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Processed Food and Beverages Industry in Hong Kong

Overview

  • Food safety has become a prime concern of consumers worldwide. Increasing numbers of countries and regions, such as the Chinese mainland, the US and the EU, have implemented ever more stringent controls on food safety, whether locally produced or imported.

  • Between January-July 2016, Hong Kong’s total exports of processed food and beverages increased by 14%, reaching HK$33 billion. Chinese mainland was the largest export market for Hong Kong’s processed food and beverages (accounting for 38% of the total), followed by the Vietnam (26%).

  • The food and beverages industry in Hong Kong is largely related to re-export activities. Between January-July 2016, Hong Kong’s re-exports of food and beverages accounted for more than 90% of Hong Kong’s total exports of food and beverages.

Industry Features

Table: Industry Features
Table: Industry Features

The processed food and beverages industry in Hong Kong is characterised by its active trading activities. Major food importers/traders in Hong Kong include Dah Chong Hong, Four Seas Food Investment, EDO Trading Co, Kampery and Sun Shun Fuk.

Food and beverages production in Hong Kong is a large-scale business, with most of the output going for local consumption. Key products here include instant noodles, macaroni, spaghetti, biscuits, pastries and cakes. Other related activities include the canning, preserving and pro-cessing of seafood (fish, shrimps, prawns and crustaceans); the manufacture of dairy products (fresh milk, yoghurt and ice-cream); seasonings and spirits. With the growing Western interests in Asian food and condiments, such as soya sauce, soya milk and oyster sauce, there has been an increase in demand for Hong Kong’s food exports. A number of Hong Kong brands, such as Lee Kum Kee, Vitasoy and Kampery, have expanded their markets proactively on both the Chinese mainland and in the overseas markets, resulting in high recognition levels.

The industry has also attracted substantial foreign investment. A notable foreign investor is Japan’s Nissin, which now produces instant noodles in its factory in Tai Po Industrial Estate and is the leading player in Hong Kong’s instant noodles market. Also, the Japanese multinational group Ajinomoto Co acquired Amoy, a Hong Kong-based frozen dim sum and sauces producer.

Large Hong Kong manufacturers have expanded their global networks and set up offices or factories in several major markets. For example, Lee Kum Kee has factories and regional offices in China, the US and Malaysia and Vitasoy has factories on the mainland as well as in the US, Australia and Singapore. Besides headquarters located in Hong Kong, Kampery has regional offices in China and Canada; whereas manufacturing plants were set up in Shanghai, Foshan and Guangzhou.

Performance of Hong Kong's Exports of Processed Food and Beverages^

Table: Performance of Hong Kong’s Exports of Packaging Materials
Table: Performance of Hong Kong’s Exports of Packaging Materials
Table: Performance of Hong Kong’s Exports of Packaging Materials (by Markets)
Table: Performance of Hong Kong’s Exports of Packaging Materials (by Markets)
Table: Performance of Hong Kong’s Exports of Packaging Materials (by Categories)
Table: Performance of Hong Kong’s Exports of Packaging Materials (by Categories)

Sales Channels

Many Hong Kong food and beverages manufacturers deal directly with overseas importers and supermarket chains. However, Hong Kong’s food and beverages trading companies have played a pivotal role in introducing Western foods to mainland consumers, and in assisting smaller producers based locally and on the Chinese mainland in selling abroad.

Many Hong Kong brands have successfully entered overseas markets. Garden (biscuits, cakes and sweets), Doll (instant noodles), Vitasoy (soft drinks), Amoy, Lee Kum Lee (cooking sauces), Lam Soon (edible oils) and Kampery (instant milk tea mix) are the leading local brands. Many of these brands have appointed distributors and/or established overseas offices to promote overseas sales. These Hong Kong brands have expanded vigorously into overseas markets and have received increased international recognition. Some companies have also set up overseas factories to produce for, and to serve, their local markets. For example, Vitasoy Group has spread far beyond Hong Kong and now sells its products in more than 30 markets throughout the world. Besides Hong Kong, Shenzhen, Foshan and Shanghai, the Vitasoy Group also has production plants in the North America, Australia and Singapore.

