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The shortage is a tencha problem, not a tea problem

Since autumn 2024 the Global Japanese Tea Association has described what is happening as the first matcha shortage in history. It is worth being precise about what ran out, because the precision is where the opportunity sits.

Matcha is not a kind of tea leaf. It is a process. The leaf is tencha: Camellia sinensis grown under shade that blocks around 90 per cent of sunlight for three to four weeks before harvest, which pushes the plant to overproduce chlorophyll and theanine and gives matcha its colour and sweetness. The dried leaf is then de-veined and stone-ground. Not milled industrially — stone-ground, slowly, because friction heat destroys the aroma.

Every part of that chain is a constraint. Shade structures are capital. De-veining is specialised. Stone mills are slow by design. And the bushes themselves take about five years to reach full production, which is the binding one: global demand rose roughly eightfold in five years, and no amount of price signal makes a tea bush grow faster.

What the numbers did

Rupee conversions at ¥1 = ₹0.6030 (21 August 2026). Tencha and matcha volumes are MAFF figures as reported by the trade press. The per-kilo retail equivalents are computed from the tin price and are indicative only — small-format retail always carries a large packaging and brand margin over bulk.

There are two second-order effects worth noting. Farmers switching land to tencha have created a sencha shortage — ordinary Japanese green tea is now tight because the shade-grown premium pulled acreage away. And the production map moved: Kagoshima has overtaken Shizuoka, historically the centre of Japanese tea, as the largest tencha producer. A shortage severe enough to redraw a country’s internal agricultural geography is not a passing fad.

The KitKat that proved the category

Before matcha was a cafe drink in Delhi it was a chocolate bar in Kyoto, and the sequence matters.

Nestlé Japan launched KitKat Uji Matcha in 2004, after developing a technique for blending matcha powder into white chocolate. It became one of the most successful of the 350-plus KitKat variants Japan has produced, and one of the country’s most-bought edible souvenirs. In 2019 Nestlé took the green tea matcha version to Europe — a Japanese regional flavour exported back out as a global product.

That is the template, and it is not a tea template. It is a food-ingredient template. The bar did three things for matcha that no teahouse could: it removed the preparation ritual, it fixed the dose, and it put the flavour into a format people already ate. Everything the category has done since — lattes, ice cream, ready-to-drink bottles, protein powders — follows from that. It is also why the shortage bites the way it does: bottled and processed products need stable, large-volume supply, which is exactly what a few hundred specialist tencha farmers cannot provide.

India: five kilograms, and 1.37 billion

On 3 July 2026, Chota Tingrai Tea Estate in Tinsukia district became the first Indian estate to commercially produce matcha. The maiden batch was five kilograms, sold at the Guwahati Tea Auction Centre for ₹3,000 a kilo. It followed nearly a decade of work with Japanese manufacturers, agronomists and equipment suppliers, and a fully automated Japanese-style processing line on the estate.

Set that five kilograms against the base it came from.

Indian production per Tea Board figures as reported; Japanese figures per MAFF via trade press. The 342× ratio and the 0.29 and 0.58 per cent shares are computed here. These are volume comparisons only — they say nothing about whether the leaf is suitable, which is the next section.

The things that are not land

Volume arithmetic is the easy part and it is where most of the commentary stops. Four constraints sit between Assam and a matcha industry, and only one of them is agronomic.

Cultivar. Assam tea is overwhelmingly Camellia sinensis var. assamica, bred and selected over a century and a half for strong, malty, high-tannin black tea. Matcha is made from var. sinensis cultivars selected for the opposite: sweetness, umami, low astringency. Shading an assamica bush for three weeks produces shaded assamica, not tencha. Chota Tingrai spent close to a decade on this with Japanese agronomists, which is a reasonable proxy for how hard the problem is.

Grinding. A traditional granite mill produces on the order of tens of grams of matcha an hour. That is the physical reason Japanese matcha is expensive and the reason a country cannot scale into the category simply by planting more. Industrial milling is faster and produces a measurably different product — which may be perfectly adequate for a latte or a chocolate bar, and is not adequate for a ceremonial grade.

Grade separation. Matcha is not one market. Ceremonial grade is a small, high-price, reputation-driven business that Japan will keep. Culinary and ingredient grade is the volume — the KitKats, the lattes, the bottled drinks — and it is where the shortage is most acute, because that is where the industrial buyers are. An Indian entrant that tries to compete on ceremonial grade is fighting on Japan’s ground. One that supplies ingredient grade at scale is selling into the actual gap.

