Required Report - public distribution

**Date:** 10/18/2004

**GAIN Report Number:** HK4022

HK0000

**Hong Kong**

**Market Development Reports**

**Exporter Guide**

**2004**

**Approved by:**

![](media/image1.wmf)Lloyd Harbert

U.S. Consulate General, Hong Kong

**Prepared by:**

David Wolf & Caroline Yuen

**Report Highlights:**

Hong Kong's economy has gradually walked out of the doldrums since
mid-2003. A revived property market, improved employment and robust
inbound tourism have stimulated the economy as a whole. As such, Hong
Kong, being the 5^th^ largest export market for U.S. consumer-oriented
products, provides good prospects for U.S. exporters. During the first
half year of 2004, both food retail sales and HRI businesses have
improved compared to the same period last year (retail and HRI sales
increased 2% and 12% respectively). In 2003, Hong Kong's food retail
market was sized at \$5.8 billion and HRI at 6.2 billion.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Hong Kong \[HK1\]

\[HK\]

Table of Contents

[Section I. Market Overview 3](#section-i.-market-overview)

[Section II. Exporter Business Tips
4](#section-ii.-exporter-business-tips)

[Importer Lists 4](#importer-lists)

[Travel Visa 5](#travel-visa)

[General Consumer Tastes and Preferences
5](#general-consumer-tastes-and-preferences)

[General Import and Inspection Procedure
7](#general-import-and-inspection-procedure)

[Labeling of Biotech Foods 7](#labeling-of-biotech-foods)

[Section III. Market Sector Structure and Trends
7](#section-iii.-market-sector-structure-and-trends)

[Food Retail 7](#food-retail)

[Supermarkets 8](#supermarkets)

[Convenience Stores 11](#convenience-stores)

[Traditional Markets 11](#traditional-markets)

[Trends in Promotional/Marketing Strategies and Tactics
12](#trends-in-promotionalmarketing-strategies-and-tactics)

[Hotel, Restaurant and Institutional (HRI)
13](#hotel-restaurant-and-institutional-hri)

[Trends in Promotional/Marketing Strategies and Tactics
15](#trends-in-promotionalmarketing-strategies-and-tactics-1)

[Food Processing 15](#food-processing)

[Market Entry Approach 16](#market-entry-approach)

[Section IV. Best Hig-Value Product Prospects
17](#section-iv.-best-high-value-product-prospects)

[Section V. Key Contacts and Further Information
20](#section-v.-key-contacts-and-further-information)

[Appendix I. Statistics 23](#appendix-i.-statistics)

[Table A: Key Trade & Demographic Information
23](#table-a-key-trade-demographic-information)

[Table B: Consumer Food & Edible Fishery Product Imports
24](#table-b-consumer-food-edible-fishery-product-imports)

[Table C: Top 15 Suppliers of Consumer Foods & Edible Fishery Products
25](#table-c-top-15-suppliers-of-consumer-foods-edible-fishery-products)

# Section I. Market Overview

Food Imports

-   Hong Kong is an important market for consumer-oriented American
    foods and ranks number five as a U.S. export destination for these
    products. Hong Kong imported over U.S.\$1 billion of
    consumer-oriented products from the United States in 2003 accounting
    for 21 percent of the market share. Of all U.S. consumer-oriented
    exports to Hong Kong, poultry meat, fresh fruit, red meats,
    processed fruit & vegetables and tree nuts are the leading items.
    For fish and seafood products, the United States exported U.S.\$52
    million worth of products to Hong Kong, increasing 24% in two years.

-   Due to limited land resources and rapid urbanization, Hong Kong has
    to rely heavily on imports for its food supply. In 2003, local
    production contributed only 5 percent of fresh vegetables, 31
    percent of live poultry, and 23 percent of live pigs. However, Hong
    Kong's total imports of consumer-oriented products and fish &
    seafood products amounted to U.S.\$4.9 billion and U.S.\$1.7 billion
    respectively.

Economy

-   Being one of the most affluent economies in Asia, Hong Kong's 2004
    forecast per capita GDP is U.S.\$23,700.

-   The Hong Kong economy has demonstrated a solid upturn since
    mid 2003. In the first half of 2004, real GDP rose by 9.5% from a
    year earlier resulting from the picking up of the property market
    and an upsurge of consumer spending. With stronger positive consumer
    sentiment and improving employment prospects, retail sales grew by
    13% in value in the first seven months of 2004. The unemployment
    rate also fell from a historic high of 8.7% in the three months
    ended June 2003 to 6.9% this June. The economy forecast for 2004 is
    encouraging. The official forecast of GDP growth was lately revised
    to 7.5% for the whole of 2004, 1.5 percentage points higher than the
    earlier forecast.

-   The second phase of the Mainland-Hong Kong Closer Economic
    Partnership Arrangement (CEPA II) was concluded in August 2004,
    providing further liberalisation measures on trade in goods and
    services entering the mainland and promising great benefits for Hong
    Kong's economy. It's expected to provide a new source of growth for
    the city's economy.

-   Consumer prices fell by 2.6% in 2003 and 1% in the first seven
    months of 2004. However, consumer prices reverted to an increase in
    July, signifying the end of a 68-month deflation period. Hong Kong
    consumers are psychologically prepared to experience rising prices
    across the board.

-   Tourist arrivals surged by 68.3% in the first half 2004. The
    flourishing inbound tourism has been largely due to a policy change
    that allows mainland residents in selected cities to visit Hong Kong
    on an individual basis, rather than exclusively as part of tour
    groups. In 2003, tourists spent \$873 million in restaurants other
    than meals taken in hotels, accounting for approximately 14% of Hong
    Kong's HRI business. As such, a robust tourism not only has the
    merit of stimulating a series of peripheral businesses but also has
    a positive direct impact on HRI revenue. The Hong Kong Tourism Board
    targets 20.5 million tourist arrivals in 2004, assuming a growth of
    31.8% from the 2003 total of 15.5 million.

Demographic Factors

-   Two demographic trends contribute to the good potential for
    "convenience" and processed foods. 1. An increasing number of women
    in the work force. In 2003, 51.3 % of women in Hong Kong were in the
    labor force. 2. A youthful work force: 57.4 % of the labor force is
    in the age group of 25 - 44. In addition, this younger population is
    very receptive to new food varieties.

  ----------------------------------- -----------------------------------
  Advantages                          Challenges

  World's freest economy (Economic    Severe competition between
  Freedom of the World, 2004 Annual   different supplying countries.
  Report, published by the Cato       
  Institute of the United States in   
  conjunction with the Fraser         
  Institute of Canada and some 50     
  other research institutes around    
  the world). Consistent free trade   
  and free enterprise policies. No    
  import duty except on wine, liquor, 
  cigarettes, hydrocarbon oils and    
  methyl alcohol. Separate customs    
  territory from Mainland China. No   
  foreign exchange controls.          

  H.K. dollar pegged to the U.S.      A very price sensitive market;
  dollar, so U.S. products are not    importers' buying decisions depend
  subject to price fluctuations based largely on price.
  on exchange rates. (Can be a        
  disadvantage when U.S. dollar is    
  strong. Then products from other    
  supplying countries become more     
  price competitive compared to U.S.  
  products.)                          

  Foreign and local businesses        U.S. products are disadvantaged by
  operate on a level playing field.   a higher transport cost when
                                      compared with Australian and
                                      Chinese products.

  As one of the most affluent         Lack of trader and consumer
  economies in Asia, a market leader  awareness of U.S. foods.
  for new products.                   Traditional preference for European
                                      foods, due to previous ties with
                                      the U.K.

  International city; residents       A virtual duopoly in food retailing
  travel frequently and are receptive allows retailers to charge high
  to western and novel food.          slotting (shelf space) fees. See
                                      section on Supermarkets.

  Sophisticated, reliable banking     
  system.                             

