Required Report - public distribution

**Date:** 10/12/2006

**GAIN Report Number:** HK6025

HK0000

**Hong Kong**

**Market Development Reports**

**Exporter Guide**

**2006**

**Approved by:**

![](media/image1.wmf)Philip Shull, David Wolf

U.S. Consulate General, Hong Kong

**Prepared by:**

Caroline Yuen

Report Highlights:

Hong Kong, with a population of only 6.8 million, is impressively ranked
the 10^th^ largest market for U.S. consumer-oriented agricultural
products. Hong Kong's high per capita GDP of \$25,711, one of the
highest GDPs in Asia, offer good opportunities for U.S. exporters in
this trendy and sophisticated market. Hong Kong imported over \$750
million worth of consumer-oriented products from the U.S. in 2005. A
bourgeoning inbound tourism industry (a record 23 million tourists in
2005) accounted for 17 percent or \$1,255 million of Hong Kong's Hotel
Restaurant Institution business last year. The potential opportunities
that Hong Kong provides to U.S. exporters are not limited to the strong
demand in this market alone. Many Hong Kong traders have strong ties
with mainland China and Macau. U.S. exporters should also consider Hong
Kong as the front door for re-export of their products to the vast China
market and the booming Macau.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Hong Kong \[HK1\]

\[HK\]

Table of Contents

[**SECTION I. MARKET OVERVIEW 3**](#section-i.-market-overview)

[SECTION II. EXPORTER BUSINESS TIPS
6](#section-ii.-exporter-business-tips)

[Importer Lists 6](#importer-lists)

[Language 6](#language)

[Travel Visa 6](#travel-visa)

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

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

[Labeling of Biotech Foods 8](#labeling-of-biotech-foods)

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

[Food Retail 9](#food-retail)

[Supermarkets 10](#supermarkets)

[Convenience Stores 13](#convenience-stores)

[Traditional Markets 13](#traditional-markets)

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

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

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

[Food Processing 18](#food-processing)

[SECTION IV. BEST CONSUMER ORIENTED PRODUCT PROSPECTS
20](#section-iv.-best-consumer-oriented-product-prospects)

[SECTION V. KEY CONTACTS AND FURTHER INFORMATION
24](#section-v.-key-contacts-and-further-information)

[APPENDIX - STATISTICS 26](#appendix---statistics)

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

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

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

[Table D. Composition by Product Category for US Agricultural, Fish &
Forestry Total to Hong Kong
28](#table-d.-composition-by-product-category-for-us-agricultural-fish-forestry-total-to-hong-kong)

# SECTION I. MARKET OVERVIEW

Food Imports

-   Hong Kong is a mature but sophisticated market. Price conscious
    consumers look for "value for money" products. Price and quality are
    equally important. Hong Kong relies almost entirely on imports for
    its own food supplies. Hong Kong's imports of consumer oriented
    products and seafood products amounted to \$5,300 million and
    \$1,885 million respectively. Major import items range from red
    meats, fruits, poultry meat, dairy products, and snack foods to tree
    nuts. The affluent middle class, a large segment of the Hong Kong
    population, also provides a niche market for new, trendy and novelty
    products. In the past year, some fast growing product categories are
    included in the following table.

> Hong Kong's Imports with Significant Growth in 2005 (US\$ million)

  ---------------------------------- ---------- ---------- ------------------
                                     **2004**   **2005**   **Growth Rate**

  Snack Foods (Exclud. Nuts)         224        265        18%

  Poultry Meat                       521        581        11%

  Fruit & Vegetable Juices           23         29         30%

  Tree Nuts                          206        257        25%

  Salmon                             50         60         19%
  ---------------------------------- ---------- ---------- ------------------

-   Hong Kong is an important market for U.S. consumer-oriented foods
    and ranks tenth as a U.S. export destination for these high-value
    products. Hong Kong imported over \$758 million worth of
    consumer-oriented products from the United States in 2005,
    accounting for 14 percent of the market share. Of all U.S.
    consumer-oriented exports to Hong Kong, fresh fruit, poultry meat,
    tree nuts, processed fruit & vegetables, and snack foods are the
    leading items. For fish and seafood products, the United States
    exported \$66 million worth of products to Hong Kong, maintaining 4
    percent of the market share. Hong Kong's imports of U.S. seafood
    products in 2005 recorded a 14 percent increase compared to 2004.
    The rise speaks for the growing popularity of U.S. seafood products
    in Hong Kong.

> Hong Kong's Imports from the U.S. with Significant Growth

  ----------------------------------- ---------- ---------- -----------------
  Imports from the U.S.               **2004**   **2005**   **Growth Rate**

                                                            

  Snack Foods (Exclud. Nuts)          14         17         21%

  Eggs & Products                     13         16         25%

  Processed Fruit & Vegetables        62         67         8%

  Fruit & Vegetable Juices            8          15         80%

  Molluscs                            28         39         41%
  ----------------------------------- ---------- ---------- -----------------

-   Hong Kong serves as an important gateway to the huge market in China
    as well as the Asia-Pacific region. In 2005, 10 percent (\$532
    million) of the \$5,300 million worth of international high value
    imports to Hong Kong, were re-exported to China. Additionally, many
    more products have been transshipped to China but not officially
    recorded in Hong Kong trade statistics. Some statistics however are
    generated by the Hong Kong companies themselves. Despite products
    shipped directly to China without landing in Hong Kong, much of the
    decision making process, including placing orders, still takes place
    in Hong Kong. Many U.S. exporters, particularly for new to Asia
    exporters, feel more comfortable dealing with Hong Kong traders who
    generally conduct business in English. U.S. importers can also take
    comfort in Hong Kong's consistent import regulations, rule of law
    and zero tariff's on all agricultural products except alcoholic
    beverages and tobacco.

-   In 2005 Hong Kong imported \$758 million worth of consumer-oriented
    products from the U.S., about 16 percent or \$122 million of the
    products were re-exported to China. Hong Kong is a stepping stone
    for the huge market in China.

-   Macau, a 500,000 populated city next to Hong Kong, obtains much of
    its supply of U.S. products from Hong Kong importers. The market
    there is not big enough to import many products directly from the
    U.S. Macao importers therefore rely on Hong Kong companies to obtain
    U.S. supplies. In 2005, about 2 percent of U.S. high value imports
    to Hong Kong or \$18 million worth of high-value U.S. products were
    re-exported to Macao. In recent years, Macao has embarked on a very
    vigorous tourism plan by gearing to become Las Vegas in Asia. New
    hotels and casinos have been built to lure tourists. There has been
    an increasing demand for quality food products, thus providing
    opportunities for U.S. exporters.

