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Hong Kong's wine industry is
supported by a significant pool of experienced
fine wine merchants with good wine knowledge and
international wine trade experience. Besides
wine trading and distribution, wine-related
business includes auction, retailing,
warehousing, catering and transportation.
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Since the removal of all
duty-related customs and administrative controls
in February 2008, Hong Kong has further
developed into a wine trading and distribution
centre for the region, particularly for the
Chinese mainland.
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Hong Kong has entered into an
agreement with the mainland Chinese Government,
allowing wine imports to go into China under CEPA and
enhanced customs facilitation measures.
Industry Features
Hong Kong has a significant pool of
experienced fine wine merchants with good wine
knowledge and international wine trade experience.
Amid the growing demand for wine in Asia, the Hong
Kong government removed all duty-related customs and
administrative controls for wine in February 2008 to
facilitate the development of Hong Kong as a wine
trading and distribution centre for the region,
particularly the Chinese mainland. Besides wine
trading and distribution, wine-related business
includes auction, retailing, warehousing, catering
and transportation.
Following the deregulation,
development of the wine industry has accelerated.
Wine imports surged some 80% in the first year.
According to an ad hoc survey carried out by the Commerce
and Economic Development Bureau to evaluate the
economic benefits of wine duty exemption, about 850
new wine-related companies were set up in Hong Kong
in 2008 and 2009, bringing the total to 3,550; the
wine sector as a whole gained HK$5.5 billion worth
of wine-related business receipts in 2009,
representing an increase of over 30% as compared
with 2007; and the number of employees engaged in
wine-related business increased by more than 5,000
as compared with 2007, reaching 40,000 by the end of
2009. This increase in employment was equivalent to
about 1,000 full time jobs, 60% of which were for
front-line staff; and the number of wine-related
manpower and professional courses (including
sommelier training as well as wine
business/management courses) grew from 21 in 2007 to
86 in 2009. The number of participants in these
courses reached over 8,500 in 2009, representing an
increase of more than two times as compared with
about 2,400 participants in 2007.
Hong Kong has entered into an
agreement with the mainland Chinese Government,
allowing wine imports to go into China under CEPA
and enhanced customs facilitation measures. This
makes the city an unrivalled gateway to China,
attracting industry players from around the world to
launch or expand their business in Hong Kong. Hong
Kong, being a duty-free port with good air
connectivity and storage facilities, is regarded by
Asian investors as the most cost-effective and
convenient distribution hub to store their
investment-grade wines for delivery to their markets
on-demand.
Performance of Hong Kong's Wine Trade
[1]
Since the weather in Hong Kong is not
suitable for growing grapes, there is only very
little wine production in Hong Kong, and therefore
insignificant domestic exports. Virtually all
exports are re-exports of imported wines with Asia
being the major market. Chinese mainland and Macau,
taking up more than 91% of the total in the first
half of 2017, are the major wine exporting
destinations of Hong Kong. In January-June 2017,
total exports of wine saw a sharp decline of 24%,
after a 9% growth last year.
On the other hand, Hong Kong’s wine
imports have expanded fast since the elimination of
import duties in February 2008. In January-June
2017, imports of wine amounted to HK$5.7 billion,
more than three times of the value of HK$1.6 billion
in 2007. Most of the imported wines originated from
European countries such as France and the United
Kingdom, but there has also been a significant share
coming from Australia in recent years. In the first
half of 2017, the value of wine imports decreased by
9%, led by those originated from France (-13%) and
the United Kingdom (-11%).
In volume terms, Hong Kong imported
30.3 million litres of wine in the first half of
2017, with about 43% of these imported wines being
re-exported. The rest – about 57% – of wine imports
were brought away from Hong Kong by individuals or
retained in Hong Kong, for storage or immediate
consumption.
Sales Channels
To facilitate Hong Kong as a trading
and distribution hub for the region, the Hong Kong
government has signed co-operation agreements with
Australia, Chile, France (and its Bordeaux and
Burgundy regions), Germany, Hungary, Italy, New
Zealand, Portugal, Romania, Spain and the United
States (and its Oregon and Washington states) to
strengthen promotional activities in areas including
wine-related trade, investment and tourism. Various
wine promotional activities, including seminars,
wine tastings, receptions and food pairings, also
take place in Hong Kong. In particular, trade fairs
in Hong Kong provide good business matching
opportunities, support new wines and labels
launches, and facilitate market testing on Asian
Palette. Below is a list of selected trade fairs in
the industry.
