Our Startup Pitch, Matcha Shortage Recap, and Reflections

Ryan · 0:00

Hello and welcome to the Specialty Matcha Podcast, a very special Specialty Matcha Podcast. My name is Ryan, This is Zongjun Li. Hello. Hello. Who also goes by Sam. Yeah, we launched this podcast to discuss our learning journey, Matcha, share startup stories and interview experts, and today marks the 50th episode of this podcast and the end of Season 2.

Zongjun · 0:20

Yeah. So we titled this our startup page because we wanted to talk a lot more about the company, what we're working on. Part of our intro, you know, we talked about telling startup stories and we realized we're not telling very many. So this was a fine opportunity to share a bit more of what we're working on, how we presented, what our next steps are, and sort of why we want to form a community of specialty matcha people.

Ryan · 0:43

So we structured this in four different parts. 1st is sort of a reintroduction, What is this podcast, what is the Specialty Matcha Podcast and kind of a performance review of ourselves, what we are very happy with that we have done and what we think we could have done better throughout these 50 episodes.

Ryan · 1:00

We're going to do a recap on the matcha shortage. We recorded a breaking news segment on Marukyu Koyamaen's matcha shortage announcement, but a lot more news and takes on the matcha shortage have been published since we published that. So wanted to give everyone a recap of what we're reading and kind of our thoughts and opinions on the topic. Then we're going to give our start up pitch the things that we actually give to investors or people that we meet as we're trying to scale up what we're working on as we're developing technology to mill Matcha fresh.

Ryan · 1:33

And then we're going to share some of our goals not only for the coming season, but for our company through the rest of the year. And we have a pretty strong call to action where we're looking for some partners to launch the mill. So we want to give some more details about that and thought that anyone who regularly listens to this podcast should be the first to know.

Zongjun · 1:53

Well, Ryan, should we give our audience a new introduction of this so. We never thought that we would be this regular with the podcast. We started it because we had a few unique things to say and a few things that weren't really floating out there in the Internet sphere. Really just a find excuse of, you know, talking to people to begin with.

Ryan · 2:18

Yeah, actually a huge part of it was a wonderful platform that we could use to just get access to some people. So he reached out to some people in the really early days and we struggled sometimes to meet some of the match of founders that we that we wanted to talk to since we had a match of business.

Zongjun · 2:34

Turns out everyone is just so nice, like so willing to share about, you know, their knowledge and their experience in the realm. They really were thankful to us providing them platform for them to speak, which was very unexpected. Zongjun and I both have startup experience before, and we worked.

Zongjun · 2:52

Zongjun, you worked for the startup for maybe five years. I worked there for eight years. It's called Gastrograph AI and the company originally came out of T Research and that got spun off from Penn State University and it went, we went through an accelerator program. There's two really big ones.

Zongjun · 3:09

One is called Y Combinator, which companies like Airbnb and Dropbox have been through. And but the other big competing 1 is called Techstars. And we went through Techstars. I was really young at the time, I think I was maybe 22.

Zongjun · 3:21

It's a really formative experience going through Techstars. The rejection rate is higher than Harvard. And so I just got like super lucky when I joined that company on the founding team. And the biggest thing that they # into you at Techstars is give first. Don't ask for things.

Zongjun · 3:38

Give first when you're networking, when you're talking with other companies or investors or advisors or people working in industry that's you need something from. You shouldn't go up to someone and say it could be a mentor.

Zongjun · 3:50

You need to have the mental framework of what can I give this person 1st? And something that was really missing was in the matcha economy was something more of a media platform. You have the Global Japanese Tea Association, but that's more than just matcha.

Ryan · 4:05

And there weren't many other like media or diverse media properties where people were having these types of conversations. So, you know, giving or reaching out to people to interview them to tell their story was just a fantastic way of us to give first before, you know, ever asking for anything. And and that's sort of our approach to business in general. So we love the Specialty Matcha Podcast, not only to share these diverse voices, but you know, we're ultimately talking to other small businesses or other content creators. And you know, even though this isn't the largest audience platform, you know, we really

Ryan · 4:43

believe in this concept of giving before asking for anything in return. And it's really we don't see it as transactional at all. Like sometimes what we get in return is just knowledge or perspective or experience. And we're happy to share that and give first with everyone listening as well. And so that's that's one of our ethoses behind the Specialty Matcha Podcast.

Ryan · 5:03

So we aim to bring on a really diverse set of voices. I think we've done pretty well with that from many different corners of the world now, which has been great, and covering some more controversial topics. I think we've done that really well, especially around authenticity and poetic names and giving some perspectives that I think some people are a little shy to talk about. One thing I think we've done very poorly is bringing on the Japanese people.

Zongjun · 5:29

Well, the language barrier is true. It certainly is a hit to our credibility. The lack of virtual like Japanese ethnic, Japanese tea farmers is something that we would really like to have. They tend to be quite a bit more reserved.

Ryan · 5:45

Almost everyone we've talked to doesn't want us to talk about them publicly. So we talked about them in the general case. And so I think it's just going to be a much slower burn on that of relationship building and trust building. And it's kind of the lack of Japanese people and Japanese tea industry people on this is a great reflection of our naivete and the fact that we're kind of newcomers to this game. Yeah, but they're definitely gold mines out there for us to learn more.