-   Due to limited land resources and rapid urbanization, Hong Kong has
    to rely heavily on imports for its food supply. In 2005, local
    production contributed only 4 percent of fresh vegetables, 52
    percent of live poultry, and 18 percent of live pigs to local
    consumption. The agricultural industry produced \$152 million worth
    of agricultural products in total. However, Hong Kong's total
    imports of consumer-oriented products and fish & seafood products
    amounted to \$5.3 billion and \$1.9 billion respectively.

Economy

-   Being one of the most affluent economies in Asia, Hong Kong's 2006
    forecast per capita GDP is \$26,500.

-   The Hong Kong economy is robust, with real GDP rising 6.6 percent in
    the first half of 2006. The government forecast of GDP growth has
    been maintained at 4-5 percent for 2006 as a whole. The unemployment
    rate fell to 4.8 percent in June-August 2006, from the peak of
    almost 9% in 2003.

-   Consumer spending has posted a solid growth amid stronger consumer
    sentiment and improving employment prospects. Retail sales grew by
    6.8% in value in 2005 and 6.5% in the first seven months of 2006.
    Inflation has been edging up, with consumer prices rising by 1.1
    percent in 2005 and 2.0 percent in January-August 2006.

-   The third phase of the Mainland-Hong Kong Closer Economic
    Partnership Arrangement (CEPA III) took effect in January 2006,
    providing further liberalisation measures on trade in goods and
    services entering the mainland and promising great benefits for Hong
    Kong's economy. It is expected to provide a new source of growth for
    the city's economy.

-   In 2005, tourist arrivals increased by 7.1 percent reaching a record
    23 million. In the first eight months of 2006, a total of 16.74
    million tourists visited Hong Kong, representing a 10.4 percent
    year-on-year increase. The Hong Kong government has geared to
    develop the tourist industry in Hong Kong. In recent years, some
    major tourist attractions have been completed including Hong Kong
    Disneyland, the Tung Chung Cable Car System, and Hong Kong Wetland
    Park. In 2005, tourists spent \$1,255 million in restaurants
    (excluding restaurants located in hotels), accounting for 17 percent
    of Hong Kong's HRI business. In contrast, tourists' contribution to
    HRI sales amounted to 14 percent in 2004. 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.

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 2005, 51.8 percent of women in Hong Kong were
    in the labor force. 2. A youthful work force: 54.9 percent 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 (2006        Severe competition between
  Heritage Foundation/Wall Street     different supplying countries.
  Journal Index of Economic Freedom). 
  Consistent free trade and free      
  enterprise policies. Free flow of   
  information. Transparent            
  government. 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. There is an      
  advantage when the U.S. dollar is   
  weak, as it has been over last few  
  years. Products from other          
  supplying countries generally       
  become less 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.

  Consistent import regulations and   Labeling regulation getting
  rule of law.                        tougher. Effective July 2007,
                                      allergens and additives have to be
                                      listed. The introduction of
                                      nutrition labeling is also under
                                      discussion.

  Sophisticated, reliable banking     
  system.                             
  ----------------------------------- -----------------------------------

# 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 be 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.

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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.

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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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-   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 Gain Report HK#5020.)

-   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 four years ago; the variety has
    greatly expanded to over 2000 items in recent years. The price
    discrepancy between conventional and organic foods has also narrowed
    over the years. Currently, organic products are priced generally 10
    percent higher. The most popular organic products are baby foods,
    vegetables, fruits, eggs, fresh meats, and fruit juices.

-   Health foods continue to grow in popularity in Hong Kong because of
    consumers' desire to enhance general health. The most appealing
    factors of health foods are "low Glycemic Index" and "Antioxidants".

-   Foods categorized as Natural are also appealing to Hong Kong
    consumers. Nut suppliers market nuts as healthy snacks good for the
    heart. Cereals are marketed as an effective means of controlling
    cholesterol.

-   According to AC Nielsen's recent survey, the top three functional
    food types in Hong Kong are soy milk, whole/high fiber products, and
    fruit juice with added supplements/vitamins and fermented drinks
    containing good bacteria.

-   A survey conducted by the Hong Kong government indicated that about
    22.8 percent of all persons aged 15 and over in Hong Kong had taken
    health supplements during the twelve months before enumeration.
    Popular health supplements include "vitamins", "Chinese herbs",
    "calcium", "cod-liver oil/ pills", " products for strengthening
    immune system", etc.

-   Consumption of wine is growing in popularity in Hong Kong. The
    number of wine retail stores is steadily expanding.

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-   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.

-   Hong Kong consumers' buying decision is largely based on value for
    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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-   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.

## 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, however, intends to
    implement a mandatory nutrition labeling system for all prepackaged
    foods and aims to introduce the drafted legislation to the
    Legislative Council in early 2007. With the grace period allowed,
    all prepackaged food items would have to carry a nutrition label by
    2011 at the earliest. Details refer to Gain Report HK#5020.

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-   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
    2006\". Gain Report #HK6017.

## Labeling of Biotech Foods

The Hong Kong government has issued guidelines on voluntary labeling of
biotech food. The draft guideline is based on the following four
principals.

-   The labeling of biotech food will comply with the existing food
    legislation.

-   The threshold level applied in the guideline for labeling purpose is
    5 percent, in respect of individual food ingredient.

-   Additional declaration on the food label is recommended when
    significant modifications of the food, e.g. composition, nutrition
    value, level of anti-nutritional factors, natural toxicant, presence
    of allergen, intended use, introduction of an animal gene, etc, have
    taken place.

-   Negative labeling is not recommended.

The guideline is advisory in nature and has no legal effect. Adoption is
entirely voluntary and is not binding. It applies to prepackaged food.

As the guideline is voluntary, U.S. food exports should not be affected
if they choose not to have any biotech labeling. However, it should be
noted that the Hong Kong government does not encourage negative labeling
particularly for the use of the following terms:

-   GMO free,

-   Free from GM ingredients, etc

For products with such definite negative labeling, the government may
take the initiative to test the products against GM ingredients and zero
tolerance will be adopted for testing purposes. If products are found to
have misleading labeling, a retailer may be subject to prosecution under
Section 61 -- False Labeling and Advertisement of Food or Drugs of
Chapter 132 Public Health and Municipal Services Ordinance.

