Reasonable profit

      I saw these from my LINE and feel very sorry and depressed.

      This writing is about partial costs of making Oolong tea sourced from tea farms located in mountain areas height between 1300 to 2000 meters.

Excluding land costs, tea farm management fee, and farmers' expenses.

1. hand pick cost: NT$250-300 per 600 grams of dried tea leaves  

2-1: make tea labor cost: NT$100-120 per 600 grams
2-2:cook tea labor cost: NT$20-30 per 600 grams
2-3:rounding tea labor cost:NT$80-100 per 600 grams
2-4:tea factory expense:NT$110-130 per 600 grams

So we can tell that the ordinary cost of 600 grams of tea is about NT$560-680.

Tea leaves' cost not included.  However, we shall be able to find the original tea saplings' cost and make some calculations.

      Nevertheless, we haven't calculate land costs, tea farm management fee, and farmers' expenses.  In fact, the later two are part of  operational costs.  "Land costs" or I should say "share of land costs" include farm land taxes, and loan and interests determine by how one acquire this farm land.  unless one inherits the land, and one does not want to sell her or his land, the return on investment of land usually sets for 20 years.  Under this principle, we can calculate the share of payment/loan and interest per year.

      I suppose "share of land costs" may be categorized in the section of "raw material cost."

      As for the tea farm management fee and farmers' expenses, I suppose we can give it a reasonable number from the production quantity of that season.  Because I don't know the real number of costs, if I sue 20/80 principle to determine the operational cost from the cost I know, which is NT$560-680, than I will get a range of cost about NT$700-850.  Then, I use the 1/3 principle (raw material cost, operational cost, gross profit) to determine the price and it turns out about NT$2100-2550.

      However, I would say that what I have mentioned above are idealistic.  The reality is that with this price at the origin of production farm, we can buy its top ranking tea, not just an ordinary tea!

      No matter what the current reality is, I will do my best establishing a new value chain system in Taiwan's business and upgrade it into industry.

To be or not to be!

       The situation of those Taiwanese who are doing tea business is quite similar to that of the Western wine industry in the mid 20th century, in which it is on a transition point of becoming highly industrialized or not.  
      Back then, the trading mode of wine industry was pretty much like auction.  Moreover, during that time the general public considered wine as a luxurious product for the upper class and the wealthy people.  However, in 1976, wine from California, USA won the world championship in Paris, France.  This caught people's attention all over the world because Californians use scientific methods producing their wine and are capable producing large number of wine relatively much easier.  According to "economy of scale," when the total number increases, the cost-per-unit goes down.  Hence, the product price should be cheaper than before.  Under these circumstance, more and more people will be capable of buying wine.
      Although my factors might seem quite persuasive for Taiwanese tea business participants to consider, there is a powerful psychological factor keeping my fellows from making changes.  That is the "prisoners' dilemma!"  briefly saying, no one knows if adopting the Californian way will better off.  Even though people are not very happy with the current auction-like trading mode, it is still more preferable to the uncertainty of changes.
      In fact, there are quite some other reasons keeping us make a difference.  For instances, Taiwan is only 1/11th of California and in average each Taiwanese farmer only have about 1 hectare of land.  In addition, it is much easier to choose one product from many stores in Taiwan.  Moreover, price is usually the first consideration.    Under these circumstances, most Taiwanese tea farmers prefer trading by themselves instead of establishing a pricing system and let the sales channels do the final tradings.
      As for myself, I am working on finding people who have similar thoughts like me and try our best establish a pricing system and hopefully soon our tea business can become highly industrialized.