Zongjun · 6:16

Gold mines of knowledge, yeah. It's, it's definitely true. And hopefully, you know, this coming year, we can spend more time in Japan talking to them, you know, building better and deeper relationship with all these farmers.

Ryan · 6:29

And hopefully, hopefully my Japanese can get a little bit better. Can certainly make it much easier. Yeah. And we would like to do so. Something we did in Season 2, if you haven't listened to it already, we did notes at origin or sourcing trip notes and that we recorded in real time.

Zongjun · 6:44

And so we would like to do quite a bit more of that as well, especially during harvest season this year. The other thing that I think we can do better or we haven't actually really tried is to bring bringing multiple perspectives at once. Yeah.

Zongjun · 6:58

So having multiple guests in one episode in one conversation, I think will be very, very interesting because, you know, this is not only a platform that we aim to build and, you know, learn and share for us or for just one perspective, you know, it's also a platform that we really hope to can be a Information Center for all the content creators and the industry friends out there too. And certainly our economic incentive in building this and this will be, we'll, we'll talk a bit about this more during our startup pitch.

Ryan · 7:30

And that we would like to share with everyone is that we would like to see the specialty matcha blossom much like the specialty coffee or third wave coffee did 20 to 25 years ago at the turn of the last Millennium. And one of the biggest barriers to entry is just knowledge in English.

Ryan · 7:46

I remember when I first started studying tea back in 2013, at least studying teas very seriously, it is very, it was very hard to learn even about Chinese tea and Japanese tea outside of the context of tea ceremony was even more difficult. So we really would like to see these barriers lower and so that more people are drinking and wanting specialty matcha and we would like to kind of grow the whole size of the pie. And especially we would like to see more vendors and more businesses that are doing more value creation. So like the the core theme of our company is creating infrastructure to mill matcha

Ryan · 8:22

fresh. And we think that there's a whole bunch of things that foreign companies, non Japanese companies can do to create a higher quality product for their customers because no one knows their customers like they do. Like traditionally when you talk about like being a matcha vendor, owning a matcha brand, I mean, what you're really doing is repackaging someone else's product, right?

Ryan · 8:44

You're not the farmer, you're not the blender, like you're coordinating with your packaging and your material, but the value add or you're bringing the customers, you're bringing the education. And it's a huge value add and typically it's worth 100% markup or really large margins.

Ryan · 9:00

And it's a really important part of the value chain. But it's start, it's time for the consumer piece and the people that know the consumers the best to start influencing what's happening downstream even more is something we would like to see. Because if you look at things like specialty coffee or bean to bar chocolate, there's this whole rich ecosystem of people doing really interesting value added creations to better meet the needs of their local customers, whether or not it's blending or sourcing or milling fresh. Roasting fresh.

Ryan · 9:32

Like it'd be cool to see someone buy a roaster, lightly roast some tencha fresh, give it that nice hojicha aroma, and then mill it fresh. Like that's wild. That'd be super cool to see. And there's probably a bunch of other similar ideas that can be done.

Zongjun · 9:48

Oh yeah, definitely, for sure. Like not only we want to see it, we want to be part of it. And part of the goal of Sanko is really to be part of these infrastructure development to empower people to create, you know, better matcha products or more innovative matcha products and helping them to realize their imagination and turn them into reality.

Zongjun · 10:09

And I think this mentality really transcends beyond this company. For the podcast, we also want it to be a infrastructure of this community to, you know, have people feature to share their ideas and to have conversations bounce back and forth and forming new ideas.

Zongjun · 10:26

And I think that will be a really happy future and that we are proud, proud of to be part. Of that and we don't know what the answers are. In some cases, we don't even know what the right questions are. So by bringing in different perspectives during this podcast gives us a fine opportunity to fill our own knowledge gaps first, you know, with the assumption that other people might have very similar questions.

Ryan · 10:47

And weirdly enough, if we talked to quite a few people now that listen to this that have reached out, like there are a lot of very like minded people out there who like totally see this the exact same way and probably had like recognized a lot of these problems in the industry before we even entered it.

Zongjun · 11:03

So it's been really wonderful connecting with the community and the people that we've talked to. Yeah. Yeah, and the fact that knowing those people don't really know each other or their existence, like really trigger some matchmaking passion inside me.

Ryan · 11:17

So there will be some interesting conversation upcoming. Absolutely. We've also gotten a little bit of negative criticism, as Zongjun. Or feedbacks, really. Yeah, feedback. We wanted to share that our use of the word baggage, especially when talking about chanoyu or Japanese tea ceremony or the more broader cultural connotations of matcha in Japan, was a very impolite and disrespectful word. Especially when we're trying to source a Japanese product, mill it fresh and sell it and quote, UN quote, profiting off of what is a legacy Japanese cultural food product and that we should give it quite a bit more

Zongjun · 12:00

reverence. What were some of your thoughts behind that? Oh, I think, you know, it's a very context specific term. Like we're talking about Japanese tea ceremony as a baggage, not because of, you know, it's a baggage to matcha itself.

