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Exporter Guide

WINE IN HONG KONG


AND MACAU
Market Profile
November 2010

This document is one of a series of free information tools for exporters produced by New Zealand Trade and Enterprise.
New Zealand Trade and Enterprise provides a wide range of standard services and sophisticated solutions that assist
businesses through every stage of the export process. For information or advice, phone New Zealand Trade and
Enterprise on 0800 555 888, visit www.nzte.govt.nz, or contact your New Zealand Trade and Enterprise client manager.
CONTENTS

1 MARKET STRUCTURE 3
1.1 Market Overview 3
1.2 Market Drivers 3
1.3 Market Potential 4
1.4 Import Trends 5
1.5 Key Players in the Market 6
1.6 Regulatory 8
1.7 Sustainability 8
2 MARKET ENTRY AND DEVELOPMENT 10
2.1 Market Entry Strategies 10
2.2 Points of Differentiation 10
2.3 Long Term Strategic Issues for Exporters to Consider 11
2.4 Distribution Channels 11
2.5 Pricing 12
3 MARKET RESOURCES AND CONTACTS 14

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1 MARKET STRUCTURE
1.1 Market Overview
The population of Hong Kong is seven million comprising 95 percent of Chinese descent,
four percent ‘other Asian’ and one percent European. Wine consumers in Hong Kong are
more likely to be local Chinese familiar with western food and beverage products,
Europeans and expatriates. Hong Kong does not produce any wine due to land
constraints and the high cost of production, hence the market is dependent on imports.
The Hong Kong wine market is estimated to have generated total revenues of US$440
million in 2009, with market consumption volume at 28.7 million litres.1 Wine imports
reached US$520 million in 2009. Total wine imports (including red, white, sparkling and
fortified) over the 2005-2009 period grew from US$89 million to US$520 million,
representing a continuous average growth rate (CAGR) of 55.45 percent.2
Cabernet Sauvignon, Merlot and Shiraz are the three most popular grape varieties for red
wine in Hong Kong. Together they account for around 80 percent of total volume sales. Of
these, Cabernet Sauvignon is the most popular, accounting for around 50 percent of total
red wine sales. For white wine, Chardonnay is the most popular grape type, accounting
for over 60 percent of total white wine sales.3
Macau is a small market with a population of just over half a million people. However, the
gaming sector contributes to an influx of over two million tourists each month.4 Macau
imported a total of US$117.7 million in wine in 2009, an incredible 1,242 percent increase
from 2002 values (US$8.8 million). Just like other Asian countries, Macau is
predominately a red wine market. The ratio of consumption between red wine and white
wine is approximately 100:15.

1.2 Market Drivers


Until recently, the import duty was a key constraint to the growth of wine consumption in
Hong Kong. Prior to February 2007, the rate was 80 percent ad valorem, which is high
compared with most other Asian markets. As a result, wine was expensive in Hong Kong.
In February 2007 the Hong Kong SAR government reduced the import duty to 40 percent
and in February 2008 the government waived the duty altogether in a move to establish

1
Source: Datamonitor. Wine in Hong Kong to 2014. October 2010.
2
Source: Hong Kong Census and Statistics Department via World Trade Map.
3
Source: USDA Foreign Agricultural Service Gain Report. Hong Kong Imports of U.S. Wine Set New Record. 3/18/2010.
Gain Report Number HK0004. www.fas.usda.gov/gainfiles/200803/146294113.pdf.
4
Source: Government of Macao. Statistics. http://portal.gov.mo/web/guest/info_detail?infoid=86423.

