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Wine Industry in Hong Kong

  • Hong Kong's wine industry is supported by a significant pool of experienced fine wine merchants with good wine knowledge and international wine trade experience. In addition to wine trading and distribution, local wine-related activities include auctions, retailing, warehousing, catering and transportation.
  • Following the removal of all duty-related customs and administrative controls in February 2008, Hong Kong has developed into a wine trading and distribution centre for the region and, particularly, for mainland China.
  • Hong Kong has entered into an agreement with the mainland Chinese government, allowing wine to be imported into China under CEPA and various enhanced customs facilitation measures. Since November 2017, the customs facilitation measures have been extended to every port in the 42 mainland Customs Districts.

Industry Features

Hong Kong has a significant pool of experienced fine wine merchants with good wine knowledge and international wine trade experience. Amid the growing demand for wine in Asia, the SAR’s government removed all duty-related customs and administrative controls for wine in February 2008 to facilitate the development of Hong Kong as a wine trading and distribution centre for the region, particularly for mainland China. In addition to wine trading and distribution, local wine-related activities include auctions, retailing, warehousing, catering and transportation.

Following deregulation, the development of the wine industry accelerated, with wine imports surging some 80% in the first year. According to an ad hoc survey carried out by the Commerce and Economic Development Bureau to evaluate the economic benefits of wine duty exemption, about 850 new wine-related companies were set up in Hong Kong in 2008 and 2009, bringing the total to 3,550. At the same time, the wine sector as a whole gained HK$5.5 billion worth of wine-related business receipts in 2009, representing an increase of more than 30% compared with 2007, while the number of employees engaged in wine-related business increased by more than 5,000 compared with 2007, reaching 40,000 by the end of 2009. This increase in employment was equivalent to about 1,000 full-time jobs, 60% of which were for front-line staff; while the number of wine-related manpower and professional courses (including sommelier training, as well as wine business/management courses) grew from 21 in 2007 to 86 in 2009. The number of participants in these courses was in excess of 8,500 in 2009, more than three times the 2,400 participants recorded for 2007.

Hong Kong has entered into an agreement with the mainland Chinese government allowing wine to be imported into China under CEPA and various enhanced customs facilitation measures. This makes the city an unrivalled gateway to China, attracting industry players from around the world to launch or expand their business in Hong Kong. Hong Kong, as a duty-free port with good air connectivity and prime storage facilities, is regarded by Asian investors as the most cost-effective and convenient distribution hub to store their investment-grade wines for delivery to markets on-demand.

Performance of Hong Kong's Wine Trade [1]

Wine (HS 2204-5) Trade
in value terms

20172018Jan - Jun 2019
HK$ (mn)Growth (%)HK$ (mn)Growth (%)HK$ (mn)Growth (%)
Total Exports4,422-14.93,426-22.5745-64.0
Domestic ExportsNilNilNilNilNilNil
Re-Exports4,422-14.93,426-22.5745-64.0
Imports11,951-0.811,968+0.14,552-26.6

Source: Hong Kong Trade Statistics, Census and Statistics Department

 

Wine Exports by Market (by value)20172018Jan - Jun 2019
Share (%)Growth (%)Share (%)Growth (%)Share (%)Growth (%)
Asia98.4-15.097.0-23.793.4-65.5
Mainland China83.1-17.784.4-21.459.7-75.4
Macao10.4-3.88.3-38.524.7+37.1
Japan1.0+99.70.7-45.53.5+73.2
Taiwan0.6+23.01.1+39.52.2-28.1
Singapore0.6+23.61.3+58.42.0+19.6
Cambodia0.1+113.10.1+5.30.5+59.5
US0.5-41.80.4-35.93.2+136.7
United Kingdom
0.3
+29.0
0.3-5.81.0+37.9
Denmark
Nil
-100.0
1.1=
0.9-55.9

* Insignificant; = Infinitive

Source: Hong Kong Trade Statistics, Census and Statistics Department

 

Wine Imports by Origin (by value)   2017 2018
Jan - Jun 2019
Share (%)
Growth (%)
Share (%)
Growth (%)
Share (%)
Growth (%)
Europe73.4
-3.4
79.8
+8.9
81.8
-20.5
France59.5
-6.0
65.1
+9.6
63.9
-23.7
United Kingdom
7.3
-3.3
8.7
+18.9
10.2
-4.6
Italy
2.9+26.4
2.4
-16.2
3.1
-15.0
Spain
1.1
+12.7
0.9
-20.7
1.7
+20.7
Switzerland0.7
+61.9
1.2
+59.6
1.1
-15.1
Germany0.9
+106.2
0.7
-16.7
0.8
-12.7
Australia18.5
+3.9
13.3
-27.9
9.7
-57.0
US5.1 +30.24.1
-19.7
4.8
-31.8
Chile
1.5
+2.2
1.4
-8.9
1.9
+6.7

