Matcha crossing the Chasm

 

Hello, this is the Specialty Matcha Podcast and I'm Ryan and this is my co -host Zongjun Hello, hello. And we're the co -founders of Sanko Matcha Products.

Yeah, so we launched this podcast to discuss our learning journey in matcha, share startup stories and interview experts. So today we're going to talk about matcha crossing the chasm. So what's crossing the chasm, Ryan? Do you just jump over the gap?

so there's a really famous book called Crossing the Chasm, which is commonly referenced in a bunch of startup circles. It's pretty famous for being like mandatory reading and like the early days of Facebook and companies like that. And it's a theory about the adoption of new things, usually used for the adoption of new technology. And it kind of segments people into two groups. You have what are called the visionaries and the pragmatists and that any new industry that becomes mainstream needs to cross the chasm from being adopted and used by early visionaries who don't mind delays, they don't mind if it's not a perfectly working product, but they believe in the future so much that that product offers that they're willing to use it. And then at some point that's got to cross over to people it can bring value to, but are not necessarily willing to go out of their way to find it or to deal with different technical difficulties that adopting that thing entails. So, you know, this can be applied to things like the PC revolution, the internet, the mobile revolution, can be applied to AI, but we thought it'd be interesting to apply this framework on matcha

Yeah, so it's really something that's going from niche core to mainstream core.

something that started from a small group of people celebrating this very niche thing until other people started to join the party. You see that happens, you know, sometimes it happens, sometimes it don't. So it's a very interesting phenomenon. Yeah, and it can be different across different markets. So for example, matcha was very popular in China about 10 years ago, and it just didn't take off. If you walk a into a random specialty coffee shop in China, say Shanghai or Guangzhou, you're not going to find matcha on the menu in the same way that you would in North America or in Europe. Yeah, on contrary, you find all these specialty coffee drinks that are almost like coffee cocktails. And you don't quite find that outside of China. They kind of evolve into its own space.

I think a few years ago there were kind of a small trend on coffee cocktail or specialty drinks in the states and other countries. But just like matcha didn't take off in China, those didn't really take off in other countries. But it really finds its new home here in China.

Yeah, well in other markets, especially like in Southeast Asia, you know, matcha really stuck and is growing and thriving and in a lot of ways it's more advanced and more mainstream than it is in the States and in Europe, which is really interesting to see. So, Zongjun amongst this framework, you have these two segments that value different things. You have the visionaries and you have the pragmatists, sort of the early mainstream. So among much of visionaries, let's say in North America, who are they and what do they value?

Well, if you are really trying to trace back to the origin of how matcha takes place as a cultural phenomenon in the States, you know,

We have all these Japanese chanoyu practitioners from Urasenke Omotesenke and all these sensei teachers traveling all the way from Japan to the states. And you have all these students, the early day students in the states following the tradition, trying to study what matcha is, trying to...practice tea ceremony with the teachers. Those are probably some of the earliest community that have the exposure to matcha. And then we have people who starting to like matcha as a flavor, not just in the context of tea ceremony, but also in different drinks, in different snacks, slowly trying to understand the flavor space and understand and how the flavor interacts with different kinds of food and beverage categories. I think these are really the early adopters of matcha. And then we have companies like Starbucks starting to really kind of...codified matcha as a formal drink in their menu. So actually Starbucks is one of the companies in the states that have matcha latte featured as a drink in the menu in the super, super early days. I think in the early 2000s. Yeah, closer to 2004, 2005, I think it was first introduced to the menu. I was trying to do some research about where the first cafe was that had a matcha.

