In Part 1, I did my best to summarise 800 or so years of matcha production in order to provide the relevant context to understand the current supply chain and shortage scenario. So now, let’s look at how the 2024 demand surge stressed this supply chain and how this stress has affected 2025 matcha harvest, prices, and relationships.

The 2024 Demand Surge

So what exactly happened? There are a few things going on here besides the already steadily increasing demand for matcha outside Japan. One thing that did happen is a push towards higher-quality teas for use in lattes and mixed drinks. For a few years now, we've seen a push towards ceremonial grade (and you'll know that I have personal issues with this term). While it’s not an accurate or particularly helpful term, it does ostensibly denote a higher quality than ‘culinary’. As more and more people started to drink matcha, and more and more people want to drink higher-quality matcha, this puts the stress on the industry closer to the smaller, higher-end side, and away from the large commercial culinary side. As a reminder from Part 1, about 50% of tencha in Japan is first flush and only 5% is hand-picked. As the growing market increasingly targeted a smaller section of the industry, problems were bound to occur.

On top of this, the recent weak yen in Japan has led to an influx of tourists, especially to Kyoto, where increased exposure to matcha, namely from the traditional blending houses (e.g. Marukyu Koyamaen, or Ippodo, or Yamamasa Koyamaen, etc.), has led to these companies receiving an overwhelming amount of attention. These traditional blending houses have been mostly selling their tea directly to tea ceremony practitioners, or even to the schools of tea ceremony themselves—these have been the primary customers of high-end tea in Japan for centuries. These teas have gone viral, creating a sort of feedback loop where more people want higher-quality tea, more high-quality tea goes viral, and more people try and buy said high-quality tea until there's none left.

This is what happened in the second half of 2024, when some of the largest matcha producers in Japan announced that they would stop selling tea to new wholesale customers and put a cap on the amount of tea being sold to retail customers. This doesn't mean sales stopped completely, but it meant that the biggest tea producer couldn't keep up with demand, and so let's take a look down the supply chain at how this happened.

Packaging

Of course, the last step that goes into making matcha before selling it is packaging. While Japan is often depicted as a technologically super-advanced country with lots of automation, the truth is that in the traditional craft industry that is matcha, a good portion of high-quality tea is still packed by hand, either partially or fully. This is especially true for smaller tea farms and producers who don’t have access to automated packing machines. Without knowing if this demand surge would be permanent, companies are naturally hesitant to onboard more staff to help cope with added workload, leading to delays. On top of this, the agricultural sector as a whole has been facing labour shortages as fewer people want to work in the fields and factories. 

Grinding

One step further back on the supply chain is the grinding of tencha into matcha, which is one of the slowest parts of the entire production process, taking about one hour to produce 40 grams of matcha. Why so slow? Why can’t they just make the mills spin faster? The answer is simple: quality. 

Since the start of matcha’s industrialisation in the early 1900s, there have been efforts to speed this up, but to little avail. The pre-industrial stone mills were all roughly 1ft/30cm/1 shaku in diameter and rotated by hand and produced 10-20g/hr. With the advent of electricity, larger and heavier stones could be turned faster. Heavier stones means smaller particle sizes leading to smoother, more vibrant matcha. With this in mind, some producers tried making mills 5ft across and ran into a problem: the immense weight of this quern stone created so much friction that the heat generated began to deteriorate the tea. Increasing the speed of the mill increased the output, but also generated more heat, further degrading the quality. Additionally, the particle size became too small, crossing a threshold that actually makes the vibrancy of matcha decrease. After some experimentation, the optimal size of the mill was determined to be 2ft/60cm/2 shaku in diameter. Another innovation was the refrigeration of the milling rooms, offsetting some of the friction heat, allowing the mills to spin faster without degrading the tea. With all of these innovations, stone mills can now output ~40g/hr. 

Before the boom, many larger tea producers didn’t need to be grinding 24/7 to keep up with demand, so they could rent out their grinders to smaller producers. These sorts of friendly relationships between producers have become strained as the demand surge puts pressure on suppliers to produce more tea faster.

So, what happens when you can’t mill tea fast enough to keep up with demand? Buy more mills! Which is exactly what happened. Producers large and small all began to order more stone mills to expand their grinding capacity which then pushed the bottleneck to the handful of stone mill cutters in Japan, who were then also overwhelmed by this sudden surge, leading to months of even more delays. Moreover, the quern-stones require periodic resharpening by these same stonecutters (a process called metate - 目立て), and as more mills are grinding more frequently, the waitlists to get these stones sharpened grows too. This means that some producers have their milling capacity reduced as they must wait for the stones to be ready.

Storing Tencha

In the matcha supply chain flowchart from part one, the step right before grinding is storage, which I’ll break down a little here. 