Zongjun · 12:17

Like thank you. Japanese tea ceremony like, like this is the very reason why matcha still exists today. We can still consume this product, but it is a baggage in certain contexts, especially when it comes to innovation in modern base, especially so when it comes to treating matcha as a specialty product. And you are encountering all of these legacy inertia that you know, work the product to the other way. Yeah, if you view it from a very different perspective, let's say a really high end coffee shop who wants to do matcha properly and goes to the proper sources to learn the way they quote, UN quote, do it traditionally and

Zongjun · 12:52

authentically in Japan, right. In that context, it kind of is cultural baggage, retrofitting ceremonial tools into a place where they really weren't intended to be used and using them in ways that they weren't intended to be used.

Zongjun · 13:05

You know, which is fine if it works for them, but it's not, it's not definitively the correct way of preparing matcha. There can be other ways, just like there is no correct way to drink wine or to brew coffee. Just different ways of doing things well. It's very context specific right? There is a correct way of doing matcha in a chanoyu context, yes.

Zongjun · 13:28

But there is no correct way of doing matcha in a modern consumption context in a cafesha. Like probably using the ceremonial correct way to do matcha in a cafesha will not be very effective. So this is a word that we are actually going to continue to use. We deeply respect Japanese culture and matcha and where everything came from, but this is the Specialty Matcha Podcast. We care about matcha as a specialty product and a specialty ingredient, which has found a really new audience outside of tea ceremony practitioners. And while we repeatedly say how much we care about and respect Japanese culture, we don't need

Zongjun · 14:10

to bend the knee every time we have something critical to say about a legacy or heritage or traditional practice. These practices are by no means perfect in their own merits, right? There's actually quite a bit wrong and quite a bit of valid criticism about a lot of the Japanese tea ceremony institutions and various institutions hutching Japanese tea which are just because it's traditional or heritage does not make them immune from criticism.

Ryan · 14:39

So we want we have a balanced perspective. We deeply care about the culture, and we are much more forward-looking than retrospective looking. The way someone did something in the past is not necessarily the way that something should be done in the future.

Ryan · 14:52

So we apologize if we've offended anyone with some of our sharp tanks. And we being tea ceremony students ourselves, we have deep respect where these things come from. And we are outsiders. Sam is Chinese, I'm half Korean, half American, and it's, you know, we are exploring this from the outside in, not the inside out. So, you know, who are we to make any of these criticisms? But you know, we are the new matcha consumers, right? Matcha consumers now exist outside of Japan and that's just the reality.

Ryan · 15:30

And we are a very consumer focused company and that is our biased narrative. We care a lot about the consumers, we care a lot about the product. And we think that there's lots of other companies and tea ceremony schools and institutions doing great work promoting traditional practices and traditional crafts.

Ryan · 15:47

That's just not where our focus lies. Yeah, again, context specific. Yes, so I think that is a good summary. Please keep sending them. It only helps us improve and give perspectives. You know, we're we're really happy to have a dialogue and then to invite people on that we disagree with them too.

Ryan · 16:03

So if you have any contrasting opinions while listening to what we're saying, please let us know. And thank you for everyone who has let us. Know. Yep. It's. Before you unsubscribe, please send us a message. So thank you.

Ryan · 16:15

So Zongjun, moving on to Part 2 around the matcha shortage recap. I mean, this is by far the single most important thing that's going on at matcha right now. And everyone kind of has their own explanation and own hot take about what's going on with the matcha shortage. So when you go out to different media properties or different matcha companies, I've noticed that a lot of people actually have a slightly different explanation. There's some common threads, but the causes are you have different people emphasizing different things. One unique perspective came from Marc from Ooika. I think he reported a reel about

Ryan · 16:50

this. And something that I don't think has been talked about enough is that there was a labor shortage during COVID, During COVID, a lot there. I don't know if there were layoffs exactly, but there was a personnel shortage in the actual production.

Ryan · 17:03

And you know, it takes about three to five years for a little baby tea tree, tea Bush to go from being put in the ground to being something you can harvest any tea from. So you know, that time window dates back exactly back to COVID when you look at about a three to five year time horizon now that we're here in 2025. So you know, that was one impact. And obviously the massive tourism boom, which is something that Ian from Yunomi had mentioned on that special podcast episode that we've done, especially since the yen is so weak.

Ryan · 17:38

As an American, at least it feels like you can go to Japan on a 20 to 40% discount. Yeah, it's. Time to Yolo. But yeah, really great time to travel to Japan. Yeah. But you know, I was reading an article from Saison talking about the whole shortage from a different perspective.

Ryan · 17:55

And I think people are getting very conservative in making any new development or investing any new capital into overcoming the shortage because this has happened before. And and this surge has was like it happened right before COVID and hit a historical high and then COVID hit and then massive layoff and the whole market plumped.

