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Hong Kong’s wine trade is grappling with new realities.
The city’s once-bustling wine scene faces unprecedented new challenges amid the city’s economic downturn, shifting demographics following expat exodus, and an increasing number of penny-wise locals who prefer to wine and dine across the border.
As the city goes through “a transitional phase,” the changes are reshaping the city’s wine trade and consumer behaviours, warns Jefferson Liu, General Manager for Hong Kong and Macau at EMW Fine Wines, a leading wine importer in Greater China region.
VINTAGE BORDEAUX BACK IN FAVOR
Amidst economic fluctuations in Hong Kong and China, Liu admits consumers in general are tightening their purse string and adopt a cautious approach to spending that doesn’t compromise on quality. “Hong Kong and China are currently still going through an economic downturn… This means that most people are a bit more conscious when it comes to spending and entertaining but still want a similar quality level to what they are used to,” he explains.
This economic sensitivity coupled with inflation and rising production costs heaped up on wine has led consumers to older vintages, which haven’t seen the recent price hikes, and to seek value in lesser-known regions and producers, according to the wine merchant. “Most have also shifted to smaller regions within Burgundy or well-known villages from lesser-known producers. Good value Bordeauxs have also definitely been more demanded throughout this period ” Liu adds, highlighting a shift in consumer preferences.
Jefferson Liu, General Manager for Hong Kong and Macau at EMW Fine Wines (pic: EMW Fine Wines)
CHANGING DEMOGRAPHICS
The demographic landscape of Hong Kong’s wine market is also changing. The decline in rosé wine sales, according to Liu, serves as an informal index of the expatriate population’s size, traditionally a significant consumer segment in the city. “We have seen rosé sales plummet throughout COVID, and they have not recovered entirely,” Liu remarks, suggesting a decrease in the expatriate community.
Though there’s no official data on the number of expats leaving the city during the covid era, it’s estimatedroughly 20% Americansin the city have left since 2021.
Conversely, with the exodus of expats, there’s a notable increase in affluent, young, well-educated and -travelled Chinese professionals moving to Hong Kong following government’s efforts to woo mainland talents.
Local restaurants that are able to market to this segment through social media channels and apps familiar to these new immigrants such as Little Red Book (Xiao Hong Shu), Black Pearl, DianPing are performing well, Liu notes.
“The pattern and consumer behaviour is very different to the Chinese consumers we see from years past as they seem to be more open-minded and willing to explore different wines from different regions. I believe that cool and interesting looking labels also have a big role to play as most young people communicate and share through images these days,” Liu observes, indicating a pivotal change in consumption trends.
Hong Kong residents flocking to Shenzhen for cheaper options (pic: Noemi Cassanelli/CNN)
TRIPPING NORTH
However, the wine trade in Hong Kong faces challenges beyond changing demographics and consumer preferences. Since the resumption of cross-border movement in January 2023, Hong Kong residents have made more than 48 million trips to Shenzhen, significantly outpacing the 19.8 million crossings by mainlanders into Hong Kong, according to immigration statistics.
This trend coined as “tripping north” has far-reaching implications for local retail and hospitality business as locals flood to Shenzhen for cheaper and better value options from dining, entertainment to grocery shopping.
“The city faces an imminent challenge. There are too many cheaper alternatives close by – 15 minutes to Shenzhen, and another 45 minutes to Guangzhou where a meal would cost half the price for something similar in Hong Kong with probably better service,” Liu points out, referring to the competitive pricing Hong Kong’s neighoring cities. “This is the current reality that Hong Kong has to face and will continue to face for the foreseeable future,” he warns.
“The city faces an imminent challenge. There are too many cheaper alternatives close by – 15 minutes to Shenzhen, and another 45 minutes to Guangzhou where a meal would cost half the price for something similar in Hong Kong with probably better service,” Liu points out, referring to the competitive pricing Hong Kong’s neighoring cities. “This is the current reality that Hong Kong has to face and will continue to face for the foreseeable future,” he warns.
Hong Kong residents traveling north are projected to spend up to HK$84 billion (US$10.7 billion) in Shenzhen and other parts of Guangdong province this year, an estimate from Gary Ng, Senior Economist at Natixis SA, suggests. This expenditure represents approximately 14% of Hong Kong’s revenue from retail sales, catering services, and the hospitality sector, according to a Bloomberg report.
“Overheads are too expensive in Hong Kong, which also stifles creativity and deter people from taking any risks,” Liu points out. Yet, there’s a silver lining as the city’s weeknight economy thrives, suggesting a shift in dining and consumption patterns to earlier in the week.
Despite these hurdles, Liu is confident in Hong Kong’s continued role as a key player in the fine wine trade, contingent on the city’s zero wine tax policy. He emphasizes the importance of reasonable on-trade pricing to lure in clients.
“As long as establishments are willing to price their fine wines on their list at reasonable rates, consumers who may be traveling from abroad or are able and willing to spend are still enticed to purchase these ‘big’ bottles,” he asserts.
Moreover, offering value to on-trade partners is critical in this climate, as Liu believes, “Being able to offer wines at significantly lower than market prices or wines that are hard to find adds significant value to on-trade partners.” This approach, he suggests, leads to a healthier merchant-to-outlet relationship and a more structured market.
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