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Hong Kong as a regional fine wine hub. Prices have reduced to more acceptable levels for
consumers, which has encouraged stronger market growth.
French wine is the most popular, followed by Australian wine. Middle aged Chinese tend
to favour French wine, especially red, due to its established reputation. Europeans,
expatriates and the younger or more westernised Chinese tend to drink New World wines,
either because they know the wines, or they perceive wine to be a fashionable product.
However, the growth of wine consumption amongst younger people in Hong Kong may
decline over time as Hong Kong’s birth rate is currently amongst the lowest in the world.
Most consumers believe that drinking about two glasses of wine a day is beneficial to
health and that is a major influence on the boom of the wine market in Hong Kong. Similar
to other Asian countries, Hong Kong is primarily a red wine market. Wine traders and
retailers point out that it is because consumers like the flavour and colour of the wine,
along with the higher perceived health benefits associated with drinking red wine.
The wine market in Macau has benefited from the entry of large hotel and casino
operators since the gaming sector was opened to foreign competition in 2002. Wine sales
started to build in 2002 and experienced dramatic growth following the completion of
major hotel and casino projects in 2006. In August 2008 the Macau Special Administrative
Region Government waived the import duty for wines and the market is expected to grow
further.

1.3 Market Potential


In 2009, auction houses Sotheby’s and Christie’s reported that Hong Kong had overtaken
New York and London as the world’s largest market for rare vintages. Hong Kong’s
vibrant local market and prime geographic location serve as a platform for growing wine
trade in other Asian markets. Hong Kong re-exported 19 percent by value of its wine
imports and retained 81 percent for local consumption in 2009. To help the industry better
grasp the business opportunities in the Mainland, the Hong Kong Government has signed
an agreement with the General Administration of Customs to facilitate measures for wines
exported from Hong Kong to Mainland China. The measures were implemented on a trial
basis in Shenzhen in the second quarter of 2010.
According to importers, the global financial crisis impacted on wine consumption in Hong
Kong over the 2008-2009 period. However, wine traders are generally optimistic about
future sales and believe there with be growth, albeit slightly slower, from the existing
considerable base. The wine market is predicted to reach US$532 million - 34.4 million
litres - in 2010.5

5
Source: Datamonitor. Wine in Hong Kong to 2014. October 2010.

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1.4 Import Trends
Total wine imports reached US$520 million in 2009. Strong overall growth can be
observed over 2007 and 2008 as the Hong Kong government first reduced, then
eliminated, wine tariff duties.
Red wine makes up just under 90 percent of all imports, with just under 29 million litres
imported in 2009, valued at US$464 million. Although imports of both white and sparkling
wine have approximately doubled over the past five years, both still represent
comparatively lower import values, US$25 million and US$24 million respectively.

New Zealand’s total wine exports to Hong Kong have grown at a continuous average
growth rate (CAGR) of 40 percent over the past five years. In 2009, white wines
dominated exports at around 60 percent of trade (NZ$5.3 million). The remainder of
exports consisted of red wine at 39 percent (NZ$3.5 million) and sparkling at 1 percent
(NZ$90 thousand), combining to total exports of NZ$8.9 million.

Source: Hong Kong Census and Statistics Department, via World Trade Map

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Source: Hong Kong Census and Statistics Department, via World Trade Map

Source: Hong Kong Census and Statistics Department, via World Trade Map

1.5 Key Players in the Market


France and Australia dominate both red and white export categories. New Zealand is the
third highest volume exporter of white wine to Hong Kong and the tenth of red wine. Most
top ten red and white wine exporters to Hong Kong have enjoyed double-digit CAGR rates
over the past five years. Argentinean red and white exports in particular have surged in
demand, with CAGR rates in excess of 40 percent in both categories.

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With wine exports of US$88.9 million, France was the most significant supplier to Macau,
followed by Australia (US$7.1 million) and Portugal (US$6.5 million) in 2009. New Zealand
exports made up less than one quarter of a percent of the exports to Macau in 2009 with
exports totalling only US$269 thousand.