Matcha latte on their menu. Really hard to find. If you Google that question, you don't get a straightforward answer. The best I could find is that it was some cafe in Vancouver, but it really wasn't a very definitive source. So it actually seems like Vancouver was one of the earliest places where matcha entered the North American market.

and then later spread to California, the best I can tell after talking to some food professionals who were selling matcha on their early days. And I'd say, you know, Chanoyu practitioners, traditional Japanese tea ceremony practitioners are definitely like the early missionaries. And they didn't just bring it to the United States, they brought it all over the world, especially Urasenke is the more international school. Like you can go anywhere from Brazil to Thailand to Philippines to...to Mexico, to Canada, they have branches all over the place that are really the early missionaries of spreading Japanese tea, tea culture, matcha, matcha awareness.

foreign -wide, doing a lot of public demonstrations, which are a good way for the public to be introduced to it, which is actually one reason why I think we see so much legacy baggage of people using very traditional equipment and taking a very ceremonial lens versus as something, having matcha as just kind of its own interesting beverage. It's because a lot of those early exposures were through tea ceremony. But the other people who were really early adopters, the matcha visionaries were, the health food people, people who are looking for new novel ingredients that were very healthy, that were attracted to matcha because of its L -theanine, its EGCG, other catechins and polyphenols, as well as caffeine and having a more balanced energy profile in the way that it -keeps you awake. And you know those early day practitioners like if you were practicing tea ceremony 15 years ago or 20 years ago in the states or were someone who's very interested in health that happened to stumble across matcha in a health food store, you know they were really willing to go out of their way to find it. It's actually kind of very difficult you know pre -internet era to find good matcha.

And even in the early internet era, sort of when we first started buying tea in the early to mid 2010s, it was really hard area to navigate and you kind of had to pay your tuition. I've ordered a lot of matcha that just wasn't really any good. Yeah, absolutely. I mean, you see this kind of phenomenon.

categories too, like GABA tea and also the whole turmeric trend. It's very hard to find good quality GABA and good quality turmeric. But now they are more available in a lot of places.

So thank God that, you know, matcha exists in the health food world as well. And it's really a powerful kind of gateway for a lot of people to gain this initial oomph or the initial, you know, impulsion to get into a new ingredient. Yeah. So how is it that matcha was able to break off now into really the complete mainstream and a lot of markets in North America and Europe?

Whereas things with other functional ingredients, I don't know, I'll pick wheatgrass for example, you don't see that everywhere. That's still very niche, didn't cross the chasm. No, Starbucks isn't making a wheatgrass latte as far as we know. I'd argue large part is there isn't a lot of flavor there, doesn't taste very good, or much it does.

But not every ingredient is able to cross the chasm into the mainstream. So what are the values of the average mainstream consumer? What does the average matcha consumer in the US care about? What are their values? That's a very interesting question. I'm very curious about your opinion too. First, matcha is cool. It has all these cultural associations about Chanoyu or Japanese tea ceremony being kind of like a legacy baggage of the modernization of matcha. But you know it's also very cool cultural label that people you know will be curious about. So I think like that like it really serves as its purpose to you know kind of bring the curiosity out of people to get into you know to matcha, to knowing matcha, trying to understand matcha. That's first also, matcha really has existed in the West or any country outside of Japan for quite a long time, decades. You know, it really kind of went from a new novelty into a more kind of mainstream ingredient that people at least know what matcha is.

Yeah, so like general awareness that was able to bridge the gap where, you know, the average person has at least heard of it usually. Maybe they don't know exactly what it is, but you know, they know that it exists. I would say like other matcha pragmatists, I mean, we keep talking about Starbucks, but they're a great example. They were really early to the scene and introducing matcha and green tea latte as a concept and presenting it to new consumers in a very approachable way.

in a latte, in a frappuccino, and you know, paired with other ingredients. And you still see them doing that, like in their new spring menu, having the matcha lavender latte with cold foam.

doing it in a way to have it be a bridge product to people who might be matcha a curious and looks kind of weird. I don't know if I like this to pair it with things that will make it more likely that they'll end up liking it. So Starbucks really can't be ignored in the story. Similar to the specialty coffee story, when you look at the rise of the specialty coffee industry, which is worth tens of billions of dollars now, could have never happened without Starbucks. And we'll talk about that a little bit later.

