HRI Food Service Sector

An Expert's View about Food and Beverage Services in Hong Kong SAR

Last updated: 19 Mar 2011

U.S. exports of high value food products to Hong Kong reached a record level of US$2.1 billion in 2010, consolidating Hong Kong’s position as our 4th largest market for these products after Canada, Mexico and Japan.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 3/9/2011 GAIN Report Number: HK1107 Hong Kong Food Service - Hotel Restaurant Institutional HRI Food Service Sector Approved By: Erich Kuss Prepared By: Chris Li Report Highlights: U.S. exports of high value food products to Hong Kong reached a record level of US$2.1 billion in 2010, consolidating Hong Kong?s position as our 4th largest market for these products after Canada, Mexico and Japan. Benefiting from the strong economic growth in Mainland China, Hong Kong enjoyed 7.8% economic growth in 2010. In addition, it is expected that Hong Kong will maintain its position as one of the top 4 markets for U.S. consumer ready food products in 2011, as it continues to be a major buying center and transshipment point for China and Southeast Asia. Economic growth in Hong Kong is forecast to be 4.5% in 2011. Post expects that U.S. products will continue to fair well due to competitive prices and consumer confidence in the quality and safety of U.S. products. Page 1 of 28 HRI Food Service Sector 1. Restaurants Hong Kong restaurant industry purchased over US$3.7 billion in food and beverages, and generated sales of over US$10.7 billion in 2010. This represented an increase of 6.5% and 5.1% respectively over 2009. Table 1. Hong Kong: Restaurant Receipts and Purchases, in US$ Million Growth 2009 2010 2010 vs 2009 Restaurant Receipts 10,239 10,764 5.1% Restaurant Purchases 3,546 3,776 6.5% As Asia?s most cosmopolitan city, Hong Kong boasts around 13,000 restaurants serving a wide range of world cuisines. These restaurants are comprised of 36% Chinese, 55% non-Chinese restaurants, and 9% fast food outlets. In addition, there are over 1,000 bars, pubs and other eating and drinking establishments. Chinese restaurants: Chinese restaurants are popular among local citizens and tourists. There are a variety of Chinese restaurants in Hong Kong serving different regional cuisines: Canton, Shanghai, Beijing, Sichuan?etc. A typical lunch at a nice Chinese restaurant costs around US$13-40 per person and a typical dinner costs around US$20-50 per person. Non-Chinese restaurants: Many Hong Kong consumers enjoy western food, as do the 36 million tourists. 5-Star and other high-end western restaurants are as likely to be patronized by locals as tourists/visitors. Japanese food, fast food chains, coffee houses and casual dining establishments are also increasing their presence. A typical lunch at a western restaurant costs around US$13-40 per person and a typical dinner costs around US$25-65 per person. Fast food outlets: Fast food outlets are popular among Hong Kong consumers. The most popular fast food chains in Hong Kong are McDonald?s, KFC and Pizza Hut. There are also some large local fast food chains such as Café De Coral, Maxim?s and Fairwood that serve both Chinese and western foods. Competition among fast food chains is intense, as they each try to keep meal prices competitive. The average cost is around US$3.5 for breakfast, US$4 for lunch, US$2.5 for afternoon tea and US$6.5 for dinner. To further meet competition, many fast food operators have renovated their outlets to make them look more modern, spacious and attractive. To meet the demand of a growing number of health-conscious customers, fast food chains have also introduced more new ingredients and developed healthy-food options such as salads, fruits, and fresh juices. Coffee Shops: The coffee shop market continues to grow in Hong Kong?s commercial areas. The two largest coffee house outlets are Starbucks operating 109 outlets and Pacific Coffee operating 89 outlets. Most shops also offer basic menus consisting of muffins, pastries, cakes, sandwiches, and bottled beverages (juices and water). McDonalds has also vigorously expanded its McCafe in order to gain share in this growing market. Of its 221 outlets, 66 include a McCafe inside their shops. Page 2 of 28 Growing Trend ? Healthy Eating: Hong Kong?s food culture is ?fresh?. Consumer preference for fresh and live products is due to tradition, as well as concern about food safety. Hong Kong consumers are increasingly health conscious. Hong Kong has over 50 small to medium size health food stores. The two leading supermarket chains (Wellcome and ParknShop) and drug store chains (Manning?s and Watson?s) also sell natural/organic products at their outlets. The growth of ?Mix? ? a juice bar that also serves food is a good example of a successful ?healthy? restaurant chain. Organic foods are also gaining popularity as evidenced by the growth of specialized retail outlets for organic foods. There is increasing opportunity for U.S. products and ingredients in this sector. 2. Hotels The number of hotels and available rooms in Hong Kong is growing. Table 2. Hong Kong: Growth Hotels, Hostels and Guesthouses (2009-2010) 2009 2010 Growth Number of hotels/guesthouses 758 794 +4.7% Number of rooms 65,386 66,354 +1.5% Room occupancy rate 77% 87% - (Source: Hong Kong Census & Statistics Department) According to the latest report (in 2009) of the Hong Kong Tourism Board, tourists spent more than US$1.37 billion on food and beverages. Many five-star hotels serve U.S. beef, chicken, turkey, pork, eggs, fish and seafood products, fruits and vegetables, processed products and beverages. The Hong Kong Government (HKG) provides a searchable list of licensed Hotels & Guest Houses at: http://www.hadla.gov.hk/en/hotels/search_h.html http://www.hadla.gov.hk/en/hotels/search_g.html A list of Hong Kong hotels are available at: http://www.hkha.com.hk/doc/mem_eng.pdf http://www.discoverhongkong.com/eng/jsp/hotel/search-index.jsp 3. Institutions Institutions like schools, hospitals, and airlines are serviced by a small number of large catering groups who are generally affiliated with the restaurant sector. These caterers mainly source their ingredients from China where supplies are cheaper and more abundant. They also use ingredients from other countries such as the U.S. when they cannot find the same quality products in China. Schools: As school regulators prohibit primary and lower secondary students from eating their lunch out, students must pack their lunch boxes or subscribe to a school lunch box program. According to the latest statistics (academic year 2009/2010) of the Education Bureau, there were 582 primary schools and 523 secondary schools, having a total of 344,748 primary students