Food and beverage to Hong Kong

(Last updated: 6 Jan 2012)

Trends and opportunities

The market

With a population of almost 7.1 million and a significant tourism industry (a total of 36 million visitors in 2010), Hong Kong is a substantial market for all kinds of food products.

Hong Kong can be characterised as a food import-dependant market, there is minimal domestic agricultural production and a small food processing industry. Hong Kong is also a trading hub for re-exports into mainland China, Macau and other neighbouring markets in Asia.

While there is increasing demand for various kinds of convenient food items, consumers are becoming more health conscious about what they eat (eg. healthy diet, concerns over GMO, interest in organic food). As a result, we are seeing an increasing trend towards healthy, functional and organic foods which is reflected in the introduction of more of these products in the retail channels.

The food retailing and catering market has been changing in recent years as a result of the changing lifestyle of the local population. Supermarkets, fast food stores and theme restaurants continue to grow and have become an integral part of shopping and dining out habits.

Major supermarket chains are being transformed into one-stop-shop ‘superstore’ outlets enabling business growth through new set-ups of wet market corners, in-store bakery, take-away food services, specialty selections and linked shopping facilities such as personal care stores, wine cellars, banking facilities, books and photo processing.

There has been a trend of retail expansion in the upper-end sector. Oliver’s Delicatessen (part of the Dairy Farm group), Great Food Hall (part of the A.S Watson group) and Citysuper are the three key players in the market who effectively cater to the needs of the upper-end market segments in Hong Kong. ThreeSixty, part of the Dairy Farm group caters to health conscious consumers as a one stop-shop for organic, natural and wholesome foods.

Opportunities

Meat

In the absence of meat safety problems such as 'foot and mouth' or 'mad cow' disease, Australian is perceived as one of the top supplying countries for beef, lamb, pork and poultry. Significantly increased demand for various meats and meat products from Australia has been witnessed in the last five years.

Dairy

Australia and New Zealand are regarded as the two key supplying countries for all types of dairy products in the Hong Kong market. Australia has the leading market share position in fresh/UHT milk, cheese, yoghurt and butter categories.

Fruit and vegetables

Per capita consumption of fresh fruit and vegetables in Hong Kong is thought to be among the highest in the world. However, the openness of the Hong Kong economy contributes to the competitive nature of the fresh produce trade.

Fruit demand is high for oranges, apples and grapes. Pears, mandarins, bananas, mangoes, papaya, melons and plums are other major imported lines.

Vegetables imported from Australia into Hong Kong mainly include: potatoes, onions, tomato, lettuce, celery, broccoli, carrots, Chinese cabbage, cucumbers, leafy and root vegetables. In recent years, pre-packed salad mix is also high in demand.

Based on current market developments, consolidated Australian fruit and vegetable export efforts will lead to greater competitiveness for Australian exporters in the international market places in terms of bargaining power, pricing, quantity and quality consistency, credit management, marketing funding and brand building.

Seafood

Hong Kong has a very high per capita consumption of seafood. Substantial demand exists for all kinds of seafood, ranging from the low price fin fish (eg. croaker and carp) to the more expensive gourmet delicacies (eg. abalone, lobster and shark fins).

The Hong Kong Chinese population has a strong preference for fresh seafood, resulting in an unusually high demand for live and chilled products. It is estimated that 75 per cent of local requirements for fish and fish products are purchased in live or chilled form. However, as the cost of live seafood increases, industry sources believe consumers will purchase increasing amount of frozen seafood.

Australia is a major source of supply for most gourmet shellfish sold in Hong Kong. The main items imported from Australia include: live, frozen, and canned abalone, frozen scallops, live lobsters, frozen prawns, coral trout, oysters, mussels, king crab, selected fin fish, etc for Western catering.

Wine

Hong Kong is a typical import-dependent market for all wines. Traditionally, the expatriate population and a significant number of inbound tourists make up the main consumer segments for wine consumption in Hong Kong. Now, an increasing number of affluent and middle-class local Chinese consumers are considering wine appreciation as part of a healthy and trendy lifestyle, resulting in a steady expansion of the Hong Kong wine market size. 

Australian wines have been making healthy inroads in Hong Kong with the wine quality and wine region identity gaining increasing recognition amongst the trade and consumers. The growth of market share for Australian wines has been very much at the expense of French wines in the past decade. Most of the local import agents carry a wide range of wines from Australia. Hong Kong alone is currently the 14th largest market for Australian wine exports to the world, and is a springboard for Australian wines to greater China.

