Required Report - public distribution

**Date:** 11/28/2008

**GAIN Report Number:** HK8032

HK8032

**Hong Kong**

**Retail Food Sector**

**Annual**

**2008**

**Approved by:**

![](media/image1.wmf)Anita Katial

U.S. Consulate, Hong Kong

**Prepared by:**

Chris Li

**Report Highlights:**

Retained imports of high value consumer oriented agricultural products
and seafood into Hong Kong (HK) are expected to reach US\$8.15 billion
in 2008, an increase of 22% over 2007 and food retail sales in HK are
expected to reach US\$7.97 billion this year, a surge of 10% over last
year. The global financial crisis is expected to have a significant
impact on the value of HK's food & beverage imports from all sources,
while the volume of total imported food products is expected to remain
relatively stable. Lower food prices, rising unemployment, depressed
demand for luxury products, and tighter credit terms are expected to
result in a drop of 20% in the value of HK's imports of agricultural
products in 2009. Consumers spending habits in 2009 will likely see
significant change, as more consumers eat at home versus at restaurants
and the new trend will support food retail sales, which are expected to
be maintained at US\$8 billion in 2009. Alternatively, demand for US
products will certainly be bolstered by strong consumer concerns over
Chinese food safety and its competitive pricing. In addition, the HK
dollar link to the US dollar provides much needed foreign exchange
stability. It is expected that Hong Kong will remain as the 7^th^
largest market for US consumer ready food products in 2009, as it
continues to be a major buying center and transshipment point for China
and Southeast Asia.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Hong Kong \[HK1\]

\[HK\]

TABLE OF CONTENTS

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

[Food Imports 3](#food-imports)

[Outlook for 2009 6](#outlook-for-2009)

[Economy 8](#economy)

[Summary of the Key Strengths and Challenges for the Hong Kong Market
8](#summary-of-the-key-strengths-and-challenges-for-the-hong-kong-market)

[Retail Sales and Outlets 9](#retail-sales-and-outlets)

[Import Regulations 11](#import-regulations)

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

[A. Entry Strategy 15](#a.-entry-strategy)

[B. Market Structure 16](#b.-market-structure)

[Supermarkets 17](#supermarkets)

[Convenience Stores 20](#convenience-stores)

[Traditional Markets 21](#traditional-markets)

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

[SECTION III. COMPETITION 23](#section-iii.-competition)

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

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

[Post Contact 38](#post-contact)

[Department to Implement Food Safety Control Policy
38](#department-to-implement-food-safety-control-policy)

[Department to Control the Importation of Plants & Live Animals
38](#department-to-control-the-importation-of-plants-live-animals)

[Department to Issue License for Imported Reserved Commodities
38](#department-to-issue-license-for-imported-reserved-commodities)

[Department to Register Health Foods Containing Medicine Ingredients
38](#department-to-register-health-foods-containing-medicine-ingredients)

[Department to Issue License for Imported Dutiable Commodities
39](#department-to-issue-license-for-imported-dutiable-commodities)

[Department for Trade Mark Registration
39](#department-for-trade-mark-registration)

[Semi-Government Organization Providing Travel Information
39](#semi-government-organization-providing-travel-information)

[Semi-Government Organization Providing Hong Kong Trade Information
39](#semi-government-organization-providing-hong-kong-trade-information)

# SECTION I. MARKET OVERVIEW

# 

## Food Imports

-   Due to limited land resources and rapid urbanization, Hong Kong
    relies on imports for about 95% of its food supply. Local production
    contributes only 3% of fresh vegetables, 46% of live poultry, and
    18% of live pigs consumed[^1].

-   Due to its central location, free port status and position as a
    regional purchasing and distribution center, 29% of Hong Kong
    imports are re-exported. Of which, 57% are re-exported to Mainland
    China[^2].

> **Hong Kong's Imports (2004-2008) of Consumer Oriented Agricultural
> Products**[^3] **(COAP) & Seafood**

  -------------- -------------- ---------- ---------- ---------- ---------- ------------ ------------ -------------
  ** **          ** **          ** **      ** **      ** **      ** **      ** **        **2008\***   **Growth**

  **Supplier**   **(US\$        **2004**   **2005**   **2006**   **2007**   **2008\***   **Share**    **08\*/07**
                 Million)**                                                                           

  World          Gross Imports  6,976      7,152      7,647      9,098      11,539       100%         27%

                 Re-exports     1,529      1,474      1,775      2,435      3,392        100%         39%

                 Retained       5,447      5,678      5,873      6,663      8,147        100%         22%
                 Imports[^4]                                                                          

  China          Gross Imports  1,718      1,827      1,854      2,007      2,220        19%          11%

                 Re-exports     267        287        296        309        364          11%          18%

                 Retained       1,451      1,541      1,558      1,698      1,856        23%          9%
                 Imports                                                                              

  US             Gross Imports  882        824        875        1,042      1,633        14%          57%

                 Re-exports     201        191        220        328        624          18%          90%

                 Retained       681        633        655        715        1,009        12%          41%
                 Imports                                                                              

  Brazil         Gross Imports  435        481        645        989        1,440        12%          46%

                 Re-exports     105        124        273        491        610          18%          24%

                 Retained       331        357        372        498        831          10%          67%
                 Imports                                                                              

  Australia      Gross Imports  458        440        485        529        623          5%           18%

                 Re-exports     38         37         41         58         62           2%           7%

                 Retained       421        403        444        470        561          7%           19%
                 Imports                                                                              

  Japan          Gross Imports  382        439        485        573        572          5%           0%

                 Re-exports     36         36         38         36         36           1%           0%

                 Retained       346        403        446        536        535          7%           0%
                 Imports                                                                              

  Thailand       Gross Imports  328        319        338        410        471          4%           15%

                 Re-exports     140        143        161        226        262          8%           16%

                 Retained       188        177        177        184        209          3%           13%
                 Imports                                                                              

  France         Gross Imports  140        140        147        251        394          3%           57%

                 Re-exports     23         27         39         88         109          3%           24%

                 Retained       117        114        108        164        285          3%           74%
                 Imports                                                                              

  Canada         Gross Imports  210        216        208        217        377          3%           74%

                 Re-exports     59         27         26         43         161          5%           272%

                 Retained       151        190        182        173        215          3%           24%
                 Imports                                                                              

  Germany        Gross Imports  75         77         86         148        329          3%           122%

                 Re-exports     22         20         39         73         200          6%           176%

                 Retained       53         57         47         76         129          2%           70%
                 Imports                                                                              

  Netherlands    Gross Imports  147        156        166        211        311          3%           48%

                 Re-exports     32         28         34         60         105          3%           73%

                 Retained       115        127        132        151        207          3%           37%
                 Imports                                                                              

  Total of       Gross Imports  4,776      4,919      5,288      6,378      8,370        73%          31%

  Top 10         Re-exports     922        920        1,168      1,712      2,534        75%          48%

  Suppliers      Retained       3,854      4,000      4,121      4,666      5,836        72%          25%
                 Imports                                                                              

  Total of       Gross Imports  2,200      2,233      2,359      2,721      3,170        27%          17%

  Rest of        Re-exports     608        554        607        723        859          25%          19%

  World          Retained       1,593      1,678      1,752      1,998      2,311        28%          16%
                 Imports                                                                              

  **(\*                                                                                               
  Estimated                                                                                           
  figures for                                                                                         
  2008)**                                                                                             
  -------------- -------------- ---------- ---------- ---------- ---------- ------------ ------------ -------------

-   Hong Kong is a mature and sophisticated market with a growing demand
    for gourmet foods. At the same time, most Hong Kong shoppers are
    price conscious consumers looking for "value for money" products.
    Hong Kong's gross imports of COAP and Seafood products are expected
    to reach US\$9.06 billion and US\$2.48 billion respectively in 2008,
    an increase of 33% and 9% over 2007. The increase was mainly due to
    the continued growth of the Hong Kong economy which has raised the
    demand for food imports. Major import items include red meats,
    fruits, poultry meat, seafood and tree nuts.

-   "Retained" imports of COAP and Seafood products have grown from
    US\$5.45 billion in 2004 to US\$8.15 billion in 2008, an increase of
    50%. The following charts show the market share of the major
    suppliers of these products in 2004 and 2008 (figures for 2008 are
    estimated).

**[Market Share of Agricultural Product Suppliers to Hong
Kong]{.underline}**

> Total Retained Imports Total Retained Imports

2004: US\$5.45 billion 2008 (Est.): US\$8.15 billion

![](media/image2.jpeg){width="3.0694444444444446in"
height="2.026388888888889in"}
![](media/image3.jpeg){width="3.2118055555555554in" height="2.0375in"}

(Source: Calculations based on World Trade Atlas data)

-   China continues to lead as the largest supplier of COAP and Seafood
    products to Hong Kong, followed by the U.S. In 2008, we estimate
    that retained imports of products from China and the U.S. will reach
    US\$1.86 billion and US\$1 billion respectively, representing market
    shares of 23% and 12%.

-   The following table shows the most popular COAP and Seafood products
    that Hong Kong imported from the world:

> **Hong Kong Imports of COAP and Seafood Products from the World (US\$
> million)**

  ---------- ------------------------------------ ------------- ------------- ------------- ----
  **HS**     ** **                                **Jan-Sep**   **Jan-Sep**   **Growth**    

  **Code**   **Description**                      **2007 (A)**  **2008 (B)**  **(B)/(A)**   

             Consumer Oriented Agriculture Total  4,940         6,564         33%           

             Fish & Seafood Products              1,634         1,774         9%            

  **TOP 20                                                                                  
  ITEMS**                                                                                   

   0206      Ed Offal, Bovine, Swine, Sheep,      464           949           105%          \*
             Goat, Horse, Etc.                                                              

   0207      Meat & Ed Offal Of Poultry, Fresh,   653           823           26%           \*
             Chill Or Frozen                                                                

   0307      Molluscs & Aqua Invert Nesoi, Lve    550           504           -8%           
             Etc.; Flours Etc                                                               

   0203      Meat Of Swine (Pork), Fresh, Chilled 263           496           89%           \*
             Or Frozen                                                                      

   0305      Fish, Dried, Salted Etc, Smoked Etc; 287           352           23%           \*
             Ed Fish Meal                                                                   

   0306      Crustcns Lve Frsh Etc, Ckd Etc.;     297           333           12%           
             Flrs Mls H Cnsump                                                              

   1602      Prepared Or Preserv Meat, Meat Offal 187           291           55%           \*
             & Blood Nesoi                                                                  

   0802      Nuts Nesoi, Fresh Or Dried           193           268           39%           \*

   2204      Wine Of Fresh Grapes; Grape Must     130           247           90%           \*
             Nesoi                                                                          

   0402      Milk And Cream, Concentrated Or      179           228           27%           \*
             Sweetened                                                                      

   2201      Waters, Natural Etc, Not Sweetened   232           222           -4%           
             Etc; Ice & Snow                                                                

   0202      Meat Of Bovine Animals, Frozen       134           217           63%           \*

   0810      Fruit Nesoi, Fresh                   183           206           12%           

   210690    Food Preparations Nesoi              155           177           14%           

   0301      Fish, Live                           134           171           27%           \*

   0805      Citrus Fruit, Fresh Or Dried         135           155           15%           

   1905      Bread, Pastry, Cakes Etc; Comm       127           142           11%           
             Wafrs, Emp Caps Etc                                                            

   0806      Grapes, Fresh Or Dried               115           137           19%           

   1704      Sugar Confection (Incl White         111           123           11%           
             Chocolate), No Cocoa                                                           

   2202      Waters, Sweetened Etc & Oth Nonalc   110           113           3%            
             Beverages Nesoi                                                                
  ---------- ------------------------------------ ------------- ------------- ------------- ----

(Source: Calculations based on World Trade Atlas data) (\* Fast-growing
items are marked with an asterisk)

