Last week, Export Connect held our first online forum – ‘Hong Kong Market Insights & Opportunities’ in collaboration with the Hong Kong Trade Development Council (HKTDC) and leading Hong Kong high-end retailer, City’super group.
With over 200 registrants, including international participants, of which 80% are current exporters, 55% already export to Hong Kong and 60% food and agricultural businesses, it is encouraging to see that many businesses are still working away despite a pandemic that has slowed down much of the world over the last six months or so.
City’super is a retail chain located in Hong Kong, Taiwan and China (Shanghai specifically) and is positioned as a lifestyle specialty store, with the core format being upmarket supermarkets selling mainly fresh produce and groceries.
Under the City’super group is:
- City’super – specialty food market with stores in Hong Kong, Shanghai and Taiwan
- LOG-ON – speciality lifestyle product store located in Hong Kong, Shanghai and Taiwan
- CookedDeli – food and beverage food court located in Hong Kong
The City’super brand is all about bringing food diversity and international food culture into Hong Kong, a city where over 95% of food items are imported. For City’super, 100% of their food items are imported, from fresh produce through to dry goods. It is really a foodie wonderland, with a focus on meeting the demands of customers looking for fresh, organic and health food items.
The general City’super customers are food lovers, living a healthy lifestyle and are supporters of the go-green campaign in Hong Kong. They tend to be into experiential activities and are willing to try new products that fit within the premium or affluent market. Demographic-wise, 65% of City’supers’ customers are female.
The retailer has approx. 20,000 unique SKU’s in stock with 53% of overall sales based around the fresh food side of the business including fruit, vegetables, meat, seafood, deli, cheeses, bakery items and ready to eat items. The remaining 47% is based on the dry goods section including grocery, condiments, and wine.
Hong Kong Food Market Insights
Hong Kong is an interesting market – e-commerce sales only make up a small percentage of grocery sales as it is simply easy to walk out of your apartment and be at a supermarket or grocers within minutes. Some interesting points on the Hong Kong market include:
- 7.5 million population and a GDP per capita of US $48,938
- Retail sales of packaged food in 2019 was worth US$7.5 billion
- Retail volume of fresh food in 2019 was 3.3 million tonnes
- Grocery retail value in 2019 was US $14.6 billion
- Food & beverage e-commerce sales in 2019 US $243 million
- Food & beverage import value from Australia US $1.12 billion or the equivalent of 5% of all agricultural products imported.
There is consistent sales growth for food & beverages year on year in the Hong Kong market which makes it attractive to new and existing exporters.
Impacts of Global and Domestic Developments
The recent global and domestic developments have impacted sales and the supply chain at City’super. Mr Woo said that “food business (retail) is doing quite ok”, while the lifestyle and food court (food service) arms of the business have been affected. He noted that “fresh food can overcome the downturn of the other categories”, noting that while consumers were willing to pay increased costs to cover shipping, shipping costs have come back down and are mostly back to normal.
Mr Woo also commented on the flour situation in Hong Kong saying that “every batch that comes in would be gone in practically an hour”, a similar experience to what consumers found the world over.
Australian Products Making Waves
We mentioned earlier that City’super stocks around 20,000 unique SKUs or products but how many of those are Australian brands? Mr Woo notes that City’super carries over 750 Australian SKUs as a whole and represents 3% – 4% of the purchase. He mentioned that they sell “a lot of Australian beef, Australian Wagyu is very popular in Hong Kong, and also we sell quite a lot of Australian fruit and vegetables. Customers like organic produce from Australia.”
Seafood is another popular Australian product category, particularly Toothfish while other popular products are organic eggs, frozen products, dairy products, and wine, “Penfolds is very big in Hong Kong”, as are boutique wines, Mr Woo made a point to mention. With over 180 SKUs of Australian wine in the City’super cellars, it is certainly a popular product amongst consumers.
Movers and Shakers
Organic and healthy foods are some of the best moving categories and show the strongest growth with customers happy to pay more for the product. Australian organic produce is very welcome.
Supply and Logistics Concerns
Something that many businesses looking to export come up against is how to supply retail outlets in other countries. For Mr Woo, it is all about being logistically viable but notes that “product quality comes first”.
The company receives 25 x 20ft container loads via sea of dry goods and 21 air shipments of fresh and perishable goods – weekly. For fresher products, it is viable to export a large range, but smaller volume of SKUs, while for dry foods, a higher volume is required to gain economies of scale. It is in these situations where working with a local distributor is more beneficial than direct contracts. Direct imports are generally more suited to those exporters willing to provide exclusivity to City’super.
Marketing is Best Done Face to Face
All businesses are aware that it takes a fair amount of marketing and promotion to get your products in front of the consumer but what works in one country, often does not work in another. In Hong Kong, it can take many months to build a reputation with customers, particularly for new entrants into the market. Mr Woo told the online forum attendees that promotional activity such as regular tastings held by a representative of the manufacturer or supplier is roughly five times more effective than events held by City’super staff members. “We welcome suppliers to come into stores for demonstrations”, he noted, with many suppliers attending stores two to three times a year to build that reputation.
The Bottom Line
There was a lot of information made available for exporters to think about coming out of the online forum from Mr Woo and Ms Shek, but one point was really strong “whether you’re premium or mass market, quality is the bottom line.”
The first online forum held by Export Connect was received very well and is sure to be repeated in the future.
We hope you’ve found this overview of our recent online forum on exporting into Hong Kong helpful. As always, if you’ve got any questions or want to discuss export opportunities for your company, feel free to drop us a line at Export Connect – we’d love to hear from you.