Tea By-Product Business Guide: Monetizing Stem Tea and Powder Residue for Profit and Sustainability

By-products generated during tea production—stems, powder residue, and sifted powder—are gaining attention not as waste, but as new revenue sources and pillars of sustainable business. Materials that might appear destined for disposal actually represent valuable resources.

This article provides comprehensive coverage of tea by-product types and characteristics, domestic and international application examples, monetization models, and pricing strategies. Essential reading for food and beverage industry professionals, cosmetics manufacturers, agricultural stakeholders, and anyone considering new business ventures. Discover the potential of tea by-products and apply it to your business.

Key Takeaways

• Tea by-products are valuable resources: Stems, powder, and residue contain flavor compounds and beneficial components
• Multiple revenue pathways exist: From traditional stem tea to modern food ingredients, cosmetics, and agricultural applications
• Cost reduction meets new income: Converting disposal costs into sales revenue benefits producers
• Sustainability enhances brand value: By-product utilization supports SDGs and ESG positioning
• Quality differentiation creates premium opportunities: Premium by-products from quality tea command better prices
• Circular economy models emerging: From tea waste to fertilizer back to tea fields, closing resource loops

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What Are Tea Production By-Products?

Matcha is a premium tea created by carefully grinding tencha in stone mills. However, this process inevitably generates by-products including stems, powder residue, and sifted powder. While “by-products” might suggest “waste,” these materials actually contain abundant umami and aromatic compounds, making them precious resources. When effectively utilized, they can be deployed across food, cosmetics, and agricultural materials. Here we explain the representative by-products: stem tea, powder residue, and sifted powder in detail.

Stem Tea (Kukicha)

Stem tea is made from stem portions separated during matcha and gyokuro production. Compared to leaves, stems contain less catechins (astringency compounds) and are rich in L-theanine, making sweetness and umami stand out. The fresh, verdant aroma offers distinct appeal different from rich matcha or sencha.

articularly “gyokuro stem tea” using gyokuro stems is appreciated for its elegant sweetness and richness, gaining popularity recently as premium tea. Stem tea generated from matcha production has lower raw material costs and stable supply compared to regular sencha, leading to increased use in commercial-use ingredients and gift blend teas. While a by-product, it attracts attention as cost-effective merchandise.

Powder Residue and Sifted Powder

Stone-ground matcha production inevitably produces particles that don’t become fine powder and coarse particles remaining after sifting. Called “powder residue” (konaochi) or “sifted powder” (furuiko), these are distinguished from first-grade matcha due to inconsistent particle size and color, but retain the same flavor and nutritional value.

Powder residue has particularly high demand in the confectionery and baking industries. When used in cookies, madeleines, matcha latte bases, or ice cream, it allows expressing matcha flavor solidly while controlling costs. Recently, cases of blending sifted powder to sell as “rich matcha” or “matcha salt” are increasing, gaining attention as material that simultaneously achieves food loss reduction and added value creation.

Why By-Products Become Business Opportunities

Tea by-products are often perceived as “waste,” but are actually “untapped resources” that generate both profit and social value simultaneously. Utilization leads to cost reduction, securing new revenue sources, and building sustainable brands.

Cost Reduction Plus New Revenue Streams

The greatest benefit of utilizing by-products is achieving both waste reduction and monetization. For example, matcha powder residue and sifted powder incur disposal costs if discarded, but become new sales when sold to confectionery and baking industries.

• Raw material cost reduction: Available at lower prices than regular matcha, allowing manufacturers to reduce procurement costs
• Stable supply possible: Tea factories generate by-products year-round, suitable for long-term contracts
• Benefits for small businesses: Easy to start small, reducing cost burden for prototype development試作品開発のコスト負担を軽減

This way, converting disposal costs into profit creates win-win relationships between tea factories and manufacturers.

Sustainable Branding

By-product utilization is highly valued from SDGs and ESG investment perspectives. Modern consumers increasingly emphasize not just “what to buy” but “what background the product has.”

• Food loss reduction contribution: Reducing waste and lowering environmental impact
• Circular society participation: Realizing resource circulation by returning by-products as ingredients
• Brand story enhancement: Appealing environmental consideration stance

In practice, Ito En re-resources approximately 50,000 tons of tea residue annually, advancing upcycling into paper, resin, and building materials. Furthermore, collaborating with leather brand “genten,” they developed leather products tanned with tea residue. Products born from “by-product × by-product” combine antibacterial and deodorizing effects with environmental consideration, earning high consumer support.