  Consistent import regulations and   
  rule of law.                        
  ----------------------------------- -----------------------------------

# Section II. Exporter Business Tips 

## Importer Lists

## 

ATO provides Hong Kong importer lists to U.S. exporters and assists to
arrange meeting appointments provided adequate lead time is given.

Language: The official written languages in Hong Kong are Chinese and
English. The official spoken languages are Cantonese (the prominent
Chinese dialect in Hong Kong and South China) and English. In general,
all correspondence can be in English.

## Travel Visa

Even though Hong Kong is now part of China, there is still a border
boundary between Hong Kong and China. If you are traveling with a U.S.
passport, you do not need a travel visa for Hong Kong. However, if you
are planning to go to Mainland China, you need to apply for a travel
visa into China.

**Legal System**

Hong Kong's legal system is firmly based on the rule of law and the
independence of the judiciary. Hong Kong's legal system is separate from
Mainland China. Also, Hong Kong is a separate customs territory from
China.

**Payment**

Hong Kong importers are willing to pay by letter of credit in the
beginning. When a trading relationship has been established, many of
them prefer to pay by open accounts so as to cut transaction costs.

## 

## General Consumer Tastes and Preferences

-   There has been growing popularity of frozen foodstuffs because many
    working women cannot afford the time to do grocery shopping daily.
    Besides, more and more consumers believe that frozen foods are more
    hygienic. However, Hong Kong consumers in general still prefer fresh
    foodstuffs, particularly fish.

-   Hong Kong's relatively sophisticated shoppers are buying an
    increasing percentage of their groceries in supermarkets, as opposed
    to traditional wet markets. On the other hand, supermarket chains
    are able to offer products at more competitive pricing because they
    have a strong bargaining power at getting supplies and are able to
    reap the merits of economies of scale.

-   According to a recent survey by AC Nielsen, Hong Kong people are
    among the most impulsive buyers in Asia. The most popular retail
    outlets for impulsive purchase include convenience stores (22%),
    bakeries (21 %) and supermarkets (17%). Impulse buyers of food items
    include drinks (50%), bread (29%) and snacks (14%). Popular drinks
    include lemon tea, green tea, soft drinks and water. Ice cream,
    chocolate and chewing gum are most popular snack items.

-   Since ice-cream is the most popular snack, Hong Kong has witnessed
    the opening of more and more ice-cream specialty shops such as New
    Zealand Natural, Kida Garden, Papagallo, along with the long
    established Ben & Jerry's, Double Rainbow and Haggen Daz.

-   Hong Kong consumers' buying decision is largely based on for value
    money. Generally, consumers are not brand loyal when they are faced
    with discount privileges of another brand or with "out-of-stock"
    situation.

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-   Because of the limited living space in Hong Kong, it is inconvenient
    for Hong Kong consumers to store food products. Therefore, bulk pack
    food products do not sell well in Hong Kong, and small package food
    products are preferred.

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-   There is most potential for growth in the processed/convenience
    sectors of Hong Kong's retail food markets for U.S. high value
    consumer foods such as general grocery items, ingredients for home
    meal replacement, and health food.

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-   Due to the increasing prevalence of dual income families,
    ready-to-cook food has become more popular. The major supermarket
    chains in Hong Kong have been putting more emphasis on convenience
    foods.

-   Hong Kong consumers have become increasingly more aware of food
    safety issues and nutrition values of food products. Clear
    indications of nutritional value on the package are certainly a good
    marketing strategy for health foods. (The Hong Kong government is
    planning to regulate nutrition labeling and health claims. Details
    please refer to reports HK3040 and HK4017 respectively.)

-   The health-supplement market continues to enjoy healthy growth in
    recent years. According to Euromonitor's latest study, there has
    been a steady growth in the past six years in Hong Kong from \$106
    million in 1997 to \$121 million in 2002. US-based Nu Skin
    Enterprises, one of the largest direct selling companies in the
    world, opened a shopping plaza in Hong Kong in July 2003. The
    company made a \$1 million plus investment in Hong Kong's retail
    sector because it sees significant potential in the health products
    markets and regards Hong Kong as a stepping-stone to China. The
    company representative revealed that the company has experienced
    double-digit growth in Hong Kong since 2000.

-   According to a survey result released in late 2003, Hong Kong women
    consume more health food and health supplements than men and they
    are willing to spend a lot more money. Strengthening the immune
    system and for slimming topped the list of reasons why Hongkongers
    ate health food and 36% of women and 40% of men saying they would
    look for information on strengthening their systems when reading
    labels.

-   The sales of organic products have been increasing steadily. A
    representative of the Great Supermarket revealed that there were
    only 200 organic items for sale three years ago, the variety has
    greatly expanded to over 2000 items this year. The price discrepancy
    between conventional and organic foods has also narrowed over the
    years. Currently, organic products are priced generally 10% higher.
    The most popular organic products are baby foods.

-   According to a survey result released in July 2003 by one
    supermarket chain in Hong Kong, the top ten most popular product
    brands were: Amoy dim sum, Coca-Cola, Doll dim sum, Dreyer's ice
    cream, Lee Kum Kee oyster sauce, Mr Juicy orange juice, Nestle Dairy
    Farm fresh milk, Nissin instant noodle, Vitasoy soya milk and Yakult
    lactic drink. The survey reflected Hong Kong consumers' preferences
    to a certain extent.

-   To better understand Hong Kong consumers' preferences for western
    foods, the ATO commissioned a pilot study from a Hong Kong market
    research firm on consumer preferences among Hong Kong Chinese
    consumers for four different categories of food products: hot dogs,
    salty snacks, fruit juice beverages and celery. The purpose of the
    study is to identify consumer attitudes and buying habits so as to
    help U.S. exporters gain an insight as to how to introduce western
    foods in the most effective way to Hong Kong consumers. For details,
    please refer to Gain Report \# HK0056.

# 

## General Import and Inspection Procedure

-   Food products can be imported to Hong Kong duty free. As for
    technical import requirements, the basic tenet is that no food
    intended for sale should be unfit for human consumption. Products
    which require import permits/health certificates include meat, milk
    and frozen confections. The Hong Kong government encourages food
    importers to produce health certificates for the importation of
    seafood products to expedite custom clearance. It accepts import
    applications from Hong Kong importers; U.S. exporters are not
    required to apply for import permits. However, U.S. exporters may
    need to supply their agents/importers with necessary documentation
    such as health certificates from the U.S. government.

-   Currently Hong Kong does not have any nutrition labeling
    requirements or guidelines. The government intends to implement a
    mandatory nutrition labeling system, which will start to run on a
    voluntary basis for a period of five to ten years. According to the
    proposal, all prepackaged foods will eventually be subject to
    nutrition labeling. Details refer to Gain Report HK#3040. Drafting
    of the regulation by the Hong Kong government has not yet started.

-   For more information on food import regulations, please also refer
    to the "Hong Kong Food and Agricultural Import Regulations and
    Standards, Importation of Food & Agricultural Products to Hong Kong
    2003\". Gain Report #HK4018.

## Labeling of Biotech Foods

The Hong Kong government is considering to adopt voluntary labeling and
pre-market safety assessment for biotech foods but has set no timetable
for implementation.

# Section III. Market Sector Structure and Trends 

Among the three major market sectors of Hong Kong: the retail and HRI
(Hotel, Restaurant and Institutional) sectors present the best
opportunity for U.S. exporters. The Food Processing sector in Hong Kong
is very small and presents less opportunity for market development.

## Food Retail

-   Total retail sales of food and drinks in Hong Kong for 2003 reached
    U.S.\$5.8 billion. For January - July 2004, retail sales of food,
    alcoholic drinks, and tobacco for traditional markets and
    supermarkets, increased 2.3% and 1% respectively, compared with the
    same period last year. The sentiment for spending is improving.