Source: Hong Kong Trade Statistics, Census and Statistics Department

 

Wine Trade in volume terms20172018Jan - Jun 2019
mn litresGrowth (%)mn litresGrowth (%)mn litresGrowth (%)
Total Exports24.539-9.316.607-32.35.195-46.0
Domestic Exports
NilNilNilNilNilNil
Re-Exports
24.539-9.316.607-32.35.195
-46.0
Imports60.880-3.351.215-15.921.874-23.9

Source: Hong Kong Trade Statistics, Census and Statistics Department

As the local climate is not suitable for growing grapes, there is very little wine production in Hong Kong and, therefore, an insignificant level of domestic exports. Virtually all exports are re-exports of imported wines, with Asia being the major market. Mainland China and Macao, taking up more than 84% of the total in the first half of 2019, are the major wine exporting destinations for Hong Kong. In January-June 2019, total exports of wine dropped by 64.0% by value, after a decline of 22.5% last year.

On the other hand, Hong Kong’s wine imports have expanded fast since the elimination of import duties in February 2008. In January-June 2019, imports of wine amounted to HK$4.5 billion, nearly three times the HK$1.6 billion recorded for 2007. Most of the imported wines originated from European countries, such as France and the United Kingdom, but there has also been a significant share coming from the ‘New World’ countries notably Australia, the US and Chile, in recent years. In the first half of 2019, the value of wine imports dropped by 27%, with those from Australia (-57.0%), the US (-31.8%) and France (-23.7%) decreasing the most.

In volume terms, Hong Kong imported 21.9 million litres of wine in the first half of 2019, with about 24% of these being re-exported. The rest – about 76% – were either conveyed out of Hong Kong by individuals exiting the territory or retained for storage or local consumption.

Sales Channels

In order to establish Hong Kong as a trading and distribution hub for the region, the Hong Kong government has signed co-operation agreements with Australia, Argentina, Chile, France (including its Bordeaux and Burgundy regions), Germany, Hungary, Italy, New Zealand, Portugal, Romania, Slovenia, Spain and the US (including Oregon and Washington) to strengthen promotional activities in a number of areas, including wine-related trade, investment and tourism. Various wine promotional activities, including seminars, wine tastings, receptions and food pairings, also take place in Hong Kong. In particular, trade fairs in Hong Kong provide good business matching opportunities, support new wines and label launches, while facilitating market testing of the Asian palate. Below is a list of selected trade fairs in the industry.

Country/ RegionMajor Events
Hong Kong

HKTDC Hong Kong International Wine and Spirits Fair in November

VinExpo Hong Kong in May in every even-numbered year

Europe

London Wine Fair in the UK in May

VinItaly in Verona, Italy in April

ProWein in Düsseldorf, Germany in March

VinExpo in Bordeaux, France in June in every odd-numbered year

 

High-value, investment grade wines are usually sold through auctions organised by global auction houses, including Acker Merrall & Condit, Sotheby’s, Christie's and Zachys. Thanks to the surge in demand from Asian investors, Hong Kong has been one of the largest wine auction centres in the world since 2009, with auction sales amounting to US$133 million in 2018, according to Wine Spectator.

Domestically, wines are sold through off-trade channels, such as supermarkets, specialty stores and convenience stores, and on-trade channels, such as bars, restaurants and clubs. According to Statista, wine sales in Hong Kong amounted to US$646 million (or 33.7 million litres) in 2018, up 6.1% (and 2.4%) per annum over the past five years. For 2019 to 2023, the sector is forecast to grow by 4.4% per annum in value and by 1.6% per annum in volume

Industry Trends

With wine consumption becalmed or decreasing across much of Europe, global attention has shifted to Asia. Consumers in Asia are increasingly wine savvy and their demand for wine remains strong. According to Statista, wine sales in Asia totalled US$54.9 billion or 2.8 billion litres in 2018, up 8.0% in value and up 2.6% in volume per annum in the past five years. For 2019 to 2023, it is forecast that wine sales in Asia will grow 4.0% per annum in value and 1.2% per annum in volume. The outlook for the mainland market is also promising, with sales totalling US$25.5 billion or 1.7 billion litres in 2018, up 6.2% and 2.6% respectively per annum over the past five years. For 2019 to 2023 growth is forecast at 4.1% per annum in value and 1.1% per annum in volume.