and 238,026 lower secondary students. About 70% of students Page 3 of 28 join a school lunch program. A typical lunch box consists of some kind of meat, rice and some cooked vegetables. The annual cost of Hong Kong?s school lunch program is estimated at US$250 million. Healthy eating programs are underway to encourage a change in eating trends for school children. Caterers must register with the Hong Kong Food and Environmental Hygiene Department (FEHD) before they are eligible to bid tenders provided by individual schools. ATO Hong Kong can provide U.S. exporters with the list of registered caterers for school lunch boxes. Hospitals: The Hospital Authority operates 41 hospitals with a total of around 27,000 beds and staff size of 58,000. The catering services for hospitals are outsourced on a tender basis; many of which also operate restaurants, fast food chains or school lunch catering services. Airlines: There are three aircraft catering franchisees at the Hong Kong International Airport, each with a 15-year term. The aircraft caterers provide a comprehensive range of flight catering services. These services include the preparation and assembly of flight meals, loading and unloading of food and other catering loads onto aircraft, and the storage of catering equipment and supplies. Table 3. Hong Kong: Airline Catering Size Capacity (meals/day) Catering Franchisee (sq. m.) Cathay Pacific Catering Services 50,400 80,000 Lufthansa Service Hong Kong Ltd 15,000 30,000 Gate Gourmet Hong Kong Ltd 8,850 10,000 (Source: Hong Kong Airport Authority) Economy Hong Kong?s economy continued to grow in 2010, particularly with the continued influx of investment from Mainland China. GDP and per capita GDP grew by 7.8% and 6.8% and reached US$224 billion and US$31,709 respectively in 2010. Table 4. Hong Kong: Gross Domestic Product and GDP per capita Growth 2009 2010 10 vs 09 GDP US$208 billion US$224 billion +7.8% GDP per capita US$29,695 US$31,709 +6.8% Demographics Hong Kong?s population was around 7 million in 2010. 1.73 million, or 47% of the total labor force, are women. The large number of employed women is an important influence on the demand in the restaurant business. Page 4 of 28 Table 5. Hong Kong: Labor Force Participation 2009 % of Total 2010 % of Total Labor Force-Men 1.96 million 53% 1.95 million 53% Labor Force-Women 1.74 million 47% 1.73 million 47% Total 3.7 million 100% 3.68 million 100% (Source: Hong Kong Census & Statistics Department) Imported Foods vs. Domestic Products Due to limited land resources and having a population of 7 million, Hong Kong relies on imports for over 95% of it food supply. According to the latest statistics (in 2009) of the Agricultural Fisheries and Conservation Department, the local agricultural industry produced US$72 million worth of products. It is comprised of US$30 million in crop production (mainly vegetables), US$19 million in livestock production, and US$23 million in poultry production. Local production accounted for 2.4 percent of fresh vegetables, 53.7 percent of live poultry and 6.2 percent of live pigs consumed in the territory. Due to its central location, free port status and position as a regional purchasing and distribution center, a significant amount of Hong Kong imports are re-exported. Table 6. Hong Kong: Imports (2006-2010) of Consumer Oriented Agricultural Products (COAP) & Seafood Share in Growth Re-exports as 10 v a % of Gross Rank Supplier (US$ Million) 2006 2007 2008 2009 2010 2010 09 Imports The World Gross Imports 7,647 9,098 11,544 12,826 15,270 100% 19% Re-exports 1,775 2,435 3,409 3,824 4,427 100% 16% 29% Retained Imports 5,873 6,663 8,135 9,001 10,843 100% 20% 1 United Gross Imports 875 1,042 1,615 1,972 2,766 18% 40% States Re-exports 220 328 609 752 1,155 26% 54% 42% Retained Imports 655 715 1,006 1,220 1,611 15% 32% 2 China Gross Imports 1,854 2,007 2,215 2,446 2,735 18% 12% Re-exports 296 309 356 334 392 9% 17% 14% Retained Imports 1,558 1,698 1,859 2,112 2,344 22% 11% 3 Brazil Gross Imports 645 989 1,441 1,575 1,415 9% -10% Re-exports 273 491 630 737 658 15% -11% 46% Retained Imports 372 498 811 838 757 7% -10% 4 Japan Gross Imports 485 573 603 709 971 6% 37% Re-exports 38 36 41 43 51 1% 17% 5% Retained Imports 446 536 562 665 920 8% 38% 5 France Gross Imports 147 251 385 446 688 5% 54% Re-exports 39 88 111 115 162 4% 41% 24% Retained Imports 108 164 274 331 526 5% 59% 6 Australia Gross Imports 485 529 613 682 659 4% -3% Page 5 of 28 Re-exports 41 58 59 91 83 2% -8% 13% Retained Imports 444 470 553 591 576 5% -3% 7 Thailand Gross Imports 338 410 486 590 527 3% -11% Re-exports 161 226 267 350 288 7% -18% 55% Retained Imports 177 184 219 240 239 2% 0% 8 Canada Gross Imports 208 217 342 312 394 3% 26% Re-exports 26 43 133 104 133 3% 27% 34% Retained Imports 182 173 209 207 261 2% 26% 9 Netherlands Gross Imports 166 211 306 323 386 3% 20% Re-exports 34 60 100 95 91 2% -4% 24% Retained Imports 132 151 206 228 295 3% 30% 10 Iran Gross Imports 152 172 160 147 366 2% 150% Re-exports 67 73 53 69 129 3% 88% 35% Retained Imports 85 99 107 78 237 2% 205% Total of Gross Imports 5,354 6,402 8,165 9,201 10,908 71% 19% Top 10 Re-exports 1,196 1,713 2,359 2,691 3,142 71% 17% 29% Retained Suppliers Imports 4,158 4,689 5,806 6,511 7,766 72% 19% Total of Gross Imports 2,293 2,697 3,379 3,624 4,362 29% 20% Rest of Re-exports 579 722 1,050 1,134 1,285 29% 13% 29% Retained The World Imports 1,714 1,974 2,329 2,491 3,077 28% 24% (Source: Calculations based on World Trade Atlas data) (Retained Imports = Gross Imports into Hong Kong ? Re-exports out of Hong Kong) Thanks to the fast-growing economy and consumer affluence, total retained imports of consumer-oriented agricultural products (COAP) and Seafood products in Hong Kong grew by 20% in 2010. The U.S. took over China and became the largest supplier of COAP and Seafood products to Hong Kong in 2010. Retained imports of these products from China and the U.S. in 2010 reached US$2.3 billion and US$1.6 billion, representing market shares of 22% and 15% respectively. Hong Kong?s status as a gateway for trade with China and Macau are increasingly opening up greater avenues for U.S. high value food products. In 2010, Hong Kong imported over US$15 billion COAP and Seafood from the world and re-exported 29% of these products. Around 52% of all these re-exports went to China and 9% went to Macau. (Source: Hong Kong Census and Statistics Department). Outlook in 2011 Although Hong Kong enjoyed strong economic growth in 2010, inflation is expected to rise and negatively impact its future economic growth. In addition, Mainland China is expected to take measures to curb its growing inflation in 2011 and these measures could slow down the influx