(Available at <http://www.legislation.gov.hk/eng/home.htm>)

If the trade chooses to apply negative labeling, the government advises
to use less definite terms such as "sourced from non-GM sources" (which
contains less than 5 percent of GM content) and to have documentation to
substantiate such declaration.

The Hong Kong government plans to introduce legislative measures
mandating a pre-market safety assessment, according to a proposal
delivered to the Legislative Council in 2003. The government has not set
a date for the implementation of the mandatory pre-market safety
assessment yet.

# 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 relatively smaller and presents less opportunity for market
development.

## Food Retail

-   Total retail sales of food and drinks in Hong Kong for 2005 reached
    \$6.4 billion, representing a growth of 6 percent compared to 2004.
    For January -- August 2006, retail sales of food, alcoholic drinks,
    and tobacco for traditional markets and supermarkets, increased 6.2
    percent and 6.3 percent respectively, compared with the same period
    last year. The sentiment for spending is promising.

-   Retail establishments in 2006 amounts to approximately 15,083, which
    included (1) 85 supermarkets and convenience store establishments
    (the number of supermarkets and convenience stores is about 1,634 if
    branch outlets are included) and (2) 14,998 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. Much of the 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 percent of total
    sales in 1995 to 54 percent in 2005. 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 \$684 million in 2005, increasing 31% over 2000.

![](media/image2.wmf)

![](media/image3.wmf)

-   In short, wet markets are strong in fresh foods, while supermarkets
    are strong in processed, chilled and frozen, 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

-   According to the latest figures available, in 2004 there were 85
    supermarkets in Hong Kong but only 9 of them had 5 or over branch
    outlets. About 63 supermarkets had only one store without any branch
    outlets.

-   In the past decade, there has been a substantial decline of small
    supermarket operators. Between 1997 and 2004, the number of
    supermarket operators decreased by 31 percent whereas the sales and
    the number of persons engaged in the supermarket industry rose by 11
    percent and 29 percent respectively. These figures reflected that
    the supermarket industry has been growing but in a way not favorable
    to small operators. Many small operators left the market due to
    severe competition.

  ----------------------------------- ----------- ----------- ------------
                                      **1997**    **2004**    **% change**

  No. of supermarkets                 124         85          -31%

  No. of persons engaged              15,768      20,369      29%

  Value of purchases of goods for     \$ 2,285 M  \$2,294 M   \--
  sale                                                        

  Total Sales                         \$ 3,109 M  \$3,455 M   11%
  ----------------------------------- ----------- ----------- ------------

-   There are two dominant supermarket chains in Hong Kong: The Wellcome
    Co. Ltd. (247 outlets with 20 superstores) and ParknShop (over 226
    with 46 superstores). 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 the past decade, a "superstore" concept has emerged in the
    operation of supermarkets, blending the Western supermarket style
    with a traditional Hong Kong wet market. Superstores offer
    traditional Chinese fresh food like live fish, meats, ready-to-eat
    foods and market-style fruit and vegetables as well as the most
    extensive range of international products.

-   ParknShop opened its first superstore in 1996 with a floor area of
    45,000 sq. ft. Presently, its largest supermarket in Hong Kong has a
    floor area of 72,000 sq. ft. giving customers a modern one-stop
    shopping solution. The store sells over 20,000 product categories
    ranging from snacks to electrical household appliances.

-   The ParknShop supermarket chain carries two own-label product lines,
    namely PARKnSHOP and Best Buy, first introduced in 1995.

-   ParknShop is also associated with three other supermarkets by the
    name of Great, Taste, and Gourmet. These high-end supermarkets are
    after the more affluent clientele. They are ideal outlets for
    innovative, quality and priced international food products. These
    stores also carry a wide selection of organic products. Great adopts
    a stylish international food hall concept and its flagship store
    offers over 46,000 gourmet items. The first 35,000 square feet TASTE
    food galleria was opened in November 2004, and features more than
    25,000 quality food items sourced from around the world. Gourmet,
    opened in 2005, occupied 15,000-square-foot store offering a
    selection of over 20,000 products carried across 30 merchandise
    categories of quality and premium foods. The average expenditure per
    customer for Gourmet and Taste is expected to be \$18 and \$13
    respectively.

-   Dairy Farm, which owns another major supermarket chain -- Wellcome,
    will also be opening an upscale supermarket in Hong Kong's central
    commercial area catering to the more affluent clientele. The new
    store called Three Sixty will be opened in mid November. With a
    floor area of 23,000 square feet, it will be Hong Kong's largest
    retail outlet for organic and natural products. About 6,000 items or
    70 percent of the items in the store will be organic or natural
    products. The store will include an organic sector for baby
    products. "Health" and "natural" are the key concepts of this store.

-   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.
    Major supermarket chains, such as Wellcome and ParknShop which have
    many branch stores, have expensive listing fees. Industry sources
    revealed that key supermarket chains may charge HK\$1,000 (US\$130)
    per SKU for each of its store. A 30 percent discount may be offered
    to certain suppliers. The discount offered varies tremendously
    depending on the popularity of the products and the bargaining power
    of the supplying companies. Agents/importers will not bear this
    cost, which is transferred to their principals. 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. Agents representing very popular items with large
    turnover usually have a stronger bargaining power and will be able
    to negotiate for a lower rebate rate.

-   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 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.

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 950 convenience stores in Hong Kong. Two major
    chains dominate the market: 7-Eleven (711 outlets) and Circle K (238
    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. Good sales items include packaged drinks,
    beer and snack food. The average store size of a convenience store
    is 1,000 sq. ft. Listing fees are also required for convenience
    stores.

-   7-Eleven is owned by Dairy Farm, which is also the parent company of
    the giant supermarket chain of Wellcome. Many of 7-Eleven stores are
    strategically located in MTR (subway) and KCR (train) stations,
    popular shopping malls and housing developments throughout Hong
    Kong.

-   According to a study, Hong Kong can accommodate 1,200 convenience
    stores. Given that there are about 950 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. Circle K is owned by a
    listed company and does not work on franchise basis.

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 deepen 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 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 67 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 Appolo (Magic House)
    Superstore Ltd. The company owns 46 retail stores, which are
    operated 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.