-   Retail establishments in 2002 amounted to approximately 16,202,
    which included (1) 85 supermarkets and convenience store
    establishments (including retail outlet branches, estimated at
    about 800) and (2) 16,117 wet market stalls and "mom and pop" shop
    operators. Retail shops in Hong Kong generally are very small in
    size, about 98 percent of which hire less than 10 employees.

-   Traditionally, Hong Kong consumers shop for food daily because of a
    preference for fresh food. Most shopping is still done in
    traditional markets including wet markets and mom-and-pop shops.
    However, sales in supermarkets are increasing. The supermarket's
    share in terms of retail sales has risen from 44% of total sales in
    1995 to 50% in 2003. Many supermarkets in Hong Kong now have
    successfully tapped the fresh food market by offering fresh foods at
    very competitive prices and providing a comfortable shopping
    environment, which is very different from traditional wet markets.
    In 2000, only \$524 million worth fresh/chilled meat, fish, fruit
    and vegetables and frozen food were sold in supermarkets. The sales
    values of the same category in supermarkets greatly expanded to
    \$581 million in 2003, increasing 11% over 2000.

> ![](media/image2.wmf)

-   In short, wet markets are strong in fresh foods, while supermarkets
    are strong in processed, high added value, and canned food products.
    The competition between wet markets and supermarkets has intensified
    in recent years. Some wet markets have turned air-conditioned and
    provide free shuttle to nearby residential areas. In the next few
    years, the Hong Kong Government has earmarked over \$77 million to
    improve the environment of wet markets. Meanwhile, more and more
    supermarkets have been renovated to make sales of fresh meats
    possible and to enhance the overall experience of the convenience
    shopping at a supermarket.

### Supermarkets

-   There are two dominant supermarket chains in Hong Kong: The Wellcome
    Co. Ltd. (245 outlets) and ParknShop (over 200 outlets). ParknShop
    and Wellcome account for about 80 percent of the supermarket
    turnover. Both supermarkets are able to work closely with real
    estate developers to open stores in strategic locations, thus
    maintaining their significant market share. The other players
    include: China Resources Supermarket (CRC), Dah Chong Hong, Jusco
    and City Super.

-   In recent years, a \"shopping mall' concept has emerged in the
    operation of some new superstores, i.e., a variety of services are
    provided. For example, a Wellcome superstore, with a floor area of
    54,000 square feet, provides massage service. A doctor specializing
    in Chinese medicine has an office within the store providing
    consultation to patients. The largest ParknShop store in Hong Kong
    has a floor area of 72,000 square feet and sells over 20,000 product
    categories ranging from snacks to electrical household appliances.
    New features include a drug store operating inside the superstore
    with a full-time pharmacist. Also, this new superstore provides free
    internet service to customers once they have made a minimum
    purchase. This ParknShop megastore contains a zone in which all
    goods are priced at HK\$8, in a move that could set off a war with
    existing HK\$10 bargain stores. The HK\$8 zone features 1,000
    Japanese-style items ranging from cooking utensils to skin-care
    products.

-   In 2001, a new upscale supermarket opened called Great Food Hall,
    with two outlets at the moment. It is associated with ParknShop but
    products on the shelf are more upscale. Located in commercial areas,
    it targets at a better-off clientele. Both Great Food Hall and City
    Super are competing in the same market segment. The opening of the
    Great Food Hall provides another excellent retail outlet for quality
    U.S. products. When new products are proved popular in this new
    outlet, then they can find their way easily to ParknShop's chain
    stores.

-   Almost all Hong Kong supermarkets require listing fees, that is, a
    fee charged to allow a new product to be put on their shelves. This
    is a one-off fee for a trial period. The listing fees are extremely
    negotiable and vary greatly among different supermarket chains. For
    example, Wellcome and ParknShop, which have many branch stores, have
    expensive listing fees. A product with five SKU categories is
    expected to pay U.S.\$26,000 to U.S.\$39,000. On the other hand,
    Jusco, a supermarket in a Japanese department store, charges
    U.S.\$150 for all its stores. The agent will not bear this cost,
    which is transferred to the principal. In short, all supermarkets
    require listing fees except those belonging to Japanese department
    stores. (Jusco is the only Japanese department store food retailer
    that requires a listing fee.)

-   U.S. exporters should be prepared to encounter numerous trading term
    demands from Hong Kong food retailers, such as promotional discounts
    (number of discount promotions offered each year); back-end income
    (flat rebate per year that a U.S. exporter has to pay to the retail
    chain based on the annual turnover); D.G.A. (Distribution
    allowance - the fee that the supermarkets charge for distributing
    the products from its warehouse to its many branch stores); and
    incentive rebate (a percentage of turnover rebated to the
    supermarkets in case sales exceed the agreed amount). It can be
    expected that the bigger the supermarket, the harsher the trading
    terms. For general reference, about 15 percent of the annual
    turnover has to rebated to the major supermarkets and 8 percent to
    small ones.

-   Different products have different mark-ups. A dried fruit importer
    revealed that an importer usually operates on a mark up of 5% to
    retailers who would then mark up another 30% to 35% to consumers.

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-   There is excellent potential growth in Hong Kong's retail food
    market for U.S. grocery store items, particularly new and different
    items, as food retail outlets continue to increase and diversify.
    Because of established ties and traditional relationships, most of
    Hong Kong's supermarket chains traditionally looked to the Britain,
    Australia, New Zealand, and Canada for supplies. In recent years,
    however, buying habits are shifting and many more American items are
    now available on local grocery store shelves. Supermarkets tend to
    use consolidators to help them source new products which are popular
    in the United States.

Report by the Consumer Council

-   According to a report released by the Consumer Council in August
    2003, there are some findings with regard to supermarkets. First,
    prices at the big two supermarkets and CRC over the first half of
    2003 had gone up by an average of 1.5% compared with a year earlier.
    When discounts and promotions were taken into account, average
    prices had dropped by 0.8%. However, government figures show that
    deflation for June 2003 was running at 3.1 percent, year on year.

-   Secondly, in the six years from 1996 to 2001, there has been a
    substantial decline of small supermarket operators by approximately
    41%.

-   Thirdly, from 1993 to 2003, the two major supermarket chains have
    grown 29% by number of retail outlets (31% for Wellcome and 28% for
    ParknShop respectively).

-   The Consumer Council warned that consumers would be deprived of
    choice if the market was monopolized - especially as smaller
    supermarkets and wet markets were phased out. When there is a lack
    of fair competition, supermarket giants may control the variety of
    products available. Therefore, it called for a wide-ranging law on
    fair competition, and a high-powered authority to oversee it.

-   The Hong Kong government responded that there was no sign the two
    dominant supermarket chains engaged in anti-competitive acts or
    abused their market power. The government said it did not see the
    need for a competition law.

-   Instead, the Hong Kong government introduced "Guidelines to maintain
    a competitive environment and define and tackle anti-competitive
    practices: Private Sector Participation" and encouraged various
    trade and industry associations, including the Hong Kong Retail
    Management Association to develop a set of guidelines pertinent to
    their business.

Market Entry Approach

-   Through setting up a representative office in Hong Kong: While this
    is the most effective approach, it is very costly.

-   Through U.S. Consolidators: Major supermarkets in Hong Kong work
    with U.S. consolidators for some of their products. However, the
    product quantities requested per shipment are usually small,
    especially when new products are purchased to test the market.

-   Through Hong Kong agents: This is the most popular approach. The
    advantage of having an agent is that it can help with marketing and
    distribution. Some companies may secure a very competitive price
    package with TV/magazine/radio for advertisements. In addition,
    well-established companies have extensive distribution networks not
    limited to one or two supermarkets.

-   Direct to Supermarkets: For branded products to sell direct to
    supermarkets, supermarkets usually require exclusive rights in
    selling the products in Hong Kong through their own outlets only.
    Otherwise, they will not consider any direct imports. In this case,
    expensive listing fees may be waived. For non-branded and large
    turnover products such as fruit, meat, and vegetables, supermarkets
    tend to buy direct from overseas exporters to cut costs.