Top Ten Importers of Red Wine to Hong Kong (Litres)6


2005 2006 2007 2008 2009 CAGR
0 --The World-- 11,856,603 13,643,609 17,536,220 23,599,034 28,872,672 24.92%
1 France 3,996,284 4,529,595 5,906,889 7,460,471 9,906,642 25.48%
2 Australia 2,667,038 3,010,868 4,275,555 5,058,045 6,296,833 23.96%
3 United States 1,426,699 1,542,819 1,596,977 3,301,613 3,854,509 28.21%
4 Chile 1,434,879 1,843,259 2,219,007 3,324,293 3,005,809 20.31%
5 Spain 681,695 972,674 1,187,784 1,458,931 1,384,345 19.38%
6 Italy 444,384 488,602 655,809 675,569 1,272,064 30.07%
7 Argentina 129,430 374,074 613,070 455,071 746,519 54.97%
8 United Kingdom 164,071 162,144 196,630 284,733 638,414 40.45%
9 South Africa 365,060 216,686 257,679 366,490 480,502 7.11%
10 New Zealand 75,030 137,540 153,223 278,454 247,937 34.83%

Top Ten Importers of White Wine to Hong Kong (Litres)5

2005 2006 2007 2008 2009 CAGR


0 --The World-- 2,348,580 2,387,433 3,058,360 3,379,225 3,463,115 10.20%
1 Australia 463,196 467,530 625,757 648,904 923,516 18.83%
2 France 598,641 581,779 611,081 833,941 591,765 -0.29%
3 New Zealand 169,754 239,709 324,466 358,232 401,510 24.01%
4 Chile 336,607 334,361 456,364 409,350 344,909 0.61%
5 Italy 184,321 202,470 284,627 281,729 333,937 16.02%
6 United States 254,277 194,917 250,504 243,775 232,684 -2.19%
7 Germany 56,727 73,822 113,767 154,439 204,832 37.85%
8 Spain 100,422 142,853 153,117 170,990 173,279 14.61%
9 South Africa 56,947 58,923 123,415 89,558 89,692 12.03%
10 Argentina 18,924 26,827 54,297 39,593 76,709 41.89%

6
Source: Hong Kong Census and Statistics Department, via World Trade Map

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1.6 Regulatory
Duties and tariffs
Hong Kong is a free port. Duties are only levied on four groups of commodities –
hydrocarbon oil, liquors, methyl alcohol and tobacco, irrespective of whether the product
concerned is locally manufactured or imported. It is duty free to import wines into Hong
Kong.
Licensing and registration requirements
Import licences, issued by the Hong Kong Customs and Excise Department, are required
for alcoholic liquors with an alcoholic strength above 30 percent by volume measured at a
temperature of 20ºC. As the alcoholic strength of grape wines is below 30 percent, a
licence is not required to import them into Hong Kong.
Labelling requirements
Labelling requirements for wine, liqueur wines, sparkling wines, aromatised wines, fruit
wines, sparkling fruit wines and other drinks with an alcoholic strength by volume of 10
percent or more as determined under section 53 of the Dutiable Commodities Ordinance
(Cap 109) (L.N. 85 of 2004; L.N. 139 of 2004) are exempted from Schedule 3 of the Food
and Drugs (Composition and Labelling) Regulations, except paragraph 3 (see details on
the website - www.cfs.gov.hk/english/food_leg/food_leg_cl.html#6).
Quotas
No quota systems exist for products imported into Hong Kong.
Hong Kong as a gateway to China
With the long trading history between Hong Kong and China, some wine importers in
Hong Kong have already established operations in China. As China has different labelling
requirements, wines in the low to medium price band tend to be imported directly into
China rather than re-exported from Hong Kong as label compliance is labour intensive
and costly. Wine shipped from Hong Kong to China will attract all the usual charges levied
upon entry into China such as duty, VAT and consumption tax.

1.7 Sustainability
Hong Kong remains heavily dependent on imported food products, and in this context
‘local’ production is not seen as a sustainability issue. Sustainable packaging is not
commonplace in Hong Kong, nor marketed as such. Attractive packaging, especially for
products which are sold as gifts, remains popular and is seen as a key factor for success
in the Hong Kong market. There have been some recent efforts to educate the Hong Kong
public on the need for sustainable packaging. Community campaigns have focused mostly

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on recycling expensive packaging (e.g. tin boxes for moon cakes during the Mid-Autumn
Festival) instead of encouraging local people to opt for sustainable packaging.7
Together with the Ministry of Foreign Affairs and Trade, New Zealand Trade and
Enterprise provides regular updates on sustainability issues in the Hong Kong Market. To
view these updates, go to the Doing Business in Hong Kong page on NZTE’s website:
www.nzte.govt.nz.