-   **Hong Kong agricultural imports from the U.S.**

> Hong Kong is the 7^th^ largest U.S. export destination for COAP and
> Seafood products. For the first 9 months of 2008, Hong Kong imported
> over US\$995 million worth of COAP from the U.S., which accounted for
> 13% of the market share. The top U.S. exports to Hong Kong in 2008 are
> meat, tree nuts, fruit & vegetables (please see table below). U.S.
> products have been more price-competitive because of the weakening of
> the U.S. Dollar. In addition, the frequent food scares originating
> from food supplies in China have also driven the demand of high
> quality products from the U.S., and are opening up more opportunities
> for organic products.
>
> **Hong Kong Imports of COAP and Seafood Products from the U.S. (US\$
> million)**

  ---------- ----------------------------------- ------------- ------------- ------------- ----
  **HS**     ** **                               **Jan-Sep**   **Jan-Sep**   **Growth**    

  **Code**   **Description**                     **2007 (A)**  **2008 (B)**  **(B)/(A)**   

             Consumer Oriented Agriculture Total 622           995           60%           

             Fish & Seafood Products             59            71            21%           

  **TOP 21                                                                                 
  ITEMS**                                                                                  

   0206      Ed Offal, Bovine, Swine, Sheep,     41            184           350%          \*
             Goat, Horse, Etc.                                                             

   0802      Nuts Nesoi, Fresh Or Dried          92            146           59%           \*

   0207      Meat & Ed Offal Of Poultry, Fresh,  57            89            56%           \*
             Chill Or Frozen                                                               

   0203      Meat Of Swine (Pork), Fresh,        10            85            790%          \*
             Chilled Or Frozen                                                             

   0805      Citrus Fruit, Fresh Or Dried        58            83            43%           \*

   0307      Molluscs & Aqua Invert Nesoi, Lve   38            42            10%           
             Etc.; Flours Etc                                                              

   0806      Grapes, Fresh Or Dried              30            36            21%           \*

   0809      Apricots, Cherries, Peaches, Plums  31            33            7%            
             & Sloes, Fresh                                                                

   0808      Apples, Pears And Quinces, Fresh    25            29            15%           

   0202      Meat Of Bovine Animals, Frozen      17            26            57%           \*

   210690    Food Preparations Nesoi             27            22            -21%          

   2004      Vegetables Nesoi Prepared Or        17            20            12%           
             Preserv Nesoi, Frozen                                                         

   1601      Sausages, Similar Prdt Meat Etc     13            17            24%           \*
             Food Prep Of These                                                            

   230910    Dog And Cat Food, Put Up For Retail 13            16            26%           \*
             Sale                                                                          

   0710      Vegetables (Raw Or Cooked By Steam  8             16            88%           \*
             Etc), Frozen                                                                  

   2103      Sauces & Prep; Mixed Condiments,    13            15            15%           
             Mustard Flour Etc                                                             

   1602      Prepared Or Preserv Meat, Meat      12            14            18%           
             Offal & Blood Nesoi                                                           

   0810      Fruit Nesoi, Fresh                  15            14            -3%           

   2005      Vegetables Nesoi Prepared Etc       9             12            37%           \*
             Nesoi, Not Frozen                                                             

   0306      Crustcns Lve Frsh Etc, Ckd Etc.;    9             12            38%           \*
             Flrs Mls H Cnsump                                                             

   2204      Wine Of Fresh Grapes; Grape Must    6             11            104%          \*
             Nesoi                                                                         
  ---------- ----------------------------------- ------------- ------------- ------------- ----

(Source: Calculations based on World Trade Atlas data) (\* Fast-growing
items are marked with an asterisk)

-   For Seafood products, Japan, Australia, China, Indonesia, New
    Zealand and the U.S. are the top six suppliers to Hong Kong. The
    U.S. is expected to export US\$95 million worth of Seafood products
    to Hong Kong and maintain 4% of the market share in 2008, a rise of
    21% over 2006. The high quality of U.S. Seafood products and the
    weak U.S. Dollar contribute to its export growth.

-   Additionally, many more products have been transshipped to China but
    not officially recorded in Hong Kong trade statistics, as some of
    these transshipments were going through the "grey" channels.
    Although a majority of Chinese imports are shipped directly to
    mainland China without landing in Hong Kong, traders report that a
    significant amount of the decision making process, including placing
    orders, takes place in Hong Kong. Many U.S. exporters, particularly
    those new to Asia, have said they feel more comfortable dealing with
    Hong Kong traders who generally conduct business in English. U.S.
    exporters can also take comfort in Hong Kong's consistently applied
    import regulations, rule of law, efficient business infrastructure,
    free flow of capital and zero tariff's on all agricultural products
    except alcoholic beverages. With 38% of U.S.-origin COAP and Seafood
    products transshipped, Hong Kong remains a stepping stone to China.

### Outlook for 2009

## 

-   Nearly 75% of Hong Kong's imports of US agricultural products
    consist of consumer oriented products. While these products have
    enjoyed significant growth in 2008, the demand for those products is
    expected to diminish in 2009 as the global financial crisis
    persists. While some luxury or fine food items are likely to see
    reduced demand, overall quantity is expected to hold up well. Credit
    difficulties, economic slowdown, rising unemployment, and lower fuel
    prices are expected to result in generally lower FOB and CIF food
    prices in 2009. Traders estimate that these will result in a drop of
    20% in the value of HK's imports of agricultural products in 2009.

-   The following table shows our estimates[^5] of some of Hong Kong's
    key consumer oriented imports for 2009:

+---------+--------+-------+-----+------+-------+------+-----+-----+
| Product | 2008   | 2008  | Ex  |      | 2008  | 2008 | Ex  |     |
| C       |        |       | pec |      |       |      | pec |     |
| ategory | Import | I     | ted |      | I     | Im   | ted |     |
|         |        | mport | Cha |      | mport | port | Cha |     |
|         | from   |       | nge |      |       |      | nge |     |
|         | the    | from  | in  |      | from  | from | in  |     |
|         | World  | the   | 2   |      | the   | the  | 2   |     |
|         |        | USA   | 009 |      | World | USA  | 009 |     |
|         | (V     |       |     |      |       |      |     |     |
|         | olume) | (Vo   |     |      | (V    | (Va  |     |     |
|         |        | lume) |     |      | alue) | lue) |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
|         |        |       | F   | From |       |      | F   | F   |
|         |        |       | rom | USA  |       |      | rom | rom |
|         |        |       | Wo  |      |       |      | Wo  | USA |
|         |        |       | rld |      |       |      | rld |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Red     | 1.2    | 24    | 0%  | -5%  | US    | US\  | -   | -   |
| Meat    |        | 8,956 |     |      | \$2.3 | $405 | 15% | 25% |
|         | M      | MT    |     |      |       |      |     |     |
|         | illion |       |     |      | Bi    | Mil  |     |     |
|         | MT     |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Wine    | 27     | 5     | +   | +20% | US    | US   | +5% | +   |
|         | M      | Mi    | 10% |      | \$330 | \$15 |     | 20% |
|         | illion | llion |     |      |       |      |     |     |
|         |        |       |     |      | Mi    | Mil  |     |     |
|         | Liters | L     |     |      | llion | lion |     |     |
|         |        | iters |     |      |       |      |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Poultry | 7      | 8     | +   | +10% | US    | US\  | 0%  | 0%  |
| Meat    | 19,535 | 8,828 | 10% |      | \$1.1 | $118 |     |     |
|         | MT     |       |     |      |       |      |     |     |
|         |        | MT    |     |      | Bi    | Mil  |     |     |
|         |        |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Fresh   | 1.1    | 18    | +   | +10% | US\$1 | US\  | 0%  | 0%  |
| Fruit   | M      | 6,618 | 10% |      |       | $261 |     |     |
|         | illion | MT    |     |      | Bi    |      |     |     |
|         | MT     |       |     |      | llion | Mil  |     |     |
|         |        |       |     |      |       | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Fresh   | 6      | 1     | +   | -5%  | US    | US   | 0%  | -   |
| Veg     | 17,264 | 0,942 | 10% |      | \$198 | \$14 |     | 10% |
| etables | MT     |       |     |      |       |      |     |     |
|         |        | MT    |     |      | Mi    | Mil  |     |     |
|         |        |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Dairy   | 1      | 2,945 | -   | +5%  | US    | U    | 0%  | +   |
| P       | 57,035 |       | 10% |      | \$425 | S\$9 |     | 10% |
| roducts | MT     | MT    |     |      |       |      |     |     |
|         |        |       |     |      | Mi    | Mil  |     |     |
|         |        |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Snacks  | 64,799 | 2,973 | -   | -15% | US    | US   | -   | -   |
|         |        |       | 15% |      | \$288 | \$14 | 15% | 20% |
|         | MT     | MT    |     |      |       |      |     |     |
|         |        |       |     |      | Mi    | Mil  |     |     |
|         |        |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+
| Tree    | 1      | 5     | -   | -10% | US    | US\  | -   | -   |
| Nuts    | 09,162 | 1,294 | 10% |      | \$376 | $195 | 10% | 10% |
|         | MT     |       |     |      |       |      |     |     |
|         |        | MT    |     |      | Mi    | Mil  |     |     |
|         |        |       |     |      | llion | lion |     |     |
+---------+--------+-------+-----+------+-------+------+-----+-----+

> **OUTLOOK FOR U.S. HIGH VALUE FOOD PRODUCTS**
>
> [RED MEAT]{.underline}
>
> While the import quantity for red meat is expected to remain the same,
> the import value is expected to drop due to lower prices and demand
> for cheaper cuts. Imports of US red meat are expected to drop
> disproportionately, as US red meat generally commands a premium price.
> Transshipments of US meat are also expected to decline in 2009.
>
> [WINE]{.underline}
>
> As wine imports have grown from a low base and the Hong Kong
> Government's elimination of its excise tax on wine in February 2008,
> it is expected that U.S. wine imports will continue to grow slightly
> in 2009, and the US will gain market share.
>
> [POULTRY]{.underline}
>
> As poultry meat is a cheaper source of protein, we expect imports will
> rise in 2009. As feed prices decline and consumers choose cheaper
> poultry products, it is expected that the value of imports will remain
> constant in 2009.
>
> [FRESH FRUITS]{.underline}
>
> Hong Kong residents typically consume more fresh fruits during
> economic downturns. However, consumers are likely to source cheaper
> fruits and therefore the increase in import quantity may be offset by
> the drop in import price.
>
> [FRESH VEGETABLES]{.underline}
>
> Hong Kong residents typically consume more fresh vegetables during
> economic downturns. However, consumers are likely to source even
> cheaper vegetables from their major supplier - mainland China. The
> drop in import price is expected to outweigh the increase in import
> quantity and cause a drop in overall import value. US vegetables are
> expected to be affected more as they are of better quality but higher
> price.
>
> [DAIRY PRODUCTS]{.underline}
>
> Overall imports of dairy products are expected to drop in quantity and
> remain at the same level in value. However, US dairy products are
> expected to grow because many consumers are wary of Chinese dairy
> products, will look for high quality and safer dairy products from the
> US.
>
> [SNACK FOODS]{.underline}
>
> Snacks are regarded as non-essential & luxury products. Imports of
> these products are therefore expected to drop in quantity and value.
> US snacks are generally more expensive than snacks from China and
> other Asian countries and therefore will experience larger drop in
> import value.
>
> [TREE NUTS]{.underline}
>
> Tree nuts are also regarded as a non-staple food among Hong Kong
> consumers. Therefore, it is expected that both quantity and value of
> imports will drop slightly in 2009.

## 

##  

## Economy

-   Hong Kong has enjoyed sound economic growth in the first half of
    2008 but as the global financial crisis deepens, Hong Kong's economy
    is expected to slow down for the rest of the year and in 2009. The
    following figures illustrate the growth of Hong Kong's economy and
    the purchasing power of its consumers:

  -------------- ------------ -------------- ------------ -------------- ------------
                                             **Growth**                  **Growth**

                 **2007**     **2008**       **08 vs 07** **2009\***     **09 vs 08**

  GDP            US\$207      US\$213        +3%          US\$210        -1.4%\*
                 billion      billion\*                   billion\*      

  GDP per capita US\$29,850   US\$31,340\*   +3%          US\$30,870\*   -1.5%\*

  Retail sales   US\$7.23     US\$7.97       +10%         US\$8          +0.4%\*\*
  on Food        billion      billion\*\*                 billion\*\*    
  -------------- ------------ -------------- ------------ -------------- ------------

(\* Estimated figures based on economic forecast by the Hong Kong
Government and the private sector)

(\*\* Estimated figures based on Jan-Sep 2008 data, analysis of the
economy and interviews with retail food traders)

-   Companies in Hong Kong and southern China are seriously impacted by
    the international financial crisis and many have become bankrupt and
    laid off workers. These companies cover a wide range of industries
    including toy manufacturing, fashion retail and electrical
    appliances chain. Several restaurant chains have also gone into
    liquidation because of high rents, competition and tightened credit
    by banks. The finance sector is also seriously hit and many banks in
    Hong Kong have announced or planned job cuts.

