Hong Kong retail wine scene

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Hong Kong retail wine scene

Hong Kong retail wine scene

by Sherwin Lao

The Hong Kong wine scene is as good as it gets anywhere in the world. This year, I have been traveling a bit more, going to Europe, the US, Australia, and parts of Asia, and Hong Kong is still one of the most bustling wine countries at present.

HK wine market

According to the Hong Kong Wine Import Statistics, 2010 was another banner year for wines in this Special Administrative Region of China. Wine imports are up by 14.6 percent, reaching 39.9 million liters or a hefty 4.4 million+ cases (standard nine liter cases). French wines still lord it over with a huge 37.3 percent market share, followed by Australia with 16.8 percent, US with 12.6%, and Chile with 9.5 percent. While the per capita wine consumption is nowhere near the leader Luxemburg (around 60 liters), Hong Kong with a population of just above 7 million is growing and now up to 5.6 liters per capita. This is the highest in Asia outside of gambling haven Macau. Of course, as one can imagine, the expatriates and foreign tourists would be a major contributor to this increased wine consumption, however wine industry people believes that it is the local Hong Kong nationals that are actually upping their wine consumption. In contrast, wine imports in the Philippines reached 11.6 million liters last 2010, already a 19.4 percent increase against 2009, yet barely 29 percent of Hong Kong imports. This, despite of our population being 13 times larger than that Hong Kong.

Wines are tax free

A few years back, February 2008 to be more exact, Hong Kong abolished all taxes on wines – the first and only one, not in Asia alone, but probably in the world. From previous 40 percent tax to zero, Hong Kong wanted to be the most wine-friendly hub in the region. But while most people assume prices would go down substantially, it never happened. And the reason is simply because real estate and logistics in general in Hong Kong is extremely expensive, and is and always will be the chunk of the operating cost.

Removing tax simply could not make significant cut on high operating expenses. There was indeed a price reduction in most cases, though not directly proportion to the tax removed. This has made the market even more dynamic as Hong Kong has an estimated 1,500++ wine importers now. The tax-free incentive has gotten more people to try to get into the wine business.

Strong wine retail

What impresses me more in Hong Kong is the presence of premium wines in retail stores like high-end chain supermarkets. I know that Corte Ingles in Spain would carry expensive premium wines, but in Europe, these chains normally carry wines from their respective countries most of the time, may be some will carry the universal French Grand Cru Bordeauxs as well, but not as many selections as I have seen in Hong Kong wine retail shops like Watsons, C!ty Super, Oliver’s and Sogo. In these Hong Kong wine stores especially if located in Central, Admiralty, or Causeway Bay HK side, every good wine from every country is present. While I see some of these in Singapore wine shops, the depth and breadth in Hong Kong is considerably more. Prices of these premium wines are in thousands of HK$. Again in contrast, in Philippines a Rustans, considered our premium supermarket dare not even to display a single P5,000/bottle wines …. that is less than HK$1,000. We are indeed worlds behind in wines, a good reflection also of our economic stand in the region. In Hong Kong, wine sales volume in retail is around 65 percent of total, not a bad split, against most of the region that has much higher retail share.

Promotion driven

While retail is huge, cost of doing business in retail is a lot tougher as well. For a start, retailers already make around 35-40 percent margin on the wines. Aside from the perennial high listing fees, stores now require promotions that once more take margins from importers. For example, I saw sampling activities in one of the high-end supermarkets. The cost of the one month sampling plus a small center display is HK$10,000 minimum (the display is for only a few cases). Then one has to add cost of hiring promo/sampling girl, who you have to pay HK$500/day, give special discounts, plus the sampling bottles. Wines being sampled can go as high as HK$500/bottle. These are all part of marketing expenses, which in turn are build-in to pricing. But the promotions do work. Sampling in my random observations was able to attract several serious tasters that turn into buyers. Other regular promotions include multiple purchases of the same wine to get big discounts. Oliver’s offers huge discounts of up to 30 percent on dozen (12 bottles) purchases. Another thing that is catching on is the use of Enomatic wine dispensing machines to promote wines. This also acts like sampling, but you have to pay to sample. Normally like in C!ty Super, wines priced mid tier to premium, those retailing at HK$200-HK$400/bottle are placed in the machines to generate interest on the selected wines. GWPs or Gift with Purchase are not generally popular in Hong Kong, except for very expensive wines that come in free individual wooden boxes.

The Hong Kong wine market is indeed fascinating. The retail battleground among wine importers is a great case study for any wine principal. The beauty of it all is that wine sales is still growing, and while cost of doing business is becoming more prohibitive, importers can still take chances given that there are positive results most of the time. How I wish we can someday transform our wine sophistication level to that of Hong Kong where there are choices galore. We better start with our economy first to have a chance at this level in the future. Seems like a long road ahead …. but certainly possible. I’m an optimist!

For comments, inquiries, wine event coverage, wine consultancy and other wine related concerns, please e-mail me at [email protected]. You can also follow me on twitter at www.twitter.com/sherwinlao.

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