Archive for the Category » Statistics «

28
Aug

France, its colonies and tea

I know it is probably quite strange to publish something about a country that is going to get under the ever cautious eyes of Mr @thedevotea himself and that @lahikmajoe wrote about.

What is even worst is knowing that in 2009, with a mere 0,21 kg per year and per capita, France ranked 88 in terms of tea consumption per capita and per year (along really known tea drinkers countries like Azerbaijan, Belize and Moldiva) (source: http://en.wikipedia.org/wiki/List_of_countries_by_tea_consumption_per_capita and the Food and Agriculture Organisation of the United Nations).

But we are talking about the country of Theodor, Palais des Thés, Mariage Frères, Kusmi Tea, Dammann Frères and so many others I forgot to name (and no this is not a ranking), so there must be something to it.

I did some research and found online a book published in 1912, L’agriculture pratique des pays chauds, a compilation of newspapers from the Bulletin du Jardin Colonial et des jardins d’essai des colonies françaises (Bulletin from the Colonial Garden and the French Tropical Botanical Gardens).

I think the best way to sum up this article is to say that some of the French colonies had potential but lacked both the cheap labour needed to harvest tea and the skilled one needed to prepare it.

The main producing area was Indochina but I will come back to it later.

In Senegal, there was no tea but a kind of ersatz, the Lippia adoensis, but the production was rather low.

Mayotte and Madagascar produced some tea (not much) but mostly in private gardens or through experiments with plants comings from Java or Ceylon.

The production in the second of these islands is said to have been of excellent quality but I don’t know how they judged it.

La Réunion must have shown great promises since tea production was introduced at least 4 times (1816, 1841, 1858 and 1894) from Java or Ceylon, mostly because the interest seems to have vanished because of the same reasons that seem to have plagued the French tea industry.

However, the quality was there since in 1867, tea from La Réunion earned the gold medal at the Paris Universal Exposition (the writer wrote the London one but it must be a mistake).

Now we are getting to Indochina, the tea jewel of the French Empire.

The local people produced a tea but it was badly prepared (at least for the European standards) and as such was not really interesting for the colonial power or the rich local people (who drank Chinese tea)

It seems that the missionaries were among the first to introduce tea production (mostly because no one ever thought of competing against the Chinese teas) in Assam from where it went in the whole country.

The different plantations belonged to French owners and the production was directly sold through them.

But all this for what?

Here is the tea consumption in France during these years.

As you will see it is not really that bright with a really low consumption per inhabitant and a stable price (rather typical of the period).

 

I would have liked to publish here some of the pictures that first inspired me but I asked for the authorization and didn’t receive it.

So I can only put the link here and hope you will click on it.

http://anom.archivesnationales.culture.gouv.fr/sdx/ulysse/index

After clicking on it, just write “thé” in the “Plein texte” box and then hit enter.

Category: History, Statistics  16 Comments
06
Feb

“Café du Commerce” and tea

Let’s start with what is called in French a “Café du Commerce” analysis (mostly a popular wisdom analysis that you can hear in most cafés): tea prices are too high.

You do agree, right? How many times did you hear that? Or perhaps even say it?

I once explained why the same teas sold by two different companies could be sold at different prices(Whats in a name?…Price) but this is not really the point made by popular wisdom here.

The point is more that the price of the commodity itself is high.

Since I begin to write this blog, this question of prices has been fascinating me. Why?

Because tea is for now still sold through auctions and is one of the last (if not the only one) commodities to be sold that way.

This means no futures (to be simple and unfair to what was supposed to be an insurance product about bad crops, let’s say that it is a way for the financial markets to speculate on the prices of commodities but if you want a more impartial definition, just follow the link Futures Contract) and therefore no speculations, only the good old supply and demand meeting each other and deciding for a price.

The perfect dream of any economist, no?

Don’t be afraid, I won’t try to find out if there is speculation on the prices of tea but I will try to find out if it is true that prices are high.