-   With Hong Kong's economy now feeling the impact of the global
    financial crisis, the unemployment rate for August-October 2008 has
    risen to 3.5% of the workforce but is expected to surge to 5% in
    2009.

-   **Competitiveness of U.S. Products Continues** **in 2009:** Although
    the overall economic situation appears to be gloomy in 2009, we
    project a commensurate impact on US sales. Hong Kong is the 7^th^
    largest market for U.S. exports of consumer-oriented food products,
    which is expected to reach US\$1.1 billion in 2008, a growth of 79%
    over 2007[^6]. U.S. food traders are aggressively seeking ways to
    penetrate international markets as well as take advantage of their
    much needed foreign exchange stability as the Hong Kong dollar is
    linked to the US dollar. In addition, Hong Kong consumers are
    increasingly concerned about the safety of food imports from China.
    U.S. food products, organic, health foods and gourmet products are
    well-known in Hong Kong for their high quality and are therefore
    likely to enjoy more opportunities as Hong Kong consumers are
    becoming more health and safety conscious. Tightened food supplies
    from Mainland China such as pork, eggs and milk are expected to
    continue in 2009 and thus lead Hong Kong food traders to seek
    imports from the US.

## Summary of the Key Strengths and Challenges for the Hong Kong Market

  -------------------------------------- --------------------------------
  **Strengths**                          **Weaknesses**

  U.S. agricultural and food products    U.S. agricultural and food
  are sought after by Hong Kong's food   products are more expensive than
  retail sector, as they enjoy an        some regionally available food
  excellent reputation among Hong Kong   products. China is the largest
  consumers AND they are renowned for    competitor to U.S. food
  being of high quality and food safety  products.
  standards, as well as healthy and      
  nutritious.                            

  There is a wide variety of U.S.        Lengthy transportation time and
  products available to Hong Kong        costs associated to importing
  consumers (over 30,000 different       U.S. food products to Hong Kong
  items). Consumer demands continue to   can make them less competitive
  increase for high quality products due than products available in the
  to ongoing food safety concerns from   region or from Australia and New
  Mainland China.                        Zealand.

  Total U.S. exports of high value food  The importance of the Hong Kong
  products to Hong Kong is expected to   market as a transshipment point
  reach over US\$1.1 billion, making it  and buying center is not widely
  the 7^th^ largest market for the U.S., known.
  growing at a rate of 79% from 2007 to  
  2008.                                  

  Expats as well as the younger          Numerous U.S. food regulations
  generations continue to explore new    differ from Codex, which can
  products, such as health foods,        complicate import clearances.
  organics, convenience and gourmet      
  foods. More and more restaurants are   
  including such products on their       
  menus. Hong Kongers in general, are    
  highly receptive to advertising,       
  marketing and promotions.              

  Hong Kong's modern and efficient port  
  terminal and free trade policy make it 
  an attractive location for trade,      
  including re-exports to Asia.          

  In general, HKG in its implementation  
  and application of regulations is      
  transparent and open, as it follows    
  and adopts WTO, Codex and OIE          
  guidelines for food safety.            

  Lack of domestic production means      
  virtually no protectionist pressures   
  for food and agricultural products.    

  Hong Kong has an exceptionally strong  
  infrastructure and distribution system 
  which renders it as an important       
  trading hub and gateway in the region. 
  -------------------------------------- --------------------------------

## Retail Sales and Outlets

-   Total retail sales of food and drinks in Hong Kong for 2008 are
    expected to reach US\$7.97 billion, representing a growth of 10%
    compared to 2007. Although the outlook for spending is pessimistic,
    the global financial crisis will have less negative impact on the
    food retail sector as more consumers are expected to prepare their
    own food than to dine out. Therefore, we expects that the food
    retail sales can be maintained at the level of US\$8 billion in
    2009.

**F&B Retail Sales between 2004--2009, in US\$ billion**

  ----------------------- ---------- ---------- ---------- ---------- ------------ --------------
                          **2004**   **2005**   **2006**   **2007**   **2008\***   **2009\*\***

  Supermarkets/Dept.      3.22       3.43       3.61       3.85       4.28         4.2
  stores                                                                           

  Other outlets           2.80       2.94       3.15       3.38       3.69         3.8

  **Total**               **6.02**   **6.37**   **6.76**   **7.23**   **7.97**     **8.0**
  ----------------------- ---------- ---------- ---------- ---------- ------------ --------------

> ![](media/image4.wmf){width="4.748611111111111in"
> height="3.236111111111111in"}

-   Despite a highly centralized supermarket retail network, with two
    supermarket chains accounting for about 80% of the supermarket
    turnover, the total number of retail establishments stands at
    approximately 14,842. These retail establishments include (1) 72
    supermarkets and convenience store establishments (the number of
    supermarkets and convenience stores is about 1,384 if branch outlets
    are included) and (2) 13,458 wet market stalls and "mom and pop"
    shop operators. Retail shops in Hong Kong generally are very small
    in size, about 98% of which hire less than 10 employees[^7].

-   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.
    While both wet market and supermarket sales are increasing,
    supermarkets are taking a greater share of total sales. The
    supermarket's share in terms of retail sales rose from 44% of total
    sales in 1995 to 54% in 2008.

-   In the wake of the global economic crisis, more consumers are
    expected to shop at the wet markets where they can find lower-priced
    items and bargain. However, in the long run, the retail sales share
    of supermarkets is expected to continue to expand in the future at
    the expense of traditional markets. 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.

Percentage of Sales by Retail Outlets

  ------------------- ---------- ---------- ---------- ---------- ------------ --------------
                      **2004**   **2005**   **2006**   **2007**   **2008\***   **2009\*\***

  Supermarkets/ Dept. 53%        54%        53%        52%        54%          53%
  stores                                                                       

  Other outlets       47%        46%        47%        48%        46%          47%

  Total               100%       100%       100%       100%       100%         100%
  ------------------- ---------- ---------- ---------- ---------- ------------ --------------

![](media/image5.wmf){width="3.3645833333333335in"
height="2.3041666666666667in"}

-   Overall, 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.

##  

## Import Regulations

-   **Import Duties & Import Certificates**

> With the exception of spirits, all food and beverage products can be
> imported to Hong Kong duty free. Technical requirements for imports
> vary significantly according to the product. Products which require
> import permits/health certificates include meat, milk and frozen
> confections. (Eggs are expected to be subject to the health
> certification requirements later 2008). The HKG accepts import
> applications from Hong Kong importers. In other words, local importers
> and not U.S. exporters are required to apply for import permits. U.S.
> exporters need to supply their agents/importers with necessary
> documentation such as health certificates from the U.S. government.
> For details on Hong Kong's general import regulations for food
> products, please refer to GAIN Report #8025.

-   **New Nutritional Labeling Law**

> Hong Kong's Legislative Council on May 28, 2008 passed a nutrition
> labeling regulation, which will take effect July 1, 2010.  Hong Kong's
> nutrition labeling regulation requires all prepackaged food sold in
> Hong Kong have to label energy plus seven nutrients namely, protein,
> carbohydrate, fat, saturated fat, trans fat, sodium and sugars.
> Products selling less than 30,000 units a year can apply for small
> volume exemption provided that the products do not carry any
> nutritional claims. Traders applying for exemption have to pay HK\$345
> (US\$44) per product variety for the first year and HK\$335 (US\$43)
> for annual renewal.
>
> Hong Kong's nutrition labeling regulation is unique; as all imported
> foods making nutrition claims from all sources will have to be
> re-labeled for the Hong Kong market. Despite the U.S. requiring the
> labeling of 15 energy/nutrients, U.S. products still cannot meet with
> the Hong Kong nutrition labeling requirements due to different
> nutrient definitions, rounding practices, and recommendations for
> daily consumption. Virtually all U.S. products carrying claims will
> require labeling changes and/or nutrient testing. 
>
> Sources indicated that major retailers have notified their suppliers
> that they would only accept products with nutrition labels complying
> with Hong Kong's new regulation after July 1, 2009, one year earlier
> than HKG's enforcement date.
>
> Details of the regulation are contained in the Technical Guidance
> Notes on Nutrition Labeling and Nutrition Claims, which are available
> at:
>
> <http://www.cfs.gov.hk/english/food_leg/food_leg_nl_guidance.html>.
>
> Further supplementary information will be provided in the form of FAQ
> on the Hong Kong government's Center for Food Safety website:
>
> <http://www.cfs.gov.hk/eindex.html>
>
> For more information on the impact of Hong Kong's nutrition labeling
> regulation, please see reports HK#7011 & HK#8017.

-   **Preservatives Regulations**

> Hong Kong amended its Preservatives Regulation, which became effective
> July 1, 2008. Compared to the original regulation, in which one
> preservative (propyl para-hydroxybenzoate) is no longer allowed for
> use, and eleven additional preservatives permitted in the new
> standard, as listed below:

Guaiac resin

> Isopropyl citrates
>
> Stannous chloride
>
> Tertiary butylhydroquinone (TBHQ)
>
> Thiodipropionic acid
>
> Dimethyl dicarbonate
>
> Ferrous gluconate
>
> Formic acid
>
> Hexamethylene tetramine
>
> Lysozyme
>
> Pimaricin
>
> Another change brought about by the regulation amendment is the
> adoption of a food category system based on Codex's GSFA (Codex
> General Standard for Food Additives) and the incorporation of those
> preservatives and antioxidants, as well as their permitted levels of
> use, in GSFA.
>
> To help trade better understand the amended regulation, the HKG issued
> a "User Guideline", which provides the definition of each food
> category of the newly adopted food category system. Also, the
> Guidelines include some questions and answers pertaining to the
> amended regulations. The full Guidelines are available at the
> following website:
> <http://www.cfs.gov.hk/english/whatsnew/whatsnew_fstr/files/User_Guideline_e.pdf>
>
> Hong Kong's Preservatives Regulation adopts the principle of a
> positive list. In other words, Hong Kong does not allow any
> preservatives or antioxidants in foods if they are not expressly
> permitted by the Preservatives Regulation. The list of permitted
> preservatives and their maximum permitted levels may be retrieved from
> the following website:

<http://www.legco.gov.hk/yr07-08/english/subleg/negative/ln085-08-e.pdf>

> More information on the amended Preservatives Regulation, pleases see
> gain reports HK#7018 and HK#8021.

-   **Biotech Food Related Regulations**

> The HKG does not have any specific biotechnology regulations with
> regard to the labeling of biotech food products. The HKG makes no
> distinction between conventional and biotech foods. All are subject to
> the same food safety regulation.
>
> The HKG, after evaluating the impact of its voluntary labeling scheme
> for biotech food products over the past year, released its conclusions
> to the Legislative Council on July 8, 2008, suggesting there is no
> need for a mandatory labeling law in Hong Kong. The HKG noted
> difficulty in carryout a law that currently does not have an
> international standard to back it up. As a result of its evaluation,
> the HKG plans to continue to promote voluntary labeling of GMO
> products as a viable alternative for the trade.
>
> The HKG released a set of guidelines on voluntary labeling for biotech
> foods in 2006. The guidelines on labeling for biotech foods are
> advisory in nature and do not have any legal effect. Adoption is
> entirely voluntary and is not binding. The guidelines apply to
> prepackaged food. The guidelines are based on the following four
> principles.

(1) The labeling of biotech food will comply with the existing food
    legislation.

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

(3) 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.

(4) Negative labeling is not recommended.

> 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 HKG does not encourage negative labeling
> particularly for the use of the following terms:

(1) GMO free

(2) Free from GM ingredients, etc

> For products with such definite negative labeling, the HKG 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.
>
> For more details on the voluntary labeling guidelines and
> biotechnology in Hong Kong, please refer to Gain Report HK#6026 &
> HK#8019 respectively.