7
Source: Ministry of Foreign Affairs and Trade with New Zealand Trade and Enterprise. Sustainability Market Intelligence
July 2010 Quarterly Report. www.nzte.govt.nz/explore-export-markets/market-research-by-industry/Food-and-
beverage/Documents/FB%20Sustainability%20report%20for%20Hong%20Kong%20July%202010.pdf.

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2 MARKET ENTRY AND DEVELOPMENT
2.1 Market Entry Strategies
French wine is well received in the market due to its long established reputation. Most
wine importers in Hong Kong maintain French wine as their main business line with “New
World” wines added to their portfolio for diversification. At present, New Zealand wines are
not widely known in the market – a factor of New Zealand’s relatively low profile and Hong
Kong being predominantly a red wine market. Although New Zealand has a strong
reputation for its white wine among regular consumers of white wine (especially sauvignon
blanc), few local Chinese wine drinkers are aware of it.
Most New Zealand wineries produce boutique wines and their lead product tends to be
priced at a premium. Consumers in Hong Kong are only willing to pay for premium wines if
the product is known or perceived to be of premium quality, as well as having a “famous”
label. As a result it will take time and investment for New Zealand brands seeking to
establish a premium positioning.
The Australians, French, Chileans, Californians and Italians are considered the most
active players in the market. Their wine promotion organisations and governments
undertake a lot of promotional activities into both the retail and HRI (hotel, restaurant and
institutional) channels in Hong Kong. A few Australian and South African brands targeting
the retail sector are regularly advertised in newspapers and magazines.
Targeted wine tastings and promotions are common forms of profile raising and brand
building in Hong Kong, especially for New World wines. With greater awareness and
reputation in the crowded Hong Kong market, even in small niches, New Zealand brands
can better position themselves in their chosen segments and build up acceptance among
the trade and consumers to realise desired price points.
New Zealand wineries may also choose to exhibit at trade fairs as a vehicle to identify
importers for the Hong Kong and China market or to gain more exposure for their brands.
Importers targeting the HRI sector usually run wine tasting activities to promote their
products to clients. Retailers communicate with their customers via the internet, e-mail or
direct mail outs. They also run wine tasting activities in their stores.
New Zealand wineries with an interest in the Macau market should also consider focusing
on the hotel, restaurant and institutional sector as consumers are more likely to be familiar
with New Zealand wine and more importantly, willing to pay a premium.

2.2 Points of Differentiation


As the production volume from most New Zealand wineries is small, New Zealand wine
producers should position themselves as boutique suppliers in niche market segments

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instead of attempting to compete directly with larger wine producers in mainstream
segments.

2.3 Long Term Strategic Issues for Exporters to Consider


Global wine supply is rapidly increasing. The Hong Kong wine market will become more
competitive and market prices in both mass market and niche segments are expected to
decrease as a result. This is a challenging environment in which to build a stronger market
presence and requires an investment in marketing and promotional support.
If New Zealand producers are to compete with wines from other countries in the mass
markets, the industry should investigate cost and price structures, combined with more
profile raising and brand building activities in Hong Kong, and trial some labels in the
market where volume can be assured.
Alternatively, boutique wines seeking to extend into the Hong Kong premium market will
require targeted market development activities to achieve desired positioning and pricing
and to gain acceptance for both the quality and the label.
New Zealand’s investment in high quality Pinot Noir suggests a possible area of market
potential in Hong Kong worthy of development. As a red wine, Pinot Noir should be well
accepted in Hong Kong (its qualities have been found to best complement Chinese roast
style meals, especially duck) but local consumers are not familiar with Pinot Noir. A
concerted marketing effort will be required to develop the Pinot Noir market in Hong Kong
and establish New Zealand as a leading supplier of Pinot Noir.