I would say the other match of pragmatists and being able to spread match up is also the specialty coffee movement. They're really on the front lines of educating consumers about about matcha and what it can be. And really quite sophisticated ways

Zongjun, in China with all of these sort of mocktail inspired coffee beverages. And just to put some color on that, the coffee scene in China is very weird from an American perspective. It's mixing it with orange juice. There's like cheese, like kind of like a cream cheese foam coffee. You see people having like toasted rice milk lattes, which is really good, or mango flavors, and we're not just talking about the flavor of the coffee itself, it's like being mixed with juice.

pretty interesting scene, but you see the same thing in matcha, in specialty coffee shops in the States. You see people doing matcha tonics or various mocktail inspired takes on it to bring in new consumers to make it a little more approachable because unlike health food consumers, health food visionaries for matcha, they don't necessarily mind the taste. They're willing to put up with a bad taste and what is actually an inferior product for the health benefits. And the tea ceremony practice, they need something to practice traditional tea ceremony with. They're also willing to put up with sourcing headaches or stale matcha or to overcome these obstacles to buy and share it to others. But the specialty coffee people definitely are not. The flavor matters. That's where flavor really takes center stage in its ability to spread. And companies like Starbucks and specialty coffee companies know that and are creating these bridge products and focusing a lot on quality and trying to source better matcha because flavor matters for mainstream products.

Yeah, it's very nice that when we're talking about this new wave of matcha, this new revolution in the matcha industry, we really kind of have a playbook already in the coffee industry. I would argue that in the future, the evolution of matcha, the new exposure of consumer into single -origin matcha, into transparent labeled matcha, will go through a very similar route.

as people were experiencing back in the early 2000s, early 2010s with specialty coffee.

Yeah, for sure. And that change has happened really fast. So actually back in 2015 when I was a student at Penn State, I founded the Penn State Coffee Club. And it was really interesting when we were recruiting new members at the time, like sort of a general involvement fair where we were kind of pitching this idea to thousands of students over the course of a few days, almost no one knew what specialty coffee was. I think there was one person in 2015 that I think his dad was somehow associated with.

A coffee roaster and like he knew what a Chemex was and a V60 was and different grind settings were. And I was recently back on the Penn State campus, now almost 10 years later, and by complete serendipity, I got to meet the current president of the coffee club. And she was saying that, yeah, it's not a hard sell anymore.

At the Involvement Fair, everyone knows what's like, not everyone, but like, you know, probably like one in three people who are at least interested in walking up to the coffee club booth have some idea of what specialty coffee already is, right? They're watching James Hoffman videos, they're familiar with the Third Move coffee movement, they have been educated at their local cafes, and that's just 10 years. Now, it is the case that coffee, you know, people are primed to like it more, it's not a foreign Eastern ingredient, it's, you know, really has been a part of everyone's lives and in many many countries forever. But it's been really interesting to see that adoption cycle in specialty coffee where they're really caring about brewing and origin and sourcing and roasting and all of these things that are were really in the early days at for matcha

Yeah, and you know once one country or one community cross the chasm it can really spread. I remember like back in 2018 when we were traveling back to China for conferences and meetings there weren't a lot of specialty coffee shops in even like cities like Shanghai nowadays like I remember they published a map of Shanghai coffee shops first time back in 2019.

That was just like a year later after our first landing in Shanghai. There were 300 or 400 coffee shops like emerged like out of the blue in just one year. And that was like just a mere invitation of the third wave coffee revolution happening in the States, right? People are getting to single origin. People are getting into natural process, honey processed, washed coffee.

And then, a few years later, it quickly turned into this specialty drink coffee revolution that's quite unique in China.

So that's all very interesting. And also not only you see that kind of change or revolution happened in coffee shops, like in the end user of coffee, you also see the change happened in the coffee growers, like in the upper stream, kind of the supplier of coffee. I remember that a few decades ago, Yunnan coffee was like the epitome of bad coffee.

It's like really like the industry fanning equivalent in coffee that gets shuffled into you know coffee coffee pot bad coffee pots or like instant coffees but nowadays you know a lot of these specialty coffee shops not only in China but also in a lot of you know other countries start featuring specialty Yunnan coffee that tastes actually very good. It has this very interesting

interesting

black fruits, tea -like, earthy taste that's quite unique. And the quality has drastically improved over the past few years. And thanks to all the consumers at the end of the consumer consumption chain that demand higher quality coffee. That's very interesting.