Australia has been the second largest supplier of grape wines to Hong Kong over the past 14 years. Australia was our third largest source of wine imports into Hong Kong in 2010. The total value of imports was HK$418,327,052, representing a year-on-year growth of 26.7 per cent.  For the first half of 2011, wine imports amounted to $273,909,914, representing a year-on-year growth of 51.2 per cent.

The Hong Kong Government abolished its wine import tariff in February 2008 with the aim to make Hong Kong a regional wine trading hub in Asia. While competition among the wine trade instantly intensified, demand for higher quality wines, better wine trade services, more wine auctions, wider range of wine education/training/media and storage options has increased significantly year on year.

Currently, the Hong Kong wine market is well-supplied by an existing and increasing number of new-to-market suppliers.  Instead of continuously relying on 'value-for-money, quality wine for everyday consumption', it is now time for the Australian wine export industry to position itself upward by brand building, highlighting the Australian wine regional identity, the story behind the labels and to reveal the Australian landmark wines to Asia’s wine market influencers and the regional hub market of Hong Kong. 

The signing of a wine MOU between the Australian and Hong Kong Governments in April 2009 has further enhanced the wine trade and related services promotions between the two places. Australia is believed to have a much bigger role to play in working together with counterparts in Hong Kong to further develop Hong Kong as a regional wine trading hub in Asia with Australian expertise and partnership.

From the beginning of 2011, Wine Australia has established its regional office in Hong Kong to cover greater China and major markets in Asia. Austrade network and Wine Australia offices in the region are working closely to promote the exports of Australian wines, services and professional training to key sectors, and to ensure sustainable growth of Australian wine market share in Asia.

Other products

Australia has strong market share in packed rice, dried fruit, edible oils, healthy and functional food and drink sectors.

Competitive environment

Being one of the freest markets in the world, there is minimal trade barriers for imports. The market is therefore extremely competitive, which means quality products are often competing on price.

The image of Australia’s ‘clean and green’ production environment and high food safety standards helps the promotion of Australian food exports to Hong Kong. Organic productions help sustain and develop the market share for Australian food products in markets like Hong Kong.

Australia is currently the fourth largest food supplying country to Hong Kong after China, Thailand and USA.

Tariffs, regulations and customs

Hong Kong is a free trade port. With the exception of spirits (over 30 per cent alcoholic content on volume basis), there are no duties or tariffs imposed on imports of food and beverages. However, import of food and beverages into Hong Kong is subject to the control of various local food laws and regulations pertaining to:

• Bacteriological or microbiological standards
• Preservatives
• Food colours
• Metal and mineral oil content
• Contamination by harmful substances (such as hormone residues)

Food labelling regulations

Import of food and beverage products, whether packaged for retail or catering sectors, must comply with the local composition and labelling regulations.

Labelling can be in English, or English-Chinese (bilingual). Generally, these require all products to be labelled with:

• Name and address of the manufacturer
• Net weight
• List of ingredients
• Special storage instructions
• Expiry date (if applicable)

In many cases, it is acceptable to leave the original English label unchanged. However, the expiry date and other important information should be printed in English and Chinese.

From 9 July 2007, changes to the labelling regulations of allergenic substances, food additives and date format took effect and is in force.

With respect to food allergens, to comply with these new regulations, declaration of the presence of the allergenic substances listed below, must be specified in the list of ingredients:

• Cereals containing gluten (namely wheat, rye, barley, oats, spelt, their hybridised strains and their products)
• Crustacean and crustacean products
• Eggs and egg products
• Fish and fish products
• Peanuts, soybeans and their products
• Milk and milk products (including lactose)
• Tree nuts and nut products

Changes in the labelling of food additives requires that if it is an ingredient of a pre-packaged food, it must be listed by both its functional class and its specific name or its identification number under the International Numbering System (INS) for Food Additives.

Date format in labelling durability must be in English lettering AND Chinese characters.

Nutrition labelling regulations

The Food and Drugs (Composition and Labelling) (Amendment: Requirements for Nutrition Labelling and Nutrition Claim) Regulation 2008 ('Amendment Regulation') was enacted by the Legislative Council on 28 May 2008 and came into effect on 1 July 2010. The Amendment Regulation introduces a nutrition labelling scheme, which covers two types of nutrition information on food labels, namely nutrition labelling and nutrition claims.