of investment and Hong Kong?s economic growth. The Hong Kong Government forecasts that economic growth at 4.5% in 2011. Page 6 of 28 However, post expects that U.S. products will continue to fair better than its competitors due to competitive U.S. prices and consumer confidence in the quality and safety of U.S. products. In addition, the Hong Kong dollar link to the U.S. dollar provides much needed foreign exchange stability among food importers. It is expected that Hong Kong will remain one of the top 4 markets for U.S. consumer ready food products in 2011, as it continues to be a major buying center and transshipment point for China and Southeast Asia. Import Regulations 1. Import Duties & Import Certificates With the exception of spirits, all food and beverage products can be imported to Hong Kong duty free. Technical requirements for imports vary significantly according to the product. Products which require import permits/health certificates include meat, milk and frozen confections. The Hong Kong Government (HKG) also plans to implement a health certification requirement for eggs and seafood products. Currently, the HKG accepts import applications from Hong Kong importers. In other words, local importers and not U.S. exporters are required to apply for import permits. U.S. exporters need to supply their agents/importers with necessary documentation such as health certificates from the U.S. government. For details on Hong Kong?s general import regulations for food products, please refer to GAIN Report #0026. (This report is available at: http://gain.fas.usda.gov/Lists/Advanced%20Search/AllItems.aspx) 2. New Nutritional Labeling Law Hong Kong?s Legislative Council on May 28, 2008 passed a nutrition labeling regulation, which took effect July 1, 2010. Hong Kong?s nutrition labeling regulation requires all prepackaged food sold in Hong Kong have to label the contents energy plus seven nutrients namely; protein, carbohydrate, fat, saturated fat, trans fat, sodium and sugars. Products selling less than 30,000 units a year can apply for small volume exemption provided that the products do not carry any nutritional claims. Traders applying for exemption have to pay HK$345 (US$44) per product variety for the first year and HK$335 (US$43) for annual renewal. Hong Kong?s nutrition labeling regulation is unique; as all imported foods making nutrition claims from all sources will have to be re-labeled for the Hong Kong market. Despite the U.S. requiring the labeling of 15 energy/nutrients, U.S. products still cannot meet the Hong Kong nutrition labeling requirements due to different nutrient definitions, rounding practices, and recommendations for daily consumption. Virtually all U.S. products carrying claims will require labeling changes and/or nutrient testing. Details of the regulation are contained in the Technical Guidance Notes on Nutrition Labeling and Nutrition Claims, which is available at: http://www.cfs.gov.hk/english/food_leg/food_leg_nl_guidance.html Further supplementary information will be provided in the form of FAQ on the Hong Kong government?s Center for Food Safety website: http://www.cfs.gov.hk/eindex.html Page 7 of 28 For more information on the impact of Hong Kong?s nutrition labeling regulation, please see reports HK0011, HK8017, HK7011, & HK0011. (These reports are available at: http://www.fas.usda.gov/scriptsw/AttacheRep/legacy.asp) 3. Preservatives Regulations Hong Kong amended its Preservatives Regulation, which became effective July 1, 2008. A two-year transitional period for compliance ended on June 30, 2010. Compared to the original regulation, the new regulation no longer allows for the use of propyl para- hydroxybenzoate, but additionally allows the use of the following preservatives: Guaiac resin Isopropyl citrates Stannous chloride Tertiary butylhydroquinone (TBHQ) Thiodipropionic acid Dimethyl dicarbonate Ferrous gluconate Formic acid Hexamethylene tetramine Lysozyme Pimaricin Another change brought about by the amendment to the regulation is the adoption of a food category system based on Codex?s General Standard for Food Additives (GSFA) and the incorporation of those preservatives and antioxidants, as well as their permitted levels of use, in GSFA. To help trade better understand the amended regulation, the HKG issued a ?User Guideline?, which provides the definition of each food category of the newly adopted food category system. Also, the Guidelines include some questions and answers pertaining to the amended regulations. The full Guidelines are available at the following website: http://www.cfs.gov.hk/english/whatsnew/whatsnew_fstr/files/User_Guideline_e.pdf Hong Kong?s Preservatives Regulation adopts the principle of a positive list. In other words, Hong Kong does not allow any preservatives or antioxidants in foods if they are not expressly permitted by the Preservatives Regulation. The list of permitted preservatives and their maximum permitted levels may be retrieved from the following website: http://www.legco.gov.hk/yr07-08/english/subleg/negative/ln085-08-e.pdf More information on the amended Preservatives Regulation, please see gain reports HK#8021 & HK#7018. (These reports are available at: http://www.fas.usda.gov/scriptsw/AttacheRep/legacy.asp) Page 8 of 28 4. Biotech Food Related Regulations The HKG does not have any specific biotechnology regulations with regard to the labeling of biotech food products. The HKG makes no distinction between conventional and biotech foods. All are subject to the same food safety regulation. The HKG, after evaluating the impact of its voluntary labeling scheme for biotech food products, released its conclusions to the Legislative Council on July 8, 2008, suggesting there is no need for a mandatory labeling law in Hong Kong. The HKG noted difficulty in carrying out a law that currently does not have an international standard to back it up. As a result of its evaluation, the HKG plans to continue to promote voluntary labeling of GMO products as a viable alternative for the trade. The HKG released a set of guidelines on voluntary labeling for biotech foods in 2006. The guidelines on labeling for biotech foods are advisory in nature and do not have any legal effect. Adoption is entirely voluntary and is not binding. The guidelines apply to prepackaged food and are based on the following four principles: The labeling of biotech food will comply with the existing food legislation. The threshold level applied in the guideline for labeling purpose is 5 percent, in respect of individual food ingredient. Additional declaration on the food label is recommended when significant modifications of the food, e.g. composition, nutrition value, level of anti-nutritional