-   Various promotions have varying impact on consumers' purchasing
    decisions. Given below were the findings of a survey by Consumer
    Council. Nearly 75 percent of the respondents opted for "Direct
    Price-Cut" as the most important factor in prompting them to buy the
    goods. This was followed by "Buy One Get One Free" or " Buy Two Get
    One Free" (55.5 percent); "Add \$1 for One More" (42.7 percent);
    "Add-Volume Pack" (39.8 percent); and "Free Gift/Coupon" (19.8
    percent) which had the least impact on bargain hunters.

-   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 healthy, natural, nutritional, etc.

-   Internet direct sales of food: Major supermarkets like ParknShop and
    Wellcome offer 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.

-   Starting this year, the Hong Kong government is promoting health
    awareness among school children. ATO Hong Kong is looking for
    marketing opportunities to tie in U.S. quality food products with
    Hong Kong school children health concepts.

-   To promote U.S. food products, the ATO sponsors major trade shows in
    Hong Kong such as HOFEX (May 13 -16, 2007) and the Natural Products
    Expo Asia (June 27 --29, 2007).

-   For further information on the Hong Kong food retail sector, please
    refer to "Retail Food Sector Report 2004\" (Gain Report #HK4025).

## Hotel, Restaurant and Institutional (HRI)

### 

-   A sustained revived economy with bourgeoning tourism, and rising
    stock and property markets have attributed to the good prospects of
    the catering industry for 2006. There are many positive economic
    indicators to support the expectation that the HRI business will
    grow further in 2007.

-   Restaurant businesses have remained vibrant since 2004 after the
    gradual recovery from the doldrums experienced in 2003 because of
    SARS impact. In 2005, the value of total receipts for the
    restaurants sector was \$7.3 billion and for purchases was \$2.5
    billion, representing a rise of 6 percent and 7 percent
    respectively. For the first half-year of 2006, total restaurant
    receipts amounted to \$3.9 billion, representing a rise of 10
    percent over the same period in 2005.

![](media/image4.wmf)

Source : Quarterly Restaurant Receipts and Purchases produced by the
Hong Kong Census & Statistics Department

-   Hong Kong is renowned as the " Culinary Capital of Asia". It has
    approximately 10,340 restaurants, providing a wide range of dining
    options. Eating out is a way of life for many locals. In addition,
    there are over 1,000 bars and other eating and drinking places.

-   Chinese food, in particular Cantonese style foods tend to dominate
    the restaurant sector. This is evident in that Chinese restaurants
    account for 45 percent of the 10,340 restaurants in Hong Kong.

+--------------------+------+-------+--------+----------+------------+
|                    | **20 | *     | **%    | **Pe     | **Pe       |
|                    | 04** | *2006 | ch     | rcentage | rcentage** |
|                    |      | (Ju   | ange** | by       |            |
|                    | *    | ne)** |        | number   | **by       |
|                    | *(De |       |        | 2004**   | number     |
|                    | c)** |       |        |          | 2006**     |
+--------------------+------+-------+--------+----------+------------+
| Chinese            | 4    | 4,687 | 6%     | 46%      | 45%        |
| restaurants        | ,429 |       |        |          |            |
+--------------------+------+-------+--------+----------+------------+
| Non-Chinese        | 3    | 4,040 | 11%    | 38%      | 39%        |
| restaurants        | ,625 |       |        |          |            |
+--------------------+------+-------+--------+----------+------------+
| Fast food shops    | 1    | 1,613 | 5%     | 16%      | 16%        |
|                    | ,537 |       |        |          |            |
+--------------------+------+-------+--------+----------+------------+
| Total              | 9    | 1     | 8%     | 100%     | 100%       |
|                    | ,591 | 0,340 |        |          |            |
+--------------------+------+-------+--------+----------+------------+

Source: Hong Kong Census & Statistics Department

-   The 30's generation of local Chinese have a greater propensity
    toward western style foods and are more likely to experiment with
    non-traditional styles. The growth of non-Chinese chains in Japanese
    food, fast food, coffee and snack and casual dining establishments
    has been evident. The number of non-Chinese restaurants rose
    remarkably by 11 percent from December 2004 to June 2006.

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-   McDonald's, Dominos, Pizza Hut, Pret A Manger, Starbucks, Pacific
    Coffee and others have all grown rapidly in numbers over the past
    years and now have become fixtures in the Hong Kong market. Given
    the robust economy of Hong Kong, Kentucky Fried Chicken has embarked
    on an expansion plan by expanding the number of its outlets to 90 in
    Hong Kong by 2009. Presently, it has about 50 outlets in Hong Kong
    with an average of over three million customers per month.

-   In 2006, Hong Kong witnessed the opening of the first Bubba Gump
    Shrimp Co. Restaurant and Market in Hong Kong. Having confidence in
    the strong growing business environment in Hong Kong and recognizing
    Hong Kong being a major regional and international tourist hub, this
    casual American seafood restaurant plans to open three further
    restaurants in Macao and Hong Kong over the next four years. In
    addition, Krispy Kreme Doughnuts have now arrived in Hong Kong. The
    first shop was opened in summer 2006 and 20 other outlets are
    expected to start business in the next five years in Hong Kong and
    Macao.

-   A fast developing sector of the market is the fast food outlets. The
    number of fast food shops increased 5 percent between December 2004
    and June 2006. According to a survey conducted by AC Nielsen, Hong
    Kong people are the world's most frequent patrons of fast food
    restaurants. The survey revealed that 61 percent of people in the
    territory eat at a fast food restaurant at least once a week. The
    popularity of fast food in Hong Kong was mainly due to convenience.
    Popular fast food chains in Hong Kong are Maxims, Café de Coral,
    McDonald, Kentucky Fried Chicken and Pizza Hut.

-   As consumers are getting more health conscious, fast food chains
    have provided more health food menu such as salads, premium juice
    drinks, etc.

-   The major fast food operators, Café De Coral, Maxim's and Fairwood
    have innovated their menus by introducing numerous new ingredients
    as consumers become more demanding. These fast food operators are
    also renovating their older restaurants to give them a more upscale
    look, in order to create more value in patrons' minds.

-   Exporters should note that tastes in food can often differ between
    Chinese and Western consumers. Exporters looking to develop business
    with the HRI trade should also consider applying U.S. ingredients
    for Chinese dishes offerings.