-   Direct selling to supermarkets is difficult to handle because they
    demand strict on-time delivery and very often will not be able to
    take a whole container. Logistics is the largest problem that U.S.
    exporters have to deal with if they want to sell direct to
    supermarkets. However, they can better test the market if they deal
    directly with retailers.

### Convenience Stores

-   There are around 800 convenience stores in Hong Kong. Two major
    chains dominate the market: 7-Eleven (600 outlets) and Circle K (197
    outlets). They are targeting the customer age group of 15-35.
    Convenience stores are characterized by round-the-clock operation.
    Since only a limited choice of brand names is available and prices
    are generally less competitive, most purchases are "convenience" in
    nature, i.e. goods are normally bought in small quantities for
    immediate consumption. The average store size of a convenience store
    is 1,000 sq. ft. Listing fees are also required for convenience
    stores.

-   Dairy Farm, which owned both Wellcome and 7-Eleven, acquired Daily
    Shop convenience stores in September 2004. The 87 Daily Shop
    convenience stores will be converted to 7-Eleven making the total
    number of 7-Eleven stores to 600. These stores are strategically
    located in MTR (subway) and KCR (train) stations, popular shopping
    malls and housing developments throughout Hong Kong. After acquiring
    Daily Shop, 7-Eleven accounted for 73% of all the convenience stores
    at MTR (subway) stations, compared to the 30% market share before
    the taking over.

-   According to a study, Hong Kong can accommodate 1,200 convenience
    stores. Given that there are about 800 stores presently, there is
    still a room for expansion. The primary strategy of convenience
    stores is to increase services providing \"convenience\" to
    consumers and to increase the number of stores so as to reach
    economies of scale. 7-Eleven, operated on a franchise basis, is able
    to expand the number of stores quickly. Meanwhile, Circle K is
    continuing to expand. It is reported to have set a target to
    increase its current 150- plus outlets to 210 by 2004. Circle K is
    owned by a listed company and does not work on franchise basis.

-   A new development in 2003 is that ParknShop expanded into 24-hour
    convenience store operations. The supermarket giant has opened six
    stores under the name ParknShop Express on a trial scheme and may
    expand the network across Hong Kong if the experiment succeeds.
    ParknShop has intrinsic competitive advantages over its rivals
    because it can use the leverage of the group's existing
    infrastructure to offer products at low prices. The stores carry the
    products as other convenience stores such as cooked food, drinks,
    newspapers and magazines. In a bid to lure customers, the 1,000
    products offered by ParknShop Express are priced at the same level
    as those being sold at ParknShop. This is in contrast to other
    convenience store operators charging at a premium of up to 15 per
    cent from those selling at supermarkets.

Market Entry Approach

-   Convenience stores largely buy goods from local importers and
    agents. Therefore, U.S. food exporters have to go through Hong Kong
    importers to have their products sold in convenience stores.

### Traditional Markets

-   Traditional markets include wet markets and mom-and-pop shops. They
    are widespread throughout the territory. Traditional markets used to
    account for the lion's share of food retail. For example, they
    occupied around 54 percent of total retail food sales between 1995
    and 1997. Yet supermarkets sales have exceeded traditional markets
    sales since 1998, and the dominating trend of the former is likely
    to persist and enlarge in the future. Despite the growing
    significance of supermarkets in terms of food retailing, traditional
    markets remain as key food retail outlets, particularly for seafood,
    meat and groceries. Wet markets still occupy about 80 percent of the
    retail sales of fresh foods, according to an estimate by the
    Agriculture, Fisheries and Conservation Department. Wet markets in
    Hong Kong have changed gradually over the years. The newly built
    markets are air-conditioned and more hygienic and more
    environmentally pleasant than the old ones. Some, but not all,
    stalls in wet markets have freezers and chilling equipment, which is
    necessary to maintain food quality.

-   Mom-and-pop shops around the housing estates and schools are ideal
    retail outlets for drinks and snack foods. One feature of
    traditional markets is that stalls are small, but the service they
    offer is personal.

-   A traditional mom-and-pop shop which started business in 1990 has
    expanded to 55 stores spreading all over Hong Kong in recent years.
    The stores are called Yu Kee, with floor area ranging around 1,500
    sq. feet each. They sell mainly processed foods and produce. Most of
    the food supplies come from China and South East Asia. They also
    import snack foods and drinks from Europe. However, U.S. foods are
    not yet on their shelves. The stores feature cheap prices and are
    after the mass market.

-   Another chain store worth mentioning is called Magic House. With 100
    retail stores, they operate like \"convenience stores\" except that
    their business hours are only around 10 hours instead of 24 hours.
    They primarily sell snack foods, drinks and ice cream.

Market Entry Approach

-   U.S. exporters must go through local importers/agents that have a
    good distribution networks.

### Trends in Promotional/Marketing Strategies and Tactics

-   Supermarkets expanding store size: The supermarket industry is
    undergoing a face-lift to introduce larger size stores with an
    objective to provide one-stop shopping and convenience for
    customers. In additional to traditional grocery and household
    products, supermarkets are moving towards larger, more modern stores
    with more fresh food.

-   Increasing demand for promotion package and discounts: Hong Kong
    consumers are very price sensitive. Marketing tactics such as
    selling larger economy packs or enclosing complimentary samples are
    usually used to stimulate sales. The most direct and effective
    marketing tool is to offer discounts.

-   In face of strong competition, major supermarket stores very often
    offer discounts and tend to transfer the cost to suppliers by
    requesting lower prices for supplies. Given supermarkets' strong
    bargaining power as they have many retail outlets, many suppliers
    have to give supermarkets special discounts which ordinary retailers
    do not enjoy.

-   According to a survey by AC Nielsen, Hong Kong consumers are by far
    the most impulsive shoppers in the region with 67% who make
    unplanned purchases. In contrast, other countries with a relatively
    high proportion of non-planners are Thailand (14%) and Singapore
    (14%). As such, in-store promotions seem to be effective to
    introduce new products and to stimulate impulsive purchases.

-   Consumers becoming increasingly health-conscious, and organic
    products picking up in popularity: There has been a gradual change
    in what consumers want in Hong Kong. The importance of meat,
    especially red meat, has declined among some consumers, while other
    food groups, such as fruits and vegetables, are gaining in
    popularity. Consumers increasingly look for freshness, healthiness,
    new varieties and shorter meal-preparation time for food. Consumers
    want foods of higher nutritional value, but also increasingly pay
    attention to food safety and hygiene. In short, the marketing trend
    is to position food products as a healthy, natural, nutritional,
    etc.

-   Organics: The market for organic food, especially fresh vegetables,
    has picked up considerably in the past few years. ParknShop, the
    biggest supermarket chain in Hong Kong, set up a separate organic
    food section in many of their stores. A trader of mainland grown
    organic vegetables has seen his orders steadily increasing. A local
    producer of organic vegetables said his produce has been
    experiencing strong demand, and his farm broke even two years after
    it started operating in 1988.

-   Internet direct sales of food: Currently ParknShop, Wellcome, and
    City Super are the three supermarkets offering grocery shopping over
    their website. The service is however not attracting a lot of
    interest, due to the convenience of shopping in Hong Kong, security
    concerns and the cost of delivery.

-   However, the at-work population in Hong Kong is becoming a coveted
    audience among marketers to leverage the Internet as a medium of
    advertising. The at-work online audience is large and growing - out
    of the total Hong Kong workforce of 3.52 million, about 20 %
    regularly go online at work. These regular Hong Kong internet users
    are a demographically attractive group of individuals who have
    higher than average incomes, educations and tendencies to shop and
    buy online.