Price positioning. The first Indian lot went at ₹3,000/kg. That is roughly 46 per cent of the Japanese tencha leaf auction price and about 3 per cent of the Japanese finished retail equivalent. Those two comparisons are not the same thing and neither is quite fair — one is raw leaf, the other is branded 40-gram retail — but between them they bracket the positioning problem. Indian matcha is currently priced as an agricultural commodity. Japanese matcha is priced as a designated-origin product. Which of those India ends up selling is a branding decision that has to be made early, because it is very hard to reverse.

Where the Indian demand already is

The consumption side is further along than the production side, which is unusual and useful.

Matcha is already on the menu at Third Wave Coffee across most outlets, at Blue Tokai in Mumbai, Delhi NCR, Bengaluru and Pune, at Starbucks India, and at One8 Commune in four cities. Dedicated matcha cafes have opened. The trade press expects hojicha — roasted green tea — to follow, along with yuzu and other Asian citrus, which is the signature of a category broadening rather than a single-product fad.

Every gram of that is currently imported, into a market where the source country is in its first recorded shortage and has doubled its leaf price. An Indian cafe chain buying matcha in 2026 is buying at the top of a squeezed global market, in dollars, from a supply chain that cannot expand for another five years.

That is the commercial case in one sentence, and it does not depend on any market-size forecast.

Three categories, in order of difficulty

The ordering is deliberate and it runs against instinct. The intuitive move for a tea-growing country is to sell tea. But India’s comparative advantage in this category is not tea — Japan has better matcha tea and always will. India’s advantage is a very large low-cost leaf base next to a large domestic food-processing industry and a domestic consumer market that has already adopted the flavour. That combination points at ingredient supply, not at ceremonial bowls.

It also points at a specific and unglamorous product: bulk culinary-grade matcha, sold to chocolate makers, cafe chains and beverage bottlers, in India and then for export. That is the segment the shortage has stranded, and it is the segment where an industrial mill is a feature rather than a compromise.

What to watch

• The second Indian lot, and its price. Five kilograms at ₹3,000 is a proof of concept. The number that matters is what the tenth batch fetches, and whether it moves up or down as volume rises.
• Whether anyone plants sinensis for it. Converting existing assamica bushes to shade is cheap and produces a compromised product. Planting the right cultivar is a five-year commitment and is the real signal that someone is serious.
• Tea Board classification. Matcha does not currently sit in India’s tea export categories in any visible way — black tea is 96 per cent of exports and the rest is aggregated. A separate line in the statistics would be the first sign the state considers this a category.
• Japanese supply recovery. The shortage is the opportunity. Tencha output is already 3.2 times its 2014 level and planting continues. If Japanese supply catches demand around 2029-30, an Indian entrant that has not established a buyer relationship by then is late.
• Adulteration. A four-fold price rise in a powdered green product is an invitation, and the Japanese trade is already warning about fake matcha. India’s credibility in this category will be set early by whether its first exports test clean.

The honest summary

A genuine global shortage has opened in a product India is unusually well placed to make more of, and an Assam estate has just demonstrated it can be made here. Those are both real. What sits between them is not acreage — it is three-tenths of one per cent of the crop — but cultivar, milling, grade discipline and a pricing decision.

The trap is obvious and worth naming. India has been here before with Darjeeling: a genuinely distinctive product, sold for decades as bulk leaf into other people’s blends, capturing a fraction of the value its name commanded downstream. The matcha opportunity offers the same fork. Sell culinary-grade powder into the world’s chocolate and cafe supply chains at ₹3,000 a kilo and India becomes a useful commodity origin. Build a grade structure, a testing regime and an origin claim first, and it becomes something else.

Five kilograms is not evidence of either outcome. It is evidence that the choice is now available.

Sources and caveats

Related on this blog: ₹71.86 a Litre: Why Maize Is India's Priciest Ethanol Feedstock, Even as This Season's Acreage Falls · Sugar at ₹55.70 a Kilo: Why Cane Acreage Isn't Growing, and Ethanol Is Losing the Diversion Race · The National Beekeeping & Honey Mission: A Sweet Revolution, and the Adulteration Problem Sitting Next to It · India Grows the Soybean, Exports the Meal, Leads in Lecithin — and Barely Makes Tofu Yet — other single-commodity economics teardowns on this blog, each on a crop with its own pricing quirk maize, cane, honey and soy all have that matcha does too.