Ryan · 18:20

And then now the new demand surged again. And a lot of people are actually a little bit hesitant about, you know, like, is this a just a new passing trend or this will be the new status quo? Like, you know, it's very uncertain for people in Japan to make new, new investment because, you know, the the cruel reality has fooled them once before, so. Yeah, and I was reading an Eater article where Zach Mangan, Mangan Mangan, excuse me if I mispronounce that, who is the founder of Kettl was doing a interview for Eater about the matcha shortage.

Ryan · 18:55

And he was talking with someone from Maruku who's, you know, Major supplier, traditional blend house. And he says they didn't, this is was coming from I think believe the president of that company. So they did roughly 6 months of sales in a little less than a month.

Ryan · 19:14

Like, that is an insane spike largely caused by by retail sales from new tourists coming to Japan, especially even visiting Uji. I mean, when you visit Uji, it's actually very touristy. I was talking with some friends that are not really into tea at all.

Ryan · 19:32

I'm like, Uji was on their list. Yeah. Like, why? Like, how do you know about Uji? And like it was, it was pretty surprising to see that this is like entering like the mainstream list of places to go, which is awesome from an awareness perspective.

Zongjun · 19:49

Yeah. So I mean, I don't think this is a trend. I think this is actually a pretty sustained preference. People want coffee alternatives, people want healthy products. And I think the and people clearly want a high quality product.

Ryan · 20:00

If you if you notice, it's not the Super industrial shop stuff where there's a shortage and people have actually found fantastic value with these traditional blend houses and. Want to buy it? And it's interesting, Sam, you made a pretty interesting observation.

Zongjun · 20:12

So something we've been talking about is Matcha's perishable product. It's also a renewable resource. Every season we have new things. If you could age Matcha, this might turn into like a serious bubble. Yeah, yeah. I mean, like I was comparing the current sentiment in the market to the pu'er bubble that happened back in. Wow, this almost 20 years ago in China, Yeah. But for those of you who don't know, pu'er is a type of fermented tea.

Zongjun · 20:39

Yeah, in China. Very high aging potential, like a young cake. And with comparison to its older form, 20 or sometimes just 10 years of aging for that same cake, the price can be 200 to 500 times. So the difference, yeah, it's crazy.

Zongjun · 20:58

Like some of the more legendary cakes being sold in auction for like half a million U.S. dollar. So that's some like really, really insane price tags out there. And if matcha is the same like ageable product, Oh my God I cannot fathom how big this bubble can turn into.

Ryan · 21:17

Yeah, if it got better with we get some, some very interesting market dynamics, Yeah, because now you do see some horting culture, but it does you know it's perishable, but. Tencha can be aged. Yes. Theoretically. Especially in a cold environment, tencha can be aged. In fact, I saw something very interesting. I think it was from Song Tea and Ceramics in San Francisco. That company had some 10 meal cultivar just very new from a 2019 harvest that was milled in 2024 and it was the first time I, you know Marc from Ooika has had some older vintage matcha that he's milled that was only like one or two years old. But seeing something 5 or 6

Ryan · 21:58

years old really got my interest that's, you know, if people have the capacity to know much of fresh, there might be some aging potential for Tencha and to create some very interesting matcha products. And you know, it does happen at these large traditional players, but because they're not transparent, you just don't know.

Zongjun · 22:14

Oh. My God, maybe it's time for me to start investing a new freezer. Wow. We certainly want to do those experiments. You know, it's really once the tencha is ground into a fine powder, that's when everything goes wrong. But otherwise it's an interesting transformation. But, you know, like, it's also interesting that reading all these articles, like everyone is framing this whole shortage phenomenon as something that's negative. Like, there is a, you know, internal negative tone in all of these articles and all of these, you know, retailers and much manufacturers, but they are selling more tea than ever before.

Ryan · 22:51

This is going to be the future. There is no time in human history where more diverse group of people are consuming more matcha on net than ever before. Like this is a win, yeah. We got guys. Money's dropping out from the sky. Also the spreading of culture.

Ryan · 23:11

Even people frame this as like it's at the expense of tea ceremony practitioners, but tea ceremony practitioners don't inherently care about taste, so it's important that they have traditional product to do. But as a tea ceremony Omotesenke student for what was it 3-4 years, almost never was I aware of what I was drinking. It could have been random green powdered stuff, like it just was not the focus of what the lessons were about. In fact, some practices we didn't even drink matcha. It was incredibly disappointing.

Ryan · 23:43

Sitting says out for two hours. Learning how to fold rags and Wadi geiko and all this other stuff. I remember very vividly one Sunday morning, I think I was a sophomore in college, where all the guys of the group, our job was to clean the floor, tell me it was like 9:00 AM on a Sunday morning. And all the girls in the group did all of the other stuff, like hydrate the chasen and prepare the tea bowls and kind of a more pleasant work, sift the tea. Household role-playing training.

Zongjun · 24:13

So if Japan is exporting more and more matcha and more and more tea farms that we're not making sencha are now making tencha to produce more matcha, then less there's even less supply of loose leaf tea will be produced in Japan, which means that it's destructive for domestic Japanese tea consumption. So that is a negative externality. But I actually think the pendulum might swing back the other way.