Application Examples: From Confections and Beverages to Cosmetics

Tea by-product applications already extend beyond food and beverage industries into cosmetics and agriculture. Examining domestic and international cases, by-products attract attention as sustainable materials deployable across multiple uses.

Confectionery and Baking Industry

Matcha powder residue and sifted powder are widely used as ingredients in cookies, macarons, langues de chat, financiers, and other baked goods. After baking, variations in color and particle size become unnoticeable, allowing cost control while expressing matcha-like flavor and vibrant color.

These recipes are applied not only by confectionery manufacturers but also in limited menu development at bakeries and cafés.

Beverage and Food Ingredients

Sifted powder is ideal for bottled green tea, matcha lattes, and matcha ice cream and other mass-production products. Lower procurement costs than regular matcha enable beverage and food manufacturers to achieve stable supply and cost control.

Recently, movements to blend tea by-products into craft beer and smoothies have emerged. “Sayama GREEN,” jointly developed by Sayama tea producers and Asahi Group, attracts attention as sustainable beer blending keba-cha (tea leaf fragments).

Cosmetics and Health Foods

Tea residue and sifted powder are utilized as ingredients in scrub facial cleansers, bath additives, and body care products. The antioxidant and antibacterial properties of catechins make them popular in the beauty industry.

Additionally, cases of drying powder residue into fine powder for use as supplement and functional food ingredients are increasing. Particularly in overseas markets, acceptance as “green tea powder” among health-conscious consumers is growing, expanding possibilities as export merchandise.

Compost and Feed Applications

In agriculture, initiatives to process tea residue into pellets for fertilizer reuse are advancing. “Sus-Tea-nable,” jointly developed by Ito En, JA Ooigawa, and Hotei Foods, is nitrogen fertilizer using tea residue as main ingredient, with full-scale operation beginning in 2025 at Shizuoka Prefecture contract tea gardens.

• Reduces chemical fertilizer usage
• Realizes regional resource-circulation agriculture
• Contributes to tea garden soil improvement and quality enhancement

Furthermore, mixing tea residue into livestock feed is expected to provide intestinal environment improvement and odor reduction effects, attracting attention as a circular agriculture model.

Monetization Models and Pricing Strategies

Tea by-products trade at lower prices than regular matcha, but with added value can generate sufficient profit. Success keys lie in pricing strategy and branding.

Cost-Based Price Design

Powder residue and sifted powder often trade at half to one-third the price of premium matcha, and selling at per-kg prices for OEM enables stable revenue.

Example: OEM Price Image

At these price points, confectionery and beverage manufacturers can reduce product costs while expressing matcha character, leading to continued transactions. Producers achieve both waste disposal cost reduction and stable sales.

Added Value Strategy to Enhance Brand Value

Rather than competing on price alone, providing “story” and “environmental value” together is crucial.

In practice, Ito En × genten collaboration products presented the “tea residue × leather” story, hitting with environmentally conscious consumers and gift demand. By showing by-products not as “cheap off-spec items” but as “premium materials with reasons to be chosen,” you avoid price competition.

Implementation Steps: How to Start By-Product Business

New business using tea by-products succeeds not by starting blindly but through gradual verification and expansion processes. Following these steps minimizes risk while developing market-accepted products.

Following this process allows confirming market fit while minimizing initial investment, increasing success probability.

Take the First Step with By-Product Utilization

Tea by-product business is a field you can start small and grow large. Begin by researching raw material suppliers and OEM partners, starting with prototyping and market testing.

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Conclusion: By-Products as Sources of New Revenue and Brand Value

Tea by-products are no longer “waste.” They represent future-oriented business opportunities that simultaneously solve multiple challenges: waste reduction, cost savings, environmental consideration (SDGs), and brand value enhancement.

Applications are advancing across diverse fields including confectionery, beverages, cosmetics, and agriculture, with potential to pioneer new markets depending on utilization. Using by-products as “upcycled resources” enables differentiated product development and sustainable brand building.
Now is the time to transform the “mottainai resources” (wasteful resources) sleeping in the tea industry into profit and value. The tea by-product business offers pathways to both profitability and sustainability—a combination increasingly essential in modern markets.

Source Tea By-Products or Develop Upcycled Products

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