-   **Certification Requirements for Seafood Products**

> The Hong Kong government is in the process of drawing up new
> certification requirements for all fish and seafood products.
> Currently, it is not mandatory to provide health certificates for
> seafood imports to Hong Kong, though U.S. exporters usually provide
> health certificates (on a state level) for shipments in order to
> facilitate customs clearance.

## 

##  

## General Consumer Tastes and Preferences

-   There is a growing popularity of frozen foodstuffs because more and
    more consumers believe that frozen foods are more hygienic. However,
    Hong Kong consumers in general still prefer fresh foodstuffs,
    particularly fish and poultry meat.

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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, especially in their pre-prepared sections that are virtually
    serving ready-to-eat 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 more aware of food safety issues and
    nutrition values of food products. Clear indications of nutritional
    value on the package have been a good marketing strategy for health
    foods.

-   The sales of organic products have been increasing steadily. The
    price discrepancy between conventional and organic foods has also
    narrowed over the years. Currently, organic products are priced
    between 10-20% 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 latest trend in
    health foods now is "low Glycemic Index" and "Antioxidants".

-   Foods categorized as natural and having benefits to health are also
    appealing to Hong Kong consumers. For example, nut suppliers promote
    nuts as healthy snacks good for the heart, and many cereals are
    marketed as an effective means of controlling cholesterol.

-   Consumption of wine is growing in popularity in Hong Kong. In
    February 2008, the HKG eliminated its import duty on wine and
    stimulated a surge in volumes and quantity of wines imports into
    Hong Kong. Hong Kong's wine imports for the first 9 months in 2008
    reached US\$247 million and 21 million liters, an increase of 90% in
    value and 29% in quantity compared with the same period in 2007. For
    more information on the wine market in Hong Kong, please refer to
    GAIN Report #HK8005.

-   Demand for promotion package and discounts. They are very price
    sensitive. Marketing tactics such as selling bundled economy packs
    or enclosing complimentary samples are usually used to stimulate
    sales. The most direct and effective marketing tool is to offer
    discounts.

-   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.

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

**SECTION II Road Map for Market Entry**

## A. Entry Strategy

To set up a representative office in Hong Kong is one of the most
effective means that U.S. companies can use to sell their products to
this market, but it is very costly. Apart from this entry strategy,
there are three different ways for new-to-market exporters to get into
the Hong Kong market:

1\. Through agents: U.S. exporters may consider hiring a local agent.
There are several factors to consider when hiring an agent. 1) Does the
prospective agent already have an account with major supermarkets?
Supermarkets will more readily accept new brand products when the agent
already has an account with the supermarkets. 2) Does the prospective
agent have a good marketing record and widespread distribution network?

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 but to very extensive distribution outlets.

2\. 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 dealing directly with retailers.

3\. Through consolidators: Major supermarkets in Hong Kong work with
U.S. consolidators for some of their products. Their purpose is to
introduce new products, which have already been very popular in other
overseas markets, to Hong Kong.\
\
Supermarkets in Hong Kong sometimes rely on consolidators to offer them
new products for consideration. More often, supermarkets in Hong Kong
conduct researches to identify unmet consumer needs and ask
consolidators to source new products to meet those needs.

## B. Market Structure

![](media/image6.wmf)

-   U.S. exporters intending to sell to supermarkets can go through
    either one of the above channels. For perishable products with large
    and regular turnover such as meats, fruits and vegetables, major
    supermarkets try to order directly from exporters in order to cut
    costs. While certain supermarkets have tried to order an assortment
    of imports through consolidators, the bulk of supplies come from
    local agents or importers.

-   Convenience stores and traditional retail outlets buy goods from
    local importers and agents. Due to relatively little turnover, they
    are not interested in buying direct from exporters or through
    consolidators. Therefore, U.S. food exporters have to go through
    Hong Kong importers to have their products sold in convenience
    stores or traditional markets.

-   For a list of local supermarkets and importers/wholesalers to U.S.
    exporters contact the Agricultural Trade Office (ATO) of the U.S.
    Consulate in Hong Kong. We are also happy to line up appointments if
    U.S. exporters come to Hong Kong exploring the market.

-   To promote U.S. food products, ATO has sponsored major trade shows
    in Hong Kong such as Vinexpo Asia Pacific (May 27-29, 2008), the
    Natural Products Expo Asia (June 26 --28, 2008), Restaurant and Bar
    Show (September 9-11, 2008), Asia Fruit Logistica (September
    10-12, 2008) and Wine and Gourmet Asia (November 5-7, 2008). U.S.
    exporters may wish to consider participating in these trade shows so
    as to introduce their products to Hong Kong buyers as well as buyers
    from other countries in the region.

### Supermarkets

**Profiles of Leading Supermarket Chains in Hong Kong**

+-------------+----------+--------+------------------+--------------+
| **Name of   | **Own    | **Food | **No. of         | **Type of    |
| Retailer**  | ership** | S      | Outlets**        | Purchasing   |
|             |          | ales** |                  | agent**      |
+-------------+----------+--------+------------------+--------------+
| Wellcome    | Hong     | over   | 250[^8]          | Impo         |
|             | Kong     | US\$1  |                  | rters/Agents |
|             |          | b      |                  |              |
|             |          | illion |                  | Exporters    |
|             |          |        |                  | C            |
|             |          |        |                  | onsolidators |
+-------------+----------+--------+------------------+--------------+
| ParknShop   | Hong     | over   | 220[^9]          | Impo         |
|             | Kong     | US\$1  |                  | rters/Agents |
|             |          | b      |                  |              |
|             |          | illion |                  | Exporters    |
|             |          |        |                  | C            |
|             |          |        |                  | onsolidators |
+-------------+----------+--------+------------------+--------------+
| China       | China    | not    | 97[^10]          | Impo         |
| Resources   |          | ava    |                  | rters/Agents |
| Vanguard    |          | ilable |                  |              |
|             |          |        |                  | Exporters    |
| Supermarket |          |        |                  |              |
+-------------+----------+--------+------------------+--------------+
| Dah Chong   | Hong     | not    | 68[^11]          | Impo         |
| Hong        | Kong     | ava    |                  | rters/Agents |
|             |          | ilable |                  |              |
|             |          |        |                  | Exporters    |
+-------------+----------+--------+------------------+--------------+
| Jusco       | Japan    | About  | 6 within         | Impo         |
| Stores (HK) |          | U      | department       | rters/Agents |
| Ltd.        |          | S\$247 | stores and 3     |              |
|             |          | m      | separate         |              |
|             |          | illion | stores[^12]      |              |
+-------------+----------+--------+------------------+--------------+
| CitySuper   | Hong     | not    | 4 and 1 other    | Impo         |
|             | Kong     | ava    | called Log-on    | rters/Agents |
|             |          | ilable | selling snacks   |              |
|             |          |        | only;            | C            |
|             |          |        |                  | onsolidators |
|             |          |        | 1 convenience    |              |
|             |          |        | store called     |              |
|             |          |        | Pit-in           |              |
+-------------+----------+--------+------------------+--------------+
| Oliver      | Hong     | Not    | 1                | Impo         |
| D           | Kong     | ava    |                  | rters/Agents |
| elicatessen |          | ilable |                  |              |
|             |          |        |                  | C            |
|             |          |        |                  | onsolidators |
+-------------+----------+--------+------------------+--------------+
| Uny         | Japan    | Not    | 1                | Impo         |
|             |          | ava    |                  | rters/Agents |
|             |          | ilable |                  |              |
+-------------+----------+--------+------------------+--------------+
| Sogo        | Japan    | Not    | 2                | Impo         |
|             |          | ava    |                  | rters/Agents |
|             |          | ilable |                  |              |
+-------------+----------+--------+------------------+--------------+

-   There are two dominant supermarket chains in Hong Kong: The Wellcome
    Co. Ltd. (250 outlets) and ParknShop (over 220 outlets). ParknShop
    and Wellcome account for about 80% of all supermarket turnovers in
    Hong Kong. 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: CR Vanguard 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 of its 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 three high-end supermarkets
    cater mostly to the expatriates and 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.

-   Dairy Farm, which owns another major supermarket chain -- Wellcome,
    has opened an upscale supermarket in Hong Kong's central commercial
    area catering to the more affluent clientele. The new store called
    "Three Sixty" was opened in November 2006. With a floor area of
    23,000 square feet, it is Hong Kong's largest retail outlet for
    organic and natural products. About 6,000 items or 70% of the items
    in the store will be organic or natural products. The store includes
    an organic sector for baby products. "Health" and "natural" are the
    key concepts of this store. The second "Three Sixty" was opened in
    October 2007.

-   China Resources Vanguard focuses on local customers. While carrying
    a variety of products from different countries, a major portion of
    them comes from China.

-   Dah Chong Hong's outlets are generally located near wet markets.
    While being an importer of a variety of products, its retail outlets
    focus on frozen meat and seafood products. Dah Chong Hong is a major
    food importer too.

-   CitySuper and Oliver Delicatessen capture an upscale market.
    Clientele includes mainly well-off middle class and expatriates.
    Customers are generally receptive to western foods. Both high-end
    supermarkets require no listing fees.

-   Gateway Superstore and PrizeMart are two supermarkets in Hong Kong
    selling primarily U.S. products. PrizeMart has 11 stores and Gateway
    has 2 stores. Both supermarkets import directly from US
    consolidators and do not charge listing fees.

-   Jusco, Sogo and Uny are Japanese department stores with a
    supermarket section. These supermarkets attract many middle-class
    customers, who are receptive to new products and do not mind to pay
    for higher prices for higher quality products. These three stores
    are popular spots for in-store promotions as they are packed with
    consumers seven days a week. In 2006, Jusco opened 2 separate
    supermarkets, which were not set up within a department store.

-   Hong Kong supermarkets that require listing fees, are fees 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% 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
    as it is normally just transferred to their principals.

-   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% of the annual turnover has
    to be rebated to the major supermarkets and 8% 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.

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

-   There is excellent growth potential 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

**Profiles of Leading Convenience Stores in Hong Kong**

+--------+----------+-------+---------+----------+----------+--------+
| **Re   | **Own    | **No. | **Loca  | **Pu     | **Year** | **Clie |
| tailer | ership** | of    | tions** | rchasing |          | nts'** |
| Name** |          | Outl  |         | agent**  | **estab  |        |
|        |          | ets** |         |          | lished** | *      |
|        |          |       |         |          |          | *age** |
+--------+----------+-------+---------+----------+----------+--------+
| 7-     | Hong     | 828   | Hong    | I        | 1981     | 15-35  |
| Eleven | Kong     | [^13] | Kong    | mporters |          |        |
|        |          |       |         |          |          |        |
|        |          |       |         | Agents   |          |        |
+--------+----------+-------+---------+----------+----------+--------+
| Circle | Hong     | 260   | Hong    | I        | 1985     | 15-35  |
| K      | Kong     | [^14] | Kong    | mporters |          |        |
|        |          |       |         |          |          |        |
|        |          |       |         | Agents   |          |        |
+--------+----------+-------+---------+----------+----------+--------+

-   There are over 1,000 convenience stores in Hong Kong. Two major
    chains dominate the market: 7-Eleven (828 outlets) and Circle K (260
    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. Popular items at these stores include
    packaged drinks, beer and snack food. The average 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. Circle K is owned by local
    trading conglomerate Li & Fung Group. Many of 7-Eleven and Circle K
    stores are strategically located in MTR (subway) and KCR (train)
    stations, popular shopping malls and housing developments throughout
    Hong Kong.

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% 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 built and managed by the
    Hong Kong government with air-conditioning, more hygienic and
    pleasant environment 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 housing estates and schools are ideal
    retail outlets for drinks and snack foods. Such traditional markets
    offer small stalls and personal services that many Hong Kong
    consumers enjoy.