Yeah, even since 2018, since I tried Yunlong Coffee for the first time, I remember completely writing it off, like, ⁓ yeah, not for me, I don't like it. But I actually just had one yesterday and I was like, wow, this is great. Well, it was objectively bad back in the days. They were trying to... So at the time, there's this global trend of explosion in coffee consumption and a lot of the tea farmers in Yunnan started to get rid of their tea bushes and replant coffee trees. And they just did it because they think it's more profitable. They have no idea what they're doing. They're just, you know, like trying to do it to earn more cash basically, purely from a profit point of view. But, you know, as you start to see more people getting into the industry, you start to see people demanding higher quality products, it will eventually force the upper string to kind of produce better products to meet that demand. Because producing bad coffee is eventually not going to be profitable because you are basically competing. It's basically a commodity product.

It's a race to the bottom.

Yeah, it's a race to the bottom. That's the phrase I was looking for. It's like who produce the product in the cheapest way wins the game basically. And that's not a win for consumers. Yeah, they really change from a commodity or C -grade coffee to a specialty product. And doing quite innovative things too, especially some of the fermentations, a lot of anaerobic fermentations, or fermentations free of oxygen, which select for very different microbes that create very different metabolites which result in very different flavors. Some weird, some good. Yeah, well I guess, I mean like it's kind of a kind of a natural evolution of you know Yunnan coffee being a specialty product because you already see Yunnan being the hometown of, you know, Pu'er tea and that's, you know, really a product of the magic of fermentation and seeing people kind of repurposing that specialty into coffee is quite interesting and not surprising. And they're quite innovative about it, which is also interesting. Maybe they don't have a lot of the legacy baggage that other traditional coffee growing countries have and can be much more experimental. Which maybe in the short run, sometimes you get unlucky and you get something that kind of tastes weird and different. But in other cases, you get something that's remarkably delicious and unlike anything else that you can get anywhere. Yeah, yeah. I mean like the baggage free kind of status to coffee is really, I think, a good foundation for innovation. Yeah, it'd be really cool to see the same thing in matcha. You see it a little bit, like you see, so like you have the traditional, we'll call it traditional specialty, single origin, single cultivar, maybe even single estate, single farm matcha. You're starting to see like really good hojicha be milled into a matcha like product.

But there's still a lot of room for innovation in the flavor variation that could exist within the category, like in other types of tea. Like if you look at even green tea within China, you get a vast array of different flavor profiles, not only based on cultivar, but different processing techniques.

Different picking methodologies and different terroir and larger terroirs. The day that we start to see really high quality matcha grown outside of Japan will be really interesting. We have just added an entire new dimension to flavors that can exist within matcha. The people who are really purists saying that matcha is like a bio -regional product, like champagne has to come from champagne. Or Bordeaux has to come from Bordeaux, right? Like, you know, it's sort of true for matcha, but why does it have to be? Yeah, I mean, it can totally be like older wine versus newer wine, right? Like, you know, you can have excellent wines from both regions. And I believe, you know, excellent matcha can exist outside of Japan. Yeah, absolutely. Now, the fact of the matter is right now that it really doesn't. I think there's a little bit in Korea that's actually good, that like does not go and it's not like cosmetic grade matcha. I've heard, I haven't tasted it myself. And we have some kind of contacts there. We're going to talk to them and see if we can source some samples to try it. And we've heard that mainland China is making some serious investments in matcha quality and tencha quality that can rival even sort of the mainstream average Japanese matcha, which we're also really interested in trying potentially sourcing to expand the pool of high quality matcha that can exist and the number of terroirs that are available to people who are interested in diving into matcha and new dimensions. Yeah, I mean, ultimately, there's no physical constraint that prevents good quality.

