U.S. Wines Set New Record

An Expert's View about Wine in Hong Kong SAR

Last updated: 27 Feb 2011

Hong Kong imports of U.S. wines set a new record at US$46 million in 2010, a surge of 15% over 2009. The U.S. is currently the 4th largest wine exporter to Hong Kong behind France, the UK (mainly auction sales) and Australia.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 2/2/2011 GAIN Report Number: HK1104 Hong Kong Post: Hong Kong Hong Kong Imports of U.S. Wine Set New Record 2011 Report Categories: Market Development Reports Wine Approved By: Erich Kuss Prepared By: Chris Li Report Highlights: Hong Kong imports of U.S. wines set a new record at US$46 million in 2010, a surge of 15% over 2009. The U.S. is currently the 4th largest wine exporter to Hong Kong behind France, the UK (mainly auction sales) and Australia. In terms of U.S. wine exports, Hong Kong is set to become the 3rd largest market in 2010 after Canada and the UK, up from the 15th largest in 2007, 7th largest in 2008 and 4th in 2009. In addition to being a vibrant local market, Hong Kong also serves as a gateway to wine markets in the region because of its prime geographical location, superior logistical infrastructure and sound legal and financial system. Trade statistics indicated that Hong Kong traders re-exported 19% of wine imports from around the world and retained 81% for local consumption. Exporters of U.S. wine are encouraged to contact ATO Hong Kong or check the ATO Hong Kong website for information on upcoming trade shows and other promotion opportunities. Page 1 of 11 SECTION I. MARKET OVERVIEW Hong Kong wine imports have soared since the Hong Kong Government?s (HKG) elimination of its excise tax on wine in February 2008, making Hong Kong one of the few tax free markets for wine in the world. World wine imports into Hong Kong hit a new record in 2010, reaching US$858 million and 37 million liters, representing an increase of 75% and 14% respectively over 2009. The U.S. was the 4th largest wine supplying country to Hong Kong after France, the UK (mainly auction sales) and Australia. According to official Hong Kong Government statistics, U.S. wine imports into Hong Kong reached US$46 million and 3.6 million liters in 2010, a surge of 15% and a drop of 12% respectively over 2009. This indicates that Hong Kong imported relatively more expensive wines from the U.S. in 2010. According to official U.S. statistics, U.S. wine exports to Hong Kong have been even greater in 2010, having reached $66 million through November for an increase of 138% from the same period in 2009. [Note: A thorough examination of the discrepancy between the data sets has not been completed. However, for consistency in comparing U.S. figures with those of other exporting countries, official HKG numbers are cited in this report.] Table 1: Hong Kong Wine Imports (Value) (HS Code: 220421) Growth Share of Retained Imports 10 v World v Gross Imports Country (US$ Million) 2006 2007 2008 2009 2010 09 (2010) (2010) The World Gross Imports 91 185 341 491 858 75% 100% Re-exports 23 68 81 91 165 81% 100% Retained Imports 68 117 261 399 693 73% 100% 81% France Gross Imports 42 99 204 270 495 83% 58% Re-exports 16 51 61 68 119 74% 72% Retained Imports 26 49 143 202 376 87% 54% 76% United Gross Imports 5 15 22 71 123 74% 14% Kingdom Re-exports 1 3 1 2 3 68% 2% Retained Imports 4 12 21 69 121 74% 17% 98% Australia Gross Imports 16 25 32 42 53 26% 6% Re-exports 3 6 7 8 11 27% 6% Retained Imports 13 19 25 34 43 26% 6% 80% United Gross Imports 6 8 17 40 46 15% 5% States Re-exports 0 1 1 2 3 45% 2% Retained Imports 6 7 16 38 43 14% 6% 94% Switzerland Gross Imports 0 2 7 8 28 266% 3% Re-exports 0 0 0 0 0 23% 0% Page 2 of 11 Retained Imports 0 2 7 8 28 267% 4% 100% Italy Gross Imports 5 7 10 13 19 46% 2% Re-exports 1 1 2 2 2 33% 1% Retained Imports 4 6 9 11 17 48% 2% 88% Chile Gross Imports 7 9 12 13 17 34% 2% Re-exports 1 2 2 3 4 20% 2% Retained Imports 6 7 10 10 13 39% 2% 79% China Gross Imports 0 0 1 3 16 370% 2% Re-exports 0 0 0 1 14 1189% 8% Retained Imports 0 0 1 2 2 -17% 0% 12% Germany Gross Imports 1 1 3 4 9 166% 1% Re-exports 0 1 1 1 2 20% 1% Retained Imports 0 1 1 2 8 269% 1% 81% New Gross Imports 2 4 5 6 8 50% 1% Zealand Re-exports 0 0 0 0 1 68% 0% Retained Imports 2 3 5 5 8 49% 1% 93% Total of Gross Imports 84 171 313 469 815 74% 95% Top 10 Re-exports 22 65 76 88 157 79% 95% Retained Suppliers Imports 62 105 237 381 659 73% 95% 81% Total of Gross Imports 7 14 29 22 43 97% 5% Rest of Re-exports 1 3 5 3 8 155% 5% Retained The World Imports 5 11 24 18 34 87% 5% 81% (Source: Calculations based on World Trade Atlas data) The following graph illustrates the impact of the elimination of the wine