-   Yu Kee, a traditional mom-and-pop shop, which started business in
    1990, has expanded to 70[^15] stores spreading all over Hong Kong in
    recent years. The stores have floor area ranging around 1,500 sq.
    feet each. They sell mainly processed foods and produce. Most of the
    food supplies in these shops come from China and South East Asia.
    While they also import snack foods and drinks from Europe, U.S.
    foods are not yet on their shelves. The stores feature cheap prices
    and are after the mass market.

Market Entry Approach

-   U.S. food exporters must go through local importers or agents that
    have 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 addition to traditional grocery and household
    products, supermarkets are moving towards larger, more modern stores
    with more fresh food.

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

-   In face of strong competition, major supermarket stores 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.

-   Consumers becoming increasingly health-conscious and organic
    products picking up in popularity. There has been a gradual shift in
    what food 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 over payment via the
    internet 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 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 their
    range of U.S. products.

-   To promote U.S. food products, the ATO sponsors major trade shows in
    Hong Kong and Macau, such as:

+---------------------+----------------------------------+-------------+
| HOFEX 2009          | [http://www.h                    | May 6--9,   |
|                     | ofex.com](http://www.hofex.com/) | 2009        |
| (in Hong Kong)      |                                  |             |
+---------------------+----------------------------------+-------------+
| Natural Products    | <http                            | Jun 25-27,  |
| Expo Asia           | ://www.naturalproductsasia.com/> | 2009        |
|                     |                                  |             |
| (in Hong Kong)      |                                  |             |
+---------------------+----------------------------------+-------------+
| Restaurant and Bar  | <htt                             | Sep 1-3,    |
|                     | p://www.restaurantandbarhk.com/> | 2009        |
| (in Hong Kong)      |                                  |             |
+---------------------+----------------------------------+-------------+
| Asia Fruit          | <htt                             | Sep 2-4,    |
| Logistica 2009      | p://www.asiafruitlogistica.com/> | 2009        |
|                     |                                  |             |
| (in Hong Kong)      |                                  |             |
+---------------------+----------------------------------+-------------+
| 2^nd^ Hong Kong     | <http://hkwinefair.hktdc.com/>   | Nov 4-6,    |
| International Wine  |                                  | 2009        |
| Fair (in Hong Kong) |                                  |             |
+---------------------+----------------------------------+-------------+

# SECTION III. COMPETITION

Note: Estimated statistics for 2008; Market Share in terms of Import
Value

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

**Major Product Categories of**

**Hong Kong's Imports of COAP and Seafood Products And Competition**

+-----------------+-------------+-------------------+----------------+
| **Product       | **Major     | **Strengths of    | **Advantages   |
| Category**      | Supply      | Key Supply        | and            |
|                 | Sources**   | Countries**       | Disadvantages  |
|                 |             |                   | of Local       |
|                 |             |                   | Suppliers**    |
+=================+=============+===================+================+
| **Breakfast     | 1\. China   | China is the      | Local          |
| Cereals &       | -- 57%      | largest supplier, | production is  |
| Pancake Mixes** |             | imports include   | insignificant  |
|                 | 2\. U.S. -- | some              |                |
| Imports         | 11%         | international     |                |
|                 |             | brands, which     |                |
| US\$31 million  | 3\.         | have              |                |
|                 | Thailand -- | manufacturing     |                |
| 11,763 MT       | 11%         | establishments in |                |
|                 |             | China.            |                |
| Retained        |             |                   |                |
| Imports         |             | In recent years,  |                |
|                 |             | Thailand has been |                |
| US\$29 million  |             | a popular tourist |                |
|                 |             | resort for Hong   |                |
| 11,293 MT       |             | Kong residents,   |                |
|                 |             | who are becoming  |                |
|                 |             | increasingly      |                |
|                 |             | receptive to Thai |                |
|                 |             | tastes and        |                |
|                 |             | cuisine. This is  |                |
|                 |             | conducive to the  |                |
|                 |             | growth of Thai    |                |
|                 |             | food exports to   |                |
|                 |             | Hong Kong.        |                |
|                 |             |                   |                |
|                 |             | Melamine was      |                |
|                 |             | found in eggs and |                |
|                 |             | dairy products    |                |
|                 |             | from China and    |                |
|                 |             | that has led      |                |
|                 |             | consumers to pay  |                |
|                 |             | more attention to |                |
|                 |             | food safety and   |                |
|                 |             | seek high quality |                |
|                 |             | products from     |                |
|                 |             | other supplying   |                |
|                 |             | countries.        |                |
+-----------------+-------------+-------------------+----------------+
| Red Meats,      | 1\. Brazil  | Products from     | Local          |
| chilled/frozen  | -- 30%      | Brazil and China  | production is  |
|                 |             | are price         | largely on     |
| Imports         | 2\. U.S. -- | competitive, but  | freshly        |
|                 | 18%         | they are of       | slaughtered    |
| US\$2.3 billion |             | different market  | meats.         |
|                 | 3\. Germany | segments from     |                |
| 1,228,656 MT    | -- 10%      | U.S. products.    |                |
|                 |             |                   |                |
| Retained        | 4\. China   | 50% of Brazilian  |                |
| Imports         | -- 9%       | red meat exports  |                |
|                 |             | to Hong Kong are  |                |
| US\$1.27        |             | offals, 25% pork  |                |
| billion         |             | and 21% beef.     |                |
|                 |             |                   |                |
| 467,472 MT      |             | 80% of Chinese    |                |
|                 |             | red meat exports  |                |
|                 |             | to Hong Kong are  |                |
|                 |             | pork.             |                |
|                 |             |                   |                |
|                 |             | For U.S., about   |                |
|                 |             | 61% of the red    |                |
|                 |             | meat exports to   |                |
|                 |             | Hong Kong are     |                |
|                 |             | offals, 11% and   |                |
|                 |             | 28% are high-end  |                |
|                 |             | beef and pork     |                |
|                 |             | products          |                |
|                 |             | respectively.     |                |
|                 |             |                   |                |
|                 |             | U.S. market share |                |
|                 |             | dropped from 21%  |                |
|                 |             | in 2003 to 3% in  |                |
|                 |             | 2005 as a result  |                |
|                 |             | of the ban on     |                |
|                 |             | U.S. bone-in      |                |
|                 |             | beef. Market      |                |
|                 |             | share increased   |                |
|                 |             | to 7% in 2006     |                |
|                 |             | following Hong    |                |
|                 |             | Kong's opening to |                |
|                 |             | U.S. beef since   |                |
|                 |             | the beginning of  |                |
|                 |             | 2006. Hong Kong   |                |
|                 |             | currently allows  |                |
|                 |             | U.S. boneless     |                |
|                 |             | beef derived from |                |
|                 |             | animals less than |                |
|                 |             | 30 months of age. |                |
|                 |             |                   |                |
|                 |             | Bone-in beef and  |                |
|                 |             | offals from the   |                |
|                 |             | U.S. are not yet  |                |
|                 |             | allowed entry     |                |
|                 |             | into Hong Kong.   |                |
|                 |             | Hong Kong         |                |
|                 |             | Government adopt  |                |
|                 |             | zero tolerance on |                |
|                 |             | bone fragments.   |                |
|                 |             |                   |                |
|                 |             | U.S. beef is      |                |
|                 |             | highly regarded   |                |
|                 |             | in Hong Kong. It  |                |
|                 |             | is always the top |                |
|                 |             | choice for        |                |
|                 |             | high-end          |                |
|                 |             | restaurants and   |                |
|                 |             | sophisticated     |                |
|                 |             | consumers. U.S.   |                |
|                 |             | beef is largely   |                |
|                 |             | for the high-end  |                |
|                 |             | market.           |                |
+-----------------+-------------+-------------------+----------------+
| **Red Meats,**  | 1\. China   | Chinese supplies  | Local          |
|                 | -- 33%      | dominate the      | production is  |
| Pre             |             | market because    | insignificant. |
| pared/preserved | 2\. Spain   | there is a big    |                |
|                 | -- 15%      | demand for price  |                |
| Imports         |             | competitive       |                |
|                 | 3\. U.S. -- | p                 |                |
| US\$469 million | 9%          | repared/preserved |                |
|                 |             | meatballs and     |                |
| 260,898 MT      |             | other products    |                |
|                 |             | typical in        |                |
| Retained        |             | Chinese dishes in |                |
| Imports         |             | Chinese           |                |
|                 |             | restaurants and   |                |
| US\$328 million |             | processing in     |                |
|                 |             | China is cost     |                |
| 157,583 MT      |             | effective.        |                |
|                 |             |                   |                |
|                 |             | About 51% of the  |                |
|                 |             | U.S. preserved    |                |
|                 |             | red meat exports  |                |
|                 |             | to Hong Kong      |                |
|                 |             | belong to         |                |
|                 |             | sausages. The     |                |
|                 |             | U.S. is the       |                |
|                 |             | largest supplier  |                |
|                 |             | of sausages in    |                |
|                 |             | the Hong Kong     |                |
|                 |             | market.           |                |
+-----------------+-------------+-------------------+----------------+
| Poultry Meat    | 1\. Brazil  | Brazil became the | Local          |
|                 | -- 58%      | leading supplier  | production is  |
| (Fresh, chilled |             | of poultry for    | on freshly     |
| & frozen)       | 2\. China   | Hong Kong market  | slaughtered    |
|                 | -- 19%      | in 2004, when     | meats.         |
| Imports         |             | Hong Kong banned  |                |
|                 | 3\. U.S. -- | entry of U.S.     | HRI sector     |
| US\$1.1 billion | 11%         | poultry products  | tends to use   |
|                 |             | (between February | chilled and    |
| 719,535 MT      |             | 11, 2004 and      | frozen chicken |
|                 |             | April 30, 2004)   | products       |
| Retained        |             | due to outbreaks  | rather than    |
| Imports         |             | of Avian          | freshly        |
|                 |             | Influenza cases   | slaughtered    |
| US\$604 million |             | in the U.S.       | chickens       |
|                 |             | Though the ban    | because the    |
| 319,733 MT      |             | was then lifted,  | latter are far |
|                 |             | Brazil continues  | more           |
|                 |             | to be the largest | expensive.     |
|                 |             | supplier due to   |                |
|                 |             | price             |                |
|                 |             | competitiveness   |                |
|                 |             | of its products   |                |
|                 |             | and established   |                |
|                 |             | business          |                |
|                 |             | relationship      |                |
|                 |             | between Brazilian |                |
|                 |             | exporters and     |                |
|                 |             | Hong Kong         |                |
|                 |             | importers.        |                |
|                 |             |                   |                |
|                 |             | The reduced       |                |
|                 |             | supplies of live  |                |
|                 |             | chickens to Hong  |                |
|                 |             | Kong have         |                |
|                 |             | resulted in       |                |
|                 |             | increased demand  |                |
|                 |             | for chilled whole |                |
|                 |             | chickens from     |                |
|                 |             | China.            |                |
|                 |             |                   |                |
|                 |             | Hong Kong's new   |                |
|                 |             | certification     |                |
|                 |             | requirement for   |                |
|                 |             | U.S. chicken      |                |
|                 |             | feet, which took  |                |
|                 |             | effect in May     |                |
|                 |             | 2005, has reduced |                |
|                 |             | U.S. chicken feet |                |
|                 |             | supplies to Hong  |                |
|                 |             | Kong. By the new  |                |
|                 |             | requirement, U.S. |                |
|                 |             | chicken feet are  |                |
|                 |             | required to have  |                |
|                 |             | ante mortem and   |                |
|                 |             | post mortem       |                |
|                 |             | inspection.       |                |
+-----------------+-------------+-------------------+----------------+
| **Dairy         | 1\.         | Netherlands is    | Local          |
| Products**      | Netherlands | strong in dairy   | companies      |
|                 | -- 25%      | product supplies  | supply         |
| Imports         |             | and it has        |                |
|                 | 2\.         | established       | fresh milk     |
| US\$425 million | Singapore   | position in Hong  | drinks, which  |
|                 | -- 15%      | Kong.             | are processed  |
| 157,035 MT      |             |                   | in Hong Kong   |
|                 | 3\. China   | Dairy products    | with milk      |
| Retained        | -- 12%      | from Netherlands  | originated     |
| Imports         |             | and New Zealand   | from farmlands |
|                 | 4\.         | primarily include | in the         |
| US\$367 million | Australia   | concentrated      | southern part  |
|                 | -- 11%      | dairy and cream.  | of China.      |
| 142,104 MT      |             |                   |                |
|                 | 5\. New     | Chinese dairy     | Local          |
|                 | Zealand     | products to Hong  | companies can  |
|                 | --9%        | Kong primarily    | easily fulfill |
|                 |             | include           | local milk     |
|                 | U.S. -- 2%  | not-concentrated  | registration   |
|                 |             | milk and cream.   | requirements.  |
|                 |             |                   |                |
|                 |             | Dairy products    |                |
|                 |             | from the U.S.     |                |
|                 |             | primarily include |                |
|                 |             | ice cream.        |                |
|                 |             |                   |                |
|                 |             | Melamine was      |                |
|                 |             | found in eggs and |                |
|                 |             | dairy products    |                |
|                 |             | from China and    |                |
|                 |             | that has led      |                |
|                 |             | consumers to pay  |                |
|                 |             | more attention to |                |
|                 |             | food safety and   |                |
|                 |             | seek high quality |                |
|                 |             | products from     |                |
|                 |             | other supplying   |                |
|                 |             | countries.        |                |
+-----------------+-------------+-------------------+----------------+
| **Eggs**        | 1\. China   | Eggs from China   | Local          |
|                 | -- 64%      | are price         | production is  |
| Imports         |             | competitive.      | insignificant. |
|                 | 2\.         | However, since    |                |
| US\$113 million | Thailand -- | 2006, when some   |                |
|                 | 16%         | Chinese eggs were |                |
| 1.8 billion     |             | found tainted     |                |
| eggs            | 3\. U.S. -- | with Sudan red    |                |
|                 | 12%         | (which is a dye   |                |
| Retained        |             | for industrial    |                |
| Imports         |             | use), Hong Kong   |                |
|                 |             | consumers lost    |                |
| US\$112 million |             | confidence in the |                |
|                 |             | safety of all     |                |
| 1.79 billion    |             | Chinese eggs.     |                |
| eggs            |             |                   |                |
|                 |             | U.S. dominates    |                |
|                 |             | the white egg     |                |
|                 |             | markets.          |                |
|                 |             |                   |                |
|                 |             | In recent months, |                |
|                 |             | melamine was      |                |
|                 |             | found in eggs and |                |
|                 |             | dairy products    |                |
|                 |             | from China and    |                |
|                 |             | that has led      |                |
|                 |             | consumers to pay  |                |
|                 |             | more attention to |                |
|                 |             | food safety and   |                |
|                 |             | seek high quality |                |
|                 |             | products from     |                |
|                 |             | other supplying   |                |
|                 |             | countries.        |                |
+-----------------+-------------+-------------------+----------------+
| Fresh Fruit     | 1\. U.S. -- | U.S. fresh fruits | No local       |
|                 | 25%         | are highly        | production.    |
| Imports         |             | regarded as       |                |
|                 | 2\.         | having good       |                |
| US\$1 billion   | Thailand -- | quality.          |                |
|                 | 25%         |                   |                |
| 1,095,454 MT    |             | Thai Trade        |                |
|                 | 3\. Chile   | commission in     |                |
| Retained        | -- 14%      | Hong Kong         |                |
| Imports         |             | aggressively      |                |
|                 | 4\. South   | sponsors trade    |                |
| US\$599 million | Africa --   | promotion         |                |
|                 | 7%          | activities.       |                |
| 530,002 MT      |             | Thai's tropical   |                |
|                 | 5\.         | fruits are very   |                |
|                 | Australia   | popular in Hong   |                |
|                 | -- 7%       | Kong.             |                |
|                 |             |                   |                |
|                 | 6\. China   | Chile's biggest   |                |
|                 | -- 5%       | fruit item to     |                |
|                 |             | Hong Kong is      |                |
|                 |             | grapes. The       |                |
|                 |             | supplying season  |                |
|                 |             | is different from |                |
|                 |             | the U.S.          |                |
+-----------------+-------------+-------------------+----------------+
| **Fresh         | 1\. China   | Products from     | Local          |
| Vegetables**    | --74%       | China are very    | production is  |
|                 |             | price             | about 5 % of   |
| Imports         | 2\. U.S. -- | competitive. Due  | total demand.  |
|                 | 7%          | to expensive      | Production     |
| US\$198 million |             | operation costs   | costs, both in |
|                 | 3\. Japan   | in Hong Kong,     | terms of land  |
| 617,264 MT      | -- 4%       | some farmers in   | and labor, in  |
|                 |             | Hong Kong move    | Hong Kong are  |
| Retained        | 4\.         | their operations  | high. The Hong |
| Imports         | Australia   | to China and sell | Kong           |
|                 | -- 4%       | their products    | Government has |
| US\$194 million |             | back to Hong      | encouraged     |
|                 |             | Kong.             | organic        |
| 612,337 MT      |             |                   | farming so as  |
|                 |             | Australian        | to find the    |
|                 |             | products are      | niche market   |
|                 |             | advantaged over   | for local      |
|                 |             | American products | vegetables.    |
|                 |             | because of        |                |
|                 |             | shorter freight   |                |
|                 |             | time and lower    |                |
|                 |             | transportation    |                |
|                 |             | cost.             |                |
|                 |             |                   |                |
|                 |             | High-end          |                |
|                 |             | restaurants and   |                |
|                 |             | five-star hotels  |                |
|                 |             | prefer to use     |                |
|                 |             | high quality U.S. |                |
|                 |             | products. A lower |                |
|                 |             | U.S. dollar value |                |
|                 |             | helps U.S.        |                |
|                 |             | exports to Hong   |                |
|                 |             | Kong.             |                |
+-----------------+-------------+-------------------+----------------+
| Processed Fruit | 1\. China - | Supplies from     | Local          |
| & Vegetables    | 30%         | China are price   | production is  |
|                 |             | competitive.      | insignificant. |
| Imports         | 2\. U.S. -- | Besides, some     |                |
|                 | 29%         | international     |                |
| US\$325 million |             | brands have       |                |
|                 | 3\.         | operations in     |                |
| 232,993 MT      | Thailand -- | China and their   |                |
|                 | 10%         | exports to Hong   |                |
| Retained        |             | Kong are          |                |
| Imports         |             | considered as     |                |
|                 |             | imports from      |                |
| US\$243million  |             | China.            |                |
|                 |             |                   |                |
| 174,708 MT      |             | Products from the |                |
|                 |             | U.S. are more for |                |
|                 |             | the high-end      |                |
|                 |             | market. Potato    |                |
|                 |             | chips and French  |                |
|                 |             | fries are major   |                |
|                 |             | U.S. export       |                |
|                 |             | categories to     |                |
|                 |             | Hong Kong.        |                |
+-----------------+-------------+-------------------+----------------+
| Tree Nuts       | 1\. Iran -- | 58% of the tree   | No local       |
|                 | 52%         | nuts imported to  | production     |
| Imports         |             | Hong Kong are     |                |
|                 | 2\. U.S. -- | pistachios.       |                |
| US\$376 million | 32%         |                   |                |
|                 |             | Iran is very      |                |
| 109,162 MT      | 3\. Mexico  | strong in         |                |
|                 | -- 3%       | supplying         |                |
| Retained        |             | pistachios,       |                |
| Imports         |             | occupying about   |                |
|                 |             | 97% of total      |                |
| US\$212 million |             | import supplies   |                |
|                 |             | in Hong Kong.     |                |
| 49,241 MT       |             |                   |                |
|                 |             | The U.S. is very  |                |
|                 |             | strong in         |                |
|                 |             | supplying almonds |                |
|                 |             | and hazelnuts.    |                |
|                 |             |                   |                |
|                 |             | Some of the       |                |
|                 |             | imports are       |                |
|                 |             | re-exported to    |                |
|                 |             | China for         |                |
|                 |             | processing.       |                |
+-----------------+-------------+-------------------+----------------+
| **Fruit &       | 1\. U.S. -- | U.S. products are | Local          |
| Vegetable       | 42%         | highly regarded   | companies are  |
| Juices**        |             | in the local      | well           |
|                 | 2\. China   | market.           | established in |
| Imports         | --11%       |                   | the market     |
|                 |             | Products from     | with well      |
| US\$33 million  | 3\.         | China include     | distribution   |
|                 | Australia   | international     | and marketing  |
| 22,811 MT       | -- 8%       | brands            | network.       |
|                 |             | manufactured in   | However, they  |
| Retained        |             | China.            | rarely are     |
| Imports         |             |                   | considered as  |
|                 |             | Australian        | premium        |
| US\$30 million  |             | products are      | products.      |
|                 |             | generally         |                |
| 21,210 MT       |             | perceived as      |                |
|                 |             | natural.          |                |
+-----------------+-------------+-------------------+----------------+
| **Wine**        | 1\. France  | France is the     | Hong Kong does |
|                 | -- 61%      | major supplier    | not have any   |
| Imports         |             | for wine. French  | wine           |
|                 | 2\.         | wine is highly    | production.    |
| US\$330 million | Australia   | regarded in Hong  |                |
|                 | -- 9%       | Kong though       |                |
| 27.4 million    |             | expensive.        |                |
| liters          | 3\. U.K. -- |                   |                |
|                 | 5%          | Hong Kong people  |                |
| Retained        |             | are becoming more |                |
| Imports         | 4\. U.S. -- | familiar with     |                |
|                 | 5%          | California wine.  |                |
| US\$250 million |             |                   |                |
|                 |             | The Hong Kong     |                |
| 20.6 million    |             | Government        |                |
| liters          |             | abolished the tax |                |
|                 |             | on wine in        |                |
|                 |             | February 2008.    |                |
|                 |             | The new policy    |                |
|                 |             | has attracted     |                |
|                 |             | more wine imports |                |
|                 |             | into Hong Kong.   |                |
+-----------------+-------------+-------------------+----------------+