-   Growing awareness of U.S. products fit supermarkets' needs to
    diversify product range: With awareness of the high quality and
    variety of U.S. food products increasing among supermarkets, there
    are many opportunities to introduce new U.S. products to the local
    market. ATO Hong Kong selectively invites key supermarket buyers to
    the United States on U.S. buying missions, which are followed by
    in-store promotions highlighting U.S. products. Buyers from Hong
    Kong supermarkets realize the quick-changing consumption temperament
    of local consumers, and many have expressed the need to source new
    products to capture changing tastes. With strong support from
    exporters and state regional trading groups, the ATO continues its
    efforts to promote U.S. products and help supermarkets expand the
    range of U.S. products they carry.

-   To promote U.S. food products, the ATO sponsors the HOFEX trade show
    which will be held May 10-13, 2005.

-   For further information on the Hong Kong food retail sector, please
    refer to "Retail Food Sector Report 2003\" (Gain Report #HK2039).

## Hotel, Restaurant and Institutional (HRI)

-   Total sales of all the eating establishments in 2003 were over \$6.2
    billion while purchases amounted to \$2 billion. Local households
    spend approximately 50 to 60 percent of their food budget on dining
    out. Since Hong Kong people usually have small homes, they prefer to
    entertain at restaurants instead of in the home. In 2002, there were
    over 11,342 restaurants, about 5,566 of which were Chinese
    restaurants.

  ---------------------- ------------------------- ----------------------
  Types of Restaurants   \% of sales receipts      \% of total outlets

  Chinese Restaurants    50%                       49%

  Non-Chinese            27%                       32%
  Restaurants                                      

  Fast-food Shops        18%                       10%

  Bars                   4%                        4%
  ---------------------- ------------------------- ----------------------

Source : Hong Kong Census and Statistics Department

-   Hong Kong's economy has gradually picked up since the latter half
    of 2003. During the first six months of 2004, total receipts for the
    restaurants sector amounted to \$3,319 million, increasing 12% from
    the corresponding period of last year. The increase has been
    underpinned by the pick-up in both inbound tourism and local
    consumer spending in recent months.

-   The local Chinese population, especially the under 30 age group, is
    opting for more western lifestyles and eating habits, and are moving
    toward higher consumption of convenience foods. McDonald's, Dominos,
    Pizza Hut, Kentucky Fried Chicken, Hardee's, Oliver, Pret A Manger,
    Starbucks and others have all grown rapidly in numbers over the past
    years and now have become fixtures in the Hong Kong market. 2003
    also witnessed the opening of California Pizza Kitchen (CPK) in Hong
    Kong.

-   Consumers are now more value conscious, and demand better "bang for
    the buck". This change in sentiment has forced the major fast food
    operators, Café De Coral, Maxim's and Fairwood, to innovate their
    menus by introducing numerous new ingredients, such as breaded
    chicken patties, premium juice drinks, etc. Café de Coral and
    Fairwood are also renovating their older restaurants and adding
    "cyber corners" to give them a more upscale look, in order to create
    more value in patrons' minds. The average spending in fast food
    outlets is HK\$33.90 for dinner, HK\$25.50 for lunch, HK\$18.20 for
    breakfast and HK\$16.60 for afternoon tea. (U.S.\$1.00 = HK\$7.78)

-   In recent years when the economy has been sluggish, fast food chains
    are not only competing with each other within the sector but also
    with low-end restaurants. Restaurant diners have tightened their
    budgets. Low-end restaurants have already lowered the prices to a
    level comparable to high-end fast food chains. To lure more
    business, fast food chains such as Café De Coral and Fairwood
    started to provide delivery services, reflecting the keen
    competition of the food business.

-   According to a AC Nielsen survey, western chains of fast food shops
    have surpassed Chinese chains in terms of penetration (88% vs.80%)
    and are enjoying equal share of trade in value terms (29% vs. 30%).

-   Another key feature of Hong Kong's HRI sector is the increasingly
    competitive coffee shop market in Hong Kong with new outlets opening
    around the city. While westerners will stand up and drink a coffee,
    Chinese people in the Hong Kong market want to sit down and take
    their time over their sandwich or cup of coffee. Starbucks and
    Pacific Coffee are Hong Kong's two largest coffee shop chains.
    McDonald is also rapidly expanding its coffee shops by the name of
    McCafe. People in the industry viewed that specialty coffee shops
    enjoy a bigger profit margin than fast foods shops, therefore, it is
    not surprising that more food chains will open specialty coffee
    shops in the future.

-   Hong Kong's burgeoning tourism serves as stimulus to the HRI sector.
    In 2003, Hong Kong recorded a total of 15.5 million tourists, who
    accounted for approximately 14% of the HRI businesses. Hong Kong's
    inbound tourism has been further spurred by the travel relaxation
    policy of Mainland China effective in summer 2003. Since then there
    has been a surge of Mainland China visitors to Hong Kong. The Hong
    Kong Tourism Board is expecting a total of 20.5 million tourists in
    2004, which assumed a growth of 31.8% on the 2003 level. These
    visitors are spending lavishly on restaurant meals. With the Hong
    Kong government's focus on the tourist industry, and the opening of
    Disney Land in Hong Kong in 2005, the future looks bright.

-   Exporters should note that tastes in food can often differ between
    Chinese and Western consumers, exporters looking to grow business
    with the HRI trade should focus on U.S. ingredients for Chinese
    dishes offerings since it is Chinese tourists that spear the growth
    of Hong Kong's inbound tourism.

Market Entry Approach

-   Because of small individual consumption, local hotels, restaurants
    and most fast food operators usually cannot afford to import
    directly. The distribution of food and beverages to these operators
    is generally through import agents. U.S. exporters should contact
    Hong Kong importers to explore potential business opportunities.

### Trends in Promotional/Marketing Strategies and Tactics

-   Participation in trade shows: ATO will participate in the Restaurant
    and Bar Show which will be held October 5-7, 2004. The show provides
    a showcase for U.S. food ingredients, wine and beverages to Hong
    Kong's hotel and restaurant trade. In cooperation with cooperators
    and regional groups, the show will demonstrate the versatility and
    safety of U.S. food products.

-   Menu promotions with major restaurant chains: Menu promotion dollars
    will be maximized if spent on promotion events held with the major
    restaurant chains. With the restaurant chains' announced intention
    to have an image overhaul, this provides for an opportunity to
    introduce new U.S. foods.

-   Inviting restaurant owners/chefs to seminars and/or to the United
    States: ATO Hong Kong/ cooperators organize seminars and trade
    missions to the United States with an intention to introduce U.S.
    products, meet U.S. exporters, and experience U.S. store formats.

-   Setting up of several fast food and takeaway websites: There are
    several meal delivery sites to cater to the home delivery market by
    fax, telephone, or internet. These sites are in cooperation with a
    number of restaurants which will prepare the food which clients
    order.

-   For more information on Hong Kong's HRI sector, please refer to Gain
    report#4007.

## Food Processing 

-   Based on the Chinese mainland and Hong Kong Closer Economic
    Partnership Arrangement (CEPA) which was concluded in June 2003,
    China has applied zero import tariff on 374 product codes for
    products made in Hong Kong. Ice cream and other edible ice is the
    only food item being included in zero tariff product list covered by
    CEPAI. However, under stage two of the agreement, which was signed
    in August 2004, another 713 made-in-Hong Kong product categories are
    allowed entry to China tariffs free. Zero tariff will be introduced
    to 529 product categories on January 1, 2005, the remaining 184 on
    January 1, 2006. Under CEPAII, a range of food and agricultural
    products, if qualified to have Hong Kong origin, can be exported to
    China tariff free.

-   The CEPAII zero tariff product list includes aqua -- marine products
    (certain live, fresh, chilled or frozen fish, shrimps and prawns,
    crabs), food and beverages, (certain dairy products such as yogurt
    and cheese, certain prepared meats, certain sugar confectioneries
    and cocoa preparations; certain preserved meats and seafood, bread,
    biscuits and cakes; preserved vegetables and fruits, fruit juices;
    sauces, water, etc.) and leather and fur products. The 2005 China
    bound tariff rates under WTO accession of those products range from
    5% to 51%.