Due to the growing demand for wine in Asia and the deregulation of wine imports, the wine business has boomed in Hong Kong. In addition to new entries, international wine companies and their specialist partners have increasingly moved to Hong Kong. For example, Robert Sleigh, Senior Director and head of Sotheby's wine department in Asia, relocated to Hong Kong from New York in September 2010. Also, after six years in Singapore, the Regional Council of Burgundy moved its only office in Asia to Hong Kong.

With Hong Kong recognised as the region’s culinary centre, a growing local trend has been for restaurants and hotels to host food and wine appreciation sessions, occasions where various wines are paired with Asian cuisine. There is also a food matching competition presided over by a number of Asian experts during the course of the HKTDC Hong Kong International Wine and Spirits Fair.

Responding to rising demand and driven by market forces, public as well as private training institutions are enriching or expanding their wine appreciation courses and developing enhanced manpower training programmes. For instance, the Vocational Training Council (VTC) offers training to personnel ranging from sommeliers to frontline catering staff, and provides training on food and wine pairing, wine appreciation and other wine-related matters through the International Culinary Institute. Meanwhile, the School of Hotel and Tourism Management of the Hong Kong Polytechnic University has launched a Master of Science programme in international wine management.

To support on-demand delivery to Asian markets, Hong Kong needs an expanded range of storage facilities, with a number of such resources currently being constructed or converted. With government assistance, the industry and the Hong Kong Quality Assurance Agency launched the Wine Storage Management Systems Certification Scheme, the first of its kind in the world. The industry has supported the Scheme enthusiastically, with more than 60 fine and commercial wine storage facilities, wine storage facilities in wine retailers and/or wine transportation service providers accredited since its launch in 2009.

CEPA Provisions

Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland has accorded all products of Hong Kong origin, including wine, tariff-free treatment since 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin can enjoy tariff-free treatment upon application by local manufacturers and upon the CEPA rule of origins being agreed and met. Non-Hong Kong made wine is subject to tariff rates of up to 20% when entering the mainland.

Generally speaking, for wine made from fresh grapes, fermentation and production, identified as the principal processes for the purpose of delineating their origin, should be carried out in Hong Kong. Detailed information is available here.

General Trade Measures Affecting Wine Exports

Mainland China is the biggest export market for Hong Kong. The mainland imposes the following taxes on wine: import tariffs (14% for bottled wine and 20% for bulk wine), value-added tax (13%) and consumption tax (10%), which results in an effective tax rate as high as 43-51%. The two most critical pieces of legislation concerning wine imports are the wine standards and the wine labelling law, both of which have been administered by the General Administration of Customs since March 2018. Regulatory measures that apply to wine include Rules for Inspection on Production Licensing of Wines and Fruit Wines, Measures for Administration of Imported Alcohol in Domestic Market and Provisions on the Protection of Geographical Indication Products. Food-related regulations also apply to wine production and trade, including the Food Safety Law, Measures for the Safety Administration of Imported and Exported Food and Measures for Administration of Food Production Licensing.

Labels on the wine are governed by the above regulations. All information labelled in English must also be equally given in Chinese and in the same size font. All labels must be permanently attached to bottles.

To facilitate the movement of wine imports into mainland China through Hong Kong, the Customs and Excise Department (C&ED) of Hong Kong and the General Administration of Customs of mainland China signed the Co-operation Arrangement on Customs Facilitation Measures for Wine Entering the Mainland through Hong Kong on 9 February 2010. The agreement applies to wine imported through designated ports into mainland China by Hong Kong-registered wine exporters and imported by mainland-registered wine importers. The measures include pre-valuation of duty while the wines are in Hong Kong and accelerated clearance time at mainland ports. The agreement now applies to all ports in all 42 mainland Customs Districts. On 18 September 2014, the two customs administrations signed a supplement to the Arrangement in order to enhance the facilitation measures. The supplement waived the requirement that wine consignments from Hong Kong have to be received by mainland-registered wine importers, and mandated the use of a newly developed online system for declaring wine consignment information to mainland customs. More information can be found here.

C&ED has stepped up efforts to tackle counterfeit wine, including establishing a dedicated investigation team; forming an alliance with the industry to strengthen co-operation in intelligence collection and enhancing its capacity to monitor market activities. A specialist team has also been set up within this alliance, which has drawn in experts to assist in tackling the problem of counterfeit wines, as well as establishing a liaison network with overseas and mainland China enforcement agencies to intercept suspected counterfeit wines and to verify – or not – their authenticity.