In order to establish connections and explore market opportunities, processed food and beverages manufacturers and traders can join trade fairs and missions organised by HKTDC, such as the Food Expo in Hong Kong, the Canton Fair in Guangzhou and the Style HK Show in various mainland cities. HKTDC also organises, on occasion, study or matchmaking missions for Hong Kong manufacturers to visit specific markets to help build new business relations.

Industry Trends

Health and wellness offerings are increasingly adapted to meet the expectations of consumers of processed food and beverages. In particular, ageing populations and a rise in health consciousness are creating a receptive environment for products that aid the “maintenance” of health, such as cholesterol-lowering spreads and high calcium milk. While health issues are creating new openings, convenience foods such as microwaveable and packaged foods, also looking promising in growth terms.

As people become more health conscious, organic food is becoming more popular. Organic foods are foods produced using ‘natural’ farming methods, which do not involve the use of synthetic pesticides and chemical fertilisers. Organic farmers use management systems that promote and enhance biodiversity, biological cycles, and soil biological activity. Organic foods are not processed using irradiation, industrial solvents or chemical food additives. Organic processes maintain a food’s organic status by segregating it from synthetic and other prohibited materials, carefully tracking ingredients, and maintaining detailed record keeping.

Online grocery shopping is becoming increasingly popular in Asian countries. In Taiwan and Japan, many working women buy food, including fresh fruit and vegetables through the internet. On the mainland, online grocery shopping is popular in big cities such as Beijing and Shanghai, but shoppers prefer to purchase packaged/processed foods and snacks, rather than fresh food items, online.

GM Food Labelling

The regulatory approaches on GM food labelling vary in different countries and regions, and can be broadly classified as voluntary or mandatory.

For the voluntary labelling approach, only GM food that is significantly different from its conventional counterpart, in terms of composition, nutritional value and allergenicity, needs to be labelled.

For the mandatory labelling approach, it can be further divided into “pan-labelling” and “labelling for designated products only”. The “pan-labelling” category requires labeling for any food products that either contain GM materials exceeding a threshold level or have any significantly different characteristics as a result of genetic modification. The “labelling for designated products only” category requires that only the designated products, which are genetically modified, need to be labelled. 

International Practices on GM Food Labelling

The international community is working towards a consensual policy on GM food labelling. However, the Codex Alimentarius Commission of the United Nations has not yet reached agreement on the common standards with respect to GM food labelling. At present, policies on GM food labelling vary in different countries and regions.

CEPA Provisions

Since the implementation of the third phase of the Chinese mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at a zero tariff. According to the stipulated procedures, products that have no existing CEPA rules of origin will enjoy tariff-free treatment upon application by local manufacturers and after they comply with the CEPA rules of origin. For more information about country of origin, please refer to the Trade and Industry Department’s CEPA’s web page.

General Trade Measures Affecting Exports of Processed Food and Beverages

  • The United States

To protect consumers’ health, import regulations for food and beverages in the US are normally more stringent than other consumer goods. The FDA Food Safety Modernization Act (FSMA) of 2011 aims to ensure that the US food supply is safe by shifting the focus of federal regulators from responding to contamination to preventing it.

In May 2013, the Food and Drug Administration (FDA) issued a final rule that adopts, without change, the interim final rule (IFR) entitled “Information required in Prior Notice of Imported Food” (2011 IFR). This final rule adopts the IFR’s requirement of an additional element of information in prior notice of imported food, specifically that a person submitting prior notice of imported food, including food for animals, must report the name of any country to which the article has been refused entry.

The Nutrition Labelling and Education Act of 1990 also requires that nutrition labelling become mandatory on virtually all packaged foods sold to consumers. In May 2016, the FDA announced the new Nutrition Facts label for packaged foods to reflect new scientific information, including the link between diet and chronic diseases such as obesity and heart disease. For details please visit FDA’s website.

