⏱ 2 min read
The Short Version
Kagoshima is investing $16.5 million to stop exporting its raw tencha and start capturing the matcha premium itself. By scaling processing capacity thirtyfold, the prefecture aims to transform from a mere supplier into a dominant force in the high-end finished market.
In This Article
Kagoshima is investing $16.5 million in a new processing facility designed to produce 300 metric tonnes of matcha annually starting in December 2027. This move aims to fix a massive structural imbalance in Japan’s largest tencha-producing prefecture. While Kagoshima’s tencha output surged 169% between 2020 and 2024—reaching 2,150 tonnes and doubling Kyoto’s production—nearly 90% of that leaf has historically been processed elsewhere. By increasing its processing capacity thirtyfold, the cooperative intends to keep the finishing and marketing value within its own borders.
Processing investments can help Japanese growers capture more value, but maintaining premium prices will increasingly require verifiable origin and credible quality assessment.
Capturing the premium margin
The scale of the shift is significant given China’s dominance in the sector; industry estimates place Chinese matcha output above 12,000 tonnes for 2025. As Japan fights to maintain its reputation for high-end quality, the ability to provide verifiable origin and consistent grading becomes essential. Processing investments can help Japanese growers capture more value, but maintaining premium prices will increasingly require verifiable origin and credible quality assessment. The goal is to transition from being a mere supplier of raw materials to a dominant force in the finished matcha market.
Diversification in Kenya
A similar push for higher-value products is unfolding in Kenya, where producers are attempting to break away from conventional CTC black tea. Currently, CTC accounts for roughly 99% of national production, but government initiatives are driving an expansion into purple, green, yellow, oolong, and whole-leaf orthodox teas. The ambition is massive: increasing installed orthodox processing capacity from 15 million kilograms in 2024 to 200 million kilograms by 2030. This includes a dedicated Mombasa orthodox tea auction launched in September 2025 and plans to nearly double licensed orthodox factories to 42 by 2027.
The economic incentive is clear when comparing commodity prices to specialty returns. While conventional CTC tea recently fetched $2.25 per kilogram at a Mombasa auction, Japan’s non-powdered green tea exports averaged approximately $20 per kilogram in 2025. One specific project, the Japanese-supported sencha initiative at Kangaita, utilizes a 360-million-shilling facility to help smallholders produce steamed green tea. For Kenya, the hurdle remains converting this new processing capacity into the consistent quality and reliable distribution required to secure repeat orders from premium global buyers.
Do you think regional processing hubs are the most effective way for growers to protect their margins against global competitors?
Questions & Answers
Why is Kagoshima investing in a new matcha processing facility?
Kagoshima is investing $16.5 million in a new facility to reclaim value from its tencha production. While the prefecture's tencha output surged 169% between 2020 and 2024, nearly 90% of the leaves were historically processed in other regions. By increasing local processing capacity thirtyfold, the prefecture aims to keep the finishing and marketing value within its own borders rather than acting as a mere supplier of raw materials.
How does Kenya plan to diversify its tea production beyond conventional black tea?
Kenya is driving an expansion into high-value specialty teas like purple, green, yellow, oolong, and whole-leaf orthodox varieties. The government aims to increase installed orthodox processing capacity from 15 million kilograms in 2024 to 200 million kilograms by 2030. This strategy includes launching a dedicated Mombasa orthodox tea auction in September 2025 and nearly doubling the number of licensed orthodox factories to 42 by the year 2027.
What is the difference in market value between commodity tea and specialty green tea?
Specialty green tea commands significantly higher prices than conventional commodity tea. For example, conventional CTC black tea recently fetched approximately $2.25 per kilogram at a Mombasa auction. In contrast, Japan’s non-powdered green tea exports averaged roughly $20 per kilogram in 2025. This massive price gap provides a strong economic incentive for producers in both Japan and Kenya to transition toward higher-value, processed specialty products.
When will Kagoshima's new matcha processing facility begin operations?
Kagoshima's new processing facility is scheduled to begin producing matcha in December 2027. The facility is designed to produce 300 metric tonnes of matcha annually to address structural imbalances in the local industry. This investment is a strategic move to ensure the prefecture can provide verifiable origin and consistent grading, helping Japanese growers compete against China's massive matcha output and maintain a reputation for high-end quality.
Originally reported by Tea Journey.