tax on Hong Kong imports of wine by value. Page 3 of 11 The table below illustrates Hong Kong wine imports by volume. The growth rate by volume is significantly slower over its surging value in 2010, inferring a rising demand in higher quality and priced wines. Table 2: Hong Kong Wine Imports (Volume) Share Retained in Growth Imports v Gross 10 v Imports Country (Liters) 2006 2007 2008 2009 2010 2010 09 (2010) Gross The World Imports 16,098,533 20,659,425 27,139,935 32,433,615 36,979,242 100% 14% Re- exports 2,172,828 3,908,206 4,602,240 7,016,799 10,689,151 100% 52% Retained Imports 13,925,705 16,751,219 22,537,695 25,416,816 26,290,091 100% 3% 71% Gross France Imports 5,113,588 6,519,766 8,298,338 10,503,349 13,864,740 37% 32% Re- exports 1,115,070 1,909,463 2,324,981 3,482,744 6,237,573 58% 79% Retained Imports 3,998,518 4,610,303 5,973,357 7,020,605 7,627,167 29% 9% 55% Gross Australia Imports 3,480,378 4,907,165 5,719,646 7,225,087 6,606,813 18% -9% Re- exports 428,605 886,487 816,013 1,089,250 1,532,622 14% 41% Retained Imports 3,051,773 4,020,678 4,903,633 6,135,837 5,074,191 19% -17% 77% Gross Chile Imports 2,177,620 2,675,371 3,733,643 3,350,718 3,783,646 10% 13% Re- exports 200,142 408,607 388,052 516,745 518,262 5% 0% Retained Imports 1,977,478 2,266,764 3,345,591 2,833,973 3,265,384 12% 15% 86% Gross United Imports 1,750,978 1,863,266 3,625,268 4,102,374 3,600,689 10% -12% Re- States exports 76,447 134,125 209,576 523,994 435,169 4% -17% Retained Imports 1,674,531 1,729,141 3,415,692 3,578,380 3,165,520 12% -12% 88% Gross Italy Imports 691,072 940,436 957,298 1,607,617 2,082,687 6% 30% Re- exports 93,169 133,560 186,746 315,004 334,375 3% 6% Retained Imports 597,903 806,876 770,552 1,292,613 1,748,312 7% 35% 84% Gross Spain Imports 1,123,361 1,351,834 1,643,648 1,570,414 1,895,022 5% 21% Re- exports 42,675 69,083 101,406 158,546 332,155 3% 110% Retained Imports 1,080,686 1,282,751 1,542,242 1,411,868 1,562,867 6% 11% 82% Gross New Imports 377,249 481,485 636,686 649,447 919,706 2% 42% Re- Zealand exports 19,966 41,476 29,351 38,183 45,844 0% 20% Retained Imports 357,283 440,009 607,335 611,264 873,862 3% 43% 95% Gross Argentina Imports 400,901 667,367 494,664 823,228 895,620 2% 9% Re- exports 40,039 72,941 116,075 224,695 244,575 2% 9% Retained Imports 360,862 594,426 378,589 598,533 651,045 2% 9% 73% Gross United Imports 165,682 198,924 294,973 658,582 762,058 2% 16% Re- Kingdom exports 13,446 16,229 11,884 34,089 34,814 0% 2% Retained Imports 152,236 182,695 283,089 624,493 727,244 3% 16% 95% Gross South Imports 275,636 381,137 456,633 570,195 590,163 2% 4% Page 4 of 11 Re- Africa exports 15,334 66,517 58,447 69,435 84,139 1% 21% Retained Imports 260,302 314,620 398,186 500,760 506,024 2% 1% 86% Gross Total of Imports 15,556,465 19,986,751 25,860,797 31,061,011 35,001,144 95% 13% Re- Top 10 exports 2,044,893 3,738,488 4,242,531 6,452,685 9,799,528 92% 52% Retained Suppliers Imports 13,511,572 16,248,263 21,618,266 24,608,326 25,201,616 96% 2% 72% Gross Total of Imports 542,068 672,674 1,279,138 1,372,604 1,978,098 5% 44% Re- Rest of exports 127,935 169,718 359,709 564,114 889,623 8% 58% Retained The World Imports 414,133 502,956 919,429 808,490 1,088,475 4% 35% 55% (Source: Calculations based on World Trade Atlas data) The following graph illustrates the growth in the volume of Hong Kong?s wine imports. Outlook for 2011: According to auction house Acker Merrall & Condit (Asia) Ltd., Hong Kong has now overtaken New York as the world's largest wine auction center. Its vibrant local market and prime geographic location serve as a platform for growing wine trade in other Asian markets. Hong Kong re-exported 19% by value of its wine imports and retained 81% for local consumption (please refer to Table 1). To help the industry better grasp the business opportunities in the Mainland, the Hong Kong Government (HKG) has signed an agreement with the General Administration of Customs to facilitate exports of wines from Hong Kong to Mainland China. The measures were implemented on a trial basis in Shenzhen in the second quarter of 2010. For more details on these measures, please refer to the following website: http://www.info.gov.hk/gia/general/201002/09/P201002090213.htm U.S. wine is well known in Hong Kong for being a quality product, but at an affordable price. This is partly attributed to the depreciation of the U.S. dollar in the past few years and aggressive promotional efforts by the U.S. Agricultural Trade Office, the U.S. Wine Institute and U.S. wine distributors in the market. Opportunities to increase awareness and sales of U.S. wines are bountiful at the retail and food service level. Wine promotions at leading