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Processed Food and Beverages Industry in Hong Kong

Overview

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

  • In 2018, Hong Kong’s total exports of processed food and beverages increased by 1% to reach HK$69.3 billion. Mainland China was the largest market for Hong Kong’s processed food and beverage exports, accounting for 41% of the total, followed by Vietnam on 20%.

  • The food and beverages industry in Hong Kong largely centres on re-export activities. In 2018, re-exports accounted for more than 90% of Hong Kong’s total exports of food and beverages.

Industry Features



Manufacturing
Import-export trade
No. of Establishments
1,491 (Mar 2019)
7,440 (2018)
Employment30,637 (Mar 2019)35,740 (2018)

Note: Industry statistics cover activities in Hong Kong only.

 

The processed food and beverages industry in Hong Kong is characterised by 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 sold locally. Key products include instant noodles, pasta, biscuits, pastries, cakes and drinks. Other related activities include the canning, preserving and pro­cessing of seafood (fish, shrimps, prawns and crustaceans), and the manufacture of dairy products (fresh milk, yoghurt and ice-cream) and seasonings.

Hong Kong’s foods and condiments, such as soy sauce, oyster sauce and Chinese pastries, have become increasingly popular on the mainland and overseas. In response to this, some Hong Kong companies have begun proactively expanding their overseas markets by promoting food and beverages with local characteristics to overseas consumers. These products have proved very popular. Lee Kum Kee, Kee Wah Bakery and Kampery are some outstanding examples. In addition, some brands have successfully marketed new uses of their conventional products.  For instance, soy milk sold as a substitute for milk added to drinks has received a positive market response.

The industry has also attracted substantial overseas investment. A notable example 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. These overseas companies constantly launch localised products, and are highly integrated into the local market.

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 on the mainland, in the US and in Malaysia, and Vitasoy has offices and factories on the mainland as well as in Australia and Singapore. Kampery, which has its headquarters in Hong Kong, has also established regional offices on the mainland, and in Canada and France.

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

 

2017
2018
Jan - May 2019
HK$ bn
Growth %
HK$ bn
Growth %
HK$ bn
Growth %
Domestic Exports
4.619
+18
5.392
+17
1.737
+15
Re-exports64.162+1363.939*21.846-29
Of Mainland China origin8.562+138.501-12.785-18
Total Exports68.782+1369.331+123.583-27

Source: Hong Kong Trade Statistics, Census and Statistics Department


by Market20172018Jan - May 2019
Share %Growth %Share %Growth %Share %Growth %
Mainland China36.9+1040.6+1145.2-8
ASEAN16.4-3122.6+3820.4-3
Vietnam14.7-3320.3+3917.7-6
Singapore0.8-120.8+120.7-31
Macao12.8+313.0+215.0-9
Taiwan25.9+12715.9-386.7-84
South Korea1.7+321.9+134.8+222
US1.6-71.7+81.9+4
EU0.8-71.0+161.1+3

Source: Hong Kong Trade Statistics, Census and Statistics Department



by Category
20172018Jan - May 2019
Share %Growth %Share %Growth %Share %Growth %
Processed food86.2+1886.2+187.7-27
Milk and cream, concentrated, sweetened, in solid forms, fat content > 1.5%8.3+6211.2+3615.8+3
Poultry cuts and edible offal (other than liver), frozen12.9+2711.3-127.3-64
Other food preparations5.2+506.6+286.7-16
Pistachios, fresh or dried3.4-234.2+236.6+46
Meat of bovine animals, boneless, frozen1.0-512.4+1414.1+137
Beverages13.8-913.8+112.3-30
Spirits obtained by distilling grape wine or grape marc3.0+33.3+113.2-20
Spirits and distilled alcoholic beverages2.1-222.6+263.0+4

^ Since offshore trade is not captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
* insignificant
Source: : Hong Kong Trade Statistics, Census and Statistics Department

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 Mainland China to sell abroad.

Many Hong Kong brands have successfully entered overseas markets. Garden (biscuits, cakes and sweets), Kee Wah Bakery (traditional Chinese pastries), Vitasoy (soft drinks), Amoy and Lee Kum Kee (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 40 markets throughout the world. The group now has production plants in Australia and Singapore, as well as in Hong Kong, Shenzhen, Foshan, Wuhan and Shanghai.

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

Industry Trends

Health and wellness products are being increasingly adapted to meet the expectations of consumers. In particular, ageing populations and a rise in health awareness are creating a receptive environment for products that help people maintain their health, such as high-fibre biscuits and low-sugar drinks. The growth of convenience foods, such as microwaveable and packaged foods, is also looking promising.

With people becoming more health conscious, organic food is growing in popularity. Organic foods are foods produced using ‘natural’ farming methods, which do not involve the use of synthetic pesticides and chemical fertilisers. Growing numbers of consumers have also begun to adopt vegetarian diets in recent years, so plant-based foods (such as plant-based protein drinks and artificial meat) are also becoming more popular.

