Torture the data, and it will confess to anything

My dear fellow Teatrader @thedevotea wrote a few weeks ago a post on a report about the increase in tea consumption in the world between now and 2019. His main complaint was that Australia didn’t make it to the top 20 of this list.

This is something rather unfair because there is a tea brand in this country that tries to change things out there (no name @thedevotea, no name).

When I read this post, I knew I had to write something about the report behind it.

I first looked at the tables available and wondered what was going on there until I noticed that it was all about market value and not consumption.

Now I got it.

So the overall tea market value in the whole world is going to increase in the 4 next years of a total of 32.56% (5.8% per year), with the situation being completely different from one country to another.

From a classical point of view, a market increases in value if it either:

– increases in volume while increasing/retaining its prices or not going through a huge decrease in prices,

– goes through an increase in price while keeping the same volume of sales.

An increase in volume on the tea market of a said country can mean several things. First of all, that the country population just grew or that people buy more tea or both of them at the same.

An increase in price can either mean a lack of supplies or an increase without any increase in quality (a monopoly or oligopoly situation), or with an increase in quality (new competitors coming to the market with better products, customers willing to get more for their money) leading customers to be ready to pay more for what they buy. This happens quite often when the incomes in one country rise.

The last option is a mix of both.

You can understand that the consequences of these different reasons are quite different in terms of what can be expected in the future for tea.

The situation will of course be different from one country to another.

Let’s try to do a guess on the top 20 growth rate found in the study and to categorize the different countries depending on the reasons behind their growth. Obviously, this analysis is 100% personal and subjective but it is based on my educated guess.

Since I don’t know everything about these countries so what is left blank are the topics I don’t know enough about to make an educated guess (but you can always give me the info I am lacking).

In order to try a bit more rigorous in my approach, I decided that the first two columns (increase of population and growth of average basket size) would be based on “hard” data, which means that the first one is based on the UN prospects while the second one is based on the tea consumption per capita and the position when compared to the world average.

Country Increase of population Growth of average basket size Lack of supplies Oligopoly situation Increase in quality

China

Possible because of the sheer number of inhabitants

Unlikely, competition of coffee

Unlikely unless massive change on the production side

Unlikely, due to the number of local producers

Possible, will depend on the evolution of the competition with coffee but for the same reason, potential risk of a drop in quality.

United States

Unlikely

Possible, tea is a challenger

Unlikely unless massive change on the production side

Unlikely, due to the nature of the market

Possible, will depend on the content of the average basket and the rise of a tea culture among the youngsters (see Tea with Gary)

Morocco

Likely

Unlikely, already high

Unlikely unless massive change on the production side

Sri Lanka

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Japan

Unlikely

Unlikely, competition of other drinks

Unlikely unless massive change on the production side

Unlikely, due to the nature of the market

Due to competition with other drinks and tea products, potential risk of a drop in quality.

Panama

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Bolivia

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Rwanda

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Ecuador

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Ethiopia

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

South Korea

Unlikely

Possible, below world average per capita but with a possible diversification towards other drinks (developed country)

Unlikely unless massive change on the production side

Due to competition with other drinks and tea products, potential risk of a drop in quality.

Kenya

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Sudan

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

Malaysia

Likely

Low probability, above world average

Unlikely unless massive change on the production side

Kyrgyzstan

Likely

Low probability, above world average

Unlikely unless massive change on the production side

Peru

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

United Kingdom

Unlikely

Unlikely, already among the world top tea drinkers per capita

Unlikely unless massive change on the production side

Unlikely, due to the nature of the market

Unlikely due to the consumption habits or only at the margin

Vietnam

Likely

Unlikely unless massive change on the production side

Mongolia

Likely

Low probability, above world average

Unlikely unless massive change on the production side

Colombia

Likely

Likely, below world average per capita.

Unlikely unless massive change on the production side

As you can see, I don’t know enough to make a credible review of the 20 countries and I will let you conclude why these countries should (according to the original market analysis) experiment a rise in their tea market. But according to Socrates and the Oracle of Delphi, knowing that you know nothing is the beginning of wisdom, so I don’t worry about it, drink tea and think of myself as a wise man.

Who knows it might be true?

And since being wise is still compatible with being honest, I must confess that the title is not from me but from Ronald Coase, a British economist and writer.

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Xavier

My name is Xavier.

I live on the other side of the pond but you had probably found this out thanks to my “strange” English.

I am a tea addict and I studied several (and I do mean several) years ago marketing, hence this blog, which will try to combine both worlds.
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