Zongjun · 24:39

That might be true temporarily, but as more and more people get interested in matcha internationally, naturally a subset of those consumers might become very interested in Bono, you, Japanese tea, General Senchado, like moving to gyokuro or sencha. It's like it's a pretty rich ecosystem of diversity of things to be interested in.

Zongjun · 25:03

And it just so happens that matcha has become the new entry point for a lot of new consumers. So I kind of see this as a pendulum where it's being shared with the rest of the world, and at some point the rest of the world's going to develop a large segment that's interested in these traditional crafts who need a new market.

Zongjun · 25:19

I mean, Japanese from a demographic perspective, Japan is a dying country. Literally, it's a shrinking population. And so in order for any of these arts to survive, you need domestic interest and something that's often forgotten in all of these narratives.

Zongjun · 25:35

If you look at the number of tea farms that have been declining since like the 1980s, in the 1970s and 80s were an incredibly weird time in Japan. Japan was just saturated with hash and money and like all of these rich businessmen who could afford to buy and support all of the parts of the matcha and tea and traditional craft value chain.

Ryan · 25:59

I live in Paris now because my girlfriend found a job there and there's a wonderful exhibition called Golden Threads and it was about the use of golden colored threads in clothing and throughout all different times and all different cultures in history. And there was this little documentary on Japanese special type of Japanese woven golden fabric and threads. And apparently at its peak about 40 years ago, which also happened to be like the peak of the Japanese economy, there were thousands of these looms, most of them automated, creating all of these gold textiles.

Ryan · 26:34

Now I think there's just like one couple left who are using a semi automated mill, or excuse me, loom that mill, semi automated loom. And they check every thread as it goes through. But the man has just shrunk. And if they leave, then it's no longer, it's gone.

Ryan · 26:51

And that is just one example of these traditional crafts. And Japanese people are not interested. Other companies and other markets like China or even Bangladesh or other textile producing regions can create much more competitively priced products.

Ryan · 27:06

And that wealth just doesn't exist in Japan anymore. The stagnant economy and it won't exist in Japan anymore. So actually if it doesn't internationalize and get more people interested, yes they're going to be some quote unquote matcha girlies on TikTok or just guzzling it down like in an overconsumption scenario at worst and at best very thoughtfully is probably where most consumers are anyway.

Zongjun · 27:30

I don't like this negative framing around going viral on TikTok. These are real people, like real people who are enjoying this. Products, yeah, it's a real passion and real demands out. There and sharing it at a scale that's never been seen before now a single creator can get 10 million views on a reel or a TikTok sharing it with a whole new group of people. And naturally the sub segment of those people are going to swing back and create a new international demand for these types of crafts which is what's actually needed for them to survive.

Ryan · 28:05

And something that Marc Alexandre from Ooika talks quite a bit about is that the lifeline for the Japanese tea industry is not in the domestic market. So actually we're quite excited, yeah, about all of. This, I think that's for anyone that's Japanese listening to this podcast, I don't think there will be a lot, but we are happy to be part of this new trend and happy to build this future together.

Ryan · 28:31

Yeah. And I think is a net industry. That's that's where it stands now. One really negative externality of the the matcha shortage that no one's talking about that I think is worth a few minutes of airtime here is that these are suppliers to other small businesses. You have small businesses all over the world who are reselling things like Marukyu products or, or in Shichimeien's products or Ippodo products and they don't have stuff to sell. Look, it says that as a fine example. They specialize in these traditionally blended products. They don't have anything to sell at the moment. That must hurt, right?

Ryan · 29:09

And many other places as well that cannot be supplied who are basically buying wholesale. And so we really hope that this doesn't hurt a lot of those vendors in the short term. While there is record demand, you know no one wants an inconsistent supplier. It hurts customers and it hurts those businesses. System stability is definitely needed within this market. Yeah, but this is, I would, I would say it's inevitable growing pay.

Zongjun · 29:35

But you know, like as we are, as the holding industry understand this will be the new status quo. I think you know, like with new investment, with new, you know, planning for the coming years, I think this will be would not be a problem in the future.

Zongjun · 29:50

Yeah. And two is, you know, people start looking to places like Korea and China for really high quality products that can maybe serve the bottom of the market, not necessarily the top, but for random people just tasting, you know, mixing stuff in a matcha latte in a random cafe setting, maybe they don't need the best. Yeah, maybe like, and I mean that in the best way possible, but they could have a much more industrial product or product is not necessarily from Japan and not everyone cares. I mean, honestly, if you're putting it in your bubble tea, do you need to have the best thing when there's tapioca and all these sweeteners?

Zongjun · 30:24

Maybe you you know something from another country might be lower in price and just be nearly equals quality when it's being used as an ingredient in that context. Only when you are using handmade bubbles and fresh Hokkaido milk.

Ryan · 30:38

There we go. Sounds good. So that's our take on the matcha shortage after hearing all these different perspectives. And we think it's a net spreading of culture, but certainly does have some negative externalities. The most common thread that everyone explains is that it can only be produced about once a year, which is interesting. But I don't think it's really the 'cause. I mean the cause.