To do this, I needed data (yes, economists can live on a diet made mostly of statistics, data and figures but not without a drink, which for me is obviously tea) and I was lucky to find two online sources: one with the monthly prices (in US cents per kg) of the last 360 months (starting for me in November 1981) at the London and then at the Mombasa auctions (Monthly Commodity tea price from IndexMundi) and the other with the weekly average prices of tea at the weekly auctions of Sri Lanka, Indonesia, Kenya and Malawi from December 1999 to June 2002 (Dharmasena, Kalu Arachchillage Senarath Dhananjaya Bandara (2004). International black tea market integration and price discovery. Master’s thesis, Texas A&M University. Texas A&M University. Available electronically from International black tea market integration and price discovery)

Then I had to cross check the data to see if it was usable for me and the answer was that the first set of data was usable while the second wasn’t.

Why? Because according to the methodology from the author, he had to make some guesses and assumptions (that might be right but I wanted fully reliable data) and second because I had no easy way to know when these auctions were hold, making the second step of my analysis a lot harder to do.

So what does these sets of data look like?

To be as complete as possible, you will find below both of them (for the second one, I put everything at 100 in the first week so as to compare the evolutions of different prices labelled in different moneys) but I will only use and comment the first one.


Click to view


Click to view

You will all see that after a kind of bubble in 1983-1985 and another in 1997-1998, the price was moving around a central value of more or less 200 cents per kg and this until 2005 when it began to rise to reach a little over 350 cents per kg in November 2011, meaning a rise of 175% between 1981 and 2011.

Not bad?

So now, you will begin to wonder why did it rise like that? That is a good question but one I will not answer here as there are several plausible explanations and one set of data even over 30 years might not be enough to find the good one (or good ones).

The next thing you will begin to say is that the good old popular wisdom was right and that we are all sheep waiting to be sheared.

Since you know me a little by now, you can easily understand that the answer might not be as easy as it seems.

Why? I hear them (you know them, the guys sitting at “Le Café du Commerce”) say, “the data is here, you must recognise that we are right.”

I am sorry guys but there is still a little something I need to check before telling you that you are right or wrong.

What do I have in mind exactly? A simple thing : nominal vs. real values.

You are probably thinking this is another strange concept but it isn’t.

You all know that the value of money changes overtime or put it in another way, for 1$ today, you don’t buy the same amount of a given product than 20 years earlier.

You might argue it is just a trick to make things more complex but it has more to do with inflation than with tricks, ie prices go up and down each year following inflation or from time to time deflation, so 1$ of 1991 would be more or less worth 1.6$ of 2011 (I said more or less because I didn’t bother what should be written after the point).


Click to view

So, what do these new figures tell us?

We see that the same bubbles over the years but what is more important is that tea prices have decreased.

Yes, you read me right. In the last 30 years, the price of the auctioned tea has become cheaper in constant money.

You should feel lucky to live nowadays, shouldn’t you?

Category: Analysis, Industry, Statistics  2 Comments
09
Nov

Of competitive intelligence, letters and tea

We live really interesting times.

Thanks to the Internet I can chat with people from all over the world about tea or any other topic I might be interested in.

I can also find a lot of surprises while looking for other things (which is probably my favourite part of the Internet) and I can also have access to a whole set of data and figures on tea trade, tea consumption, tea whatever you might think of.

Now, you are probably wondering if I have lost my mind somewhere over the rainbow or if the Mad Hatter took it to make one of his special teas.

The answer is none of the above.

When I read a book on trade or spying in the old times, I am always amazed by how they informed themselves about prices, products, competitors…

The whole process might surprise a few people that think that we (those of the modern era) invented everything but let’s look more closely at a modern concept: competitive intelligence.

What is it?

According to Wikipedia, “a broad definition of competitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization.”

Now, let’s go for a few lines in the mind of one of the tea merchants from earlier and see if this definition would fit.

Let’s say you belong to a big company, perhaps the East India Company and you want to know if you can still sell tea, how, to whom and at what price (you know that you want to sell tea, don’t you?).

Surprise, you just defined your intelligence needs about your customers, competitions, needs that will allow you or more likely the board of directors to decide what is the best sales strategy for tea.

