Things are looking up in Hong Kong! In early February 2023, the border between China and Hong Kong fully reopened. This is set to spark an enormous boost to the region’s tourism and hospitality industries, and will provide much-needed support for the economy following three years of closure during the COVID-19 pandemic, which saw GDP shrink by 3.5% in 2022 – its third contraction in just four years. This move is also set to boost domestic consumer confidence, encouraging more spending on a range of categories. So, with Hong Kong having re-opened, what opportunities are available for Australian food and beverage exporters? Let’s take a look!
- Dependent on Foreign Food Supply
Of course, a country that is self-sufficient when it comes to food supply creates a limited market opportunity. But, when we look at a market like Hong Kong, the USDA estimates that the region imports 95% of its food and beverage products. This comes mainly due to the fact that domestic farming and production capacities are limited, which creates room for Australian exporters to fill vital gaps in Hong Kong’s food supply chain. What’s more, an overwhelming majority of consumers prefer to buy international over local brands, reflected in the growing number of global e-commerce sites and supermarket chains.
2. Positive Perceptions of Australian Produce
Australian food products are known around the world as some of the best in the industry. And Hong Kong is no exception! Food safety has become an increasingly important factor in consumer buying decisions as of late, driven by a rise in domestic food safety scandals and the emergence of the COVID-19 pandemic. Food quality is also a primary concern, and one that is only increasing as the effects of the pandemic fade. Meanwhile, Australian produce is recognised as highly reliable, fresh and clean, owing to our clean and green environment. Plus, around 100,000 Australians are currently living in Hong Kong, creating a market for Australian produce among the large expat population.
In 2022, Coles joined forces with Hong Kong supermarket chain U Select, with the deal seeing hundreds of Australian made products, from oats and coffee to plant-based milks, make their way onto the shelves of dozens of Hong Kong stores. So, with consumers already getting a taste of what Australia has to offer, opportunities for more Australian exports to the region are only set to grow!
3. A Wealthy and Sophisticated Market
Despite technically being an administrative region of China, Hong Kong fares considerably better on the wealth scale. While China as a whole maintains a GDP per capita of approximately US$12,500, Hong Kong surpasses this figure by almost four-fold, at US$49,700. This makes Hong Kong one of the top 15 wealthiest countries globally based on GDP per capita. This translates into a relatively sophisticated consumer base with high spending power and an eagerness to try new products. In particular, wealthy consumers are driving rising demand for luxury food and beverage products, especially those from Western markets. Among the opportunities for Australian luxury food exports are seafoods, including bluefin tuna, rock lobster and abalone, agricultural produce including wagyu beef, truffles and mushrooms, as well as alcohol, especially wine and spirits.
4. Open for Business
Hong Kong has long been ranked among the world’s freest economies, topping Heritage’s Economic Freedom Index for 25 years up until 2019, when the region was removed from the index due to the undoubtable influence of China and growing socio-political tensions which have threatened the region’s autonomy. Nevertheless, Hong Kong remains distinctive from China, with largely different trade policies. Unlike China, the region maintains a strong free trade policy with minimal barriers to trade, including no customs tariff and minimal import and export licensing requirements.
As COVID-19 restrictions have eased over the past few months, more and more businesses are also open for business in the literal sense. The proportion of residents reporting an increase in their incomes has risen to 15%, and more and more people are optimistic that the threat of COVID-19 will disappear by mid-2022. This is translating into better consumer confidence, with 24% of consumers claiming to be spending more on a number of daily product categories, versus 12% who stated they’re spending less. Business sentiment is also strong, with almost 50% of businesses expecting a rise in their annual turnover.
5. Strong Trade Ties with the Australian Economy
As we’ve seen, Hong Kong is a highly free and open economy. This extends to Australia, with the Australia-Hong Kong Free Trade Agreement (A-HKFTA) signed fairly recently in January 2020. Australian goods can access Hong Kong duty-free, which is already benefiting producers of Australia’s top exports to Hong Kong, including those who produce fruit and nuts, meat, alcoholic beverages and crustaceans. While excise duties do exist for alcohol products, there’s no doubt that for the most part, Hong Kong is an attractive market when breaking down export costs.