  • The European Union

For the EU market, all imported food items are subject to the sanitary and phytosanitary regulations of the European Food Safety Authority, as well as strict certification requirements laid down by the individual country’s health authorities. In addition, imports of foodstuffs into EU countries must carry a Health Certificate. Packaged foodstuffs must also comply with EU food labelling, additive, flavouring and packaging legislation. New regulations controlling the type of material that is likely to come into contact with food, as well as their labelling, advertising and presentation have been introduced. 

  • The Chinese mainland

On April 24, 2015, the National People’s Congress approved the final revision of the 2009 Food Safety Law (FSL), the main piece of legislation governing the manufacturing and distribution of food, including special foods such as health foods and infant formula. The final FSL will become effective on October 1, 2015. The final FSL includes many changes in a number of different areas, such as (i) it requires manufacturers and distributors to establish a food tracing system and perform self-audits; (ii) it further incorporates “food related materials”, which include packaging and other food contact substances, into the regulatory scheme governing food ingredients, such as food additives and food raw materials; (iii) it requires third-party e-commerce platforms register the names of the food distributors that sell products on their platforms and examine their licenses.

The Standard for Nutrition Labelling of Prepackaged Foods (GB 28050-2011) came into effect on 1 January 2013. It requires the nutrition labelling of prepackaged food to include nutrition information, nutrition claims and nutrient function claims. It also gives requirements as to nutrition information specifications regarding the content of transfatty acids. Moreover, the Standard requires a description of the level, content, increase or decrease of energy and nutritional components in the food, with the specific content requirements and limitations set out.

  • Japan

For the Japanese market, all food products are subject to examination under the Food Sanitation Law. Processed foods entering Japan are subject to three types of inspection: examination for bacterial content, testing for chemical content (including food additives), and visual inspection. Processed foodstuffs must also bear labels. In addition, Japan has control over the usage and import of most additives, which are added to or used with foods, beverages and medicines. Those who wish to import food, food additives, apparatuses or container-packages for sale or business must first notify the Minister of Health, Labour and Welfare on each occasion and inspections may be conducted.

Product Trends

In developed economies like the US and the EU, there has been a shift in consumer taste in favour of healthy foods, partly as a result of the ageing population who seek easy-to-prepare, high quality nutritional foods to compensate for their lowered taste sensitivity.

Food manufacturers are introducing low cholesterol/carbohydrate/added sugar foods. The quest for slimness has given rise to the development by Danone, Unilever and Kraft of “dietary foods” that contain added fibre to make the food more filling and delay digestion. This trend requires increasedR&D capabilities and advanced production technology on the part of food manufacturers.

Purchase of organic food is a major trend in both developed and developing countries. According to the US Organic Trade Association, organic food sales in the US reached US$43 billion in 2015. Organic food encompasses a wide range of products including cheese, meat, wine, spices, nuts and canned goods. Organic generally means food grown or produced without the use of chemical synthetic fertilisers, pesticides and preservatives and unaffected by genetic engineering. Official definitions vary among countries, but may require a high standard in the growing practices, processing and handling of the produce. Organic foods are increasingly available in supermarkets.

Ethnic Asian cooking – including cuisines from China, Japan, India, Thailand, Korea, Vietnam, Malaysia and Indonesia – has become popular either on its own or blended with Western dishes in recent years in Western countries. High quality exotic foods have been well received. Ingredients such as rice noodles, basmati and jasmine rice, coconut milk, ginger root and curry pastes are all popular items in supermarkets in the US and Canada.

In beverages, energy drinks are taking young consumers by storm, while ordinary soft drinks and other drinks are lagging behind. These are drinks with added vitamins, minerals, caffeine and other ingredients. Drinks that lay claim to beauty or health effects are also being introduced. These include fruit juices, flavoured water and herbal or floral teas.

Content provided by Picture: Alice Tsang
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