Shops in Japan are running out of beloved matcha products, as various factors combine to send prices of the green tea powder higher. CNBC's Kaori Enjoji reports.

Tokyo

Rising global demand for matcha has led to significant price hikes and supply shortages, with some shops doubling prices and struggling to keep stock. Japanese exports of green tea, particularly matcha, have reached record levels, driven largely by demand from the United States. The price of tencha, the tea used to make matcha, has surged at auctions, partly due to concerns over crop yields following extreme weather conditions. 

Producers are facing difficulties scaling up production, and some farmers are hesitant to switch to tencha cultivation. The Japanese government is considering subsidies to encourage more farmers to grow tencha, but increasing supply could take several years. Meanwhile, both high-end and casual matcha products are affected by the shortage, prompting efforts to educate consumers about quality differences.

Matcha shortage: Supply squeeze turning green tea into gold

From lattes to desserts, the matcha demand is a surgeon worldwide, but the boom is a driving up prices and leaving some shops empty-handed. CNBC's Karin Joji has more on the story. Matcha mania is turning the green powder into gold. This shop doubled the price of its top quality powder over the last year. We sell first flush matcha, which is less bitter and has more umami, but there's only so much that's available. But the orders keep flooding in, sometimes for as much as one ton at a time. Japan exported a record 36.4 billion yen worth of green tea last year, four times more than a decade ago. The majority is powdered tea, like matcha, bound for the U.S. Prices for tencha, the kind of tea used to make matcha, surged 170% at auction this year. Buyers fear next year's crop is wilting under a record-breaking heat wave. Before they're ground into powder, tencha leaves need to be shielded from the sun, steamed and then dried to bring out the grassy flavor. Even Itoen, which dominates the bottled tea market globally, started a new matcha division as matcha went viral. Our own factory and all of our contractors are jam-packed. It's pretty hard finding somewhere to grind and package the matcha. He says farmers fear boom may turn to bust. Convincing them to switch to tencha from regular green tea has been a hard sell. Reasons for Itoen to raise the price of this tiny tin of matcha powder by 50% in September. Shops are still running out. Very highest tea ceremony grade matcha and also there is the very casual type that people do not know the difference between those matchas. So they use very high quality matcha for acai bowl. So it's really, you know, not good. So now we are trying to educate. And expand at the same time. She's opening in the Philippines next month. The Japanese government is considering subsidizing farmers to try and ramp up matcha production. But planting to harvest can take up to five years. Japan does have a pretty good track record, though, of turning a fad like matcha gorgonzola into a staple. For CNBC, I'm Kawadin Joji in Tokyo.

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