Why US Demand For Japanese Matcha Is Straining The $3.5 Billion Industry | So Expensive

Key Concepts

• Matcha: Finely ground powder of specially grown and processed green tea leaves.
• Ceremonial Grade Matcha: Highest quality, most expensive matcha, typically made from young leaves of the first harvest, intended for drinking.
• Culinary Grade Matcha: Lower quality matcha, often from older leaves, with a stronger, slightly bitter flavor, intended for cooking and baking.
• Chanoyu (Japanese Tea Ceremony): Traditional Japanese ceremony where matcha is prepared and served.
• Kocha (Thick Tea): A traditional preparation of matcha served at the beginning of a tea ceremony, characterized by its viscous, soup-like consistency.
• Usucha (Thin Tea): A traditional preparation of matcha served at the end of a tea ceremony, lighter and frothier than kocha.
• Tencha: The tea leaf from which matcha is made, processed by steaming, cooling, drying, and removing stems and veins.
• L-theanine: An amino acid found in tea that contributes to a natural sweetness and calming effect.
• Umami: A savory taste often described as "deliciousness."
• Tariffs: Taxes imposed on imported goods.

Matcha Frenzy in the US and Global Supply Chain Strain

The United States is experiencing a significant surge in matcha consumption, importing over 2,000 tons of high-quality, ceremonial grade matcha from Japan annually. This trend is driven by Western consumers increasingly opting for premium Japanese matcha over less expensive alternatives or matcha grown elsewhere. However, this heightened demand is straining Japan's production capacity, leading to global shortages and record-high prices.

The Misconception of "Ceremonial Grade"

A key issue highlighted is the ambiguity surrounding the term "ceremonial grade" in the US market. While intended to denote the highest quality matcha for drinking, the transcript notes that "Anyone can label anything as ceremonial grade and use it as a marketing term," making it an unregulated and potentially misleading designation. This contrasts with traditional Japanese classifications.

Traditional vs. Western Matcha Categorization

• Traditional Japanese Classification: Based on the context of the chanoyu (Japanese tea ceremony):
  • Kocha (Thick Tea): Served at the beginning of the ceremony, characterized by a viscous, "like melted ice cream" consistency due to a high tea-to-water ratio. This preparation requires the highest quality matcha for its rich flavor and smooth texture.
  • Usucha (Thin Tea): Served at the end of the ceremony, prepared with more water, resulting in a lighter, frothier drink. This is considered the more informal part of the gathering.
• Western Classification: Primarily a quality-based dichotomy:
  • Culinary Grade: Lower quality, often made from older tea leaves, with a stronger, slightly bitter flavor suitable for cooking and baking. Typically priced under $20 per ounce.
  • Ceremonial Grade: Higher quality, made from young tea leaves from the first harvest, rich in L-theanine for natural sweetness, intended for drinking. Priced from $20 to over $50 per ounce.

Historically, matcha consumption in Japan was largely confined to tea practitioners. Casual consumption and use in baked goods became more prevalent in the 20th century.

Matcha's Journey to Mainstream US Popularity

• Early 2000s: Matcha was a niche product in the US, with Japan exporting only 1% of its tea. Matcha was significantly more expensive than conventional tea bags ($3-$4 for tea bags vs. up to 10 times more for a small tin of matcha). Early Western perceptions were often negative, describing it as "green gruel," "bitter," and "unpalatable," with comparisons to "pea soup."
• 2006 Turning Point: Starbucks introduced matcha to a wider audience with its Green Tea Latte. This sweetened, milk-based beverage made matcha more accessible and palatable to Western consumers accustomed to sweet drinks. Rona Tisson, North American Tea Ambassador for Itto, credits this as the beginning of matcha's mainstream appeal.
• 2007: The term "ceremonial grade matcha" was coined in the West, reportedly by the founder of Canadian brand Dough Matcha, to distinguish it from culinary grade.
• 2010s: Matcha's popularity continued to grow, with Google searches for the term increasing steadily around 2012. Itto launched its "Matcha Love" line in 2015.
• Present Day: The US is the largest importer of Japanese matcha, accounting for nearly 80% of Japan's powdered green tea exports in 2024. Google searches reached an all-time high in 2025. Dedicated matcha cafes, like Aayoko Matcha in New York City, have opened and are experiencing booming business, offering a wide range of matcha-infused products from lattes to gelato.