From 1 July 2010, all general prepackaged foods are mandated to carry a nutrition label, unless the food product is an exempt prepackaged food under Schedule 6 of the Amendment Regulation. However, the Amendment Regulation, is not applicable to formula and food intended to be consumed principally by children under the age of 36 months, and other food for special dietary uses.

The nutrition label (or nutrition information panel) must contain information on energy plus seven core nutrients:

• protein
• carbohydrates
• total fat
• saturated fatty acids
• trans fatty acids
• sodium
• sugars

In addition, the amounts of any claimed nutrients (ie. nutrient content, comparative or function claims) must be listed. If a nutrition claim related to any type of fat is made, the nutrition label should also include the amount of cholesterol.

A small volume exemption may be applied for products with a total sales volume in Hong Kong of less than 30,000 units a year, provided the products do not make any nutrition claims.

The new Hong Kong requirements are unique and require more information than currently necessary in Australia eg. labelling of trans fatty acids, however these new regulations are mandatory in Hong Kong. This affects all manufacturers of prepackaged foods that export to Hong Kong (except those falling within the criteria of exemptions) and requires testing and labelling of nutrients (or provision of such results for re-labelling by your Hong Kong importer or distributor) to meet the Amendment Regulation, including those nutrients for which claims are made. You should work with your Hong Kong importer or distributor to meet these requirements.

Please note that under Section 5 of the Amendment Regulation, non-compliance would result in an offence, which is liable to a fine and imprisonment.

For a listing of accredited laboratories in Australia (as advised by the Hong Kong Food and Environmental Hygiene Department / Centre for Food Safety), please visit the National Association of Testing Authorities' website www.nata.asn.au.

For information relating to the Amendment Regulation for Nutrition Labelling and food laws in Hong Kong, please visit the following links:

• Nutrition Labelling Information for Trade (this contains a handy frequently asked questions)
• Food Legislation Guidelines
• Technical Guidance Notes on Nutrition Labelling and Nutrition Claims
• Method Guidance Notes on Nutrition Labelling and Nutrition Claims
• Guide to application for small volume exemption from nutrition labelling

The cost of labels and the cost of food testing - whether for nutritional data or compliance, cannot be claimed under the Export Market Development Grants (EMDG) scheme. However, other promotional costs such as travel, literature, websites, advertising and trade shows are covered under the scheme and full details of the types of expenditure that can be claimed can be found on the Austrade website.

For more information about compliance with the Amendment Regulation, please contact your Hong Kong importer/distributor or for technical advice, please contact the Hong Kong Government's Food & Environmental Hygiene Department's Helpdesk on +852 2381 6096 or email your enquiry to enquiries@fehd.gov.hk.

Refined regulatory framework for pesticide residues in food in Hong Kong

To better protect public health, facilitate effective regulatory control of pesticide residues in food and promote harmonisation between local and international standards, the Hong Kong Government plans to table a proposed Regulation at the Legislative Council towards the end of 2011.

To allow sufficient time for the trade to comply with the proposed regulation, a two-year grace period prior to the commencement of the proposed regulation is also proposed.

More information relating to the proposed regulatory framework for Pesticide Residues in Food in Hong Kong is available.

Export certification

The Australian Quarantine Inspection Service (AQIS) health certification is required for live animals, meat, poultry, fish and dairy products. AQIS certificates are the only official health certifications recognised by the Hong Kong authorities. Importers of live animals, meat, poultry, ice cream, wine and rice have to be either licensed or registered with the local authorities.

Duties

Effective from 27 February 2008, the duty on alcoholic beverages with an alcoholic strength of more than 30 per cent by volume is 100 per cent. The duty on wine and other alcoholic beverages with an alcoholic strength of 30 per cent or less by volume is zero per cent.

For alcoholic beverages with a zero rate of duty, no import licence or permit is required.

For alcoholic beverages that are subject to duty, a licence from the Customs and Excise Department is required to import dutiable goods into Hong Kong and to store dutiable goods for which duty has not yet been paid. A permit is also required to remove dutiable goods from bonded warehouses to the market.

Where duty is payable, it must be paid upon delivery of dutiable goods from the importing carrier or bonded warehouse to the market. The Customs and Excise Department assesses the amount of duty payable and issues a removal permit for the duty-paid goods upon payment of duty.