-   Another key feature of Hong Kong's HRI is the increasingly
    competitive coffee shop market in Hong Kong with new outlets opening
    around the city. In recent years, it is a trend to open upstairs
    cafes in order to cut rental fees. They are largely located in
    commercial areas. 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 (64) and
    Pacific Coffee (47) are Hong Kong's two largest coffee shop chains.
    McDonald has also vigorously expanded its McCafe in order to take a
    slice of the market.

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 intends to participate in the
    Restaurant and Bar Show which will be held in May 20-22, 2008. 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.

-   For more information on Hong Kong's HRI sector, please refer to Gain
    Report #5006.

## Food Processing 

-   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 US\$1.8 billion in 2004 and there
    were 790 food processing establishments as of 2005. Major local
    production includes instant noodles, macaroni, spaghetti, biscuits,
    pastries and cakes for both domestic consumption and export. Other
    significant sectors include canning, preserving and processing of
    seafood (such as fish, shrimp, prawns, and crustaceans); manufacture
    of dairy products (fresh milk, yogurt and ice cream); seasoning and
    spirits.

+-----------------------------------+-----------------------------------+
|                                   | Manufacturing                     |
+-----------------------------------+-----------------------------------+
| No. of Establishments             | 790 (Dec 2005)                    |
+-----------------------------------+-----------------------------------+
| Employment                        | 24,975 (Dec 2005)                 |
+-----------------------------------+-----------------------------------+
| Gross Output                      | HK\$13,602 million (2004)         |
|                                   |                                   |
|                                   | US\$ 1,755 million (2004)         |
+-----------------------------------+-----------------------------------+

-   Based on the Chinese mainland and Hong Kong Closer Economic
    Partnership Arrangement (CEPA), all foods and beverages made in Hong
    Kong, subject to the CEPA\'s rules of origin, can enjoy duty-free
    access to the Chinese mainland. Non-Hong Kong made processed food
    and beverages products remain subject to tariff rates of up to 35%,
    and 65% for alcoholic drinks, according to China's 2006 tariff
    schedule.

-   The CEPA 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.

-   Processed food and beverages items have to comply with the Hong Kong
    rule of origin in order to be imported to China tariff free. The
    rule of origin of individual products is basically determined by the
    manufacturing or processing operation. For example, milk and cream
    products are considered as "made in Hong Kong" only when the
    manufacturing processes of mixing, freezing sterilization and
    cooling are conducted in Hong Kong. The origin criteria for nuts is
    that the baking, seasoning, and/coating have to be done in Hong
    Kong. In the case of ginseng, the principal manufacturing processes
    of cutting and grinding have to be conducted in Hong Kong.

-   Ice cream was the only food item being allowed to be exported to
    China tariff free in 2004 during the first phase of CEPA. However,
    the food items were greatly expanded in phase II which started in
    January 2005. It was noticed that Hong Kong's food and agricultural
    domestic exports to China greatly increased by 31 percent in 2005.
    No published statistics are available to prove that the surge in
    domestic exports to China was due to the waiving of tariff. However,
    there is reason to believe that CEPA II is at work, as seen by the
    sudden reversion of trade trends. Hong Kong's food and agricultural
    domestic exports to China has decreased over the past few years
    except for 2005.

-   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.

> Hong Kong's Domestic Exports of Agricultural and Food Products

  --------------- ----------- ----------- ----------- ----------- -----------
  **Country**     **2001**    **2002**    **2003**    **2004**    **2005**

  \--The World\-- 240         242         234         229         232

  United States   57          60          48          43          43

  China           **38**      **37**      **30**      **29**      **38**

  Others          145         145         156         157         151
  --------------- ----------- ----------- ----------- ----------- -----------

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

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 CONSUMER ORIENTED PRODUCT PROSPECTS

# 

(Market size is based on imports minus exports, U.S. exports to Hong
Kong are also based on imports minus exports.)