Challenges in Matcha Production and Supply

The increasing demand for matcha is met with significant challenges in Japanese production:

Climate Impact on Tea Cultivation

• 2024 Heatwaves: Intense heat waves in Kyoto, a region responsible for 25% of Japan's tencha production, damaged tea bushes. Despite protective measures like elaborate shading systems, farm yields were negatively impacted.
• Restoration Time: Damaged tencha plantations can take up to 5 years to restore to full production.

Shrinking Farmer Base

• Aging Workforce: The majority of tea farmers in Japan are in their 60s and 70s.
• Lack of New Entrants: Few young growers are entering the field, leading to a shortage of farmers to maintain existing fields or expand production.

Production Process and Time Investment

The meticulous process of creating high-quality matcha is time-consuming:

1. Harvesting: Young leaves for ceremonial grade matcha are gathered in the spring.
2. Steaming: Tencha leaves are steamed to lock in flavor and preserve color.
3. Cooling: Leaves are cooled with a leaf spreader.
4. Drying: Leaves are dried in a furnace.
5. Stem and Vein Removal: Stems and veins are removed from the dried leaves.
6. Grinding: Tencha leaves are ground into a fine powder using traditional granite stone mills. This process is extremely slow; it takes Gentaro Yamamoto an hour to grind just 40 grams of matcha.

Economic and Market Dynamics

Rising Prices and Tariffs

• Producer Prices: The average price of tencha reached 8,235 yen ($56) per kilogram in April 2025, the highest ever recorded.
• Distributor Costs: These producer price increases are passed on to distributors. Itto, for example, doubled the price of its ceremonial grade matcha.
• US Tariffs: New US tariffs are further increasing the cost of Japanese matcha for American consumers. Isabella Pang, owner of Aayoko Matcha, is anticipating price increases for her products due to these tariffs.

Consumer Willingness to Pay

Despite record-high prices, consumers, particularly matcha enthusiasts, are willing to pay a premium for what they perceive as high quality. Customers at Aayoko Matcha express satisfaction with the quality and are willing to spend extra for the "richness" and "earthiness" of premium matcha.

The Rise of Chinese Matcha and Quality Debate

China's Growing Market Share

China has become the world's top producer of matcha over the past two decades, actively inviting Japanese matcha makers to learn their expertise. Chinese matcha is generally sold at lower prices.

Blind Taste Test Findings

A blind taste test conducted with colleagues revealed surprising results:

• Participant Preferences: All three participants chose Chinese ceremonial matcha as their favorite. Japanese ceremonial was ranked second by two participants, and one ranked it last. Japanese culinary grade was ranked last by two out of three participants.
• Qualitative Feedback: Participants described the Chinese ceremonial matcha as having "way more flavor," being a "more pleasurable drinking experience," and tasting "most matcha e." They found the Japanese ceremonial matcha to have a "bitter earthy taste" with a "slight floral flavor," and one described it as tasting like "pond scum." The Japanese culinary grade was perceived as tasting like "grass" and being "extremely bitter."

While preferences vary, Japan is still considered the standard for ceremonial matcha.

Perspectives on Matcha Consumption and Sustainability

Matcha Purists' View

Matcha purists like Rebecca Corbett advocate for mindful consumption, especially during periods of shortage. She argues that using high-quality ceremonial grade matcha in heavily sweetened or flavored beverages is akin to "buying a really expensive bottle of French red wine and adding fruit and sugar to it to make sangria." She emphasizes that lower-grade matcha is sufficient for such preparations.

Concerns about Unregulated Labeling

The lack of regulation around "ceremonial grade" labeling is a significant concern. Corbett states, "Anyone can label anything as ceremonial grade and use it as a marketing term. So it basically means that it's it's like the wild west. It's totally unregulated."

Efforts to Increase Matcha Production

Japanese officials are actively working to boost matcha production:

• Subsidies: The Ministry of Agriculture, Forestry, and Fisheries is providing subsidies to encourage tea farmers to transition from growing other tea types to tencha.
• Young Farmers: Gentaro notes an increase in young people entering the tea farming profession.

Conclusion and Future Outlook

The global demand for matcha, particularly ceremonial grade, continues to outpace Japan's production capabilities. This is exacerbated by climate challenges and a shrinking farmer base. While new markets like China are emerging, Japan remains the benchmark for quality. The transcript suggests a need for greater consumer mindfulness regarding consumption, respect for the production process, and potential for price stabilization as production efforts continue. The future of matcha availability and affordability hinges on overcoming these complex agricultural, economic, and environmental hurdles.