Marketing your products and services

Market entry

For commodity types of food products (eg. fresh produce, meats and dairy, etc.), the most effective marketing strategy, which is becoming increasingly popular is industry consolidation in export efforts. Consolidation may often improve the competitiveness of Australian exports to Hong Kong and supports:

• Bargaining power
• Pricing
• Quantity and quality consistency
• Credit management
• Export marketing funding
• Brand building

Consolidation can be based on product category, producing region, industry association, interstate or nation-wide.

For gourmet food products, dedicated partner research in selected overseas markets is the key to success. Generally speaking, you should promote your export business with a marketing package or a concept where you can work together with the importer to build the business and not just focus on the product itself.

Companies may consider the following:

• Select a committed agent and work hard on building the relationship for the long term.
• Use a qualified export packer for exports (if your volumes are too small to sell direct to an overseas importer), or team up with a producers’ association for collective export marketing and logistics while individual producers may still have its own identity for marketing its own brand in the domestic market.
• Visit the market before exporting.
• Work closely with buyers in the market as mutual trust is important. You may also learn how to engage in direct trade with mainland China from your business partnership with a Hong Kong company.
• Brand building of your products over time including use of product promoters.
• Innovative products and packaging.
• Attending or participating in trade shows is another way of marketing your products. HOFEX and Asia Fruit Logistica are the most important food shows in the region.
• Set up your own representative office in the market, you would therefore own the customer network (rather than depending on the ‘mercy’ of your agent). Once your presence in the market is well-established, you could even take on additional export business from others.

Distribution channels

Most imports of food and beverages are channelled through import agents who normally distribute direct to retailers and catering end-users.

Major supermarket chains buy many products directly from selected overseas suppliers. The two largest supermarket chains, Park'N Shop and Wellcome, are obtaining supplies of products by direct import and through local agents, however, it is generally the intention of both chains to by-pass the agents and go direct wherever possible for selected large volume product lines. These two major supermarket chains in Hong Kong have their own large warehousing facilities for the handling of perishable goods, re-packing and distribution.

Due to the lack of adequate central warehousing, processing and delivering facilities, the second tier supermarket groups and the local convenience stores are currently importing selected product items from overseas. As the trade continues to expand it is expected that some of these organisations will manage to develop their own facilities and purchase some of their requirements direct from overseas sources.

Because of the small volumes and the need for frequent and consolidated orders, most of the local hotels, restaurants and many fast food operators normally cannot afford to handle the direct import from a large number of individual suppliers overseas for their own requirements of food and beverages. Import agents generally undertake distribution of food and beverages to users in this market sector directly, with only a small quantity being handled by a few provision wholesalers.

On the other hand, Great Food Hall, Citysuper and Oliver’s, the three higher-end food retail stores in Hong Kong, are effectively using appointed consolidators in specific countries including Australia for their own sourcing requirements to broaden the range and variety available to their customers. These are typically smaller volume, niche products.

Distribution to wet markets, hawkers, groceries and small corner stores is handled by a number of intermediary provision wholesalers.

Links and industry contacts

Food and beverage­-related resources

Asia Fruit Logistica – www.asiafruitlogistica.com
Citysuper – www.citysuper.com.hk
Fish Marketing Organization – www.fmo.org.hk
Great Food Hall – www.greatfoodhall.com
HOFEX – www.hofex.com
Hotel Asia Pacific – www.hotelasiapacific.com
Kowloon Fruit & Vegetable Merchants Association Ltd – www.klnfnv.org.hk
Oliver’s The Delicatessen – www.oliversthedeli.com.hk
Park’N Shop – www.parknshop.com
Vegetable Marketing Organization – www.vmo.org
Wellcome – www.wellcome.com.hk

Government, business and trade resources for Hong Kong

The Australian Chamber of Commerce in Hong Kong (Austcham) – www.austcham.com.hk
Bilingual Laws Information System – www.legislation.gov.hk
Centre for Food Safety – www.cfs.gov.hk
Hong Kong Customs – www.customs.gov.hk
Hong Kong Food and Environmental Hygiene Department – www.fehd.gov.hk
Hong Kong SAR Government – www.gov.hk
Hong Kong Trade Development Council – www.hktdc.com
Invest Hong Kong – www.investhk.gov.hk

Media

South China Morning Post – www.scmp.com.hk

Australian resources

Australian Quarantine Inspection Service – www.aqis.gov.au