Tencha is picked in spring, around May and is processed into aracha immediately. Not long after this, it is sold to producers who refine it into shiagecha. In theory, this refined tencha can be milled into matcha straight away, and though some more commercial regions might do this, centuries of tradition and practice in Kyoto have shown that the flavour improves if the tencha is allowed to rest. This resting, or jukusei (熟成), allows the harsher, grassy, bright, fresh spring aromas to dissipate, resulting in a mellower, smoother matcha. Read here to learn more about tea’s various aromatic compounds. Historically, this resting meant packaging the tencha into paper bags, sealing those into large ceramic jars called chatsubo (茶壺), and storing those chatsubo somewhere cold, like a mountaintop or a cellar.

While this is still practiced, albeit very rarely, the chatsubo procedure has mostly been replaced by refrigeration or even deep freezing.

Most of the large tencha blenders will actually freeze tencha from previous harvests and blend it into the current year’s, giving them a backup supply. One of the contributing factors to the 2024 shortage and subsequent 2025 price increase was the exhaustion of this backup tencha. The lack of backup supply meant that the industry was banking even more heavily on the 2025 harvest.

The 2025 Harvest

Fast forward to April 2025 and the new harvest of tencha hits the tea market. At last, you'd think that there was finally enough tea for all of us thirsty little tea drinkers and that the shortage would be over…but that wasn’t quite the case. Let's have a look at the data.

As always, all eyes were on Kyoto, the cultural hub of matcha production. Since this is where the most desirable matcha is made, it sets the tone for the rest of matcha prices throughout the country.

On the 23rd of April, the new tea wholesale market opened and on the 9th of May, the first tencha hit the market and bidding ensued. If you recall the Haägen-Dazs shock from part one of this blog, you’d know that the record for year on year tencha price increase was 150%.

Well, guess what? We have a brand new record! This time, tencha prices shot up 170% and that was only for machine-picked tencha. The hand-picked tencha that was sold on the same day had an average price increase of around 220% or over double last year's prices. So what happened here? Well, in addition to the insanely increased demand, we had a bit of a low harvest.

There was a cold spring, which meant the tea plants grew slowly and that yield was down compared to last year. With a lower yield, that means you have less supply and when there's less supply and more demand, prices go up. But there was more to it. With a cold, slow growing season, that means the quality of the tea was actually higher than last year.

So low supply, high quality, high demand…and you can kind of do the math yourself. While this was the shock of the first day, prices didn’t go down as the market season continued. As the season rolled on, at some point the quality peaked, so the prices went up for a bit and they all went back down, but the average was around 170% up from last year.

Outside Kyoto, the story was similar. In Fukuoka Prefecture, some producers reported a 30% decrease in yield and doubling of price. 

Now, if all of these numbers mean nothing to you, let me recontextualise it: machine-harvested tencha this year costs the same as handpicked tencha did last year. That is a stunning shift in the market prices.

So producers are responding to this in two ways. One, simply raising prices. Two, altering blends to use more lower quality ingredients to try and keep the price increase at a minimum, while affecting taste and quality as little as possible. I've heard reports of some companies beginning to use second harvest tencha in their lower quality usucha/keiko grade blends, and that seems to be a pattern across the industry—altering or limiting the product offerings to make the most of the limited tencha supply.

What’s Next

Well, this might feel like a disappointing situation and it is a tight spot for the industry, but on the upside, there are new fields being planted and new factories being built that will hopefully be able to increase supply in the coming years. It might be a rough year for matcha, but the long-term prospects still look pretty good.

The Kyoto prefectural government has been offering money to farmers to switch over to tencha production from sencha, and while that's bad news for sencha, it’s pretty good news for matcha in the long run, but we won't see those effects for a few more years.

So how do you produce more tencha?

There are two main solutions: converting fields from sencha production over to tencha production and planting new tea fields. Converting would require farmers to invest in shading material, change harvesting and cultivation practices, and naturally would mean they produce less sencha, potentially disrupting their business and the customers that depend on them for this sencha. On top of this, many tea plants that are grown for sencha are cultivars that are not well-suited to shading and would produce less desirable matcha. Furthermore, production of tencha requires different processing machinery and hands-on knowledge than sencha, requiring further expenditure and training for the farmers.

For many, this is too much of a risk, especially considering that no one knows if this demand surge will continue or if the bubble will burst. Option two, having existing matcha producers plant new tea fields, has its own complications and costs. Freshly planted tea bushes take about three to five years to grow and mature until they are harvestible, which is another risky investment for a tea farmer.

That being said, both of these options are currently being pursued, but both take time—years rather than months—meaning that neither are quick fixes for the current boom.