+-----------+---------+--------+---------+-------------+------------+
| **        | **2005  | **2005 | 2001 -- | **Key       | **Market   |
| Product** | Market  | Market | 2005    | Constraints | Attrac     |
|           | Size**  | Size** | Average | Over Market | tiveness** |
| **C       |         |        | Import  | De          |            |
| ategory** | *       | **(\$  | Growth  | velopment** | **For      |
|           | *(MT)** | mil)** |         |             | USA**      |
|           |         |        | **(in   |             |            |
|           |         |        | v       |             |            |
|           |         |        | alue)** |             |            |
+===========+=========+========+=========+=============+============+
| Fresh     |   --    | 475    |   ----- | There is    | U.S.       |
| Fruit     | ------- |        |   -2%   | strong      | exported   |
|           |         |        |         | competition | \$174      |
|           | 560,277 |        |   ----- | from other  | million    |
|           |         |        |         | countries   | worth of   |
|           |   --    |        |         | such as     | fresh      |
|           | ------- |        |         | Australia,  | fruit to   |
|           |         |        |         | South       | Hong Kong, |
|           |         |        |         | Africa,     | accounting |
|           |         |        |         | Chile and   | for 37% of |
|           |         |        |         | China for   | the market |
|           |         |        |         | apples,     | share.     |
|           |         |        |         | oranges and |            |
|           |         |        |         | grapes.     | Consumers  |
|           |         |        |         |             | have       |
|           |         |        |         | Also, there | confidence |
|           |         |        |         | is strong   | in U.S.    |
|           |         |        |         | competition | fruits'    |
|           |         |        |         | coming from | quality    |
|           |         |        |         | other       | and        |
|           |         |        |         | tropical    | product    |
|           |         |        |         | fruits      | safety.    |
|           |         |        |         | which are   |            |
|           |         |        |         | supplied by |            |
|           |         |        |         | Thailand.   |            |
+-----------+---------+--------+---------+-------------+------------+
| Poultry   |   --    |        |   ----- | Strong      | U.S.       |
| Meat      | ------- |  ----- |   12%   | competition | exported   |
|           |         |   417  |         | from Brazil | \$73       |
|           | 348,208 |        |   ----- | exists and  | million    |
|           |         |        |         | buyers are  | worth of   |
|           |   --    |  ----- |         | price       | poultry    |
|           | ------- |        |         | conscious.  | meat to    |
|           |         |        |         |             | Hong Kong, |
|           |         |        |         |             | accounting |
|           |         |        |         |             | for 18% of |
|           |         |        |         |             | the market |
|           |         |        |         |             | share.     |
|           |         |        |         |             |            |
|           |         |        |         |             | U.S.       |
|           |         |        |         |             | products   |
|           |         |        |         |             | have       |
|           |         |        |         |             | abundant   |
|           |         |        |         |             | supplies   |
|           |         |        |         |             | with a     |
|           |         |        |         |             | variety of |
|           |         |        |         |             | grades.    |
+-----------+---------+--------+---------+-------------+------------+
| Tree Nuts |   -     | 189    | 35%     | 65% of the  | U.S.       |
|           | ------- |        |         | tree nuts   | exported   |
|           |         |        |         | imported to | \$41       |
|           |  43,148 |        |         | Hong Kong   | million    |
|           |         |        |         | are         | worth of   |
|           |   -     |        |         | pistachios  | tree nuts  |
|           | ------- |        |         | and Iran is | to Hong    |
|           |         |        |         | the major   | Kong,      |
|           |         |        |         | supplier.   | accounting |
|           |         |        |         |             | for 22% of |
|           |         |        |         |             | the market |
|           |         |        |         |             | share.     |
|           |         |        |         |             |            |
|           |         |        |         |             | The U.S.   |
|           |         |        |         |             | is the     |
|           |         |        |         |             | leading    |
|           |         |        |         |             | supplier   |
|           |         |        |         |             | of almonds |
|           |         |        |         |             | and        |
|           |         |        |         |             | hazelnuts  |
|           |         |        |         |             | with no    |
|           |         |        |         |             | major      |
|           |         |        |         |             | c          |
|           |         |        |         |             | ompetitors |
|           |         |        |         |             | at all.    |
+-----------+---------+--------+---------+-------------+------------+
| Molluscs  |   -     | 524    | 11%     | U.S.        | U.S.       |
|           | ------- |        |         | scallops    | exported   |
|           |         |        |         | and oysters | \$38       |
|           |  45,838 |        |         | compete     | million    |
|           |         |        |         | severely    | worth of   |
|           |   -     |        |         | with        | molluscs   |
|           | ------- |        |         | products    | to Hong    |
|           |         |        |         | supplies    | Kong,      |
|           |         |        |         | from        | accounting |
|           |         |        |         | Australia   | for 7% of  |
|           |         |        |         | and Canada  | the market |
|           |         |        |         | re          | share.     |
|           |         |        |         | spectively. |            |
|           |         |        |         | Australia   | Demand for |
|           |         |        |         | products    | seafood in |
|           |         |        |         | enjoy a     | Hong Kong  |
|           |         |        |         | relatively  | is strong. |
|           |         |        |         | cheaper     | U.S.       |
|           |         |        |         | freight     | oysters    |
|           |         |        |         | cost.       | and        |
|           |         |        |         |             | scallops   |
|           |         |        |         |             | are highly |
|           |         |        |         |             | regarded   |
|           |         |        |         |             | in the     |
|           |         |        |         |             | market.    |
+-----------+---------+--------+---------+-------------+------------+
| Pork &    |   --    | 470    | 10%     | China and   | U.S.       |
| Offals    | ------- |        |         | Brazil are  | exported   |
|           |         |        |         | the major   | \$25       |
|           | 302,527 |        |         | suppliers   | million    |
|           |         |        |         | because     | worth of   |
|           |   --    |        |         | their       | pork and   |
|           | ------- |        |         | products    | offal      |
|           |         |        |         | are very    | products   |
|           |         |        |         | price       | to Hong    |
|           |         |        |         | c           | Kong,      |
|           |         |        |         | ompetitive. | accounting |
|           |         |        |         | Also, there | for 5% of  |
|           |         |        |         | is a big    | the market |
|           |         |        |         | demand for  | share.     |
|           |         |        |         | price       |            |
|           |         |        |         | competitive | Hong Kong  |
|           |         |        |         | prepare     | has a high |
|           |         |        |         | d/preserved | demand for |
|           |         |        |         | meatballs   | U.S. front |
|           |         |        |         | and other   | & hide     |
|           |         |        |         | products    | feet, and  |
|           |         |        |         | typical in  | offals.    |
|           |         |        |         | Chinese     |            |
|           |         |        |         | dishes in   | U.S. is    |
|           |         |        |         | Chinese     | the        |
|           |         |        |         | restaurants | largest    |
|           |         |        |         | and         | supplier   |
|           |         |        |         | processing  | of         |
|           |         |        |         | in China is | sausages.  |
|           |         |        |         | cost        |            |
|           |         |        |         | effective.  | U.S.       |
|           |         |        |         |             | products   |
|           |         |        |         |             | are highly |
|           |         |        |         |             | regarded   |
|           |         |        |         |             | for        |
|           |         |        |         |             | quality    |
|           |         |        |         |             | and food   |
|           |         |        |         |             | safety.    |
+-----------+---------+--------+---------+-------------+------------+
| Sauces    | 64,713  | 89     | 5%      | China and   | U.S.       |
|           |         |        |         | Thailand    | exported   |
|           |         |        |         | are the two | \$17       |
|           |         |        |         | major       | million    |
|           |         |        |         | c           | worth of   |
|           |         |        |         | ompetitors. | sauces to  |
|           |         |        |         | The         | Hong Kong, |
