News

Hong Kong to be Eastern wine trade capital

As China’s thirst for fine wine continues to escalate, Hong Kong is well positioned to be a key trading hub for the region.

In just two years Hong Kong, the financial capital of the East, has gone from one of the highest wine tax Jurisdictions to the lowest – from 80% to zero. And the results have been dramatic and immediate.
In late February last year (2008) the duty on wine, beer and all alcoholic drinks except spirits was dropped, by mid-April the value and volume of wine imported into Hong Kong increased 78% and 215% respectively. By the end of the summer, imports had grown 95% in value –wines from France 116% – compared to the same period in 2007. Wine auctions have seen record-breaking sales and renowned companies have announced plans to expand their wine trading, distribution and storage business in Hong Kong.
The total market for wine in Asia, excluding Japan, according to Hong Kong Trade Development Council research figures, is expected to grow at between 10 percent and 20 percent per annum over the next five years to a probable consumption value of US$17 billion by 2012, rising to US$27bn by 2017.
The opportunity for Hong Kong to become the new hub for the importation, storage, auctioning and re-exporting of quality wines is plain to see. And the Hong Kong Trade and Development Council is determined to make this happen. It is working fast and furiously to create the right environment by putting in place everything required to match – or even better – London and New York.
Re-exporting to mainland China is, however, still problematic with the customs authorities legally able to confiscate bottles for tasting – not an acceptable practice should this be from a case of Chateau Lifite, for example. This is one country with two systems. But the HKTDC says it is working towards a process whereby wines brought into Hong Kong can be dispatched into China without further customs restrictions.
Boris De Vroom, managing director Moet Hennessy/Diageo Hong Kong (pictured), who is also chairman of the Hong Kong Wine and Spirits Industry Coalition, says around 40% of his members’ sales in London are destined for China and Hong Kong customers.
Coalition research figures show Hong Kong-based fine wine merchants could capture some HK$3,733m in sales from international markets, the auction houses could generate HK$956m from Greater China business, and the region’s storage facilities could increase from around 100,000 to 1,080,000 sq ft.
So far, De Vroom says, developments since last March have more than exceeded expectations with a return by major auction houses, including Christies, Acker and Bonhams, to the region. Bonhams held the first, very successful auction in the spring with record prices being set. There were six more auctions during the year. Despite the economic climate, Hong Kong is still considered a relatively good environment with prices for Chateau Lafite continuing to escalate.
Bonhams along with other auction houses uses Hong Kong’s world class Crown Wine Cellars located in the underground concrete pre-World War II munitions bunkers built by the British Royal Engineers in the 1930s on Deep Water Bay Drive (pictured). This converted historical site offers security and perfect storage conditions with temperatures kept to a constant 12.5-13.5degsC.
Last October the HKTDC signed a memorandum of understanding (MOU) with Spanish and French wine producing regions and is in talks with Chile, New Zealand and Australia.
The MOU provides for co-operation in a number of areas including wine-related tourism, trade and investment, and knowledge relating to wine storage and staff training. Bordeaux is also helping organise a wine festival in Hong Kong next year, and the two regions hope to encourage the Great Wine Capital Global Network to hold its annual meeting and other events in Hong Kong.
“Hong Kong is well placed to become the regional hub for wine trading and distribution not only because of its ideal geographical location and business-friendly environment, but also because the Government, in close liaison with the wine-related industries, is being proactive in making it happen,” says Yvonne Choi, Hong Kong's permanent secretary for commerce and economic development (commerce, industry and tourism).
The HKTDC launched an annual wine fair in August 2008 – hot on the heels of Vinexpo Asia-Pacific, which took place just 10 weeks earlier, also at the Hong Kong Convention and Exhibition Centre. That both exhibitions were declared successful proves how receptive Asian wine professionals and private buyers (both open one day to the public) are to these types of events. Wine education is also taking off in Asia – and not just for those working in the trade. The majority are private individuals, young business women in particular, wanting to have more knowledge in selecting wines at restaurants and for investment purposes.
From next year the HKTDC fair will be held in November to avoid future conflict with Vinexpo, which returns to Hong Kong in 2010. There is also the launch of an Asian international wine competition – with the focus on highlighting styles that appeal to Asian tastes.

First published in Drinks International, February 2008.