Matcha to exist outside of Japan. Like if you look at Korea, if you look at China, you know, like there are already a lot of very high quality green tea exists out there. You know, like Longjing or Biluochun gets sold for thousands of per kilogram, that are actually very high quality and it's good tea. You know, it's, you know, only because the growing mechanism, the growing method is different from matcha.

That the end product tastes different and probably not suitable to be milked into powder. But if we use the same kind of methodology to grow the tea, to produce the tea, I would argue that we can end up getting some excellent product.

Yeah, totally agree. And I'd love to see the matcha world evolve that way. And you know, that's not at all to discredit the heritage and the legacy of farmer, multi -generational farmers in Japan. Like, I think they will always kind of be seen as the top of the matcha world, at least in our lifetime, right? Like, you cannot replace, like, more like six to ten generation direct lineage of doing the same thing over and over and over with the kaizen mentality of constant improvement but doesn't mean we can't produce something.

Yeah, totally agree. Chateau Lafite Rothschild is in Chateau Lafite, right? But you can still find excellent wine elsewhere in like Napa Valley or, you know, Barossa Valley. You know, these wine exists, these terroir exist, these cultivars of grapes exist outside of the traditionally or historically famous region. And they can thrive too.

Yeah, but let's be real, how many people are going to get to try a Chateau Lafite? Very few people, right? Like same thing, you know, there is a very finite number of like traditional rice straw, hanzo shading, uji matcha, of asahi cultivar, that's kasumi or hand picked, slowly and perfectly prepared. I mean, we're not talking about large scale products. Like if matcha really moves into the mainstream, specialty matcha or really high -grade matcha moves fully into the mainstream, there isn't enough high -end matcha produced in Japan to satiate the world to enjoy. So you know I think it's gonna have to happen and the market will make it happen right like especially now that it's moved to the mainstream price and taste are really going to be the primary determinant of what makes a successful mainstream product.

And whether or not it comes from Japan, comes from other places, or is traditional or innovative, I think taste is going to end up winning what's going to be in the average person's matcha latte that just really wants to enjoy a really nice cup of matcha. And price too.

What if I want to enjoy that every single day, right? And if, you know, it's still the current price for a better quality matcha that's really going to hurt my wallet. Well, even the best matcha right now, it's expensive. It is like, especially like if you're not savvy on where to buy really high quality matcha and where those vendors are, right? You're going to be laying out like a couple of dollars per serving at worst. And maybe at best, you know, you can get something at like 50 cents a gram.

So if you need 2 grams per serving, or 3 grams per serving, you're talking about a buck, buck 50. It's expensive. It's not for everyone.

Zongjun what does success look like for matcha fully crossing the chasm? So we're in the early stages of it crossing the chasm, we have an early majority that will just randomly get a matcha latte.

Starbucks, but you know what point is like grandpa drinking some matcha, you know in the States the same way that he would a coffee. Like what does success look like when this is fully entered the mainstream? Yeah, I would I would envision that you know it would really really be a coffee alternative like you whatever you can find in coffee you can probably end up finding in matcha too, but it probably might not be as big as coffee.

maybe ever, but we don't know. But you know like when you can really see matcha everywhere and you know from any kind of generation all kinds of consumers start drinking matcha talking about matcha or not talking about matcha like really view it as kind of like a you know part of life part of life yeah that I would think that matcha really crossed the chasm.

And I think convenience is going to be really important, right? People are not going to go out of their way to get it if it's fully in the chasm. It's as available as any random cup of coffee. Like when are we going to get our equivalent to matcha cake cups where you don't have to go through this very elaborate process of preheating your bowl and sifting the tea and adding in the water, but only at the right temperature, otherwise it's going to taste bad. And then taking care of your whisk and hydrating the whisk and whisking the tea and then cleaning your whisk and then putting it back on the whisk stand and then taking and dumping the contents of the bowl into your drink. That's a laborious process. Yeah, one day it will really be just a machine that you push a button and then you have a nice bowl of matcha ready. Yeah, and that won't be for everyone. There are always going to be people who prefer the analog method, the intentional way, the human driven way. That's fine. That's great. And you see a lot of companies kind of doing hybrid approaches to their strategy for this for coffee.