|           |         |        |         | oriental    | accounting |
|           |         |        |         | flavor of   | for 19% of |
|           |         |        |         | sources     | the market |
|           |         |        |         | from these  | share.     |
|           |         |        |         | countries   |            |
|           |         |        |         | is a        | Hong Kong  |
|           |         |        |         | distinct    | people are |
|           |         |        |         | advantage.  | receptive  |
|           |         |        |         |             | to new     |
|           |         |        |         |             | tastes.    |
|           |         |        |         |             | The        |
|           |         |        |         |             | av         |
|           |         |        |         |             | ailability |
|           |         |        |         |             | of much    |
|           |         |        |         |             | int        |
|           |         |        |         |             | ernational |
|           |         |        |         |             | cuisine    |
|           |         |        |         |             | offers a   |
|           |         |        |         |             | demand for |
|           |         |        |         |             | U.S.       |
|           |         |        |         |             | sauces.    |
+-----------+---------+--------+---------+-------------+------------+
| French    | 20,230  | 18     | 6%      | Canada and  | U.S.       |
| Fries     |         |        |         | New Zealand | exported   |
|           |         |        |         | supply      | \$16       |
|           |         |        |         | french      | million    |
|           |         |        |         | fries to    | worth of   |
|           |         |        |         | the market. | french     |
|           |         |        |         |             | fries to   |
|           |         |        |         | Also,       | Hong Kong, |
|           |         |        |         | french      | accounting |
|           |         |        |         | fries       | for 89% of |
|           |         |        |         | companies   | the market |
|           |         |        |         | have plants | share.     |
|           |         |        |         | in China    |            |
|           |         |        |         | providing   | Hong Kong  |
|           |         |        |         | products to | has a      |
|           |         |        |         | Hong Kong.  | burgeoning |
|           |         |        |         |             | catering   |
|           |         |        |         |             | industry   |
|           |         |        |         |             | offering a |
|           |         |        |         |             | variety of |
|           |         |        |         |             | int        |
|           |         |        |         |             | ernational |
|           |         |        |         |             | cuisine,   |
|           |         |        |         |             | thus       |
|           |         |        |         |             | creating a |
|           |         |        |         |             | demand for |
|           |         |        |         |             | french     |
|           |         |        |         |             | fries.     |
+-----------+---------+--------+---------+-------------+------------+
| Ginseng   | 2,038   | 71     | 1%      | Canadian    | U.S.       |
|           |         |        |         | ginseng is  | exported   |
|           |         |        |         | offered at  | \$16       |
|           |         |        |         | very        | million    |
|           |         |        |         | competitive | worth of   |
|           |         |        |         | prices and  | ginseng to |
|           |         |        |         | has         | Hong Kong, |
|           |         |        |         | abundant    | accounting |
|           |         |        |         | supplies.   | for 23% of |
|           |         |        |         |             | the market |
|           |         |        |         | Ginseng     | share.     |
|           |         |        |         | products    |            |
|           |         |        |         | from other  | Hong Kong  |
|           |         |        |         | countries   | Chinese    |
|           |         |        |         | are labeled | regards    |
|           |         |        |         | as U.S.     | ginseng as |
|           |         |        |         | products.   | a healthy  |
|           |         |        |         |             | product    |
|           |         |        |         |             | and is     |
|           |         |        |         |             | widely     |
|           |         |        |         |             | used in    |
|           |         |        |         |             | soups.     |
+-----------+---------+--------+---------+-------------+------------+
| Eggs      | 1,704   | 73     | 0%      | Eggs from   | U.S.       |
|           | million |        |         | China are   | exported   |
|           | pieces  |        |         | very price  | \$15       |
|           |         |        |         | c           | million    |
|           |         |        |         | ompetitive. | worth of   |
|           |         |        |         |             | eggs to    |
|           |         |        |         |             | Hong Kong, |
|           |         |        |         |             | accounting |
|           |         |        |         |             | for 21% of |
|           |         |        |         |             | the market |
|           |         |        |         |             | share.     |
|           |         |        |         |             |            |
|           |         |        |         |             | The market |
|           |         |        |         |             | has a high |
|           |         |        |         |             | demand for |
|           |         |        |         |             | U.S. small |
|           |         |        |         |             | white      |
|           |         |        |         |             | eggs.      |
+-----------+---------+--------+---------+-------------+------------+
| Wine &    | 138,870 | 139    | 1%      | Hong Kong   | The U.S.   |
| Beer      | L       |        |         | consumers   | exported   |
|           |         |        |         | generally   | \$15       |
|           |         |        |         | are more    | million    |
|           |         |        |         | familiar    | worth of   |
|           |         |        |         | with French | wine and   |
|           |         |        |         | wine than   | beer to    |
|           |         |        |         | with U.S.   | Hong Kong, |
|           |         |        |         | wine.       | accounting |
|           |         |        |         |             | for 11% of |
|           |         |        |         | Also the    | the market |
|           |         |        |         | market is   | share.     |
|           |         |        |         | filled with |            |
|           |         |        |         | price       | Hong Kong  |
|           |         |        |         | competitive | is         |
|           |         |        |         | products    | gradually  |
|           |         |        |         | from Chile  | fostering  |
|           |         |        |         | and South   | a wine     |
|           |         |        |         | Africa.     | drinking   |
|           |         |        |         |             | culture.   |
|           |         |        |         | Hong Kong's |            |
|           |         |        |         | duty on     | Beer is a  |
|           |         |        |         | wine and    | popular    |
|           |         |        |         | beer is 80% | drink in   |
|           |         |        |         | and 40%     | Hong Kong. |
|           |         |        |         | re          |            |
|           |         |        |         | spectively. |            |
+-----------+---------+--------+---------+-------------+------------+
| Beef &    | 62,910  | 167    | 6%      | Hong Kong   | U.S.       |
| Processed |         |        |         | currently   | exported   |
| Beef      |         |        |         | allows U.S. | \$67       |
| Products  |         |        |         | boneless    | million    |
|           |         |        |         | beef        | worth of   |
|           |         |        |         | derived     | beef       |
|           |         |        |         | from        | products   |
|           |         |        |         | animals     | to Hong    |
|           |         |        |         | less than   | Kong (in   |
|           |         |        |         | 30 months   | 2003       |
|           |         |        |         | of age.     | before the |
|           |         |        |         | Bone-in     | ban        |
|           |         |        |         | beef and    | imposed in |
|           |         |        |         | offals from | December), |
|           |         |        |         | the U.S.    | accounting |
|           |         |        |         | are not     | for 42% of |
|           |         |        |         | allowed     | the market |
|           |         |        |         | entry into  | share.     |
|           |         |        |         | Hong Kong,  |            |
|           |         |        |         | as a result | U.S. beef  |
|           |         |        |         | of BSE      | is highly  |
|           |         |        |         | cases in    | regarded   |
|           |         |        |         | the U.S.    | in Hong    |
|           |         |        |         |             | Kong. It   |
|           |         |        |         | The market  | is always  |
|           |         |        |         | share of    | the first  |
|           |         |        |         | U.S. beef   | choice for |
|           |         |        |         | has been    | high-end   |
|           |         |        |         | largely     | r          |
|           |         |        |         | taken up by | estaurants |
|           |         |        |         | Canadian    | and        |
|           |         |        |         | beef and    | sop        |
|           |         |        |         | Australian  | histicated |
|           |         |        |         | beef.       | consumers. |
+-----------+---------+--------+---------+-------------+------------+