-   China's zero import tariff applications for products made in Hong
    Kong certainly encourage food production in Hong Kong. Hong Kong
    brand products have a competitive edge in the Mainland China market.
    The expansion of the local food processing industry will then
    trigger off a demand for raw materials. Such demand provides export
    opportunities for U.S. food ingredients suppliers.

-   A full zero-tariff product list is available at
    <http://www.tid.gov.hk/english/cepa/cepa2.html>

-   The food processing industry in Hong Kong is relatively small
    compared to food retail and HRI sectors. The total output of the
    local food processing industry was \$2.4 billion in 2001 and there
    were 765 food processing establishments as of 2003. Baking is the
    largest sector in Hong Kong's processed food and beverage industry.
    Major products of the industry include biscuits, pastries and cakes
    for both domestic consumption and export. Other significant sectors
    include instant noodles and other pasta production; canning,
    preserving and processing of seafood (such as fish, shrimp and
    prawns, and other crustaceans); manufacture of dairy products (fresh
    milk, yogurt and ice cream); seasonings; and spirits.

### Market Entry Approach

Food ingredients are sourced both through direct import by food
processors and through middleman traders. Hong Kong traders and
end-users tend to stay with suppliers with whom they know well and have
done business with for some time. While exporters would do well
exploring all channels, patience and understanding are required to
establish a relationship of trust before trading can commence.

# Section IV. Best High-Value Product Prospects

  ------- ---------------------------------------------------------------
  Note :  

  1       Hong Kong food supplies largely rely on imports. Domestic
          production is very minimal so the market size in the following
          table is equal to retained imports without taking into account
          local production.

  2       Import tariff rate for all products in the table is zero.
  ------- ---------------------------------------------------------------

+----------+----------+----------+----------+-----------+------------+
| *        | **2003   | **2003   | **1999   | **Key     | **Market   |
| *Product | Total    | Retained | -- 2003  | Co        | Attrac     |
| Ca       | I        | I        | Average  | nstraints | tiveness** |
| tegory** | mports** | mports** | Annual   | Over      |            |
|          |          |          | Retained | Market    | **For      |
|          |          |          | Import   | Deve      | USA**      |
|          |          |          | Growth** | lopment** |            |
+----------+----------+----------+----------+-----------+------------+
| **O      | 211,018  | 153,721  | 4.4%     | Strong    | Consumers' |
| ranges** | MT       | MT       |          | co        | r          |
|          |          |          |          | mpetition | ecognition |
|          |          |          |          | from      | of U.S.    |
|          |          |          |          | Brazil    | origin and |
|          |          |          |          | and other | quality    |
|          |          |          |          | fruits    |            |
+----------+----------+----------+----------+-----------+------------+
| **       | 88,575   | 26,226   | -15 %    | Strong    | U.S. being |
| Grapes** | MT       | MT       |          | co        | the        |
|          |          |          |          | mpetition | largest    |
|          |          |          |          | from      | supplier;  |
|          |          |          |          | Chile &   | c          |
|          |          |          |          | Australia | ompetitors |
|          |          |          |          |           | supplying  |
|          |          |          |          |           | in         |
|          |          |          |          |           | different  |
|          |          |          |          |           | seasons    |
+----------+----------+----------+----------+-----------+------------+
| **       | 134,085  | 88,155   | -3.7%    | Apples    | U.S.       |
| Apples** | MT       | MT       |          | from      | remaining  |
|          |          |          |          | China are | as the     |
|          |          |          |          | very      | largest    |
|          |          |          |          | price     | supplier   |
|          |          |          |          | co        | and apples |
|          |          |          |          | mpetitive | being one  |
|          |          |          |          | and their | of the     |
|          |          |          |          | quality   | most       |
|          |          |          |          | has       | popular    |
|          |          |          |          | improved. | fruits in  |
|          |          |          |          |           | Hong Kong  |
+----------+----------+----------+----------+-----------+------------+
| **French | 23,892   | 18,642   | 18%      | HRI being | U.S.       |
| Fries**  | MT       | MT       |          | hampered  | accounting |
|          |          |          |          | by        | for 93     |
|          |          |          |          | economy   | percent of |
|          |          |          |          | downturn  | the market |
|          |          |          |          | in the    | share;     |
|          |          |          |          | past few  | products   |
|          |          |          |          | years.    | wel        |
|          |          |          |          | Business  | l-received |
|          |          |          |          | is        | by trade   |
|          |          |          |          | expected  |            |
|          |          |          |          | to pick   |            |
|          |          |          |          | up in the |            |
|          |          |          |          | coming    |            |
|          |          |          |          | years.    |            |
+----------+----------+----------+----------+-----------+------------+

<table>
<colgroup>
<col style="width: 16%" />
<col style="width: 14%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 15%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 19%" />
<col style="width: 19%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Product Category</strong></td>
<td><strong>2003 Total Imports</strong></td>
<td colspan="3"><strong>2003 Retained Imports</strong></td>
<td colspan="3"><strong>1999 – 2003 Average Annual Retained Import
Growth</strong></td>
<td><strong>Key Constraints Over Market Development</strong></td>
<td><p><strong>Market Attractiveness</strong></p>
<p><strong>For USA</strong></p></td>
</tr>
<tr class="even">
<td><strong>Eggs</strong></td>
<td>1,549 million</td>
<td colspan="3">1,548 million</td>
<td colspan="3">2.3%</td>
<td>Growing competition from China and Thailand.</td>
<td>HRI has a high demand for U.S. white eggs. China has suspended its
export of eggs to China due to Avian Influenza, thus boosting demand for
U.S. eggs.</td>
</tr>
<tr class="odd">
<td><strong>Sauces</strong></td>
<td colspan="2">86,797 MT</td>
<td colspan="3">65,695 MT</td>
<td colspan="2">8.2%</td>
<td>China and Thailand are two major competitors. The oriental flavor of
sauces from these countries is a distinct advantage.</td>
<td>Hong Kong people are receptive to new tastes. The availability of
much international cuisine offers a demand for U.S. sauces.</td>
</tr>
<tr class="even">
<td><strong>Soup</strong></td>
<td colspan="2">16,990 MT</td>
<td colspan="3">15,594 MT</td>
<td colspan="2">0.6%</td>
<td>HRI being hampered by economy downturn in the past few years.
Business is expected to pick up in the coming years.</td>
<td>The U.S. occupied about 73 percent of the import market share. U.S.
products are highly regarded.</td>
</tr>
<tr class="odd">
<td><strong>Fresh Vegetables</strong></td>
<td colspan="3">584,528 MT</td>
<td colspan="3">577,258 MT</td>
<td>32%</td>
<td><p>Abundant supplies of fresh vegetables from mainland China. Prices
are very competitive.</p>
<p>U.S. products are competing with those from Australia and New
Zealand.</p></td>
<td>A bourgeoning tourist industry and availability of many high-end
restaurants lead to a constant demand for quality U.S. fresh vegetables
supplies.</td>
</tr>
</tbody>
</table>