Ryan · 31:03

It's overwhelming demand. Natural constraints are in all industries. So it's not a 'cause. It can only be produced once a year, but you know, every year there's a new batch coming. It's a renewable reason. It's a renewable reason. So I think it's a fine segue into sort of where we see ourselves in all of this and starting a new company. So Sanko, which is the company that runs the Specialty Matcha Podcast, is now about two years old. We've been commercially active I think for closer to 18 months. First six months of our existence was really figuring out what direction we wanted to point the company in. But we would like to share our

Ryan · 31:39

startup pitch and we apologize that we buried this so deeply given the expectation set and the title, but we're going to make it very short kind of elevator pitch style. This is who we are. So it's Sanko matcha products. Our goal, our vision is to enable the creation of the highest quality matcha in the world at scale and particularly help other people create the highest quality matcha in the world and at scale. We do this by creating technology to mill matcha fresh and to lower the barriers for preparing high quality matcha for both consumers at home and at cafes. We're also establishing direct

Ryan · 32:17

sourcing relationships with Japanese tea farmers to create a consistent supply for anyone who has our mill. But we're also going to keep our mill an open ecosystem. We'd love to work with brands as well as using our milling technology and their consistent supply and their brand to use this as infrastructure to create a very fresh product and to kind of rethink the existing supply chain for Matcha products.

Ryan · 32:41

And then last, we focus on education such as this podcast and we also plan on writing a book very soon. So more details about that to come. We are a small but mighty team of three people. We've all worked together actually as former colleagues at our last company which is called Gastrograph AI and we're very internationally distributed. So Zhongjun, Sam, goes back and forth between the US and China. I'm from the states, but I live in France now full time. And then our founding team member Gwen is based in the States.

Ryan · 33:14

And so we're usually distributed across three time zone, which actually makes it very easy help coordinate shipments and stuff. Yeah, to serve a pretty global audience. That's it's been an advantage. So our background started at the Tea Institute at Penn State, which was an interdisciplinary tea Research Institute dedicate the study and preservation of all tea ceremony. I was the second executive director of this research group, and Zhongjun was actually the third executive director. At any time, there were anywhere from about 30 to 40 student researchers there, and our mission was really to study and promote Japanese, Chinese, and

Ryan · 33:52

Korean tea ceremonies. At the time, we were the only institution in the United States that hosted both Omotesenke and Urasenke schools of Chanoyu, or traditional Japanese tea ceremony. And we also brought in a lot of Chinese and Korean tea experts. We as part of this program, we both flew in international experts to come speak, usually in long form exhibitions and then we also sent students abroad to learn about these products at origin.

Zongjun · 34:24

A huge part of the mandate of the Tea Institute was to have student LED research. So 1 of Zhongjun's projects, for example, was using his GIS background, which is like satellite imaging. Yeah, to look at the tea growth from from the heavens. Yeah, it was a quite quiet experience. So we were using a satellite imaging technique to essentially picking up the spectral signature of the tea bushes on the ground and trying to monitor the growth and shrinkage of at the time was focusing on Taiwanese tea plantations. But we thought that it might be a very interesting topic to use that technology to study, you

Ryan · 35:03

know, the historical growth and now probably shrinkage of Japanese teeth. Yeah, so actually we'd really love to see like to met to do a study on honzu shading because it's probably of a pretty clear infrared signature from the sky as long as you got to whip out that skill set and train some models. We need to get you some good data too. Anyone this thing is any good satellite data let. Us know that said you know any I knew. Thanks.

Ryan · 35:27

But one of the earliest research projects at the Tea Institute was developing a system to measure flavor in tea and using then more sophisticated methods than what was being used in traditional sensory science in the science of taste at the time. So I'm the founder of the Tea Institute, did research using AI methods, some cutting edge AI methods on predicting both perception and preference of flavor of tea, and then also started collecting a lot of data on coffee and other specialty products.

Ryan · 35:57

It was a little difficult to recruit students outside the Tea Institute to taste tea. So we opened it up to coffee, and it turns out it's easier to get Penn State students to show up to taste coffee and fill out a survey form.

Ryan · 36:09

And then when we started doing beer tastings, we got a whole lot more students and didn't have any data problems at all. By surprise. And with this data set and these new AI methods, and we started to realize that you could make pretty accurate predictions on what people would like and dislike and build these predictive models.

Ryan · 36:26

Realized it didn't belong in academia and spun it out of the university to form its own company, which is called Gastrograph. AII was on the founding team of that before we did any sort of large scale institutional rounds. And then Zhongjun joined right after our series seed investment of $4 million from venture capitalists. So we moved to New York City, we went through Techstars, we started working with gigantic food and beverage companies. We found a really good product market fit in large FM CGCPG products as well as some of their suppliers. There's a whole industry called flavor houses which sell and create flavors.

Ryan · 37:02

So found great success there as well. And part of what Zhongjun joined part of our job right after raising our series seed $4 million, we we had another data problem. We needed to collect much more international consumer preference data.

