I am currently finishing a series of articles on traceability, transparency and decentralization technologies (30 experts interviewed)
hong kong

Hong Kong: an Export Destination, a Re-export Hub

CONTENTS
Retailers
Restaurants
Wine consumption
Route-to-market
Our Score
68

The combination of factors facilitating the growth of wine sales in Hong Kong includes the removal of Hong Kong’s wine duty in 2008, an enhanced wine appreciation culture supported by the government and private sector, and efficiency in importing and exporting as a market and re-export hub. Hong Kong is a major hub of wine consumption in Asia.

RATE THE HONG KONG WINE MARKET ATTRACTIVENESS

Pursuant to an agreement signed by China and the UK on 19 December 1984, Hong Kong became the Hong Kong Special Administrative Region of the People’s Republic of China on 1 July 1997. In this agreement, China promised that, under its “one country, two systems” formula, China’s socialist economic and strict political system would not be imposed on Hong Kong and that Hong Kong would enjoy a “high degree of autonomy” in all matters except foreign and defense affairs for the subsequent 50 years.

Hong Kong has a free market economy, highly dependent on international trade and finance. Hong Kong has no tariffs on imported goods, and it levies excise duties on only four commodities, whether imported or produced locally: hard alcohol, tobacco, oil, and methyl alcohol. There are no quotas or dumping laws.

Hong Kong economy indicators

Mainland China has long been Hong Kong’s largest trading partner, accounting for about half of Hong Kong’s total trade by value. Hong Kong’s natural resources are limited, and food and raw materials must be imported.

Hong Kong is a dynamic market with a sophisticated international community where new high-quality products are readily accepted. 95% of Hong Kong food supplies are imported.

Modern grocery outlets

Wines at the retail level are found in all range of shops from high-end specialty stores, concept stores, to supermarkets, and convenience stores. Supermarkets, on the other hand, offer a good range of choices and attract those who are more price-sensitive. In recent years, retail stores have been enhancing their online sales offerings. From the perspective of a consumer, the selection at online stores is comprehensive and many of the sites provide search functions that are convenient for consumers to identity products within preferred criteria.

Supermarket/Department Stores” includes sales of supermarkets, convenience stores, and food and beverage sections at department stores. They are the modern grocery outlets that provide consumers with convenient and high-quality options. In addition to groceries, these stores are offering a more comprehensive shopping experience with increased items of fresh food, bread and pastry, organic options, and hot takeout meals.

Two major grocery chains, Wellcome and ParknShop, dominate the supermarket category with their over 550 outlets all together. Both chains recently expanded their premium and upscale outlets as consumers continue to seek high-quality, imported gourmet products.

Hong Kong is a quality and trend driven market so price is not always the most important factor for food and beverage purchases.

Name of RetailerOwnershipTarget Customer
WellcomeDairy FarmMiddle Class
ParknShopCK HutchisonMiddle Class
CR VanguardChina Resources EnterprisesPrimarily Local
U-SelectChina Resources EnterprisesPrimarily Local
DCH Food MartDah Chong KongMiddle Class, Primarily Local
Market Place by JasonsDairy FarmAffluent
AEONAEONMiddle Class
YATASun Hung Kai PropertiesMiddle Class, Primarily Local
City’SuperCity Super GroupAffluent
SogoLifestyle IntlMiddle Class, Primarily Local
Oliver’s The DelicatessenDairy FarmAffluent
READ MORE China, Is the Golden Age of Wine Over

A world class restaurant city

Hong Kong is a world class restaurant city with one of the highest number of restaurants per capita, at around one restaurant for every 600 residents.

As consumers are becoming increasingly sophisticated in their appreciation of wine, competition has intensified at retail and food service levels. Operational challenges and price competition will continue to drive buyers to refine product offerings to retain and gain market shares.

Restaurants and bars in Hong Kong normally charge a high mark-up on wine.

Hong Kong wine consumption, by volume

Hong Kong restaurants consist primarily of five broad categories:

  • Chinese cuisine is the top restaurant category. It will continue its dominant share due to deeply rooted cultural events, such as banquets for weddings and dim sum lunches, often enjoyed by groups of adults and families. Among all Chinese cuisines, naturally Cantonese is the most widely available option as the majority of Hong Kong residents have ties to the Cantonese origin and culture. Other easily found cuisines include Shanghainese, Sichuan, and Chiu Chow.
  • Non-Chinese: due to its history as a global trade hub, sophisticated and affluent Hong Kong consumers have an enthusiasm for a range of international cuisines made from high-quality ingredients, including Western, Japanese, Korean, Thai, Vietnamese, Indian, and more.
  • Fast Food outlets suit Hong Kong’s quick-paced lifestyle where dining out twice per day at convenient locations is not uncommon.
  • Bars: Hong Kong’s vibrant nightlife is renowned and is served by some 800 bars and pubs across Hong Kong.
  • Other establishments: “Tea restaurants” offer a range of localized Western and Chinese cuisines and beverages. Hong Kong also has a vibrant coffee culture.

Hotels – In 2016, tourist arrivals reached 57 million, with visitors from Mainland China representing 75% of travelers. Hotels in Hong Kong offer premium dining experience including buffets and occasional menus by celebrity chefs from overseas. Local residents fill dining outlets in hotels, especially during festivals when families and friends gather for celebrations.