High-value, investment grade wines
are usually sold through auctions organised by
global auction houses including Acker
Merrall & Condit, Sotheby’s, Christie's
and Zachys. Thanks to the surge in demand from
Asian investors, Hong Kong has maintained one of the
largest wine auction centres in the world since
2009, with auction sales amounting to US$92 million
in 2016, according to Wine
Spectator.
Domestically, wines are sold through
off-trade channels such as supermarkets, specialty
stores and convenience stores, and on-trade channels
such as bars, restaurants and club houses. According
to Euromonitor
International, wine sales in Hong Kong amounted
to US$1,543 million or 33.8 million liters in 2016,
up 6.5% and 3.1%, respectively, per annum in the
past five years. For 2016 to 2021, it is forecast to
grow 9.8% per annum in value terms and 5.4% per
annum in volume terms. Off-trade channels account
for approximately 24% of total wine sales in value
terms and 39% in volume terms in 2016.
Industry Trends
While wine consumption is flat or
sinking across much of Europe, the global attention
has shifted to Asia. Consumers in Asia are
increasingly wine savvy and their demand for wine
remains strong. According to Euromonitor
International, wine sales in Asia amounted to
US$93.3 billion or 6.1 billion litres in 2016, up
2.3% and 2.3%, respectively, per annum in the past
five years. For 2016 to 2021, it is forecast to grow
8.5% per annum in value terms and 3.9% per annum in
volume terms. Sales in China are more spectacular,
with an amount of US$66.5 billion or 4.6 billion
litres in 2016, up 4.7% and 3.5%, respectively, per
annum in the past five years. For 2016 to 2021, it
is forecast to grow 10.4% per annum in value terms
and 5.0% per annum in volume terms.
Due to the growing demand for wine in
Asia and the deregulation of wine imports, wine
business has boomed in Hong Kong. Besides new
entries, increasingly, international wine companies
and their specialists have moved to Hong Kong. For
example, Robert Sleigh, senior director and head of Sotheby's wine
department in Asia, has been relocated to Hong Kong
from New York since September 2010. Also, after six
years in Singapore, the Regional
Council of Burgundy has moved its only office
in Asia to Hong Kong. On the other hand, while Hong
Kong is well recognised as the culinary centre in
the region, wine matching with Asian cuisine becomes
a trend in the form of food and wine appreciation
sessions held by restaurants and hotels. There is
also a food matching competition adjudicated by
Asian experts in the HKTDC
Hong Kong International Wine and Spirits Fair.
Responding to rising demand and
driven by market forces, public as well as private
training institutions are enriching or expanding
their wine appreciation courses and developing
enhanced manpower training programmes. For instance,
the Vocational
Training Council (VTC) offers trainings to
personnel ranging from sommeliers to frontline
catering staff, and provide training on food and
wine pairing, wine appreciation and other
wine-related matters through the International
Culinary Institute, its member institute.
Meanwhile, the School
of Professional and Continuing Education of
the University
of Hong Kong has partnered with a French
institution to launch the first Master of Business
Administration’s programme in Hong Kong on wine.
To support on-demand delivery to
Asian market, storage facilities are necessary and
being built and converted in Hong Kong. With the
assistance of the government, the industry and the Hong
Kong Quality Assurance Agency launched the Wine
Storage Management Systems Certification Scheme, the
first of its kind in the world. The Scheme has been
enthusiastically supported by the industry, with a
total of 66 fine and commercial wine storage
facilities, wine storage facilities in wine
retailers and/or wine transportation service
providers accredited as of November 2016.
CEPA Provisions
Under the Mainland
and Hong Kong Closer Economic Partnership
Arrangement (CEPA), the mainland has given all
products of Hong Kong origin, including wine,
tariff-free treatment starting from 1 January 2006.
According to the stipulated procedures, products
which have no existing CEPA rules
of origin can enjoy tariff-free treatment upon
applications by local manufacturers and upon the CEPA rule
of origins being agreed and met. Non-Hong Kong made
wine is subject to tariff rates of up to 20% when
entering the mainland.
Generally speaking, for wine of fresh
grapes, fermentation and production, identified as
the principal process for the purpose of delineating
their origin, is required to be carried out in Hong
Kong. Detailed information is available here.