#  SECTION IV. BEST CONSUMER ORIENTED PRODUCT PROSPECTS

  ------- ---------------------------------------------------------------
  Notes : 

  1       95% of Hong Kong food supplies are imported. Since Hong Kong's
          domestic production is nominal the market size in the following
          table is equal to retained imports without taking into account
          local production. U.S. exports to Hong Kong are also based on
          imports minus exports.

  2       Import tariff rate for all food and beverage products in the
          tables are zero except for spirits, which is 100%.

  3       Products listed below are either enjoying a large market import
          value or a significant growth rate for the last 5 years
          (2004-2008). Figures for 2008 are estimated figures.
  ------- ---------------------------------------------------------------

**Top 10 Prospects in 2008/2009**

+----------+---------+--------+-------+--------------+---------------+
| *        | **2008  | **2008 | *     | **Key        | **Market      |
| *Product | R       | Re     | *2004 | Constraints  | Att           |
| Ca       | etained | tained | --    | Over Market  | ractiveness** |
| tegory** | Im      | Imp    | 2008  | D            |               |
|          | ports** | orts** | Av    | evelopment** | **For USA**   |
|          |         |        | erage |              |               |
|          | *       | *      | A     |              |               |
|          | *(MT)** | *(US\$ | nnual |              |               |
|          |         | mill   | Ret   |              |               |
|          |         | ion)** | ained |              |               |
|          |         |        | I     |              |               |
|          |         |        | mport |              |               |
|          |         |        | Gro   |              |               |
|          |         |        | wth** |              |               |
+==========+=========+========+=======+==============+===============+
| **Fish & | Volume  | U      | +6.3% | Fish and     | US fish and   |
| Seafood  | sta     | S\$2.4 |       | seafood      | seafood       |
| Pr       | tistics | b      | (v    | products are | products are  |
| oducts** | not     | illion | alue) | perceived    | perceived to  |
|          | av      |        |       | cleaner and  | be clean and  |
|          | ailable |        |       | safer to eat | of high       |
|          |         |        |       | in Hong      | quality.      |
|          |         |        |       | Kong.        |               |
|          |         |        |       |              | Retained      |
|          |         |        |       | Major        | imports of US |
|          |         |        |       | suppliers    | fish and      |
|          |         |        |       | are Japan    | seafood have  |
|          |         |        |       | (14%),       | grown by over |
|          |         |        |       | Australia    | 28% between   |
|          |         |        |       | (12%), China | 2004 and      |
|          |         |        |       | (12%),       | 2008.         |
|          |         |        |       | Indonesia    |               |
|          |         |        |       | (5%), New    | Many 5-star   |
|          |         |        |       | Zealand (4%) | hotels are    |
|          |         |        |       | and the US   | carrying      |
|          |         |        |       | (4%).        | Alaska        |
|          |         |        |       |              | seafood       |
|          |         |        |       |              | products such |
|          |         |        |       |              | as king       |
|          |         |        |       |              | salmon, king  |
|          |         |        |       |              | crab, snow    |
|          |         |        |       |              | crab, black   |
|          |         |        |       |              | cod and       |
|          |         |        |       |              | halibut. It   |
|          |         |        |       |              | is            |
|          |         |        |       |              | anticipated   |
|          |         |        |       |              | that these    |
|          |         |        |       |              | seafood       |
|          |         |        |       |              | products will |
|          |         |        |       |              | continue to   |
|          |         |        |       |              | be popular    |
|          |         |        |       |              | among HRI     |
|          |         |        |       |              | sector in     |
|          |         |        |       |              | Hong          |
|          |         |        |       |              | Kong[^16].    |
+----------+---------+--------+-------+--------------+---------------+
| **Fresh  | 530,002 | U      | -1.7% | The Hong     | US fresh      |
| Fruit**  | MT      | S\$599 |       | Kong fresh   | fruit are     |
|          |         | m      | (vo   | fruit market | well known of |
|          |         | illion | lume) | had negative | their large   |
|          |         |        |       | volume       | variety, good |
|          |         |        | +4.5% | growth over  | quality and   |
|          |         |        |       | the past 5   | tastes.       |
|          |         |        | (v    | years        |               |
|          |         |        | alue) | because of   | US is the     |
|          |         |        |       | bad crops in | largest       |
|          |         |        |       | some         | supplier      |
|          |         |        |       | categories.  | (25%) of      |
|          |         |        |       |              | fresh fruit   |
|          |         |        |       | Hong Kong    | to Hong Kong, |
|          |         |        |       | consumers    | followed by   |
|          |         |        |       | prefer fresh | Thailand      |
|          |         |        |       | fruit to     | (25%).        |
|          |         |        |       | frozen       |               |
|          |         |        |       | fruit.       | The top US    |
|          |         |        |       | Competition  | fruit exports |
|          |         |        |       | from         | to Hong Kong  |
|          |         |        |       | Thailand and | are citrus    |
|          |         |        |       | China is     | products      |
|          |         |        |       | keen as      | (US\$110      |
|          |         |        |       | these        | million),     |
|          |         |        |       | countries    | grapes        |
|          |         |        |       | supply       | (US\$45       |
|          |         |        |       | tropical     | million),     |
|          |         |        |       | fresh fruit  | apples        |
|          |         |        |       | at           | (US\$37       |
|          |         |        |       | competitive  | million),     |
|          |         |        |       | prices. The  | cherries      |
|          |         |        |       | shorter      | (US\$29       |
|          |         |        |       | travel time  | million),     |
|          |         |        |       | for          | plums, sloes  |
|          |         |        |       | shipments    | & peaches     |
|          |         |        |       | from these   | (US\$15       |
|          |         |        |       | countries to | million) and  |
|          |         |        |       | Hong Kong    | strawberries  |
|          |         |        |       | also render  | (US\$13       |
|          |         |        |       | their        | million).     |
|          |         |        |       | products     | These US      |
|          |         |        |       | "fresh" to   | products will |
|          |         |        |       | Hong Kong    | continue to   |
|          |         |        |       | consumers.   | be popular    |
|          |         |        |       |              | among Hong    |
|          |         |        |       |              | Kong          |
|          |         |        |       |              | co            |
|          |         |        |       |              | nsumers[^17]. |
+----------+---------+--------+-------+--------------+---------------+
| *        | 319,733 | U      | -6.6% | Brazil is    | U.S. exported |
| *Poultry | MT      | S\$604 | (vo   | the leading  | US\$81        |
| Pr       |         | m      | lume) | supplier of  | million worth |
| oducts** |         | illion |       | poultry for  | of chicken    |
|          |         |        | +     | Hong Kong.   | products to   |
|          |         |        | 10.6% | When U.S.    | Hong Kong,    |
|          |         |        | (v    | poultry      | accounting    |
|          |         |        | alue) | imports were | for 9% of the |
|          |         |        |       | temporarily  | market share. |
|          |         |        |       | suspended    |               |
|          |         |        |       | during       | U.S. products |
|          |         |        |       | February 11  | are highly    |
|          |         |        |       | to April 30, | regarded in   |
|          |         |        |       | 2004 due to  | food quality  |
|          |         |        |       | Avian        | and food      |
|          |         |        |       | Influenza    | safety.       |
|          |         |        |       | cases in the |               |
|          |         |        |       | U.S., Brazil | More popular  |
|          |         |        |       | captured     | U.S. chicken  |
|          |         |        |       | much of the  | products      |
|          |         |        |       | U.S. market  | include       |
|          |         |        |       | share.       | chicken wing  |
|          |         |        |       |              | mid joint and |
|          |         |        |       | Though the   | chicken leg   |
|          |         |        |       | ban was      | because of    |
|          |         |        |       | later        | their sizes   |
|          |         |        |       | lifted,      | and quality.  |
|          |         |        |       | Brazil       | These two     |
|          |         |        |       | continues to | products are  |
|          |         |        |       | be the       | particularly  |
|          |         |        |       | largest      | popularly     |
|          |         |        |       | supplier due | among Hong    |
|          |         |        |       | to price     | Kong style    |
|          |         |        |       | advantage of | cafes[^18].   |
|          |         |        |       | its products |               |
|          |         |        |       | and its      |               |
|          |         |        |       | exporters'   |               |
|          |         |        |       | r            |               |
|          |         |        |       | elationships |               |
|          |         |        |       | with Hong    |               |
|          |         |        |       | Kong         |               |
|          |         |        |       | importers.   |               |
|          |         |        |       |              |               |
|          |         |        |       | The reduced  |               |
|          |         |        |       | supplies of  |               |
|          |         |        |       | live         |               |
|          |         |        |       | chickens to  |               |
|          |         |        |       | Hong Kong    |               |
|          |         |        |       | have         |               |
|          |         |        |       | resulted in  |               |
|          |         |        |       | increased    |               |
|          |         |        |       | demand for   |               |
|          |         |        |       | chilled      |               |
|          |         |        |       | whole        |               |
|          |         |        |       | chickens     |               |
|          |         |        |       | from China.  |               |
|          |         |        |       |              |               |
|          |         |        |       | Hong Kong's  |               |
|          |         |        |       | new          |               |
|          |         |        |       | c            |               |
|          |         |        |       | ertification |               |
|          |         |        |       | requirements |               |
|          |         |        |       | for U.S.     |               |
|          |         |        |       | chicken      |               |
|          |         |        |       | feet, which  |               |
|          |         |        |       | took effect  |               |
|          |         |        |       | in May 2005, |               |
|          |         |        |       | has reduced  |               |
|          |         |        |       | U.S. chicken |               |
|          |         |        |       | feet         |               |
|          |         |        |       | supplies to  |               |
|          |         |        |       | Hong Kong.   |               |
|          |         |        |       | By the new   |               |
|          |         |        |       | standard     |               |
|          |         |        |       | requirement, |               |
|          |         |        |       | U.S. chicken |               |
|          |         |        |       | feet are     |               |
|          |         |        |       | required to  |               |
|          |         |        |       | have ante    |               |
|          |         |        |       | mortem and   |               |
|          |         |        |       | post mortem  |               |
|          |         |        |       | inspection.  |               |
+----------+---------+--------+-------+--------------+---------------+
| **Pork** | 179,473 | U      | +2%   | China and    | U.S. exported |
|          | MT      | S\$475 |       | Brazil are   | US\$14.7      |
|          |         | m      | (vo   | the top      | million worth |
|          |         | illion | lume) | suppliers of | of pork to    |
|          |         |        |       | pork to Hong | Hong Kong,    |
|          |         |        | +16%  | Kong because | accounting    |
|          |         |        | (v    | their        | for 4% of the |
|          |         |        | alue) | products are | market share. |
|          |         |        |       | very price   |               |
|          |         |        |       | competitive. | U.S. products |
|          |         |        |       | There is a   | are highly    |
|          |         |        |       | big demand   | regarded for  |
|          |         |        |       | for price    | quality and   |
|          |         |        |       | competitive  | food safety.  |
|          |         |        |       | prepar       |               |
|          |         |        |       | ed/preserved |               |
|          |         |        |       | meatballs    |               |
|          |         |        |       | and other    |               |
|          |         |        |       | products     |               |
|          |         |        |       | typical in   |               |
|          |         |        |       | Chinese      |               |
|          |         |        |       | dishes in    |               |
|          |         |        |       | Chinese      |               |
|          |         |        |       | restaurants, |               |
|          |         |        |       | which are    |               |
|          |         |        |       | made from    |               |
|          |         |        |       | pork. China  |               |
|          |         |        |       | enjoys the   |               |
|          |         |        |       | advantage of |               |
|          |         |        |       | low          |               |
|          |         |        |       | processing   |               |
|          |         |        |       | cost.        |               |
+----------+---------+--------+-------+--------------+---------------+
| **P      | 174,708 | U      | +2%   | China is the | US processed  |