Ryan · 37:16

So Zhongjun and I went on basically a year long road trip across over a dozen countries collecting consumer preference data. So we basically landed in a country, worked with the local recruiting firm, had them, went grocery shopping, had them taste a bunch of different flavors in combination of flavors, collected that consumer preference data that we then send back to the team who are building preference models and selling them onto food beverage companies. And so that was our life for a very long time until COVID kind of shut it down.

Ryan · 37:48

And then after COVID, I continued to do that in Zhengjun had it got stuck in China and did a lot of business development in Shanghai. So, but across, so we did this across cumulatively across all of our team went to about 30 different countries in person and recruited anywhere from 100 to thousands of consumers to understand their preferences.

Ryan · 38:11

So not only do we have hard metrics about what people like and dislike, we had a lot of anecdotal learnings from doing this. I think I'd been to around 18 to 20 countries just myself and doing that. And one thing that just became super obvious was that matcha showed up everywhere, in places that I just wouldn't have expected, seemingly overnight. I was into matcha like a little bit before it was cool. It wasn't in every coffee shop when I started learning to it. Like matcha to me was a ceremonial ingredient with strong memories associated with Sunday mornings being yelled at to move something 2cm to the

Ryan · 38:49

left. And now I'm starting to see it in all these corners of the world. And we realized that there was a real opportunity here. So both as we were transitioning outside of our roles within that company much later on in 2022 and 2023 respectively, we wanted to see like OK, what is like the biggest problem in Matcha, where can we add value? And what we really realized is that the whole existing supply chain industry was serving yesterday's consumer for the most part, it was very ceremonial focused and that the rapid growth, if you track that up and to the right versus the innovation that was going on in

Ryan · 39:30

Matcha, these are two very divergent vectors. They're very divergent lines. And that what was needed was we had to have like this third wave moment of infrastructure to enable higher quality products, right, Third wave coffee and specialty coffee. They didn't need to invent espresso machines or gooseneck kettles or pour overs or PID controllers. These are all things that already existed that just needed to be leveraged.

Ryan · 39:59

All that infrastructure was there. Like people are still literally grinding things on these 25 kilogram stone mills. So we realized that probably the biggest quality barrier was the lack of efficiency to mill matcha fresh. So that was what we decided to work on. Our goal is to focus sort of tomorrow's customer. You know, it's not a problem if you're in Japan domestic market, right?

Ryan · 40:22

Everyone keeps fresh stocks like you have tencha getting milled into matcha and being quickly consumed. That's just not what the supply chain looks like anymore. Now it's got to sit on a boat or sit on a plane and go to someone else's warehouse and they got to sell it.

Ryan · 40:36

And by the time this matcha gets to the consumer, it's been 6 months to 18 months and the product is basically dead, right? But the infrastructure within Japan to do this type of milling and like these short supply chains, it didn't exist. So we thought, you know what, if everyone could have the ability to mill matcha themselves at an incredibly high quality standard.

Ryan · 40:56

And then we're also really interested in creating a new line of equipment for preparation for cafes. The reality is, is that chasens and chawans and all of the existing preparation equipment for matcha has been designed and optimized from a form and function standpoint for centuries. For a tea ceremony practitioner who is not using them very often and expected to treat them with a lot of care, using these in a cafe where you're making 50 matcha lattes a day just doesn't make very much sense.

Zongjun · 41:28

It's not gonna work. I mean like doesn't? Work well. Well, originally those chasens were meant to be using probably only once. Yeah, they're chasens are actually. Disposable, they're disposable products now. They're using like 50 times in some of the high volume cafes, probably in two hours. It's really a we are retrofitting of a legacy product.

Zongjun · 41:51

Yeah. So we wanted to gather some agency to help change that kind of in a very similar fashion that fellow of the coffee company does that creates coffee equipment. We're very inspired by their aesthetic and form and function and want to do a very similar play, but on matcha and for matcha equipment.

Ryan · 42:10

And so that's where we see ourselves fitting into the industry and that's kind of our startup pitch and not perfectly well rehearsed, but that's that's who we are and what we're working on. It's who we are for the moment.

Zongjun · 42:21

That's true it. Goes, you know, we'll inevitably be changing along with the industry and the growing community, but you know, the core vision of us remained as a giver, a provider, a infrastructure builder for this community will remain the same. Yes.

Ryan · 42:39

And we're heads down focused on creating a fresh milled matcha product and creating these mills to enable other people to mill it fresh. That is really our primary objective. We focus that's that's our full time job at the moment. And then everything else is just in service to the broader mission, whether or not it's this podcast or finding a tencha supply or working on other products to create Matcha fresh. That's our sort of our secondary work and goals. So that is a fine segue into the last segment of this podcast, which is sort of our call to action. Our mill is creating things that taste really good. We're comparing it to

Ryan · 43:17

benchmarks. We're doing a bunch of experiments and we are finally milling things and that taste pretty good, and we're closing in on finalizing the mechanical designs of this. Once we do that, we'll have a better sense of price. And we're also in parallel working on aesthetics. We are not going to do a gigantic splashy launch in the beginning, but we want to run a beta program with what are essentially prototypes.

Zongjun · 43:43

We want to get these mills out into people's hands, out into the world. And a battle test. Them we want to battle test them and we want to be your partner. We want to be partners with all of these different beta testers.