factors, natural toxicant, presence of allergen, intended use, introduction of an animal gene, etc, have taken place. Negative labeling is not recommended. As the guideline is voluntary, U.S. food exports should not be affected if they choose not to have any biotech labeling. However, it should be noted that the HKG does not encourage negative labeling particularly for the use of the following terms: GMO free Free from GM ingredients, etc For products with such definite negative labeling, the HKG may take the initiative to test the products against GM ingredients and zero tolerance will be adopted for testing purposes. If products are found to have misleading labeling, a retailer may be subject to prosecution under Section 61 ? False Labeling and Advertisement of Food or Drugs of Chapter 132 Public Health and Municipal Services Ordinance. (Available at http://www.legislation.gov.hk/eng/home.htm) If the trade chooses to apply negative labeling, the government advises to use less definite terms such as ?sourced from non-GM sources? (which contains less than 5 percent of GM content) and to have documentation to substantiate such declaration. For more details on the voluntary labeling guidelines and biotechnology in Hong Kong, Page 9 of 28 please refer to Gain Report HK#0009 & HK#6026 respectively. (These reports are available at: http://www.fas.usda.gov/scriptsw/AttacheRep/legacy.asp) Hong Kong passed a Genetically Modified Organisms (Control of Release) Ordinance and the Genetically Modified Organisms (Documentation for Import and Export) Regulation in March 2010 and November 2010 respectively. With the expected commencement of the Ordinance and the Regulation in March 2011, there will be documentation requirements for shipments containing genetically modified organisms (GMOs). GMOs in the Ordinance are referred to as LMOs or living modified organisms. Shipments containing GMOs will need to be accompanied by documentation containing the following information: If the identity of the GMO is known, the shipment contains such a GMO; if the identity of the GMO is not known, the shipment may contain such a GMO; The GMO is not intended for release into the environment; The common name, scientific name and, where available, commercial name of the GMO; The transformation event code of the GMO or, where available, its unique identifier code; and, The details of the importer or exporter (such as name, address and contact information) for further information. There is no specific requirement regarding the form of documentation accompanying GMO shipments. The use of a commercial invoice or other documents required by existing documentation systems would be sufficient. Table 7. Hong Kong: Summary of the Key Strengths and Challenges for the Market Strengths Weaknesses Hong Kong is one of the top markets in the U.S. food products are not always price world for food and beverages, processed, competitive. China is the largest competitor of fresh and frozen gourmet products. U.S. U.S. food products. exports of HVFB products to Hong Kong reached US$2.1 billion, consolidating Hong Kong?s position as the 4th largest market for the U.S. in 2010. Hong Kong is a major trading hub where Lengthy transportation time and availability of buyers make purchasing decisions for product due to seasonality (e.g. fresh produce) hundreds of millions of dollars of consumer associated to importing U.S. food and beverage oriented products that are transshipped to products to Hong Kong can make them less China and other parts of Asia. competitive than products available in the region or from China, Australia New Zealand (favorable in terms of location). U.S. food products enjoy an excellent The importance of Hong Kong as a transshipment reputation among Hong Kong consumers, as point and buying center for China and elsewhere they are renowned for high quality and food is not widely known to U.S. exporters. safety standards. Page 10 of 28 The U.S. is the 2nd largest supplier of agricultural, Hong Kong labeling and residue fisheries and forestry products to Hong Kong. For standards differ in some cases, which can HVFB products, the U.S. overtook China as the largest impede trade. supplier to Hong Kong in 2010. Technical barriers to imports of U.S. products are Numerous HK food regulations are not in generally very low. line with Codex, which can complicate import clearances. There is a wide variety of U.S. products available to While Hong Kong has one of the busiest Hong Kong consumers (over 30,000 different items). container terminals in the world, it also has the most expensive port handling charges. The link between the Hong Kong Dollar (HKD) to the Hong Kong?s top supermarkets are a U.S. Dollar help insulate the HKD from currency duopoly that often request slotting fees. fluctuations. In general, implementation and application of Inflation is on the rise in Hong Kong. The regulations is transparent and open. increase in food prices may cause some consumers to turn to more lower-price lower-quality food products where U.S. products do not enjoy strong competitive advantage. Hong Kong exporters choose to work with Hong Kong importers and distributers to get their products to Mainland China because of Hong Kong?s dependable legal system, financial system and rule of law. Most trans-shipments to Macau are purchased, consolidated and shipped via Hong Kong. Demand is increasing most rapidly for ?healthy? and gourmet foods, market segments where the U.S. is especially strong. Hong Kong concerns over food safety have made U.S. food products as a top choice for quality and safety. 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 ?quality? and trend driven market so price is not always the most important factor for food and beverage purchases. Hong Kong is a dynamic market with a sophisticated international community where new high quality products are readily accepted. Hong Kong is dependent on imports for meeting its food needs. With continued economic growth, U.S. high value food & beverage (HVFB) exports to Hong Kong grew by 24% in 2010 compared to 2009 and consolidated Hong Kong?s position as our 4th largest market for HVFB products in the world. Biotech products are freely imported and products Page 11 of 28 containing biotech ingredients are generally not controversial. Lack of local production means virtually no protectionist pressures for food and agricultural products. Hong Kong is in an economically vibrant region and its economy is expected to grow by 4.5% in 2011. Hong Kong?s duopolistic supermarkets have a wide distribution network. Cold chain and distribution channels for food products are generally efficient and dependable, as is the customs clearance process. SECTION II. ROAD MAP FOR MARKET ENTRY Exporting and Selling Since very few hotels, restaurants or institutions import directly from exporters, most suppliers sell to importers for further distribution to the HRI sector in this market. Establishing a Business in Hong Kong If U.S. restaurant chains or caterers want to establish a stronger foothold in Hong Kong, they are allowed to incorporate freely. However, there are two market entry channels that U.S. companies may consider in their attempt to establish a presence in Hong Kong?s HRI sector. 