| rocessed | MT      | S\$243 |       | largest      | fruit and     |
| Fruit &  |         | m      | (vo   | supplier     | vegetables    |
| Vege     |         | illion | lume) | (30%),       | are well      |
| tables** |         |        |       | followed by  | known of      |
|          |         |        | +6%   | the US       | their         |
|          |         |        |       | (29%).       | superior      |
|          |         |        | (v    |              | quality and   |
|          |         |        | alue) | Some         | tastes. US    |
|          |         |        |       | i            | processed     |
|          |         |        |       | nternational | fruit and     |
|          |         |        |       | brands have  | vegetables    |
|          |         |        |       | operations   | such as       |
|          |         |        |       | in China and | potatoes,     |
|          |         |        |       | their        | nuts, sweet   |
|          |         |        |       | exports to   | corn,         |
|          |         |        |       | Hong Kong    | mushrooms,    |
|          |         |        |       | are          | peaches and   |
|          |         |        |       | considered   | pineapples    |
|          |         |        |       | as imports   | will continue |
|          |         |        |       | from China.  | to be in      |
|          |         |        |       |              | large demand  |
|          |         |        |       |              | in Hong       |
|          |         |        |       |              | Kong[^19].    |
+----------+---------+--------+-------+--------------+---------------+
| **Beef,  | 72,430  | U      | +14%  | Because of   | U.S. is       |
| Frozen** | MT      | S\$257 | (vo   | BSE cases in | expected to   |
|          |         | m      | lume) | the U.S.,    | export US\$35 |
|          |         | illion |       | Hong Kong    | million worth |
|          |         |        | +28%  | currently    | of beef to    |
|          |         |        | (v    | allows       | Hong Kong in  |
|          |         |        | alue) | boneless     | 2008,         |
|          |         |        |       | beef derived | accounting    |
|          |         |        |       | from cattle  | for 12% of    |
|          |         |        |       | under 30     | the market    |
|          |         |        |       | months of    | share.        |
|          |         |        |       | age from     | Although U.S. |
|          |         |        |       | U.S. E.V     | beef were     |
|          |         |        |       | (Export      | banned entry  |
|          |         |        |       | V            | in Hong Kong  |
|          |         |        |       | erification) | in 2004 and   |
|          |         |        |       | approved     | 2005, Hong    |
|          |         |        |       | plants.      | Kong          |
|          |         |        |       |              | consumers     |
|          |         |        |       | Bone-in beef | still have    |
|          |         |        |       | and variety  | high regards  |
|          |         |        |       | beef from    | for U.S. beef |
|          |         |        |       | the U.S. are | in terms of   |
|          |         |        |       | not yet      | quality and   |
|          |         |        |       | allowed in.  | safety.       |
|          |         |        |       |              |               |
|          |         |        |       | Currently    | More popular  |
|          |         |        |       | only 25      | U.S. beef     |
|          |         |        |       | plants have  | products in   |
|          |         |        |       | been EV      | 2008 include: |
|          |         |        |       | approved and | strip loin,   |
|          |         |        |       | are eligible | rib eye and   |
|          |         |        |       | to export    | ten           |
|          |         |        |       | beef         | derloin[^20]. |
|          |         |        |       | products to  |               |
|          |         |        |       | Hong Kong.   |               |
|          |         |        |       |              |               |
|          |         |        |       | Short U.S.   |               |
|          |         |        |       | beef         |               |
|          |         |        |       | supplies     |               |
|          |         |        |       | make U.S.    |               |
|          |         |        |       | beef very    |               |
|          |         |        |       | expensive.   |               |
|          |         |        |       |              |               |
|          |         |        |       | Brazil beef  |               |
|          |         |        |       | took the     |               |
|          |         |        |       | opportunity  |               |
|          |         |        |       | to gain      |               |
|          |         |        |       | market       |               |
|          |         |        |       | shares.      |               |
|          |         |        |       | Brazil beef  |               |
|          |         |        |       | imports grew |               |
|          |         |        |       | from US\$49  |               |
|          |         |        |       | million in   |               |
|          |         |        |       | 2004 to      |               |
|          |         |        |       | US\$149      |               |
|          |         |        |       | million      |               |
|          |         |        |       | (estimated)  |               |
|          |         |        |       | in 2008.     |               |
+----------+---------+--------+-------+--------------+---------------+
| **Wine** | 20.6    | U      | +15%  | Competition  | U.S. is       |
|          | million | S\$250 | (vo   | is keen in   | expected to   |
|          | liters  | m      | lume) | Hong Kong.   | export US\$15 |
|          |         | illion |       | Major        | million of    |
|          |         |        | +40%  | competitors  | wine to Hong  |
|          |         |        |       | come from    | Kong in 2008, |
|          |         |        | (v    | France and   | accounting    |
|          |         |        | alue) | Australia.   | for 5% of the |
|          |         |        |       | French wine  | market share. |
|          |         |        |       | is           |               |
|          |         |        |       | t            | The HKG       |
|          |         |        |       | raditionally | abolished the |
|          |         |        |       | more popular | import tax on |
|          |         |        |       | in Hong      | wine and beer |
|          |         |        |       | Kong.        | in February   |
|          |         |        |       |              | 2008.         |
|          |         |        |       |              |               |
|          |         |        |       |              | The HRI       |
|          |         |        |       |              | sector in     |
|          |         |        |       |              | Macau is      |
|          |         |        |       |              | growing,      |
|          |         |        |       |              | making it an  |
|          |         |        |       |              | excellent     |
|          |         |        |       |              | opportunity   |
|          |         |        |       |              | for U.S. wine |
|          |         |        |       |              | traders to    |
|          |         |        |       |              | expand their  |
|          |         |        |       |              | exports.      |
|          |         |        |       |              |               |
|          |         |        |       |              | Hong Kong     |
|          |         |        |       |              | consumers are |
|          |         |        |       |              | getting more  |
|          |         |        |       |              | and more      |
|          |         |        |       |              | receptive to  |
|          |         |        |       |              | wine drinking |
|          |         |        |       |              | practice. The |
|          |         |        |       |              | total         |
|          |         |        |       |              | elimination   |
|          |         |        |       |              | of the excise |
|          |         |        |       |              | tax on wine   |
|          |         |        |       |              | would         |
|          |         |        |       |              | probably help |
|          |         |        |       |              | nurture wine  |
|          |         |        |       |              | drinking      |
|          |         |        |       |              | culture in    |
|          |         |        |       |              | Hong Kong.    |
+----------+---------+--------+-------+--------------+---------------+
| **Beer** | 155     | US\$86 | +6%   | China and    | Hong Kong     |
|          | million | m      |       | Korea are    | abolished the |
|          | liters  | illion | (vo   | major        | 20% excise    |
|          |         |        | lume) | suppliers of | tax on beer   |
|          |         |        |       | beer and     | imports and   |
|          |         |        | +6%   | their beer   | created       |
|          |         |        |       | have been    | opportunity   |
|          |         |        | (v    | very price   | for US beer   |
|          |         |        | alue) | competitive. | to gain more  |
|          |         |        |       |              | market shares |
|          |         |        |       |              | in Hong Kong. |
+----------+---------+--------+-------+--------------+---------------+
| **Fruit  | 21,210  | US\$30 | +1%   | Bad citrus   | Given the     |
| &        | MT      | m      |       | crops in     | high quality  |
| V        |         | illion | (vo   | 2007 had     | of US fruit & |
| egetable |         |        | lume) | reduced the  | vegetable     |
| Juices** |         |        |       | supply of US | juices, US    |
|          |         |        | +9%   | citrus       | fruit and     |
|          |         |        |       | juices. But  | vegetable     |
|          |         |        | (v    | the          | juices such   |
|          |         |        | alue) | continued    | as orange     |
|          |         |        |       | demand in    | juices, apple |
|          |         |        |       | Hong Kong    | juices, grape |
|          |         |        |       | enabled a    | juices,       |
|          |         |        |       | healthy      | grapefruit    |
|          |         |        |       | growth next  | juices,       |
|          |         |        |       | year.        | tomato juices |
|          |         |        |       |              | and pineapple |
|          |         |        |       | The US is    | juices are    |
|          |         |        |       | still the    | expected to   |
|          |         |        |       | market       | continue to   |
|          |         |        |       | leader,      | be very       |
|          |         |        |       | exported     | popular in    |
|          |         |        |       | US\$14       | 2009[^21].    |
|          |         |        |       | million      |               |
|          |         |        |       | worth of     |               |
|          |         |        |       | fresh fruit  |               |
|          |         |        |       | juices to    |               |
|          |         |        |       | Hong Kong,   |               |
|          |         |        |       | accounting   |               |
|          |         |        |       | for a market |               |
|          |         |        |       | share of     |               |
|          |         |        |       | 42%.         |               |
+----------+---------+--------+-------+--------------+---------------+
| *        | Sta     | Stat   | Stati | Organic F&B  | As Hong Kong  |
| *Organic | tistics | istics | stics | products are | consumers are |
| Food and | not     | not    | not   | generally    | becoming more |
| Be       | av      | ava    | avai  | 20-40%       | heal          |
| verage** | ailable | ilable | lable | higher in    | th-conscious, |
|          |         |        |       | prices       | the demand    |
|          | (The    |        |       | compared to  | for organic   |
|          | size of |        |       | non-organic  | products will |
|          | the     |        |       | products.    | continue to   |
|          | Hong    |        |       |              | grow in 2009. |
|          | Kong    |        |       | There are    |               |
|          | organic |        |       | many organic | USDA Organic  |
|          | food    |        |       | standards in | enjoys an     |
|          | and     |        |       | the market   | excellent     |
|          | b       |        |       | and the poor | reputation    |
|          | everage |        |       | quality of a | among         |
|          | market  |        |       | country's    | consumers in  |
|          | is      |        |       | organic      | Hong Kong.    |
|          | es      |        |       | products may | Consumers     |
|          | timated |        |       | negatively   | generally     |
|          | at      |        |       | affect the   | have more     |
|          | US\$500 |        |       | image of     | confidence on |
|          | m       |        |       | organic      | USDA Organic  |
|          | illion, |        |       | products     | standards     |
|          | with an |        |       | from all     | than other    |
|          | annual  |        |       | supplying    | countries'.   |
|          | growth  |        |       | countries.   |               |
|          | of      |        |       |              | Grain         |
|          | 10-15   |        |       |              | products,     |
|          | %[^22]) |        |       |              | soybeans,     |
|          |         |        |       |              | cereals,      |
|          |         |        |       |              | oats,         |
|          |         |        |       |              | noodles...etc |
|          |         |        |       |              | are in good   |
|          |         |        |       |              | demand.       |
|          |         |        |       |              |               |
|          |         |        |       |              | Other         |
|          |         |        |       |              | products such |
|          |         |        |       |              | as organic    |
|          |         |        |       |              | meat (beef    |
|          |         |        |       |              | and pork),    |
|          |         |        |       |              | condiments,   |
|          |         |        |       |              | poultry, eggs |
|          |         |        |       |              | etc are       |
|          |         |        |       |              | starting to   |
|          |         |        |       |              | have more     |
|          |         |        |       |              | interest in   |
|          |         |        |       |              | the market.   |
|          |         |        |       |              |               |
|          |         |        |       |              | There is also |
|          |         |        |       |              | a strong      |
|          |         |        |       |              | demand for    |
|          |         |        |       |              | organic       |
|          |         |        |       |              | vegetables    |
|          |         |        |       |              | and fruits,   |
|          |         |        |       |              | organic       |
|          |         |        |       |              | coffee and    |
|          |         |        |       |              | tea           |
|          |         |        |       |              | p             |
|          |         |        |       |              | roducts[^23]. |
+----------+---------+--------+-------+--------------+---------------+