The next step is to decide who are the people able to answer your questions.

First, accountants to let you know how much it costs, where you make a profit, how much tea you sale each year and other mundane things.

But then, comes the tricky questions regarding competitors, foreign markets.

What do you do?

Today, you would probably look all over the Internet for raw data, chat with people for qualitative information, give a few phone calls, look at the press… But apart from the press, none of these tools were available during the time of the East India Company.

So the only option would be to take your most beautiful feather and write letters (or make others write them after all you are the boss here) to selected consuls and gentlemen to ask them to collect data on the local/national market (depending if there is a thing like a centralised state or if it is more a balkanised one).

You would probably ask the same questions to several people so as to be able to double or triple check their answers (you never know).

Now, gathering and analysis are likely to be done (it was not done as quickly or easily as I might make it sound but still) and this is when distribution of the collected and analysed data would be useful.

If you were in the Middle Ages, you would probably write it down in some obscure language but now in the 19th century, you are civilized, so you probably print it since His Majesty ordered the East India Company to do so.

And guess what? Years later, the Bayerische StaatsBibliothek made a copy of it and put it on the Internet, so enjoy the Papers relating to the trade with India and China including information and prices of tea, in foreign countries.

To help you to read through it, I gathered every tea related information I could find in this book and put it under Google Docs (file here)

Just to show you how serious these people (you know them, they are you) were with tea and competitive intelligence, I must tell you that each file has something like 18 tabs filled with data.

Category: History, Market, Statistics  4 Comments
28
Oct

Transformed in Germany, a new paradigm for German tea?

I had a few discussions and mail exchanges with @Lahikmajoe about the German tea culture and its importance mostly in Northern Germany.

According to him, one of the reasons behind it is that this area is the hinterland of the port of Hamburg.

This was coherent with other things I had read about the importance of Hamburg for the importations of coffee in the whole Europe.

So I decided to try to find a little more information on this and asked the Port of Hamburg Authority about this.

I must say that their staff was really friendly and sent me quickly some data.

According to the German Tea Association, 76.778 tons of tea were handled in Germany.

This figure includes the 50.838 tonnes imported of which about half (25.940 tonnes) were re-exported (probably after some blending and/or repackaging).

About 75% of these tonnages went through the Port of Hamburg, making of it according to the Port of Hamburg Authority the most important European hub for tea trade.

However what I found most fascinating is the data provided to them by the German Tea Association regarding imports and re exports.

When you look at them, you can see two interesting changes over time:

  • the sudden increase from 1988 on of the imported tonnages,

  • the rise of re-exportation (a little over 50% of the imported tonnes in 2010).

This prompted me to look at the few figures I have one more time and to drop the re-exportations to see what is really consumed in Germany.

 

Now, we have a completely different picture.

The 1988 increase is still there but after that, it seems that the importations are more or less flat (in terms of tonnage, value being another interesting indicator to look at).

Is Germany a country famous for its teas? Perhaps or the reason could be different as I read in my Tea Lover’s Guide that Hamburg is home to a certain number of large tea brokers that supply almost all the European “importers” of a certain standing but the problem is that the figures don’t really support that.

For now, the set of data I have is not huge enough to allow me to go further into that direction but my next task is to gather more data and to see with the German Tea Association if they have any ideas on the reasons behind these figures .

So far, I didn’t receive any answer from them but I won’t let them run away with it.

After all, I have all the time in the world as long as I have my tea cup near me.

Category: Analysis, Market, Statistics  6 Comments
25
Jul

A lot of data but no definitive answers

All the data used in this article were found in the 2010 Tea Barometer of the Tropical Commodity Coalition for sustainable Tea, Coffee, Cocoa and are stated as being 2008 data.

The most obvious information is that there is a split in the producing countries between those favouring home consumption and those favouring exportation: China and India are both countries that drink more than 70% of the tea they produce while Kenya and Sri Lanka export 95% of the produced tea.

The explanation behind it seems quite logical as China and India have a long tradition of drinking tea whereas in the other two countries, it was only introduced to sell to a foreign market.