1. Franchising The concept of franchising has been growing in Hong Kong for the past decade. Nearly 80 % of the franchise operations in Hong Kong are of U.S. origin. Home-grown franchises have also developed, especially in catering. 2. Joint Ventures Joint ventures or strategic alliances can be very helpful in entering the market, and are particularly important in competing for major catering projects. In order to attract foreign investment, the HKG set up a special department called ?Invest Hong Kong? to help overseas companies establish a presence in Hong Kong by providing all the support needed to establish and expand their operations (www.investhk.gov.hk). Entering the Hong Kong market with products suitable for the HRI trade can be handled in a number of ways. Certainly the end customer, the hotel, restaurant, institution or caterer has an influence on the selection of products or ingredients but the choice is all very much guided by a network of reliable and trusted suppliers. 3. Setting up a Representative Office One of the most effective but costly means that U.S. companies can use to sell their products to this market is to set up a representative office in Hong Kong. Information on how to set up a new business in Hong Kong can be found at: http://www.success.tid.gov.hk/english/inf_ser/bus_sta_up_inf_ser/bus_sta_up_inf_ser.html Page 12 of 28 4. Appointing Agents U.S. exporters may consider hiring a local agent. A key consideration is whether the prospective agent has a good marketing record and widespread distribution network. The advantage of having an agent is that it can help with marketing and distribution. Some companies may secure a very competitive price package with TV, magazine and radio for advertisements. In addition, well-established companies have extensive distribution networks not limited to the HRI sector but also to retail outlets. Importers and distributors tend to focus on specific categories of products and end markets. Research should be carried out to ensure the importer/distributor selected is appropriate for your products. Marketing Strategies Identify key players for the products - ATO Hong Kong can provide lists of importers, distributors, commodity cooperators and regional business groups. Test marketing maybe required prior to establishing a presence in the market. Communicate product benefits to end-users - although distributors maintain the relationships with their customers, end users assert influence over the buying decisions. It is important to directly educate all stakeholders as to the features and benefits of your products. Participate in or visit trade shows ? Hong Kong has an excellent reputation of hosting international trade shows. In cooperation with cooperators and regional groups, the shows will demonstrate the versatility and safety of U.S. food products. Some major shows include: Table 8. Hong Kong: Trade Shows Featuring Food & Agricultural Products HOFEX 2011 http://www.hofex.com May 11-14, 2011 Natural Products Expo Asia http://www.naturalproductsasia.com Aug 25-27, 2011 Restaurant and Bar http://www.restaurantandbarhk.com Sep 6-8, 2011 Asian Seafood Exposition http://www.asianseafoodexpo.com Sep 6-8, 2011 Asia Fruit Logistica http://www.asiafruitlogistica.com Sep 7-9, 2011 4th Hong Kong Int?l Wine & Spirits Fair http://hkwinefair.hktdc.com Nov 3-5, 2011 Wine & Gourmet Asia (Macau) http://www.wineandgourmetasia.com/ Nov 10-12, 2011 AgriPro Asia Expo http://www.verticalexpo.com/eeditor/index.php?expo_id=8 Nov 30-Dec 2, 2011 Stage menu promotions with major restaurant chains - Menu promotion dollars will be maximized if spent on promotion events held with the major restaurant chains. With the restaurant chains? announced intention to have an image overhaul, this provides for an opportunity to introduce new U.S. foods. Invite restaurant owners/chefs to seminars and/or to the U.S. - ATO Hong Kong/ Page 13 of 28 cooperators organize seminars and trade missions to the U.S. with an intention to introduce U.S. products, meet U.S. exporters, and share with them food service operations in the U.S. MAP Program Small to medium sized U.S. food companies wishing to export their products can get funding assistance from the USDA Market Access Program (MAP). The reimbursement rates for branded promotions are equal to the percentage of U.S. origin content of the promoted agricultural commodity or a rate of 50 percent, whichever is the lesser. If you are a producer or exporter and want to participate in the MAP, please contact a trade association that represents your specific product. If no trade association is applicable, please contact one of the four State regional trade groups: Food Export USA - Northeast (FEUSA), Food Export Association of the Midwest USA (FEA), Southern US Trade Association (SUSTA), and Western US Agricultural Trade Association (WUSATA). For details of the MAP program and a list of trade associations, please contact our office or visit the website: http://www.fas.usda.gov/mos/programs/maptoc.html Market Structure U.S. Exporter Importer / Distributor / Wholesaler Wet Markets Hong Kong HRI Trade The market structure for Hong Kong typically involves a dedicated importer/distributor who deals with the U.S. exporter and maintains relationships with local resellers. Some special items are imported directly by large hotels, restaurant chains and institutions but most tend to outsource the import burden. Hong Kong is a mature trading port and as such has developed an effective network of importers, distributors and wholesalers that support the HRI trade. Page 14 of 28 Most major importers/distributors service multiple reseller sectors including HRI/food service, retail and wet markets. ATO Hong Kong has a resourceful database of Hong Kong importers servicing the HRI trade. For information regarding specific category suppliers, the ATO Hong Kong can provide additional information. Given below is a partial list of catering franchises in Hong Kong Name of Franchise No. of Outlets Ajisen-Ramen (catering - Japanese noodles restaurant) 32 Coffee Chateau (catering - retail of coffee and tea) 1 Double Star (catering - coffee shop) 4 Genki Sushi (catering - Japanese restaurant/takeaway 34 Grappa's Ristorante (catering - Italian restaurant) 3 (+ 1 wine bar) Hui Lau Shan (catering - herbal tea house and health food) 45 Hung Fook Tong (catering - herbal tea house) 82 Jollibee (catering ? restaurant) 1 Kentucky Fried Chicken (catering - fast food restaurant) 68 Kung Wo Tong (catering - herbal tea house) 10 Kung Wo Beancurd Products (catering - beancurd drinks and products) 6 Magic House Superstore Ltd (catering - ice cream and snacks) 47 McDonald's (catering - fast food restaurant) 221 Mian Cafe (catering - cafe) 7 Mrs. Fields Cookies (catering ? bakery) 13 Pie & Tart Specialists (catering - pie and tart) 12 Pizza Box (catering - pizza delivery) 15 Pizza Hut Restaurants (catering - restaurants) 66 Saint?s Alp (catering ? Taiwanese tea house) 9 Strawberry Forever (catering - western dessert house) 2 TGI Friday's (catering - restaurant) 1 Yoshinoya (catering - Japanese restaurant) 48 Given below is a partial list of restaurants in Hong Kong Company Name Type of Food No. of Outlets Maxims Chinese Restaurants /fast food / Max Concepts / 409 bakery Page 15 of 28 McDonalds Fast Food - Burgers 221 (66 McCafe) Café de Coral Chinese fast food / lunch boxes 148 Fairwood Chinese Fast food 98 KFC Fast Food - Chicken 68 Starbucks Coffee & snacks 109 Pizza Hut Pizza, local menu 66 (31 takeaway) Pacific Coffee Coffee & Snacks 89 Deli France Bakery, Fast Food Sandwiches 36 Steak Expert Steak house 24 Spaghetti House International 25 Epicurean International 21 Igor?s Group International 31 Lan Kwai Fong International 5 Entertainment Oliver?s Super Sandwich Fast Food Sandwiches / Salads 19 Mix California Smoothies & Wraps 9 Pret a Manger Fast Food Sandwiches / Salads 8 Chiram Restaurants Ltd International 6 Eclipse Management International 10 Outback Steakhouse Australian / American style Steak House 7 Red Ant Chinese 8 Elite Concepts International 8 California Pizza Kitchen American style pizza 4 Dan Ryan?s American Style dining 3 Ruby Tuesday?s American Style dining 4 Burger King Fast Food - Burgers 15 Jimmy?s Kitchen International 2 Ruth?s Chris Steakhouse American Style Steak House 2 Bubba Gump American Style dining 1 Harlan?s International 1 Lawry?s The Prime Rib American Steak House 1 Morton?s the Steakhouse American Steak House 1 TGI Fridays American Style dining 1 Tony Roma?s American Style dining 2 SECTION III. COMPETITION Note: Trade Statistics for 2010; Market Share in terms of Gross Import Value Source: World Trade Atlas ? Hong Kong Census & Statistics Department Page 16 of 28 Table 11. Major Product Categories of Hong Kong?s Imports of COAP and Seafood Products And Competition Product Category Major Strengths of Key Supply Advantages and Supply Countries Disadvantages of Sources Local Suppliers Red Meats, 1. Brazil ? Products from Brazil and China are Local production is chilled/frozen 30% price competitive, but they are of largely on freshly different market segments from slaughtered meats. Imports 2. U.S. ? U.S. products. US$2.5 billion 15% 1,206,000 MT U.S. market share dropped from 3. China ? 21% in 2003 to 3% in 2005 as a Retained Imports 11% result of the ban on U.S. bone-in US$1.4 billion beef. Market share of U.S. beef 404,000 MT 4. Germany gradually picked up following Hong ? 8% Kong?s opening to U.S. beef since the beginning of 2006. Hong Kong currently allows U.S. boneless beef derived from animals less than 30 months of age. Bone-in beef and offals from the U.S. are not yet allowed entry into Hong Kong. Hong Kong Government adopts zero tolerance on bone fragments. U.S. beef is highly regarded in Hong Kong. It is always the top choice for high-end restaurants and sophisticated consumers. U.S. beef is largely for the high-end market. Red Meats, 1. China ? Chinese supplies dominate the Local production is Prepared/preserved 31% market because there is a big insignificant. demand for price competitive Imports 2. U.S. ? prepared/preserved meatballs and US$612 million 13% other products typical in Chinese 326,000 MT dishes in Chinese restaurants and 3. Spain ? processing in China is cost Retained Imports 10% effective. US$496 million About 51% of the U.S. preserved 248,600 MT red meat exports to Hong Kong belong to sausages. The U.S. is the largest supplier of sausages in the Hong Kong market. Poultry Meat 1. Brazil ? Brazil became the leading supplier Local production is on (Fresh, chilled & 36% of poultry for Hong Kong market in freshly slaughtered frozen) 2004, when Hong Kong banned meats. 2. U.S. ? entry of U.S. poultry products Imports 34% (between February 11, 2004 and HRI sector tends to Page 17 of 28 US$1.7 billion April 30, 2004) due to outbreaks of use chilled and frozen 1,150,000 MT 3. China ? Avian Influenza cases in the U.S. chicken products 14% Though the ban was then lifted, rather than freshly Retained Imports Brazil continues to be the largest slaughtered chickens US$822 million supplier due to price because the latter are 379,776 MT competitiveness of its products and far more expensive. established business relationship between Brazilian exporters and Hong Kong importers. The depreciation of U.S. dollar attracted more imports of U.S. products to Hong Kong and market share of the U.S. grew more significantly & reached 34% in 2010. Hong Kong?s new certification requirement for U.S. chicken feet, which took effect in May 2005, has reduced U.S. chicken feet supplies to Hong Kong. By the new requirement, U.S. chicken feet are required to have ante mortem and post mortem inspection. Dairy Products 1. Netherlands is strong in dairy Local companies Netherlands product supplies and it has supply fresh milk Imports ? 27% established position in Hong Kong. drinks, which are US$677 million processed in Hong 175,420 MT 2. Ireland ? Dairy products from Netherlands Kong with milk 17% and New Zealand primarily include originated from Retained Imports concentrated dairy and cream. farmlands in the US$594 million 3. Japan ? southern part of China. 159,852 MT 15% Chinese dairy products to Hong Kong primarily include not- Local companies can concentrated milk and cream. easily fulfill local milk U.S. ? 1% registration Dairy products from the U.S. requirements. primarily include ice cream. Melamine was found in eggs and dairy products from China and that has led consumers to pay more attention to food safety and seek high quality products from other supplying countries. Eggs 1. China ? Eggs from China are price Local production is 59% competitive. However, since 2006, insignificant. Imports when some Chinese eggs were US$128 million 2. U.S. ? found tainted with Sudan red 1.9 billion eggs 18% (which is a dye for industrial use), Page 18 of 28 Hong Kong consumers lost Retained Imports 3. Thailand confidence in the safety of all US$126 million ? 