What is Direct Sourcing and Why Does It Matter?
Many vendors will advertise that they use “Direct Sourcing” or source “directly from farms”. But what does this really mean?
Generally speaking, this would suggest that they have actually visited the farm, spoken with the farmer, and are buying their teas directly from the farmer. This is important for several reasons:
It helps ensure high quality tea.
It reduces costs for the vendor and/or increases profits for the farmer because there isn’t any form of intermediary / middleman taking a cut first.
This sounds like a fantastic method of sourcing —> Better teas, lower costs, better for the farmer. Win-Win-Win all around, right?
Unfortunately, many vendors who use “Direct Sourcing” aren’t getting the full benefit. Many vendors use what I would describe as “Networkers”. These networkers help facilitate communication and make introductions between farmers and vendors, allowing the vendors to meet the farmers, speak with them, and source from them directly. Sounds like Direct Sourcing, right?
Not quite. These ‘Networkers’ will often keep 25%-40% of any transaction for themselves. That means that either the farmer is making less (booooo) or the expense gets passed onto the vendor and their costs increase by up to 67%, which means significantly higher prices for the consumer (double boooooo!).
So if you care about responsible sourcing, make sure your favorite retailers aren’t just sourcing directly from farms, but truly cutting out the middlemen to create a real, direct, relationship.
But how can you check if your favorite vendors are truly sourcing directly from the farmers?
Some vendors are honest about it, and will state that they use “sourcers”, “finders”, “networkers”, etc.
But most don’t. The great thing (sorta) about the tea industry is that is is highly fragmented, so most of the vendors are fairly small. This should make them more personable and willing to talk with potential customers.
Of course, they can always lie, but it doesn’t hurt to ask.
As transparency increases in the industry, it will make it easier to compare different vendors on a direct basis. For example, in the wine industry, wine stores don’t sell “Self-branded Chardonnay Grade 1”, they sell “Fog Head 2014” or “Daou 2012”. If you go to another store and see Daou 2012, you know it is the exact same wine.
Transparency is good for the consumer, but typically bad for the vendor, because it removes the smoke and mirrors and shines a light on those who are not the best actors. This is something we are working on changing.
Based on our experience, direct sourcing is good if you’re looking for premium segment of teas. With a lot of middle men, the prices would be too high.
However, for bulky teas, there’s really no benefit of getting it direct from the source. First, bulk tea is a quantity game, and a large importer that purchases these teas per container, will get a better price. Also the shipping costs are relatively high when shipping cheap tea from the source in small quantities.
We often receive wholesale requests for bulk teas, and we always advice the customer to find a local supplier.
I suppose this all depends on what your definition of “cheap, bulk” teas and “premium” teas are.
Generally speaking, if the cost from the farmer is <$50 / kg, I would describe that as ‘cheap, bulk’ teas, and if the cost is >$150 / kg I would describe it as ‘premium’ teas.
Teas in the $50 – $150 / kg range are simply ‘good’ teas, neither cheap nor premium.
Granted, it also depends on the type of tea. For example, a Da Hong Pao at $100 / kg is not good, it is clearly fake and/or really low quality.