#  

# SECTION V. KEY CONTACTS AND FURTHER INFORMATION

## Post Contact

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@fas.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}

## 

## 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.afcd.gov.hk]{.underline}

## Department to Issue License for Imported Reserved Commodities

Trade & Industry Department

18/F., Trade Department Tower

700 Nathan Road

Kowloon, Hong Kong

Tel: 852-2392-2922

Fax: 852-2789-2491

Web site: [http://www.tid.gov.hk](http://www.tid.gov.hk/)

## Department to Register Health Foods Containing Medicine Ingredients

Department of Health

Pharmaceuticals Registration

Import & Export Control Section

18^th^ Floor, Wu Chung House

213 Queen's Road East, Wanchai, Hong Kong

Tel: 852-2961-8754

Fax: 852-2834-5117

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

## Department to Issue License 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.customs.gov.hk](http://www.customs.gov.hk/)

## 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.ipd.gov.hk](http://www.ipd.gov.hk/)

## Semi-Government Organization Providing Travel Information

Hong Kong Tourist Board

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

18 Whitfield Road, North Point, Hong Kong

Tel: (852) 2807-6543

Fax: (852) 2806-0303

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

## 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

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

# 

[^1]: Source: Website of the Agriculture, Fisheries and Conservation
    Department, Hong Kong SAR Government

[^2]: Source: Calculation based on World Trade Atlas data

[^3]: Consumer Oriented Agricultural Products (COAP) refers to
    agricultural products that require little or no additional
    processing and are generally ready for final consumption at either
    the food retail or food service level. Examples of COAP are: red
    meat, poultry meat, snacks, breakfast cereals, pancake mix, fruits
    and vegetables, fruit and vegetable juices, tree nuts, wine, beer,
    cut flowers and pet foods. Source of data: Hong Kong Census & Stat.
    Dept.

[^4]: Retained imports.= Gross Imports -- Re-exports

[^5]: Estimates based on analysis of trade data, trade trends, economic
    forecasts and discussions with F&B traders

[^6]: Source: BICO trade statistics for U.S. food exports to Hong Kong,
    FAS website

[^7]: Based on latest available statistics (2005) from the Hong Kong
    Census and Statistics Department

[^8]: Website of the Dairy Farm Group

[^9]: Website of the Cheung Kong Group and Hutchison Whampoa Group

[^10]: Website of CR Vanguard supermarket

[^11]: Website of Dah Chong Hong

[^12]: Annual Report of AEON (HK) Stores Company Ltd.

[^13]: Website of the Dairy Farm Group

[^14]: Website of the Li & Fung Group

[^15]: Website of Yu Kee Store

[^16]: In discussion with the Alaska Seafood Marketing Institute

[^17]: In discussions with various US fruit cooperators in Hong Kong

[^18]: Source: Hong Kong Office of USA Poultry and Egg Export Council

[^19]: Analysis of Hong Kong F&B import statistics and discussions with
    US fruit & vegetable cooperators in Hong Kong

[^20]: Interview with one of the largest local beef importers

[^21]: Analysis of Hong Kong F&B import statistics and discussions with
    US fruit & vegetable cooperators in Hong Kong

[^22]: In discussions with leading Hong Kong organic food importers and
    retailers

[^23]: In discussions with leading Hong Kong organic food importers and
    retailers