8% Chinese eggs. 1.89 billion eggs U.S. dominates the white egg markets. Melamine was found in eggs and dairy products from China and that has led consumers to pay more attention to food safety and seek high quality products from other supplying countries. Fresh Fruit 1. U.S. ? U.S. fresh fruits are highly No local production. 31% regarded as having good Imports quality. US$1.26 billion 2. 1,278,410 MT Thailand Thai Trade commission in Hong ? 20% Kong aggressively sponsors Retained trade promotion activities. Imports 3. Chile ? Thai?s tropical fruits are very US$663 million 15% popular in Hong Kong. 529,556 MT Chile?s biggest fruit item to Hong Kong is grapes. The supplying season is different from the U.S. Fresh 1. China Products from China are very Local production is about 5 % of Vegetables ?69% price competitive. Due to total demand. Production costs, expensive operation costs in both in terms of land and labor, in Imports 2. U.S. ? Hong Kong, some farmers in Hong Kong are high. The Hong US$218 million 9% Hong Kong move their Kong Government has encouraged 625,210 MT operations to China and sell organic farming so as to find the 3. S. their products back to Hong niche market for local vegetables. Retained Korea ? Kong. Imports 5% US$208 million High-end restaurants and five- 615,948 MT star hotels prefer to use high quality U.S. products. A lower U.S. dollar value helps U.S. exports to Hong Kong. Processed 1. China Supplies from China are price Local production is insignificant. Fruit & ? 31% competitive. Besides, some Vegetables international brands have 2. U.S. ? operations in China and their Imports 29% exports to Hong Kong are US$382 million considered as imports from 237,400 MT 3. China. Thailand Retained ? 9% Products from the U.S. are more Page 19 of 28 Imports for the high-end market. Potato US$272million chips and French fries are major 179,319 MT U.S. export categories to Hong Kong. Tree Nuts 1. U.S. ? 46% of the tree nuts imported No local production 61% to Hong Kong are pistachios. Imports US$1.2 billion 2. Iran ? The U.S. is very strong in 284,250 MT 30% supplying almonds, walnuts, hazelnuts and pistachios. Retained 3. Mexico Imports ? 2% Some of the imports are re- US$719 million exported to China for 127,417 MT processing. Wine 1. France France is the major supplier for Hong Kong has insignificant wine ? 58% wine. French wine is highly production. Imports regarded in Hong Kong though US$858 million 2. U.K. ? expensive. 37 million liters 14% Hong Kong people are becoming Retained 3. more familiar with California Imports Australia wine. US$693 million ? 7% 26 million liters The Hong Kong Government 4. U.S. ? abolished the tax on wine in 5% February 2008. The new policy has attracted more wine imports into Hong Kong. SECTION IV. BEST CONSUMER ORIENTED PRODUCT PROSPECTS Notes : 1 95% of Hong Kong food supplies are imported. Since Hong Kong?s domestic production is nominal the market size in the following table is equal to retained imports without taking into account local production. U.S. exports to Hong Kong are also based on imports minus exports. 2 Import tariff rates for all food and beverage products in the tables are zero except for spirits with alcohol content greater than 30%, which is 100%. 3 Products listed below are either enjoying a large market import value or a significant growth rate for the last 5 years (2006-2010). Page 20 of 28 Table 12. Hong Kong: Top 10 Prospects Product 2010 2010 2006 ? Key Constraints Over Market Category Retained Retained 2010 Market Development Attractiveness Imports Imports Average For USA (MT) (US$ Annual million) Retained Import Growth Fish & Volume US$2.6 +11.1% Major suppliers of fish U.S. fish and Seafood statistics billion (value) and seafood products are seafood products are Products not Japan (18%), perceived as high available China (15%), Australia quality and safe. (9%) and the US (6%). Many 5-star hotels in Hong Kong are carrying Alaska seafood products such as king salmon, king crab, snow crab, black cod and halibut. It is anticipated that these seafood products will continue to be popular among HRI sector in Hong Kong. Fresh Fruit 529,556 MT US$663 -2.4% The Hong Kong fresh U.S. fresh fruit are million (volume) fruit market had negative well known for their volume growth over the large variety, good +4.9% past 5 years because of quality and tastes. (value) bad crops in some categories. U.S. was the largest supplier (31%) of Hong Kong consumers fresh fruit to Hong prefer fresh fruit to Kong, followed by frozen fruit. Competition Thailand (20%). from Thailand and China is keen as these The top U.S. fruit countries supply tropical exports to Hong fresh fruit at competitive Kong were citrus prices. The shorter products (US$128 travel time for shipments million), grapes Page 21 of 28 from these countries to (US$96 million), Hong Kong also render apples (US$67 their products million), cherries ?fresh? to Hong Kong (US$46 million), consumers. plums, sloes & peaches (US$19 million) and strawberries (US$13 million). These U.S. products will continue to be popular among Hong Kong consumers. Poultry 379,776 MT US$822 +5.7% Brazil is the leading U.S. exported Products million (volume) supplier of poultry for US$581 million Hong Kong. Brazil worth of chicken moved in as the no. 1 products to Hong +21% poultry exporter to Hong Kong, accounting for (value) Kong when U.S. poultry 34% of the market imports were temporarily share. banned during February 11 to April 30, 2004 due U.S. products are to Avian Influenza cases highly regarded in in the United States. food quality and Though the ban was later food safety. lifted, Brazil continues to More popular U.S. be the largest supplier chicken products due to its price include chicken wing advantage and its mid joints and exporters? relationships chicken legs because with Hong Kong of their sizes and importers. quality. These two products are The depreciation of U.S. particularly dollar attracted more popularly among imports of U.S. products Hong Kong style to Hong Kong and cafes. market share of the U.S. grew more significantly & reached 34% in 2010. Hong Kong?s certification requirements for U.S. chicken feet, which took effect in May 2005, reduced U.S. chicken feet supplies to Hong Kong. By the requirement, U.S. chicken feet are required to have ante mortem and Page 22 of 28 post mortem inspection. Pork 145,376 MT US$413 +0.5% China and Brazil are the U.S. exported million (volume) top suppliers of pork to US$52 million worth Hong Kong because their of pork to Hong products are very price Kong, accounting for +15% competitive. 