retail outlets, wine seminars, tastings, food pairings and trade shows are effective means to promote U.S. wines (please also refer to Section VI of this report). Page 5 of 11 Growth of U.S. wine imports was 135% in 2009 but according to HKG statistics slowed down to 15% in 2010. A key reason for the slowed growth was keen competition for other wine exporting countries. In particular, French and Australian interests strongly promoted their wines throughout the year. Conducting more promotions to increase consumers? knowledge and interest on US wines will help gain more market shares in Hong Kong. SECTION II. COMPETITION French wine still dominates the market, accounting for 54% of total retained wine imports value and 29% of import volume in 2010 (please refer to Table 1). However, New World wines, including those from the U.S. continue to gain popularity and growth in the market. The growth of New World wines is attributed to the boom of the wine appreciation culture and consumers beginning to realize that they can buy high quality New World wine at competitive prices. It should be noted that wine represents a much larger portion of France?s overall food and beverage exports (~70%) to Hong Kong when compared to the United States (slightly over 1%). Thus French wines may continue to enjoy substantial marketing resources to maintain and grow market share given the relative importance of the wine industry to its overall food and beverage trade. SECTION III. MARKET SECTOR OPPORTUNITIES AND THREATS Consumption Patterns Driving the Market 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. Trade statistics revealed that Hong Kong consumers prefer red wine to white wine. In 2010, gross imports of red wine were US$826 million, constituted 96% of total wine imports into Hong Kong. In contrast, gross imports of white wine were only US$29 million (3.4% of total wine imports). Wine traders and retailers pointed out that it is because they like the flavor of the wine, the color of the wine and more perceived health benefits associated with drinking red wine. Hong Kong wine traders are cautiously optimistic about the wine market. As Hong Kong wine imports have reached a larger base, traders expect a slightly slower growth in wine imports in 2011. Cabernet Sauvignon, Merlot and Shiraz are the three most popular grape varieties for red wine in Hong Kong. Together they accounted for around 80% of total volume sales. Of these, Cabernet Sauvignon is the most popular, accounting for around 50% of total red wine sales. For white wine, Chardonnay is the most popular grape type, accounting for over 60% of total white wine sales. Page 6 of 11 Sales Channels Hong Kong?s retail markets, such as supermarkets, specialty stores and convenience stores, account for approximately 60% of the wine sales in terms of volume, and 40% in value terms. The reminder is sold through the restaurants and bars. Generally, wine mark-ups are high in the food service market, resulting in prices being three to four times higher than in the retail market. Retail Market Supermarkets account for the greatest share of wine volume sales among retailers, accounting for 50% of all retail sales. The two largest supermarket chains ? Wellcome Supermarkets (253 outlets) and ParknShop (260 outlets), because of their large turnovers, usually import wine directly from overseas suppliers to reduce middlemen?s mark-ups. Therefore they can price their wines more competitively to their customers, who are generally more price-conscious and rank wine quality, country-of-origin and age as secondary for importance in selection. Wine specialty stores account for 35% of wine retail sales. Watson?s Wine Cellar is largest wine specialist in Hong Kong with 13 outlets. Specialty stores serve a consumer group who pay more attention to wine quality, country of origin, and age, rather than just price. Wine specialty stores offer greater opportunities for moderate and high price point U.S. wine. Other high-end retailers such as Oliver?s, Three-Sixty, Taste, Market Place by Jasons?etc that also carry higher priced wines, but at a much smaller scale due to their fewer number of outlets. Restaurant and Bar Price points of wine sold in restaurants and bars vary according to the overall price point of the outlet. A glass of low-end wine normally costs between US$4-9, whereas a medium- end one costs US$8-20 and a high-end one costs US$20 and above. As is the case almost anywhere, the higher-end the restaurant, the more premium the wine it will serve and vice versa. Restaurants in Hong Kong normally charge a high mark-up on wine consumption. Restaurants that allow customers to bring their own wine charge high