# 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.net**](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**](mailto: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**](mailto:mailbox@afcd.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**](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**](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**](mailto:hktdc@tdc.org.hk)

Home Page: [**http://www.tdctrade.com**](http://www.tdctrade.com/)

# APPENDIX - STATISTICS 

# 

## Table A: Key Trade & Demographic Information

## 

2005

  -------------------------------- --------------------------------------
  Agricultural Imports From All    \$7,794 million/13%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Consumer Food Imports From All   \$5,300 million/14%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Edible Fishery Imports From All  \$1,885 million/4%
  Countries (\$Mil) / U.S. Market  
  Share (%)                        

  Total Population (Millions) /    6.99 million/0.8%
  Annual Growth Rate (%)           

  Urban Population (Millions) /    6.99 million/0.8%
  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 \$25,711 (HK\$199,261^\#^)
  Product (U.S. Dollars)           

  Unemployment Rate (%)            4.8%

  Annual Per Capita Food           1,949
  Expenditures (U.S. Dollars)      

  Percent of Female Population     51.8%
  Employed                         

  Exchange Rate (U.S.\$1 = HK      HK\$7.78
  currency)                        
  -------------------------------- --------------------------------------

  ------- ----- ---------------------------------------------------------
  Note :  1     The middle class, about 30 percent of all households (2.3
                million), is based on the expenditure pattern of
                households which have an average monthly expenditure of
                \$2,219 -- \$3,884. The average household size is 3
                persons.

          2     ^\#^ Subject to revision when more data is available.
  ------- ----- ---------------------------------------------------------

## 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)  **2003**   **2004**   **2005**   **2003**   **2004**   **2005**   **2003**   **2004**   **2005**

                                                                                                                     

  **Consumer Oriented Ag    5,039      5,097      5,300      1,036      824        758        21%        16%        14%
  Total**                                                                                                           

  Snack Foods (Exclud.      199        224        265        14         14         17         7%         6%         7%
  Nuts)                                                                                                             

  Breakfast Cereals &       27         29         30         10         6          4          36%        20%        12%
  Pancake                                                                                                           

  Red Meats,                731        743        759        150        41         23         21%        6%         3%
  Fresh/Chilled/Frozen                                                                                              

  Red Meats,                194        220        236        30         33         28         16%        15%        12%
  Prepared/Preserved                                                                                                

  Poultry Meat              641        521        581        270        157        125        42%        30%        21%

  Dairy Products (Excl.     242        266        290        10         7          6          4%         3%         2%
  Cheese)                                                                                                           

  Cheese                    32         45         49         4          4          4          11%        9%         9%

  Eggs & Products           74         79         78         12         13         16         16%        16%        21%

  Fresh Fruit               736        705        687        238        220        227        32%        31%        33%

  Fresh Vegetables          156        158        149        12         11         12         7%         7%         8%

  Processed Fruit &         237        245        256        60         62         67         25%        25%        26%
  Vegetables                                                                                                        

  Fruit & Vegetable Juices  23         23         29         7          8          15         32%        36%        50%

  Tree Nuts                 251        206        257        62         61         61         25%        29%        24%

  Wine & Beer               132        155        163        14         15         16         11%        10%        10%

  Nursery Products & Cut    50         50         53         1          1          1          1%         1%         1%
  Flowers                                                                                                           

  Pet Foods (Dog & Cat      34         40         34         13         16         14         38%        41%        42%
  Food)                                                                                                             

  Other Consumer Oriented   1,259      1,364      1,359      130        153        122        10%        11%        9%
  Products                                                                                                          

                                                                                                                     

  **Fish & Seafood          1,755      1,905      1,885      57         58         66         3%         3%         4%
  Products**                                                                                                        

  Salmon                    49         50         60         0          0          0          0%         0%         0%

  Surimi                    5          6          5          0          0          0          0%         0%         0%

  Crustaceans               422        421        400        8          8          7          2%         2%         2%

  Groundfish & Flatfish     123        158        154        4          7          7          3%         5%         5%

  Molluscs                  475        549        582        29         28         39         6%         5%         7%

  Other Fishery Products    681        720        681        16         15         12         2%         2%         2%

                                                                                                                     

                                                                                                                     

  **Agriculture Total**     7,479      7,699      7,794      1,382      1,134      1,027      18%        15%        13%

  **Ag, Fish, & Forestry    10,213     10,488     10,380     1,570      1,301      1,172      15%        12%        11%
  Total**                                                                                                           
  ------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Source: World Trade Atlas using Hong Kong Census & Statistics Department

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

  ----------------- ------- ------- ------- -- ------------- ---------- ------- -------
  **Hong Kong Top                                                               
  15 Suppliers**                                                                

  (in Millions of                                                               
  Dollars)                                                                      

  Consumer Oriented                                          Fish &             
  Agriculture Total                                          Seafood            
                                                             Products           

                                                                                

  Country           2003    2004    2005       Country       2003       2004    2005

                                                                                

  \--The World\--   5,039   5,097   5,300      \--The        1,755      1,905   1,885
                                               World\--                         

  China             1,390   1,505   1,629      Japan         219        226     266

  United States     1,036   824     758        Australia     217        232     199

  Brazil            329     399     439        China         225        213     198

  Australia         231     244     260        Indonesia     97         98      105

  Thailand          257     240     234        Canada        66         73      85

  Iran              161     121     178        Thailand      84         88      85

  Japan             141     156     173        South Africa  54         100     79

  Netherlands       140     147     155        United States 57         58      66

  Canada            130     137     136        New Zealand   62         63      65

  France            96      127     131        Vietnam       51         75      63

  New Zealand       95      111     104        Philippines   43         46      54

  Taiwan            83      82      82         Spain         55         61      54

  Germany           80      73      76         Norway        48         47      53

  Italy             55      55      76         Brazil        34         37      42

  Singapore         63      64      72         Singapore     36         41      42

  Others            752     813     796        Others        408        446     429
  ----------------- ------- ------- ------- -- ------------- ---------- ------- -------

Source: World Trade Atlas using Hong Kong Census & Statistics Department

## Table D. Composition by Product Category for US Agricultural, Fish & Forestry Total to Hong Kong

## 

![](media/image5.wmf)

Source: Bico -- U.S. Bureau of the Census Trade Data