6. A Gateway into Dozens of Asian Economies
‘Location, location location’– it’s just as important in trade as it is in real estate! Hong Kong is situated in an ideal location in Asia, which allows businesses to tap into a world of opportunities in both Hong Kong and beyond, especially China and the North Asia region. But it’s not just Hong Kong’s location that makes it an attractive export hub–it also houses a superb logistics network, which is ranked 12 globally. This not only ensures efficient export activity, but also means that your goods can be transported efficiently within the Hong Kong market, saving both time and money for exporters.
7. Opportunities in the Health and Sustainability Space
Mirroring global trends, consumers in Hong Kong are becoming more and more environmentally conscious. For instance, an overwhelming 90% of the population have expressed a dislike for plastic packaging, while 70% choose to buy from brands that do without extra packaging. The global shift towards health and wellness is also evident, with products labelled as sugar-free and organic experiencing growth, as well as product categories such as nutritional supplements. In fact, 49% of consumers say that they’re expecting to increase their spending on health and wellness products in coming years. The population is increasingly demanding functional foods, including gluten-free, lactose-free and other allergen-free foods, as well as functional products containing beneficial ingredients such as polyunsaturated fatty acids, proteins, vitamin D, prebiotics and probiotics.
8. Consumer Demand for Convenience Foods on the Rise
Hong Kong is among the most urbanised regions in the world, with 100% of its population living in urban areas. This has had a profound impact on consumer purchasing behaviours. Urban professionals in the city lead hectic lifestyles, making them highly time-poor. The result? A substantial demand for convenience foods! On the one hand, Hong Kong consumers are much more likely than their global counterparts to eat out at restaurants and cafes, and this isn’t necessarily reserved for weekends. On the other, when eating at home, consumers will often order food for takeaway or pick-up, or prepare ready meals.
This never-ending pursuit of convenience has also boosted the growth of e-commerce platforms. While e-commerce growth during the pandemic was largely fuelled by necessity, it has seen permanent shifts in the way consumers shop, with the F&B e-commerce market experiencing 60.5% year-on-year growth in 2020, and 14.2% in 2021. With consumers now much more familiar with e-commerce, these effects are set to stay.
Now, we’ve explored the reasons that make Hong Kong attractive for Australian exporters. But of course, no market is without its challenges. In recent years, the market has been plagued by socio-political unrest. Hong Kong’s GDP growth has also lagged behind its Asian peers in the past few years. This trend, if prolonged, is likely to reduce demand for Australian exports, especially those in the food and beverage sector. The local workforce also shrank by 140,000 in the past few years, mainly fuelled by the exodus of expats during the pandemic, dramatically reducing the region’s total consumer base.
Another risk to look out for is China’s growing influence in the region. While Hong Kong still remains distinct from mainland China in many regards with the ‘one country, two systems’ principle in place, recent changes are significantly undermining the region’s autonomy, and this may mean that the legal and business risks formerly limited to mainland China spread to Hong Kong.
And with that, we’ll wrap-up our look at the Hong Kong market! It’s an exciting time for Australian exporters, with the Hong Kong economy finally opening up after years of closure. As tourists and expats return to the city, and the purchasing power and optimism of local residents rises, this is set to provide a much-needed boost to the economy, especially the food and beverage sector. Hong Kong’s dependency on foreign food supply and strong inclination towards Australian foods among expats and locals alike boost the opportunities available for exporters. A wealthy and sophisticated market is driving demand for high-quality Australian foods and beverages, as well as functional and sustainable foods. The city’s busy urban consumer base is also creating huge demand for convenient, ready-to-eat foods, and supporting the foodservice sector. Plus, the low barriers to entry can’t be ignored, with the Australia-Hong Kong Free Trade Agreement providing duty-free access for most products.
We hope you’ve found these insights on the Hong Kong market 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.