There has been growing concern recently among consumers about allergens in food, such as peanuts, gluten, soybean, eggs and milk, which may trigger allergic reactions. They have begun demanding clearer indications on food packaging to help them select the right foods.

Online grocery shopping is becoming increasingly popular in Asia. In Taiwan and Japan, many working women buy food such as fresh fruits and vegetables through the internet. Online grocery shopping is popular throughout Mainland China. Many famous food and drink brands have established flagship stores on major shopping platforms. Online shopping and delivery of fresh food items have become extremely popular in some large cities in recent years.

GM Food Labelling

The regulatory approaches on genetically modified (GM) food labelling vary between countries and regions, but can be broadly classified as voluntary or mandatory.

Under 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.

Mandatory labelling can be further divided into “pan-labelling” and “labelling for designated products only”. Pan-labelling requires labelling 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.

The international community is working towards a consensual policy on GM food labelling. However, the Codex Alimentarius Commission of the United Nations is unlikely to be able to set internationally agreed standards in the near future.

CEPA Provisions

Since the implementation of the third phase of the 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. A new Agreement on Trade in Goods signed between the Hong Kong Special Administrative Region Government and the Ministry of Commerce took effect on 1 January 2019. The new agreement enhances the arrangement for rules of origin. Products currently without “Product Specific Rules of Origin” can enjoy zero tariff status subject to their fulfilment of the general rules of origin based on the calculation of the value-added to the products in Hong Kong. The agreement also allows enterprises to use the newly-introduced build-down method in calculating the value-added in Hong Kong, as well as the existing build-up method under CEPA. Details of the origin certification can be found in the website of the Trade and Industry Department.

General Trade Measures Affecting Exports of Processed Food and Beverages

•  The United States

Import regulations for food and beverages in the US are normally more stringent than those for 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. The new Nutrition Facts Label for Packaged Foods will be implemented on all packaged food products by 1 July 2021.

•  The European Union

For the EU market, all imported food items are subject to the EU sanitary and phytosanitary requirements, 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.

In April 2019, the European Commission adopted a new EU Regulation that strictly limits the amount of industrially produced trans fats in all foodstuffs that are sold. The maximum limit of industrially produced trans fats is 2 grams/100 grams of fat in food intended for the final consumer and for supply to retail. The new regulation will take effect on 2 April 2021.

In June 2019, the EU published a new directive which regulates single-use plastics products. Under the new regulations, single-use plastic products in food packaging must comply with the new EU requirements. For example, polyethylene terephthalate (PET) bottles must contain at least 25% recycled plastic by 2025. The new directive will be implemented in stages by 2030.

•  Mainland China

On April 24, 2015, the National People’s Congress approved the 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 revised FSL became effective on October 1, 2015. The revised 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 Pre-packaged Foods (GB 28050-2011) came into effect on 1 January 2013. It requires that the nutrition labelling of pre-packaged food include nutrition information, nutrition claims and nutrient function claims. It also sets out requirements on nutrition information specifications regarding the content of transfatty acids. The Standard also requires that there be a description of the energy and nutrients contents and their respective nutrient reference values (NRV) 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 want to import food, food additives, apparatuses or container-packages for sale or business must first notify the Ministry of Health, Labour and Welfare every time they do so, and inspections may be carried out.

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 because these economies’ ageing populations want easy-to-prepare, high quality nutritional foods to compensate for their lowered taste sensitivity.

There is a growing movement towards replacing animal protein with plant protein in people’s diet. Plant protein is lower in essential amino acids than animal protein, it also contains components that can help protect against chronic disease and promote overall bodily health. Some industry players noted that plant protein replacing animal protein has a positive impact on climate change, conserving natural resources and respecting animal welfare. Products such as plant protein egg and vegan burger are becoming more popular.

Food manufacturers are increasingly introducing products low in cholesterol, carbohydrates or added sugar. Because many consumers want to be healthier and slimmer, companies such as Danone, Unilever and Kraft have developed diet foods that contain added fibre to make the food more filling and delay digestion. Catering to this trend requires food manufacturers to invest more in R&D capabilities and advanced production technology.

Increasing sales of organic food is a major trend in both developed and developing countries.  According to the Organic Trade Association of the US, organic food sales in the US reached US$47 billion in 2016, an increase of US$4 billion from 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 between countries, but usually require high standards in the growing, processing and handling of the produce. Organic foods are increasingly available in supermarkets.

With the rapid growth of many Islamic economies in recent years, Halal food is becoming a more important market. According to the State of the Global Islamic Economy Report, total global spending by Muslims on Halal food in 2017 amounted to US$1.3 trillion, and that figure is projected to increase by an annual average 6.1% to US$1.9 trillion in 2023.  Demand for Halal food among non-Muslims is also growing, due to concerns over food safety. The non-Muslim market for Halal food is yet to be fully tapped.

Content provided by Picture: C.H. Poon
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