+----------+----------+----------+---------+-------------+------------+
| *        | **2003   | **2003   | **1999  | **Key       | **Market   |
| *Product | Total    | Retained | -- 2003 | Constraints | Attrac     |
| Ca       | I        | I        | Average | Over Market | tiveness** |
| tegory** | mports** | mports** | Annual  | De          |            |
|          |          |          | R       | velopment** | **For      |
|          |          |          | etained |             | USA**      |
|          |          |          | Import  |             |            |
|          |          |          | G       |             |            |
|          |          |          | rowth** |             |            |
+----------+----------+----------+---------+-------------+------------+
| Wine     |   ----   |   ----   | 23%     | Strong      | Hong       |
|          | -------- | -------- |         | competition | Kong's     |
|          |   11     |   10     |         | from French | wine       |
|          | ,231,964 | ,199,099 |         | wine. Hong  | market is  |
|          |   liter  |   liter  |         | Kong        | far from   |
|          |          |          |         | consumers'  | mature.    |
|          |   ----   |   ----   |         | established | There is   |
|          | -------- | -------- |         | association | plenty of  |
|          |          |          |         | of wine     | room for   |
|          |          |          |         | with        | d          |
|          |          |          |         | France.     | evelopment |
|          |          |          |         | Duty for    | and        |
|          |          |          |         | wine is     | education. |
|          |          |          |         | 80%.        |            |
+----------+----------+----------+---------+-------------+------------+
| **Beer** | 120      | 116      | 4.6%    | Consumers   | Hong Kong  |
|          | ,921,868 | ,001,880 |         | of beer     | people     |
|          | liter    | liter    |         | tend to     | like beer  |
|          |          |          |         | have brand  | and there  |
|          |          |          |         | loyalty and | are many   |
|          |          |          |         | Hong Kong   | bars and   |
|          |          |          |         | consumers   | r          |
|          |          |          |         | are not     | estaurants |
|          |          |          |         | very        | in Hong    |
|          |          |          |         | familiar    | Kong.      |
|          |          |          |         | with U.S.   |            |
|          |          |          |         | brands.     |            |
|          |          |          |         |             |            |
|          |          |          |         | Duty for    |            |
|          |          |          |         | beer is     |            |
|          |          |          |         | 40%.        |            |
+----------+----------+----------+---------+-------------+------------+
| **P      | 18,218   | 16,748   | 8%      | HRI being   | U.S.       |
| rocessed | MT       | MT       |         | hampered by | accounting |
| Sweet    |          |          |         | economy     | for 88     |
| Corn**   |          |          |         | downturn in | percent of |
|          |          |          |         | the past    | the market |
|          |          |          |         | few years.  | share;     |
|          |          |          |         | Business is | products   |
|          |          |          |         | expected to | wel        |
|          |          |          |         | pick up in  | l-received |
|          |          |          |         | the coming  | by trade.  |
|          |          |          |         | years.      |            |
+----------+----------+----------+---------+-------------+------------+
| **Ice    | 6,305 MT | 6,017 MT | -0.5%   | Expensive   | Great      |
| Cream**  |          |          |         | to launch   | demand for |
|          |          |          |         | marketing   | ice cream  |
|          |          |          |         | programs    | products;  |
|          |          |          |         | for new     | consumers  |
|          |          |          |         | brands.     | willing to |
|          |          |          |         |             | pay for    |
|          |          |          |         |             | premium    |
|          |          |          |         |             | products.  |
+----------+----------+----------+---------+-------------+------------+

+--------+------------+-----------+--------+-----------+------------+
| **P    | **2003     | **2003    | **1999 | **Key     | **Market   |
| roduct | Total      | Retained  | --     | Co        | Attrac     |
| Cate   | Imports**  | Imports** | 2003   | nstraints | tiveness** |
| gory** |            |           | A      | Over      |            |
|        |            |           | verage | Market    | **For      |
|        |            |           | Annual | Deve      | USA**      |
|        |            |           | Re     | lopment** |            |
|        |            |           | tained |           |            |
|        |            |           | Import |           |            |
|        |            |           | Gr     |           |            |
|        |            |           | owth** |           |            |
+--------+------------+-----------+--------+-----------+------------+
| **Moll | 56,061 MT  | 40,996 MT | 5.6%   | Co        | Strong     |
| uscs** |            |           |        | mpetition | demand for |
|        |            |           |        | severe    | seafood in |
|        |            |           |        | from Hong | Hong Kong; |
|        |            |           |        | Kong's    |            |
|        |            |           |        | ne        | U.S.       |
|        |            |           |        | ighboring | oysters    |
|        |            |           |        | c         | highly     |
|        |            |           |        | ountries; | regarded;  |
|        |            |           |        | Molluscs  | however,   |
|        |            |           |        | including | the        |
|        |            |           |        | a variety | overall    |
|        |            |           |        | of        | U.S.       |
|        |            |           |        | products  | market     |
|        |            |           |        | such as   | share in   |
|        |            |           |        | scallop,  | molluscs   |
|        |            |           |        | oyster,   | market     |
|        |            |           |        | abalone,  | being      |
|        |            |           |        | etc.      | small;     |
|        |            |           |        | Japan     | room for   |
|        |            |           |        | being the | market     |
|        |            |           |        | largest   | expansion  |
|        |            |           |        | supplier  | present.   |
|        |            |           |        | for dried |            |
|        |            |           |        | scallop   |            |
|        |            |           |        | and       |            |
|        |            |           |        | Australia |            |
|        |            |           |        | for       |            |
|        |            |           |        | abalone.  |            |
+--------+------------+-----------+--------+-----------+------------+

# Section V. Key Contacts and Further Information

Foreign Agricultural Service (FAS)

Home Page: [http://www.fas.usda.gov](http://www.fas.usda.gov/)

Agricultural Trade Office

American Consulate General

18^th^ Floor, St. John's Building

33 Garden Road, Hong Kong

Tel: (852) 2841-2350

Fax: (852) 2845-0943

E-Mail: [ATOHongKong@usda.gov]{.underline}

Internet Homepage : [http://www.usconsulate.org.hk]{.underline}

[http://www.usfoods-hongkong](http://www.usfoods-hongkong/).net

Department to implement food safety control policy

> Food & Environmental Hygiene Department
>
> 43/F., Queensway Govt Offices
>
> 66 Queensway
>
> Hong Kong
>
> Tel: 852-2868-0000
>
> Fax: 852-2834-8467
>
> Web site: [http://www.fehd.gov.hk]{.underline}
>
> E-mail: <enquiries@fehd.gov.hk>

Department to control the importation of plants & live animals

> Agriculture, Fisheries & Conservation Department
>
> 5-8/F., Cheung Sha Wan Govt Offices
>
> 303, Cheung Sha Wan Rd
>
> Kowloon, Hong Kong
>
> Tel: 852-2708-8885
>
> Fax: 852-2311-3731
>
> Web site: [http://www.info.gov.hk/afcd]{.underline}
>
> E-mail: mailbox@afcd.gov.hk

Department to issue licence for imported reserved commodities

> Trade & Industry Department
>
> 18/F., Trade Department Tower
>
> 700 Nathan Road
>
> Kowloon, Hong Kong
>
> Tel: 852-2392-2922
>
> Fax : 852-2789-2491
>
> Web site: http://www.info.gov.hk/tid
>
> Email : <enquiry@tid.gov.hk>

Department to register health foods containing medicine ingredients

Department of Health

Pharmaceuticals Registration

Import & Export Control Section

18^th^ Floor, Wu Chung House

213 Queen's Road East, Wanchai

Hong Kong

Tel : 852-2961-8754

Fax : 852-2834-5117

Web site : [http://www.info.gov.hk/dh/index.htm]{.underline}

Department to issue licence for imported dutiable commodities

> Hong Kong Customs & Excise Department
>
> Office of Dutiable Commodities Administration
>
> 6-9th floors, Harbor Building
>
> 38 Pier Road
>
> Central
>
> Hong Kong
>
> Tel: 852-2815-7711
>
> Fax: 852-2581-0218
>
> Web site: <http://www.info.gov.hk/customs>
>
> [Email : customsenquiry@cutsoms.gov.hk]{.underline}