2.4 Distribution Channels


Wine distribution in Hong Kong is relatively straightforward. The following illustrates typical
distribution channels for Hong Kong.

Re-export
Macau and
China

HRI Customers

Importers Consumers

Exporters

Retailers

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Wine retailing in Hong Kong is mainly through supermarket chains and specialty wine
shops. There are over 750 supermarket outlets and 170 wine shops. Less experienced
wine consumers usually buy their wines from supermarkets and base their purchase
decisions on price. Wine connoisseurs predominantly purchase from wine shops due to
the wider selection of varieties, sources and labels. They also buy their everyday drinking
wines, usually in cases, direct from importers for a greater discount. As premium fine
wines are mostly sold in the retail sector it retains the greater market share by value.
There are approximately 13,250 eating establishments in Hong Kong. Consumers are
more likely to drink wine at functions, business dinners and wedding banquets. They also
like to order wine when they dine out. The HRI sector consumes more wine by volume
than the retail sector but less by value as restaurants tend to pour cheaper wines as their
house wines.
Wine is available in both European and Chinese restaurants in Hong Kong. Fine dining
and high end Chinese restaurants tend to feature mid to premium range wines while
family and casual restaurants offer low to mid range products.
Macau wine distributors source wines from wineries as well as Hong Kong importers.
They may import directly from wineries if the label is popular and is targeted at the
mainstream market. Distributors tend to import boutique wines via Hong Kong importers
as it is more cost effective to purchase a selection of different wine labels and varieties.
More importantly, they do not need to commit to a large volume of stock from a single
winery. The timeframe to ship wines from Hong Kong to Macau is half a day.

2.5 Pricing
The younger generation of Chinese generally has limited disposable income to spend on
luxury products such as wine so they are more inclined to consume wines under HK$100
(equivalent to NZ$20 or below). Chilean and Australian labels are strong at this end of the
market so tend to be popular with these consumers.
Most expatriates and people who are well exposed to the western dining culture enjoy
wine and know how to recognise and appreciate quality wines. They tend to be executives
with reasonable incomes. This group is more inclined to spend between HK$100 and
HK$350 per bottle (equivalent to NZ$20 to NZ$70). The wines consumed by this group
are more diverse in terms of varieties and countries of origin. As New Zealand is a
boutique wine producer, this segment is a good fit for New Zealand wine.
The high income middle aged group has a higher disposable income to spend on wine.
Labels, perceived quality and the prestige factor are far more important to these
consumers than price per bottle. This group will pay HK$350+ per bottle (equivalent to
NZ$70+) for wines they like, usually the more premium French wines.

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Profit margins for importers and retailers are approximately 30-40 percent and 30-50
percent respectively in Hong Kong.
For Macau, wines imported from Portugal tend to be at the lower end of the market with
import prices averaging between MOP30 (US$3.75) and MOP40 (US$5) per bottle.
French wines imported into Macau are mostly premium fine wines and the average import
price was MOP679 (US$84.88) and MOP392 (US$49) per bottle for red wine and white
wine respectively. Australian wines imported into Macau were primarily low to mid range
with an average import price per bottle of MOP93 (US$11.63) for red wine and MOP53
(US$6.63) for white wine.

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3 MARKET RESOURCES AND CONTACTS
ASSOCIATIONS
Hong Kong Trade Development Council www.hktdc.com
Census and Statistics Department of Hong Kong www.censtatd.gov.hk
Macao Trade and Investment Promotion Institute www.ipim.gov.mo
Macau Department of Census and Statistics www.dsec.gov.mo

TRADE EVENTS

HOFEX 2011

Held in May biennially www.hofex.com


Hong Kong International Wine & Spirits Fair
Held in November every year www.hktdc.com/fair/hkwinefair-en
Restaurant and Bar 2011

Held in September every year www.restaurantandbarhk.com


Wine and Gourmet Asia - Macau
Held in October every year www.wineandgourmetasia.com
Vinexpo Asia-Pacific 2012
Next event in Hong Kong will be held www.vinexpo.com
29 - 31 May 2012

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