corkage fees around US$25-38 per bottle. Since the abolishment of the wine tax in February 2008, many restaurants and hotels have launched more wine-tasting classes and special promotions. These activities have supplemented sales promotions at the retail market in an effort to spread the wine appreciation culture and increase the demand for more fine wines. U.S. suppliers of high price point wines should expect more opportunities and target this market segment. SECTION IV. PRICING Retail Price Segments Page 7 of 11 The abolition of its wine tax has created intense competition in the Hong Kong wine market, placing downward pressure on retail prices of wines. A study of the wines available at the two largest local supermarket chains revealed the 57% of the red wines on offer were priced below US$13, 35% were priced between US$13-26 and only 8% were priced above US$26. As for white wines, 62% were priced at below US$13, 33% were priced between US$13-26 and only 5% were priced above US$26. To see a list of popular wines available in the Hong Kong retail market and their retail prices, please visit the websites of the two leading supermarkets and the leading wine specialist: Wellcome Supermarket http://shop.wellcome.com.hk/ ParknShop http://www1.parknshop.com/WebShop/Home.do Watson?s Wine Cellar http://www.watsonswine.com/ (Note: Retail prices of wine you can find on their websites are based in Hong Kong dollars and US$1 equals to approximately HK$7.8.) SECTION V. MARKET ACCESS For information on Hong Kong?s import regulations on wine, please refer to GAIN Report #HK0033. (This report is available at: http://gain.fas.usda.gov/Lists/Advanced%20Search/AllItems.aspx) SECTION VI. ENTRY AND MARKETING STRATEGY For new-to-market wineries that wish to enter the Hong Kong market, the following approaches are recommended: One-on-one meetings with potential importers: Most local importers are interested in meeting new-to-market exporters in a private environment. A list of local wine importers is available by contacting our Agricultural Trade Office in Hong Kong. Exhibiting in a local trade show: There are trade shows in Hong Kong for U.S. wine exporters to showcase their high quality wine to buyers from Hong Kong, Macau, China and the region. For information on Hong Kong?s major food and beverage trade shows in 2011, please refer to GAIN Report #HK0029. (This report is available at: http://gain.fas.usda.gov/Lists/Advanced%20Search/AllItems.aspx) Participating in wine promotional activities: The Agricultural Trade Office in Hong Kong organized, co-organized with other U.S. wine promotional associations or participated in promotional activities such as seminars, wine tastings, receptions, food pairings and trade Page 8 of 11 shows to promote U.S. wines. You can contact our office to check out the dates of confirmed activities and see if you may be able to participate in those activities. Below please find some photos taken at these activities for your reference: Tasting of California wine Tasting of California wine at Watermark Restaurant at Harbor Grand Hong Kong Hotel Reception at ATO Director?s Residence Promotion of US wine at American Club Vinexpo 2010 Promotion of US wine at American Food Festival at ParknShop Page 9 of 11 Promotion of US wine at Jusco Stores Promotion of US wine at New Yaohan Department Store Hong Kong Wine & Dine Festival Hong Kong Int?l Wine & Spirits Fair US wine tasting US wine at Hong Kong Int?l Wine & Spirits Fair at Great American BBQ Page 10 of 11 SECTION VII. KEY CONTACTS AND FURTHER INFORMATION U.S. wine suppliers, traders, exporters?etc seeking marketing information pertaining to food and beverage import regulations, promotional opportunities, trade inquiries and marketing assistance are welcomed to contact ATO Hong Kong at: U.S. Agricultural Trade Office Hong Kong 18 St. John's Building 33 Garden Road, Central Hong Kong Tel: (852) 2841-2350 Fax: (852) 2845-0943 E-mail: ATOHongKong@usda.gov Website: http://www.usfoods-hongkong.net The Wine Institute of California also has a local representative in Hong Kong who assists its members in promoting U.S. wines in Hong Kong and Macau: Wine Institute Mr. Phillip C. Holloway Ringe Marketing Service Limited Room 401, Dannies House 20 Luard Road, Wanchai Hong Kong Tel: (852) 2366-3089 Fax: (852) 2722-6300 E-mail: ringe@netvigator.com Page 11 of 11
Posted: 26 February 2011, last updated 27 February 2011

See more from Wine in Hong Kong SAR

Expert Views    
U.S. Wines Set New Record   By Foreign Agricultural Service
Wine Industry in Hong Kong   By Hong Kong Trade Development Council (HKTDC)
Latest News    
Imports of U.S. Wine Set New Record   By Foreign Agricultural Service