10% of the market (value) share. There is a big demand for price competitive U.S. products are prepared/preserved highly regarded for meatballs and other quality and food products typical in safety. Chinese dishes in Chinese restaurants, which are made from pork. China enjoys the advantage of low processing cost. Processed 179,319 MT US$272 +0.77% China is the largest U.S. processed fruit Fruit & million (volume) supplier (31%), closely and vegetables are Vegetables followed by the U.S. well known of their +5.5% (29%). superior quality and (value) tastes. U.S. Some international processed fruit and brands have operations vegetables such as in China and their potatoes, nuts, exports to Hong Kong sweet corn, are considered as mushrooms, imports from China. peaches and pineapples will continue to be in large demand in Hong Kong. Beef, 87,687 US$317 +16% Because of BSE cases in U.S. exported Frozen MT million (volume) the U.S., Hong Kong US$98 million worth currently allows boneless of frozen beef to +31% beef derived from cattle Hong Kong in 2010, (value) under 30 months of age accounting for 21% from U.S. E.V (Export market share. Verification) approved Although U.S. beef plants. was banned in Hong Kong in 2004 and Bone-in beef and variety 2005, Hong Kong beef from the U.S. are consumers still have not yet allowed in. high regards for U.S. beef in terms of Currently only 25 plants quality and safety. have been EV approved and are eligible to export beef products to Hong Kong. Page 23 of 28 Short U.S. beef supplies make U.S. beef very expensive. Brazil beef took the opportunity to gain market share. Brazil beef imports grew from US$49 million in 2004 to US$182 million in 2010. Wine 26 US$693 +17% Competition is keen in U.S. exported million liters million (volume) Hong Kong. Major US$46 million of competitors come from wine to Hong Kong +79% France and Australia. in 2010, accounting (value) French wine is for 5.4% of the traditionally more market share. popular in Hong Kong. The HKG abolished the import tax on wine and beer in February 2008. The HRI sector in Macau is growing, making it an excellent opportunity for U.S. wine traders to expand their exports. Hong Kong consumers are more and more receptive to wine. The total elimination of the excise tax on wine would probably help nurture wine drinking culture in Hong Kong. Tree Nuts 127,417 MT US$719 +32% 46% of the tree nuts No local production million (volume) imported to Hong Kong are pistachios. +48% (value) The U.S. is very strong in supplying almonds, hazelnuts and pistachios. Some of the imports are re-exported to Vietnam Page 24 of 28 and China for processing. Fruit & 18,725 MT US$24 +0.4% The U.S. is still the Given the high Vegetable million (volume) market leader, exported quality of U.S. fruit Juices US$8.7 million worth of & vegetable juices, -3% fresh fruit juices to Hong U.S. fruit and (value) Kong, accounting for a vegetable juices market share of 32%. such as orange juices, apple juices, grape juices, grapefruit juices, tomato juices and pineapple juices are expected to continue to be very popular in 2011. Organic Statistics Statistics Statistics Organic F&B products are As Hong Kong Food and not not not generally 20-40% higher consumers are Beverage available available available in prices compared to becoming more non-organic products. health-conscious, (The size of the demand for the Hong There are many organic organic products will Kong standards in the market continue to grow in organic and the poor quality of a 2011. food and country?s organic beverage products may negatively USDA Organic market is affect the image of enjoys an excellent estimated organic products from all reputation among at US$500 supplying countries. consumers in Hong million, with Kong. Consumers an annual generally have more growth of confidence on USDA 10-15%) Organic standards than other countries?. Grain products, soybeans, cereals, oats, noodles?etc are in good demand. Other products such as organic meat (beef and pork), condiments, poultry, eggs etc are starting to have more interest in the market. There is also a strong demand for Page 25 of 28 organic vegetables and fruits, organic coffee and tea products. SECTION V. KEY CONTACTS AND FURTHER INFORMATION Post Contact Foreign Agricultural Service (FAS) Home Page: http://www.fas.usda.gov Agricultural Trade Office American Consulate General 18th Floor, St. John?s Building 33 Garden Road, Hong Kong Tel: (852) 2841-2350 Fax: (852) 2845-0943 E-Mail: ATOHongKong@fas.usda.gov Web site: http://www.usconsulate.org.hk http://www.usfoods-hongkong.net Department to Implement Food Safety Control Policy Food & Environmental Hygiene Department 43/F., Queensway Govt Offices 66 Queensway, Hong Kong Tel: (852) 2868-0000 Fax: (852) 2834-8467 Web site: http://www.fehd.gov.hk Department to Control the Importation of Plants & Live Animals Agriculture, Fisheries & Conservation Department 5-8/F., Cheung Sha Wan Govt Offices 303, Cheung Sha Wan Rd Kowloon, Hong Kong Tel: (852) 2708-8885 Fax: (852) 2311-3731 Web site: http://www.afcd.gov.hk Department to Issue License for Imported Reserved Commodities Trade & Industry Department 18/F., Trade Department Tower 700 Nathan Road Kowloon, Hong Kong Tel: (852) 2392-2922 Page 26 of 28 Fax: (852) 2789-2491 Web site: http://www.tid.gov.hk Department to Register Health Foods Containing Medicine Ingredients Department of Health Pharmaceuticals Registration Import & Export Control Section 18th Floor, Wu Chung House 213 Queen?s Road East, Wanchai, Hong Kong Tel: (852) 2961-8754 Fax: (852) 2834-5117 Web site: http://www.dh.gov.hk Department to Issue License for Imported Dutiable Commodities Hong Kong Customs & Excise Department Office of Dutiable Commodities Administration 6-9th floors, Harbor Building 38 Pier Road, Central, Hong Kong Tel: (852) 2815-7711 Fax: (852) 2581-0218 Web site: http://www.customs.gov.hk Department for Trade Mark Registration Intellectual Property Department Trade Marks Registry 24th and 25th Floors, Wu Chung House 213 Queen?s Road East Wan Chai, Hong Kong Tel: (852) 2803-5860 Fax: (852) 2838-6082 Web site: http://www.ipd.gov.hk Semi-Government Organization Providing Travel Information Hong Kong Tourist Board 9th - 11th floors, Citicorp Center, 18 Whitfield Road, North Point, Hong Kong Tel: (852) 2807-6543 Fax: (852) 2806-0303 Web site: www.hktourismboard.com Semi-Government Organization Providing Hong Kong Trade Information Hong Kong Trade Development Council 38th Floor, Office Tower, Convention Plaza 1 Harbor Road, Wanchai, Hong Kong Tel: (852) 2584-4188 Fax: (852) 2824-0249 Web site: http://www.tdctrade.com Page 27 of 28 Page 28 of 28
Posted: 18 March 2011, last updated 19 March 2011

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