Department for Trade Mark Registration

Intellectual Property Department

Trade Marks Registry

24th and 25th Floors, Wu Chung House

213 Queen's Road East

Wan Chai

Hong Kong

Tel : 852-2803-5860

Fax : 852-2838-6082

Web site : <http://www.info.gov.hk/ipd/eng/index.htm>

Semi-government Organization Providing Travel Information

Hong Kong Tourist Association

9^th^ - 11^th^ floors, Citicorp Center,

18 Whitfield Road, North Point, Hong Kong

Tel: (852) 2807-6543

Fax: (852) 2806-0303

E-mail: info@hkta.org

> Home Page: [www.hkta.org](http://www.hkta.org/)

Semi-government Organization Providing Hong Kong Trade Information

> Hong Kong Trade Development Council
>
> 38^th^ Floor, Office Tower, Convention Plaza
>
> 1 Harbor Road, Wan Chai, Hong Kong
>
> Tel: (852) 2584-4188
>
> Fax: (852) 2824-0249
>
> E-mail: hktdc@tdc.org.hk
>
> Home Page: [http://www.tdctrade.com](http://www.tdctrade.com/)

# Appendix I. Statistics

## Table A: Key Trade & Demographic Information

Year 2003

  -------------------------------- --------------------------------------
  Agricultural Imports From All    \$7,321 million/ 18%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Consumer Food Imports From All   \$4,904 million/ 21%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Edible Fishery Imports From All  \$1,659 million/ 3%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Total Population (Millions) /    6.8 million /0.2%
  Annual Growth Rate (%)           

  Urban Population (Millions) /    6.8 million/0.2%
  Annual Growth Rate (%)           

  Number of Major Metropolitan     One (Hong Kong as a whole)
  Areas                            

  Size of the Middle Class         2 million
  (Millions)^1/^                   

  Annual Per Capita Gross Domestic \$23,700
  Product (U.S. Dollars)           

  Unemployment Rate (%)            6.9% (April -- June 2004)

  Annual Per Capita Food           \$1,765
  Expenditures (U.S. Dollars)      

  Percent of Female Population     51.3%
  Employed                         

  Exchange Rate (U.S.\$1 = HK      HK\$7.75 
  currency)                        
  -------------------------------- --------------------------------------

Note : The middle class, about 30 percent of all households, is based on
the expenditure pattern of households which have an average monthly
expenditure of \$2,387 -- 4193. The average household size is 3.3
persons.

## Table B: Consumer Food & Edible Fishery Product Imports

  ------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
  **Hong Kong Imports**     Imports                          Imports                          U.S.                  
                            from the                         from the                         Market                
                            World                            U.S.                             Share                 

  (In Millions of Dollars)  **2001**   **2002**   **2003**   **2001**   **2002**   **2003**   **2001**   **2002**   **2003**

                                                                                                                     

  **CONSUMER-ORIENTED AG    5,127      5,048      4,904      1,172      1,077      1,021      23         21         21
  TOTAL**                                                                                                           

  Snack Foods (Excl. Nuts)  233        231        218        15         13         14         6          5          6

  Breakfast Cereals &       22         23         27         8          8          10         37         32         35
  Pancake Mix                                                                                                       

  Red Meats,                658        634        731        108        117        151        16         18         21
  Fresh/Chilled/Frozen                                                                                              

  Red Meats,                181        176        194        39         35         30         22         20         15
  Prepared/Preserved                                                                                                

  Poultry Meat              761        647        639        410        319        264        54         49         41

  Dairy Products (Excl.     352        299        241        20         17         9          6          6          4
  Cheese)                                                                                                           

  Cheese                    33         34         32         4          3          3          12         10         10

  Eggs & Products           88         83         74         20         15         12         23         18         16

  Fresh Fruit               758        796        734        226        231        237        30         29         32

  Fresh Vegetables          174        161        156        25         17         12         15         10         7

  Processed Fruit &         260        260        225        77         75         56         30         29         25
  Vegetables                                                                                                        

  Fruit & Vegetable Juices  22         21         23         9          7          6          39         33         26

  Tree Nuts                 133        191        250        50         64         62         37         34         25

  Wine & Beer               153        141        132        15         15         14         10         11         11

  Nursery Products & Cut    47         56         50         1          1          1          3          2          1
  Flowers                                                                                                           

  Pet Foods (Dog & Cat      23         24         34         9          11         13         39         45         38
  Food)                                                                                                             

  Other Consumer-Oriented   1,228      1,268      1,146      136        128        128        11         10         11
  Products                                                                                                          

                                                                                                                    

  **FISH & SEAFOOD          1,766      1,763      1,659      42         51         52         2          3          3
  PRODUCTS**                                                                                                        

  Salmon                    54         51         50         1          1          1          0          0          0

  Surimi                    6          6          5          1          1          0          1          1          0

  Crustaceans               487        443        329        7          13         8          1          3          2

  Groundfish & Flatfish     116        111        122        4          3          4          3          3          3

  Molluscs                  416        472        474        20         20         25         5          4          5

  Other Fishery Products    687        679        678        11         15         15         2          2          2

                                                                                                                    

  **AGRICULTURAL PRODUCTS   7,533      7,366      7,321      1,434      1,343      1,354      19         18         18
  TOTAL**                                                                                                           

  ** **                                                                                                              

  **AGRICULTURAL, FISH &**  10,503     10,252     9,953      1,581      1,521      1,534      15         15         15

  **SEAFOOD PRODUCTS**                                                                                               

                                                                                                                    

  Source: FAS\' Global                                                                                              
  Agricultural Trade System                                                                                         
  using data from the                                                                                               
  United Nations                                                                                                    
  Statistical Office                                                                                                
  ------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

## Table C: Top 15 Suppliers of Consumer Foods & Edible Fishery Products

  --------------------- ------------ ------------ ------------ --- ------------- ------------ ------------ ------------
  **Hong Kong Imports -                                                                                    
  Top 15 Ranking**                                                                                         

  **CONSUMER-ORIENTED                                              **FISH &                                
  AG TOTAL - 400**                                                 SEAFOOD                                 
                                                                   PRODUCTS -                              
                                                                   700**                                   

                                                                                                           

                        **2001**     **2002**     **2003**                       **2001**     **2002**     **2003**

                        **1000\$**   **1000\$**   **1000\$**                     **1000\$**   **1000\$**   **1000\$**

  China                 1,344,706    1,390,025    1,363,346        China         281,739      288,215      271,133

  (Peoples Republic of)                                            (Peoples                                
                                                                   Republic of)                            

  United States         1,171,828    1,076,912    1,020,603        Japan         160,210      189,890      207,519

  Brazil                252,332      260,782      326,744          Australia     224,026      206,088      183,413

  Thailand              268,774      280,977      253,420          Indonesia     107,504      101,481      86,909

  Australia             238,455      245,152      221,828          Thailand      106,109      85,473       78,548

  Netherlands           191,179      173,314      154,984          Canada        60,319       74,918       71,309

  Iran                  36,843       82,496       143,203          United States 41,523       50,827       51,861

  Japan                 140,671      146,663      133,370          Taiwan        63,401       64,098       51,771
                                                                   (Estimated)                             

  Canada                120,182      110,217      113,674          Vietnam       69,099       62,143       51,096

  Germany               90,313       97,495       94,199           New Zealand   76,608       70,393       48,045

  New Zealand           143,530      105,202      92,976           Norway        48,194       45,494       47,924

  France                88,109       84,464       88,190           Spain         36,521       36,301       45,427

  Taiwan (Estimated)    75,034       82,957       81,404           Philippines   39,114       38,039       40,225

  Singapore             74,966       105,359      78,560           South Africa  41,759       54,611       38,859

  Philippines           77,049       75,718       71,630           Malaysia      40,735       36,063       34,260

  Other                 812,993      729,988      666,282          Other         369,126      359,376      350,629

  World                 5,126,959    5,047,733    4,904,424        World         1,766,013    1,763,405    1,658,921

                                                                                                           

  Source: United                                                                                           
  Nations Statistics                                                                                       
  Division                                                                                                 
  --------------------- ------------ ------------ ------------ --- ------------- ------------ ------------ ------------