Hong Kong Hot for Wine Exports

Vancouver, B.C. -- China's elimination of duties on wine imports into Hong Kong is fueling exporters' interest in doing business with the former U.K. colony. China initially reduced import duties on wine from 80% to 40% in 2007, then lifted duties on wine imports altogether at the end of February 2008, leading to a surge in international wine shipments to the former colony that now operates as a special administrative region with privileges unique from the rest of China.

The abolition of import duties on wine, for example, aims to help Hong Kong remain competitive against rivals for Asia's wine trade.
During the year since the duties were lifted, Hong Kong imported $370 million in wine, an 80% increase over the previous year. U.S. wine shipments to Hong Kong topped $18 million, double the value posted in 2007.

Retail consulting firm Nielsen, which recently added a review of Hong Kong wine sales to its publications, reports that the per-liter price of wine in Hong Kong fell 7% since the duty's removal. The impact was most significant for premium wines, which saw prices fall an average of 22%.

Hong Kong residents have been taking advantage of the lower prices, buying 8.5 million bottles of wine in 2008 compared to 6.2 million bottles in 2007. Red wine showed the strongest growth, with sales rising 27% over the year and accounting for 75% of all wine sold.

But it's the on-premise trade that U.S. wineries such as Chateau Ste. Michelle are pursuing, because of the higher level of exposure these offer, especially to international visitors. Chateau Ste. Michelle vice president Al Portney, who oversees international sales for a portfolio that includes not only the Chateau Ste. Michelle brands but also wines from L'Ecole No. 41, Pepper Bridge Winery and Woodward Canyon among others, said eradication of the duties is transforming Hong Kong into a destination for international wine buyers.

While tapping the China market through Hong Kong is good, Portney told Wines & Vines that merely being available in Hong Kong is even better.

"It's a very important window," he said. "It's not always measured in actual volume that's sold through Hong Kong, but what the world sees and recognizes as brands that are well-distributed in Hong Kong is important."

Lily Huynh, export manager with the Washington Wine Commission, said that Hong Kong isn't currently one of the key regions the commission is focusing on with its marketing efforts, but the question may be discussed at a June 11 retreat that will look at export priorities for the coming fiscal year, which starts July 1.

"Since a lot of the major importers have headquarters or at least an office in Hong Kong, it seems to be that if you can get your product into Hong Kong, there's Greater China-region benefits for you as well," Huynh said.

But competition is stiff, making it tough for brands just entering the market.

Stephanie Hogan, operations and marketing director for Hong Kong restaurant and lounge operator Eclipse Management Ltd., visited Washington state wineries last month. While there are opportunities, she said many vendors have taken advantage of the elimination of duties to send Hong Kong product that would otherwise have gone to markets hit by the current recession.

"What has evolved over time is that the market is overwhelmed with everyone getting into the wine business," Hogan said. "Supply is overwhelming, therefore competition is heating up."

Still, several small Northwest wineries with big backers see opportunities.

Sotheby's, the international auction house and real estate brokerage, plans to showcase a handful of British Columbia wineries in Hong Kong this summer. Holman Lang, whose properties are listed with Sotheby's real estate division, and Tantalus Vineyards are participating in the initiative. A tasting event at the end of September will introduce the labels to Hong Kong restaurants and wine shops in advance of a larger trade event in November.