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Growing Tastes, Growing Opportunities

Hong Kong's wine consumers provide audience for wine industry suppliers, too

by Peter Mitham
hong kong
Hong Kong’s former chief secretary for administration Henry Tang samples wine today at the Hong Kong International Wine & Spirits Fair.
Hong Kong, China—Asia’s wine trade is getting a taste of everything from North Carolina scuppernong to tomato wine from Quebec’s Charlevoix region at this week’s Hong Kong International Wine and Spirits Fair.

While wines of Spain are the focus of this year’s event, the breadth of offerings brought from Australia to Zaragoza, and encompassing absinthe to Zinfandel, underscore the growing interest among the local trade—expected to number more than 20,000 this year—and consumers, who will descend on the fair Nov. 9.

With the annual trade in wine through Hong Kong now totaling 38 million liters valued at $765 million (all numbers in U.S. dollars), of which 14.5 million liters worth $154 million are re-exported, the opportunities for companies to service the market are also growing.

The consumer market
Wine bars such as California Vintage on Hong Kong’s Wyndham Street have opened their doors catering to younger wine drinkers—both ex-pats and a growing number of local and mainland Chinese tipplers, for whom wine is a chic new experience.

Other companies are targeting the growing number of consumers who are making wine a regular part of their lifestyle in Hong Kong.

When the government dropped tariffs on wine in 2008, Hubert Li, managing director of Hong Kong Wine Vault, saw an opportunity to provide wine-storage services to collectors. His company provides storage space for 800,000 bottles and is about three-quarters full.

“A lot of people picked up the new hobby and bring back wines from elsewhere,” Li told Wines & Vines. “And that wine has to go somewhere.”

Li, who also engages in wine sales, focuses his storage services on consumers who have top-end wines that require cellaring but who drink frequently enough that they also require regular access.

Li sees business growing, though for now he is focused exclusively on the Hong Kong market. While future growth in wine sales will likely be in mainland China, the market there is different as most high-end consumers don’t face the same space constraints that Hong Kong’s dense urban geography imposes.

The trade
Dan Sullivan of Elevation Wine Cellars in St. Helena, Calif., also sees opportunities to serve the Hong Kong wine consumer through Maitre De Vin Ltd.

He was at this week’s fair with business partner Bert Doornmalen showing off the company’s eponymous wine-dispensing system, which is geared for home use. The system is similar to the Enomatic system but doesn’t use gas to preserve the wines. Maitre De Vin allows wines to be kept between 7º and 17º C, and Sullivan expects it to be popular with consumers who sign up for regular purchases from wine retailers. By his logic, consumers who have the system will want to keep it stocked with wines they can share with friends or tasting circles.

Andy Liu, representing Zhongshan Yehos Electrical Appliances Co. Ltd., also has seen opportunities rise for his company’s wine coolers. Though the company has established export markets in Europe and North America, where the coolers bear the Avanti brand name, the growing popularity of wine in China has also created local sales opportunities.

The import—and re-export—of wine through Hong Kong has created business-to-business opportunities.

King Lai, managing director of Leo Design and Packaging Solution Ltd. In Hong Kong, provides a full range of packaging solutions to the wine trade.

Originally established in 1982 to manufacture paper bags for the U.S. market, it has since diversified to serve brand owners shipping wines and spirits into Asia. It designs and manufactures packaging for regional markets and works with customs brokers to bring in products and has repackagers who fill the packaging the company provides.

“The whole packaging business is growing,” Lai said—noting, like others, that Hong Kong’s elimination of tariffs in 2008 has been a boon for businesses servicing the trade.

Other companies seeing opportunities include Guangzhou Yifeng Printing & Packaging Co. Ltd., which has added wine packaging to its existing lines of cosmetics and jewelry packaging.

But manufacturers also face economic pressures that could limit new entrants keen to capitalize on the increasing opportunities.

Philip Chiang, general manager of Hong Kong-based Beeline Industries Ltd., which operates a factory in neighboring Guangdong province, said manufacturers face higher costs, narrower margins and conditions that poise them to be less competitive to cost-conscious clients.

While he was at the fair seeking new opportunities for his business, he is taking the challenges seriously as he looks to the future. The minimum wage in Shenzhen, which neighbors Hong Kong, is set to rise 20% in 2014, for example.

Chiang said this would put pressure on factory owners, who already face higher operating rents for their operations. The combination could encourage some factories to shut down, or packaging operations to leave China for less expensive locales.

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