 

For auction and direct selling, Chinese teas are all sold directly while most of those coming from Kenya and Sri Lanka are sold via the classical auctions (see what happened in Europe when tea drinking became a must). India is in a third category as its production is sold nearly equally through auctions and direct selling.

When I tried to understand why it works like that, 3 reasons came to my mind.

The first and most obvious one is that these differences could be explained by the introduction of tea in a country “only” in order to supply a colonial power with the use of the sales techniques and infrastructures that keep on being used even when the country becomes independent .

Another plausible explanation was that the higher the quality, the higher the percentage of direct sales or the lower the production, the more the auction system is being used. However, this is not consistent with the facts as Sri Lanka has the lowest direct sales percentage but probably not the lowest quality and the difference in raw production with Kenya is not enough to explain this loss of direct bargaining power.

A third idea was that the countries with more tonnage sold were also the ones most heavily involved in auctions but again China with its “low” level of exportations goes against this rule.

Of these 3 explanations, only the first one is coherent with the 4 countries but the question would then be: why did the situation remain the same?


The smallholders/estates production split would seem to be linked to the timeframe and men behind the introduction of the tea culture (cf. the introduction of tea in Sri Lanka and how smallholders were crushed) but the facts don’t support this theory since only India has a really high percentage of its tea production coming from estates (more than 70%).

Another explanation could be that the countries producing tea in estates do sell teas strongly linked to the places they are in (a bit like terroir in wine) but the Chinese example with its 80% of its tea production coming from smallholders is an example that doesn’t support this theory.

 

Perhaps the reason lies in the workforce but even if in India, you need less men to produce one ton of tea than in the three other countries, the difference between Kenya and Sri Lanka shows that this explanation is not the good one either.

So in the end, what can we learn from this set of data? Several things but more importantly that nothing is as easy as it seems and that more work is needed to understand the tea industry.

If you have information or insights on how it works, please feel free to comment.

Category: Analysis, Industry, Statistics  2 Comments
27
May

The classical economics (Part I)

According to classical economics, prices are the result of the interaction between the quantities of a good supplied by the producers and those demanded by customers.

However for tea, the process is a little different as it involves auctions.

But in spite of this, I decided to stick with the classical economics and to try to describe the market with a first focus on the production side.

 

For this and other similar posts, I will use the world data provided by the FAO, the Food and Agriculture Organization of the United Nations, which goes back to the year 1961.

Here are a few findings (probably quite obvious but who knows?).

 

The world production averaged in these 47 years to nearly 2.2 millions of tonnes per year with only 983,825 tons being produced in 1961 against nearly 3,896 millions in 2008.

As can be seen below, the growth rate is quite impressive and almost constant.


But there is more to it.

 

I looked at the 7 (why 7? only because this number is more or less 20% of the total number of countries and together they produce more than 80% of the world tea production, another illustration of the Pareto Principle) biggest tea producing countries in 2008 (China, India, Indonesia, Kenya, Sri Lanka and Turkey) and the growth of their average production is more important than the growth of the average world production (*4 vs. *3).

Over the same period of time, the number of tea producing countries increased by nearly 30% (and this is without counting the new Republics from the former USSR) but almost a third of the producers have a yearly averaged production below 1 000 t (I checked and this ratio was the same in 1961 and in 2008).

Along the years, the weight of the 7 biggest tea producing countries in 2008 is slightly increasing (from 77.3% to 84% of the world production with a low point at 73.2%) with an important increase from mid 1980s on (linked to an increase of the Chinese production).


What can we learn from this?

Tea production is clearly fragmented with a “high” number of countries involved but with only a few “big fishes” and with one becoming the n°1 producer country and yes, it is China, which sees its share of the world production from 9.9% to 32.7%.

For those interested, the Indian share decreased over the same period of time from 36% to 20.7% (China became n°1 in 2005).

 

The real questions start from now:

  • Why did the Indian production grow less than the Chinese one?

  • Why was there an increase in the number of producers?

  • Why was there an increase in production?

Category: Analysis, Industry, Statistics, Theory  5 Comments
Skysa App Bar