And Fellow, for example, which is a company we like to talk about a lot, we really like their products and are very inspired by their design, they recently came out with an all -in -one coffee brewer. So kind of like a really advanced version of a Mr. Coffee pot that can do everything from cold brew to Kyoto ice drips to your normal a pour -over like product and it's hyper programmable. And it's interesting because on the surface, why is Fellow doing that? They're a company that make coffee grinders and pour -over equipment like kettles, but also actual pour -over devices and crafts and stuff. They're like really, they're like the coffee, cool coffee equipment company for the analog way, the hard way, the human driven way. And now they're putting out a product that's fully automated.

And I read an interesting article, I think it was in Bon Appetit, of an early tester of this new all -in -one coffee machine. And, you know, this was a guy who was heavily dedicated to the analog way, the slow way, his morning pour -over. And he said, yeah, you know, the only reason I do it is because it actually makes better coffee. I want a good cup of coffee, that's how I want to start my day. And, you know, I don't really care about whether or not I'm standing here for five minutes, slow -dripping this thing into this cone.

Or if I push a button and get it and this finally is able to deliver on that experience. And I think that's true for most mainstream consumers. Like I don't think that's going to cannibalize it. People want both or at least have the option to do both. Yeah, or sometimes it's not even catching, you know, the different consumer segments. It's probably, you know, one consumer that's going through a different consumer journey. Yeah, I remember, you know, back in the days, we really loved this kind of analog way to bring cost.

But now we are perfectly fine with instant coffee, you know, in all these travel schedules or, you know, tight life, you know, arrangements, you know, we really just don't have the time to spend on, you know, brewing coffee for like 10 or 15 minutes. And I think it's totally fine. You know, there are a lot of these instant coffee out there that actually tastes pretty good. And, you know, like it's, it's sometimes it's not really the start of a consumer journey but also can be an end of the consumer.

Totally agree. You know, let's be honest, most pour overs at cafe are bad. They suck. People, baristas do not want to stand and be a slave to this kettle and take five minutes to hand pour you your coffee. They're not usually not paying attention and usually it's not very good. And honestly, half the time I'd rather be drinking Nescafe. Let alone not only am I waiting $10, waiting 10 minutes for this thing, you know, and spending maybe eight bucks on this hand poured coffee.

But usually it's not even any good. So there's a real case for automation and innovation for just convenience in everyday life. Yes, matcha is this romantic thing, has this amazing heritage, and should be treated with tons of respect. And that's why people love it now. That's why people will probably love it into the future. But that's not going to be true for their consumer journey forever. So seeing innovation, seeing more variance in matcha flavor, seeing more automation, more convenience, is going to be what the future of matcha is if it's fully crossed over, crossed the chasm completely into the mainstream. Yeah, at that point, you know, like it's really, you know, consistency and quality that would really matter. You know, like a consistently okay coffee is infinitely better than a inconsistent great or bad coffee. Yeah, totally agree.

And one thing, we're approaching the end of this episode, but one thing that's worth mentioning is that we're talking about matcha very broadly. We're talking about it as an entire category, not necessarily more niche topics. So like the specialty matcha movement, or worrying about very transparent sourcing, or like single cultivar, single estate, right? That's pre -Casam, right? We're in the early stages of seeing single cultivar matchas on a cafe's menu. So what is it gonna take for that to cross the Casam into the mainstream, just like the specialty coffee was, where people cared about single origin or single cultivar coffee? So that'll be a topic of a different episode, really just scratching the surface on the way these things get popularized and adopted. Yeah, I bet that similar phenomenon is going to happen in matcha too, which, you know, after the consumer cross the chasm, the entire industry needs to cross the chasm too. Like it's not just, you know, the matcha makers, but also the matcha farmers, the matcha companies needs to cross the chasm to meet the consumer demand. Yeah. Cause you created an entirely new market and that's where the growth will be.

All right, well, I think that's all we have time for today. If you like the show, please consider giving us a five -star rating please recommend it to a friend. And we'll see you on the next one. All right, see you.