Hong Kong uncorked
A few years ago, Julian Lau was pushing coffee in Toronto. Mr. Lau, who once owned three Timothy's Coffee franchises in the financial district, moved back to Hong Kong to take advantage of a rising Asian trend: wine consumption.
His fledging wine distribution business, Le Vin-Art, moves 20 cases of premium wine a month, and Mr. Lau has set up a separate firm to sell wine into China, including labels such as Albert Mann Cremant d'Alsace from France.
"The Toronto market is saturated with coffee retail, and so the news that the government was removing wine taxes gave me the push to start something new here," he says.
In early 2008, the Hong Kong government scrapped its 40% tariff on wine and beer. As a result, the territory is becoming a wine hub in Asia, and Canadian wine distributors are looking to ride a new commercial wave. The duty-free winds of change hit the territory immediately. Wine imports jumped 83% between February and December, 2008, -- increasing to US$340-million from US$214-million. "Forty-eight hours after the duty was scraped there was a frenzy of importing," says Wendy Cheung, Hong Kong's principal assistant secretary for commerce and economic development. Not only has this had an economic impact, it's had having a cultural one, she says.
Hong Kong has seen an explosion of wine bars as districts such as Soho and Hollywood Road, once home to antiques stores, has given way to trendy bars and restaurants such as Bacar Wine Brasserie. At the hip venue, Tastings Wine Bar, customers sample expensive wines by inserting prepaid cards into small vats that portion out tasting sizes. Even established hotels such as the The Peninsula Hotel's Salon de Ning lounge, styled to reflect 1930s Shanghai, carries a bigger selection of wines. While high-rollers can still get their Chateau Petrus 1982 for HK$10,800 a bottle, they can also get Canada Vineland Estate for a more reasonable HK$400 a bottle.
Not that long ago Asian customers liked their wine served with coca-cola, but locals are now a little more sophisticated, says Francis Lo, beverage manager at the Peninsula Hotel. Although the new connoisseurs still prefer the Premier Cru Bordeaux of France, they are willing to experiment on Australian, Chilean ... and even Canadian, he says.
Wine consumption in Asia (excluding Japan) was US$7-billion in 2007. The Hong Kong government expects that figure to reach US$17-billion by 2012. "By 2017, we think Asia will have greater wine consumption than the U. S.," Ms. Cheung says. For importers, though, the bigger story is the growing Chinese market. In 2007, the Mainland imported US$184-million of wine, a 138% increase from 2006. The guesstimate for 2017 is US$870-million.
Hong Kong hopes to remain a platform for wine distributors expanding into the Mainland. Already, 24% of all wine imports to Mainland Chine goes through Hong Kong. That means big revenues for distributors setting up a beach-head in Hong Kong. "If we maintain a 25% share that will increase our revenues five times," Ms. Cheung adds.
After years of operating under the constraints imposed on him by the Liquor Control Board of Ontario, Leo Baduria finds Hong Kong's open-door policy a breath of fresh air. The independent wine distributor has been importing specialty wines into the province since 1991. His wine list ranges from Crianza from Vina Vilano in Spain, which is available in the Vintages section at the LCBO to Koura Bay Estate wines from New Zealand and Rocche Costamagna from Italy which he sells to posh restaurants such as Globe Bistro on the Danforth in Toronto.
"I've being doing LCBO vintages, but I felt that when you work in a monopoly, you aren't allowed to be creative," Mr. Baduria says. He is frustrated by the LCBO's high mark-up which pushes the price of his wines up dramatically. He is also incensed by the restriction of 175 cases he can bring into the country at any given time, and he says if he hasn't sold his wine in 120 days, the LCBO will seize the remainder and sell it at a discount.
By contrast, Mr. Baduria has imported 3,000 cases into Hong Kong through his company Portfolio Asia Wine & Spirits Ltd. His list is more expansive than in Canada, ranging from the Gewurztraminer Vendange Tardive from France to Vino Nobile di Montepulciano DOCG from Italy. Next up: Stratus wines from the Niagara Region by celebrated vintner Jean-Laurent Groux and from Summerhill Winery in British Columbia.
"We are getting requests from a lot of places and Hong Kong is one of them," says Charles Baker, marketing and sales director at Stratus Vineyards, who is working with Mr. Baduria to offer his wines in Asia.
In Hong Kong, Mr. Baduria has his own warehouse space (which is not allowed in Ontario), and he is selling into supermarkets such as Jusco and has opened a show room on the busy Canton Road in Tsim Tsui Choi district. "I've recognized Asia is the future of wine," he says. Not only is the demographic becoming more sophisticated, but he can sell his product for less. The Spanish Crianza you would pay $20.95 in Ontario you can get for $11 in Hong Kong.
Hong Kong is where Ontario was about 15 years ago, Mr. Baduria says. "We did education programs in hotels and restaurants in Canada; now we are doing the same thing here," he adds. While Hong Kong still needs more wine schools and writers to build the industry, Mr. Baduria is helping develop the local palate by participating in wine fairs, one of which will be held from Nov. 4 through Nov. 6, and food and wine pairing events at small restaurants such as Megan's Kitchen and Wooden Table Restaurant.
"I'm excited about pairing wine with Chinese food," says Mr. Baduria, who believes Chinese dumplings go well with sparkling Alsatian wine, and clams and ginger dishes go well with a nice rose or a riesling depending on the level of spice. "The most exciting thing about Chinese cuisine is that it has complex flavours," he says.
While the 40% cut to duties has been a boon to distributors, it has not translated into a big price drop for Hong Kong consumers. While lesser known brands reduced their prices 15% to 25% after the tax was lifted, distributors of the big Bordeaux wines and champagnes such as Moet Hennesy did not. It's rather ironic because Boris de Vroomen, managing director at Moet Hennessy Diageo, headed the coalition urging the Hong Kong government to make the territory competitive by abolishing taxes for wine.
"The big brand companies [in Hong Kong] have not been so generous at passing on the savings," says James Hepple, operations and marketing controller, Watson's Wine Cellar, one of the largest retailers of quality wine in the city. That, however, may be helping new brands get a toe-hold in the region. "The main positive thing to come out of the tax cut is that the market is getting bigger as more companies move into the market," Mr. Hepple says. While the top French reds are still very popular, there is growing interest and sophistication in other wines such as New Zealand Pinot Noir and Sauvignon Blanc varietals, he adds.
Can Canadian distributors and Canadian wines make a dent in Asia? "Absolutely," Mr. Lau says. At a wine trade show in Hong Kong last August, there were booths selling premium wine from France; "our booth was serving something different, and the younger crowd gathering were really excited.
"The new generation of wine drinkers in Asia are weaning themselves off the big bordeaux," Mr. Lau says. While Hong Kong is his market now, he fully intends to move into the Chinese market.