Zongjun · 43:56

We will come physically wherever you are in the world. We will show up physically in person, do an implementation work with you with this machine and understand how you might use it, how you want to use it and triage through any problems.

Zongjun · 44:11

And we're also going to have a lot of guarantees. We're working out the the final details around like making sure that we either fix something immediately if it breaks on you or just get you a new prototype if anything's broken.

Zongjun · 44:22

So we want to de risk this proposition, but we're really looking for early adopters that are interested in testing out a matcha mill. Perhaps people that were interested in buying an ishi-usu and didn't want to make the investment or people who decided not to buy an ishi-usu but would like to mill matcha fresh. And so we're actively looking for partners. I'd say we have about 5 people committed so far to being a beta tester.

Zongjun · 44:43

We would like to see that number closer to 10, especially because it's anything more might be way too much travel for us. But we do want to do this in person and understand how these are going to be used before we solidify and make the investments for us as a company to create molds to make these things at scale. Because basically every prototype is going to be one off manufactured like CNC routed absolutely inefficient. And we want to do a pricing model where it is very fair, much cheaper than an ishi-usu, but enough that it covers our costs and bringing it.

Zongjun · 45:18

But we'd like to be partners and we really commit to de risking this, but we would also really like to learn from you. So anyone who's listening that has a matcha business or a coffee business that would like to be an early adopter in being a part of our beta program, please reach out.

Ryan · 45:34

My e-mail is ryan@sanko-cha.com and Sam's is the same, sam@sanko-cha.com. And we would love to to talk with you, get to learn about your business. Our timeline is within the next few months we would like to have these released and then as we solidify all of the other details we're then after the beta testers we're going to open it up to pre sales for the main actual commercial launch of these mills. We are doing an open ecosystem model. So if you have your own brand and you'd like to source your own tencha, totally fine, you can use that. And we're going to have a pretty competitive wholesale program where if you supply cafes or you

Ryan · 46:19

supply other matcha businesses that might be interested in the mill too, we're going to create incentive structures and so that you get a Commission of that sale. Right now the functionality and the features of the machines pretty agile. You can tweak the pressure compression, pressure of the millstone and change the RPM and also change the capacity of the pooling system.

Ryan · 46:41

So in this way, we wanted to really give you the freedom of using this machine in any circumstances for any of your usage contexts. But there will be things that we hadn't thought about and throughout the process it will really be a learning experience for us to help us bring more value add to your business. Yeah, absolutely.

Ryan · 47:01

And also the plates are completely swappable and interchangeable. And so like a pretty big risk factor buying an ishi-usu is dropping or damaging in some way from the millstone face. But with these we can get them made at scale and to really high precision from an engineering and manufacturing perspective. Yeah, we don't need to ship you a Japanese grandpa. Chiseling damage, The issues of plates. Yes.

Zongjun · 47:26

So those will be much easier to replace and will definitely come with spare millstones in case something does happen. But also what's very exciting about this model is that these millstones are completely swappable and interchangeable.

Zongjun · 47:41

So in the future we might experiment with different groove patterns which gives different levels of efficiency. Different. Material and different materials. So something we're actively investigating are using some form of hard and stainless steel plate and even finding ishi-usu makers that are interested in making plates that will fit this mill to have a stone ground product as well. So if anyone knows any ishi-usu makers that might be interested in this opportunity, we would love to be connected with them to see if we can make that a reality even faster. Since there seems to be high consumer demand for it, we don't see it as necessarily necessary

Ryan · 48:18

from a strictly a food science perspective. From the ceramic plates that we have created are incredibly hard, incredibly durable, incredibly easy to manufacture, and very food safe. It's extremely biologically inert. So for example, a lot of coffee grinders use similar material. Actually, they use the same material and so it actually makes more sense from a food processing perspective than using a stone.

Zongjun · 48:44

Yeah, it's also a lot of pharmaceutical industries using the same material. Yes, but we're also want to have a a stone version as well, almost certainly not going to launch with it. But the idea with this mills that it's a pretty flexible platform where we can give maximum agency and potential for creativity to the user to create new and interesting matcha products.

Zongjun · 49:08

We're working on a pipeline and getting a high high range of tencha supply. To really diversify the choice for consumers to getting more exposure to a wide variety of Japanese. Yeah, we've actually been talking to a large number recently of people more in the dessert bubble tea sector of this.

Ryan · 49:26

Maybe they want something that's bitter, but they want a fresh ground product because one, it's more nutritious, but it also might just be more potent than what they're buying. So we think that we kind of you need matcha for everyone to, to borrow a phrase from MTCH. And so we want to focus on that.

Ryan · 49:42

I'm not just a high end artisanal product, although we want, we think that's very important, but also having product that is very economical for all different types of businesses. All right, that's a perfect place to stop. We've had a blast filming season 2. We're going to take a week off, so there's gonna be nothing in the feed.

Zongjun · 50:01

Holidays. We can't believe that we've done this for 50 episodes in a row. It's kind of crazy. And we'll see you on the next one. Yeah. Coming soon. Thanks.