General Trade Measures Affecting Wine
Exports
The Chinese mainland is the biggest
export market for Hong Kong. It imposes the
following taxes on wine: import tariff (14% for
bottled wine and 20% of bulk wine), value added tax
(17%) and consumption tax (10%), which results in an
effective tax rate as high as about 48-56%. The two
most critical pieces of legislation concerning wine
imports are the wine standards and the wine
labelling law, both of which are administered by
the General
Administration of Quality Supervision, Inspection
and Quarantine (AQSIQ). Some standards that
apply to wine are “Standards for the Administration
of Wholesaling of Alcoholic Products”, “Standards
for Administration of Retailing of Alcoholic
Products”, “Measures for the Administration of Wine
Distribution” and “Hygiene Standards of Distilled
and Brewed Wine”. However, these standards do not
necessarily correspond with international standards.
Labelling verification must be sought
from AQSIQ,
a process which takes one to two weeks. All
information labelled in English must also be equally
given in Chinese and in the same size font. All
labels must be permanently attached to the bottles.
Separately, the port requires a 24-hour notice prior
to shipment arrival. According to customs inspection
regulations, samples will be selected randomly and
proportionately. Less than 1,500 ml will be sampled
if the bottles contain less than 500 ml. There is
currently no wine classification or grading system
in China.
To facilitate the movement of wine
imports into the Chinese mainland through Hong Kong,
the Customs
and Excise Department (C&ED) of Hong Kong and
the General
Administration of Customs of the Chinese
mainland signed on 9 February 2010 the "Co-operation
Arrangement on Customs Facilitation Measures for
Wine Entering the Mainland through Hong Kong". The
agreement applies to wine which is imported through
designated ports into the Chinese mainland, exported
by Hong Kong registered wine exporters and imported
by mainland registered wine importers. The measures
include pre-valuation of duty whilst the wines are
in Hong Kong and compression of clearance time at
mainland ports. The agreement now applies to all
ports in Beijing, Tianjin, Shanghai, Guangzhou and
Shenzhen. On 18 September 2014, the two Customs
administrations signed a supplement to the
Arrangement to enhance the facilitation measures.
The supplement waived the requirement that wine
consignments from Hong Kong have to be received by
the Mainland Registered Wine Importers, and mandated
the use of a newly developed web-based system for
declaration of wine consignment information to the
mainland customs.
C&ED has
stepped up efforts to tackle counterfeit wine, which
include establishing a dedicated investigation team;
forming an alliance with the industry to strengthen
co-operation in intelligence collection and enhance
their capacity in monitoring market activities;
setting up a specialist team under the alliance,
drawing in experts to assist in enforcement against
counterfeit wine; as well as establishing a liaison
network with overseas and Chinese mainland
enforcement agencies to enhance its capability in
intercepting suspected counterfeit wine and verify
wine authenticity.
Product Trends
More “laymen” labelling and bottle
closures
Wines were traditionally selected
from a wine menu or list without the customers ever
seeing the bottle. Amid the rise of off-trade
channels, wine packaging, in terms of label design
and bottle closure, becomes more important. Now,
wine labels show more information such as the
vintage, the variety and the country of origin.
Label designs are increasingly eye-catching and easy
to recognise as brands can play a big part in wine
selection. For example, Australia’s Yellow Tail
whose distinctive orange kangaroo logo has helped
the brand sell more than 25 million cases in five
years. To make it more user friendly, screw caps,
crown seals, synthetic corks are increasingly used
as alternatives to traditional corks as bottle
closures.
Targeting the entry-level tasters
According to Euromonitor
International, there are more products which
target entry-level tasters and people new to wine
consumption launched in recent years. Examples
include Ruffino
Lbaio Chardonnay by Ruffino
SRL, and Barefoot
White Zinfandel by Barefoot
Cellars. Another company, Te
Hana, also launched Te
Hana Rose Cuvee, a low-price Champagne
available in PARKnSHOP targeting
low- to middle-income consumers.
Wine packaged in smaller bottles
Some wine retailers packaged the same
wines in large and small bottles. The idea is to
allow consumers to replicate a winery tasting room
in the comfort of their own homes, trying a taste of
top-notch wines before committing to buying
full-sized 750 ml bottles.
Companies introduce wines to be
paired with certain foods
An increasing number of consumers
have started to develop a more sophisticated
palette, and are hence consuming more wine.
According to Euromonitor
International, regional companies have started
to launch their products in a bid to appeal to the
local palette.
Source: HK
Trade Development Council |
