Economic and Financial Forces that affect the Tea Consumption in Saudi Arabia
There are many economic and financial forces and aspects that can affect by increasing or decreasing the percentage of the overall consumption of tea in Saudi Arabia. One of this is the presence of war in the Middle East (, 2002, ). This war factor helps to increases the price of tea in the market. Due to the price increase of tea, coffee have become one of the favorite drinks and therefore become its primary competitor in terms of sales. Data shows that coffee retail sales increase to 58% during 2005 (, 2006).
Growing domestic demand, competition with other countries and loss of the Soviet market also affect the export of tea and eventually lead to the decline of the export industry (, 2004, ).
Another great aspect that can affect the industry and the overall consumption of tea in Saudi Arabia is the change in weather. Unlike coffee, tea is less prone than the coffee and cocoa to peaks and troughs due to change of weather and other diseases (, 2002).
Another thing is the effects of the temperature or the weather to the preference of the consumers. According to & (1986), tea consumption in the US declined by 2% for the year; this is because as cooler weather in the spring and a late summer reduced, consumption of iced tea has gained more popularity than the usual hot tea. This is not a problem when it comes to the situation in Saudi Arabia, this is because, the said country is composed or in the middle of a desert and therefore, it has a hot temperature in the morning but offers an extremely cold ambiance at night. This is the primary reason why tea and coffee is a necessity in the country.
Another aspect is the motivation of the workers towards the production of tea. This can affect the overall quality of the said product. But due to the decline of the price of the tea, the production cost have risen, this have putted the pressure to the farmers’ incomes and the working condition of the laborers (, 2002). The low price of tea is passed to the poorest segments of the country in the form of low wages for the employees in a given plantation. Low price of tea is an advantage to the part of the consumer but it offers low wage and benefits for the workers that are involved in the said industry. This is due to the urge of the manufacturer to lower their price in order to gain a competitive advantage against their contenders.
Another factor is the price volatility issue. It is necessary requirements for viable and feasible future markets because it is only when price change that producers, traders and processors find out that they are in great need to evade against the price fluctuations (, 2002).
Behavioral Consumption Forces that affects the Tea Consumption in Saudi Arabia
There are many behavioral forces that are affecting the overall consumption of tea of Saudi Arabia. One of the greatest factors that can affect the consumption of tea is the shift of the consumer’s choice that prefer to a healthier lifestyle (, 2007). Appendix A indicates that due to health reasons, consumers are shifting into healthier beverages. The consumption of plain milk increased by 14% and flavored milk by 7% (, 2007). Although the data shows that health issue is the primary factor why consumers are settling for healthier drinks such as fruit juices and milk, positive issues of tea towards health aspects also affect the response of consumers in Saudi Arabia towards consumption of tea. Drawing on a large sample from the Saudi Arabia, . (2003) found out that tea consumption has a potential protective effect to the coronary heart disease (cited in , 2007, ). The knowledge and consciousness of the consumers regarding the health effects of tea as well as those unhealthy benefits are the primary reasons and factors that can affect the overall consumption of tea. Appendix B shows the primary reason why do consumers are drinking tea in Saudi Arabia.
Another reason is the launching of new beverages in the market such as new flavor of coffees and milk. It can affect the industry because there are consumers that will switch from the tea to another product.
Another factor is the innovation. Because of this aspect, manufacturers of tea will be able to create new varieties of tea that will catch the attention of the market and eventually lead to large sale of their product. New varieties such as flavored tea such as apple, lemon, strawberry as well as red, green and blue tea will help to increase the interest of the consumers. It will help the company to target new market such as those teenagers that are not into tea but because of the new taste and flavor, they will be able to capture the demand of the teenagers. New and improved packaging also has its great impact to the consumer.
Another factor that can affect the consumption of tea in Saudi Arabia is the culture and customs of the Saudis. Saudis preferred to highly sweetened drink tea throughout the day (, 2005,). Tea is a part every meal.
Tea is also a part of their ceremonial functions (, 2005, ). It is offered in welcoming guests in any formal occasion like meeting with businessmen and government officials (, 2005, ). Saudi men gathered in a café to drink tea while discussing current and past issues that are affecting the life of each one of them as well as the global issues and factors that are affecting the current performance of their country and industry. This affects the overall consumption and the entire tea industry in the country because tea is a part of their lives.
Hypothesis
There are many factors that can affect the consumption or demand of Saudis over tea. These can be economic, financial and personal factors that can affect the preferences of the consumers in Saudi Arabia.
During 2003, tea had gained an 81% of incidence of consumption and 37 % of the share f the total beverage consumption (see Appendix A for the table of incidence of consumptions of beverages) (, 2007). This record had decreased during 2005; the data shows (see Appendix A) that the consumption of tea had reduced from 81% to 78% and the share of consumption has reduced by 7% (, 2007). Health issue is the primary personal reason why Saudis are into tea. Some believe that it is good for their health while other oppose. Another reason is the culture and the long time believes of the citizens about the importance of tea in their life.
As of the financial and economic reason, price is the primary factor. Tea markets are not apprehended around the international market price but according to the diverse auction prices in different producing countries such as India (, 2002). The entire market is therefore hazier and more complex, but the local pricing of every grade of each factory’s produced means that the price of tea is more responsible to producers (, 2002).
Bibliography
Appendices
Appendix A: Incidence of Consumption and Share of Consumption in Saudi Arabia
Incidence of Consumption (%)
2003
2005
Water
100
100
Tea
81
78
Coffee (Hot)
51
47
CSD (Cola)
44
43
Juice/Drinks
30
60
Laban
28
33
Plain Milk
16
33
CSD (Non Cola)
15
18
Powdered Fruit Drinks
11
6
Flavored Milk
3
10
Non-alcoholic Beer
3
4
Juice Milk
2
5
Cocoa drink (hot/cold)
2
4
Cordials/ Squashes
2
1
Sports Energy Drink
1
5
Share of Consumption (%)
2003
2005
Tea
37
30
Coffee (Hot)
18
15
CSD (Cola)
13
11
Juice/Drinks
9
16
Laban
8
7
Plain Milk
4
7
CSD (Non Cola)
4
4
Powdered Fruit Drinks
11
6
Flavored Milk
3
1
Non-alcoholic Beer
1
1
Juice Milk
2
5
Cocoa drink (hot/cold)
1
1
Source: (, 2007).
Appendix B: Reason for Drinking Tea
Top 10 Reasons for Drinking Tea
%
Feel energetic/active/awake
24
Feel alert/focused
22
Feel cool
21
Wash down the food
19
Habit
17
Aid in digestion
15
Feel close to family/entertain guests
13
Have a good time/fun
7
Feel refresh/quench thirst
5
Feel soothed/relaxed/get sleep
5
Source: (, 2007).
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