In recent years China has signed free-trade agreements with various countries. Under the current arrangements, wines originating from certain wine-producing countries, namely New Zealand, Chile, Georgia and Australia, can be imported to China at a zero tariff rate. As a result, tariffs on Australian wines have been eliminated since 1 January 2019. On the other hand, under the current China-US trade war, wines originating from the US are subject to tariffs ranging from 10%-25%. A further 15% tariff was imposed on wines originating from the US after China decided to suspend tariff concessions on imports from the US in April 2018. Hence, the total tariff on wines originating from the US can be up to 40%.

Product Trends

New world wines gaining market share

Old World wines, which refer to those produced in continental Western Europe, including France, Italy, Portugal and Germany, dominate the Asian market. However, New World wines produced in the US, Latin America, Australia, New Zealand, South Africa, etc, are gaining popularity. Seen as more user-friendly for wine beginners, New World wines are usually labelled in English with greater emphasis on their primary grape variety. On the other hand, Old World wine labels are more difficult to read. Most European wines are labelled under the geographic appellation (the region in which the grapes are grown) rather than their grape variety, which assumes consumers are familiar with the producer regions. In addition, wines coming from countries such as Australia are nearer to Asian countries and thus incur lower transportation costs.

Emerging wine-producing countries gaining world attention

In recent years, wines from some countries, including Moldova, Georgia and Hungary, have started to enter the world market and receive appreciation from wine drinkers for their quality and traditional winemaking techniques. Mainland China, too, is an emerging wine-producing country. According to Trade Map, between 2014 and 2018, the compound annual growth rate of China’s wine exports reached 29%. Wines are produced in various mainland regions, such as Yunnan Province, Shandong Province, the Ningxia Hui Autonomous Region etc. Several international brands have now established wineries on the mainland. For example, Château Lafite Rothschild and LVMH now operate wineries in Shandong and Yunnan respectively. Local Chinese wine makers are also actively promoting their products to a number of export markets.

AR wine labels appeal to consumers

In bars and restaurants wines are traditionally selected from a wine list without the customers ever seeing the bottle. Amid the rise of off-trade channels, wine packaging, in terms of label design, has become more important. Now, wine labels show more information, such as the vintage, variety and country of origin. Label designs are increasingly eye-catching and easy to recognise, as brand recognition can play a major role in wine selection. Some wine companies have even invested in AR (Augmented Reality) labelling apps, in order to enhance consumer’s wine purchase and consumption experience. After the consumers download the app, they can then hover their smartphones over the AR wine label to view an animated video.

Targeting entry-level tasters

According to Euromonitor International, more products targetted at entry-level tasters and people new to wine consumption have been launched in recent years. Examples here include Ruffino Libaio Chardonnay by Ruffino SRL, and Barefoot White Zinfandel by Barefoot Cellars. Another company, Te Hana, launched Te Hana Rose Cuvee, a low-price champagne available in PARKnSHOP and targetted at low- to middle-income consumers.

Wine packaged in smaller bottles

Some wine retailers package the same wines in large and small bottles. The idea is to allow consumers to replicate a winery tasting room in the comfort of their own homes, giving them the opportunity to taste a range of high-quality wines before committing to buying full-sized 750 ml bottles.

Companies introduce wines to be paired with certain foods

An increasing number of consumers have started to develop a more sophisticated palate, and are, consequently, drinking more wine. According to Euromonitor International, regional companies have started to launch products particularly geared to local tastes. These include Chateau Tour Sieujean by Jointek Fine Wines, which is said the be ideal for pairing with roast pork / steak. Similarly, St. Émilion Grand Cru has launched Chateau Haute Nauve 2006, which is said to go down particularly well with roast lamb / duck.

Targeting the entry-level tasters

According to Euromonitor International, there are more products which target entry-level tasters and people new to wine consumption launched in recent years. Examples include Ruffino Lbaio Chardonnay by Ruffino SRL, and Barefoot White Zinfandel by Barefoot Cellars. Another company, Te Hana, also launched Te Hana Rose Cuvee, a low-price Champagne available in PARKnSHOP targeting low- to middle-income consumers.

Wine packaged in smaller bottles

Some wine retailers packaged the same wines in large and small bottles. The idea is to allow consumers to replicate a winery tasting room in the comfort of their own homes, trying a taste of top-notch wines before committing to buying full-sized 750 ml bottles.

Companies introduce wines to be paired with certain foods

An increasing number of consumers have started to develop a more sophisticated palette, and are hence consuming more wine. According to Euromonitor International, regional companies have started to launch their products in a bid to appeal to the local palette. These include Chateau Tour Sieujean by Jointek Fine Wines for matching roast pig and steak. On the other hand, St. Émilion Grand Cru has launched the Chateau Haute Nauve 2006, which is targeted to match roasted lamb and duck.


[1] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Content provided by Picture: C.H. Poon
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