The Hong Kong Government eliminated the wine tax in 2008. Beverages with less than 30% alcohol content, primarily wine and beer, are not subject to an excise duty. Hong Kong has developed into a dynamic market for wine, both as an export destination and as a re-export hub.

A platform for wine re-exporting to Asia

Premiumization is becoming more widespread across all alcoholic beverage categories, and consumers are looking for distinctive experiences

Though re-exports also declined in 2017, some traders believe the role of Hong Kong as a re-export hub has not diminished in its importance. They continue to use Hong Kong as a purchasing and distribution center to the region, mainly to Mainland China, to minimize risk and enjoy the flexibility of consolidating shipments.

Import statistics show a strong preference for red wine (about 82% of the total in volume and 89% in value) over white. Cabernet Sauvignon, Merlot, and Shiraz are the three most popular grape varietals of red wine in Hong Kong. Chardonnay remains the most popular grape type of white wine. Sparkling wine, mostly champagne, is gaining in popularity as reflected in growing sales, especially among young adults.

Millennials look for new and trendy ideas and tend to endeavor less traditional options. Their preferences pose opportunities for new alcoholic beverage items.

The largest supplier, France, which accounts for around 60% of Hong Kong wine import values, is expected to further consolidate its leading position given its heavy long-term investment in promotions.

The volume/value gap shows that the French offer exports mainly high-priced wines Bordeaux wines remain predominant among exported French wines. Burgundy, on the other hand, has gained market share in 2019.

The French offer has the advantage of its quality but also and above all of its diversity which, if it allows to offer very high quality wines, also proposes a very good offer in the middle range, which is a great advantage in this period. Moreover, the maturity of a part of the consumers benefits to the less “known”, “atypical” wines or any product reflecting an image of quality, soil and authenticity. The diversity of the range of French wines responds to a crisis mentality where the quality-price ratio becomes a primary factor.

Australia, Hong Kong’s second largest wine supplier, is still far behind France in value (10%) but with a more pronounced presence in volume (25%). The United Kingdom is in third place by value, demonstrating the importance of the consumption of grand cru and prestige wines in Hong Kong (mainly through auctions and English wine merchants).

Hong Kong wine consumption, by value

Although some items share smaller portions of the market, traders have noticed growth potential and are pondering possibilities of expanding choices for consumers in the future:

  • Organic wine: as the organic food and beverage sales in Hong Kong are growing, there are more inquiries in organic options for wine.
  • Non-alcoholic wine: for people need to refrain from drinking e.g. health concerns, age under 18, needs to drive, etc., non-alcoholic wine seem an alternative for them to participate in the collegial drinking environment.
  • Packaging options: screw caps are convenient for food service and less-than-750ml bottles feed the needs of small household gourmet dining.

Hong Kong’s modern and efficient port terminal and free port status make it an attractive destination and for re-exports. Hong Kong is a trading hub where buyers make purchasing decisions for a vast range of consumer-oriented products that are transshipped to China and other parts of Asia. Most transshipments to Macau are purchased, consolidated, and shipped via Hong Kong.

To facilitate wine re-exports from Hong Kong to Mainland China, a “Cooperation Arrangement on Customs Facilitation Measures for Wine Entering the Mainland through Hong Kong” (“Customs Facilitation Arrangement“) exists. This trade facilitation measure has been extended to all ports in all 42 Customs Districts in Mainland China.

Hong Kong is a platform for re-exporting to Asia since 17% in value and 27% in volume of wines imported into Hong Kong are then re-exported, mainly to mainland China. Note that re-exports are down sharply 33% in volume, 53% in value) since 2018.

READ MORE Taiwan, Socializing with Wine in Hotel Restaurants

Business is done quickly

New-to-market exporters may consider several approaches to enter the Hong Kong retail market:

  • Establishing a representative office in Hong Kong: A good method to build trade relationships and implement marketing programs, but rents and operating expenses can be costly.
  • Developing a relationship with a Hong Kong agent: Well-established companies have extensive distribution networks to supermarkets, other retail outlets, and many also cover non-retail sectors. Hong Kong agents very often request exclusive sales rights. This is common in Hong Kong due to the small geographical size.
  • Exporting direct to supermarkets: Branded products that sell direct to supermarkets may be required to provide exclusive sales rights for the products in Hong Kong. In this case, expensive slotting fees may be waived.

Many restaurants, hotels, and retailers work closely with local wine importers to broaden the variety of products offered. New-to-market wine exporters that wish to enter the Hong Kong market can connect with importers and explore the market.

Many Hong Kong supermarkets charge slotting fees for new products’ placement, as well as other terms, such as promotion discounts, back-end income (flat rebate per year that a supplier pays to the retail chain based on the annual turnover), D.A. (Distribution allowance – the fee that the supermarkets charge for distributing the products from its warehouse to its many branch stores), and incentive rebates (a percentage of turnover rebated to the supermarkets when sales exceed an agreed amount).

Business is done quickly, especially in times of crisis when the market moves faster.

hong kong
Hong Kong: an Export Destination, a Re-export Hub
Our evaluation method
The data shows key metrics, and these are combined to show a ranking calculated using a composite weighted attractiveness combining overall economic factors and wine market factors.
WINE CONSUMPTION IN VOLUME
52
WINE CONSUMPTION IN VALUE
74
IMPORTED WINE IN VOLUME
65
IMPORTED WINE IN VALUE
79
POPULATION
16
GDP PER CAPITA
84
Reader Rating0 Votes
0
68
Wine Market Attractiveness