Steve Bachmann





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The Wine Collector

Practical wine collecting advice from Steve Bachmann, Vinfolio's CEO

 
26
Feb
2008

Hong Kong eliminates duty on wine

Categories: Asia , Market-related

The Hong Kong government just dropped duties on all alcoholic beverages, effective immediately (see story).  The duty on wine had been 40% after having been cut from 80% the prior year.  Financial Secretary, John Tsang, is betting on the behavior of free markets to turn this into an economic win for Hong Kong. 

Hong Kong destined to be Asian trading hub for wine? 

By forgoing approximately US$72 million a year in duties on all alcoholic beverages, Tsang commented that he expects wine-related trading activity may increase by as much as US$500 million.  In particular, the historic status of Hong Kong as a trading hub has been reinforced and this move places Hong Kong in a position to capitalize on its current lead as the center of wine in Asia.  Meanwhile, neighboring Macau, the new center of global gambling, has a 15% wine duty and mainland China's wine duty remains at around 50% (plus bottles are at risk of being "sampled" -- which effectively kills importing small quantities of rare wines).

Other Implications

  1. More foreign wine business will open offices and expand activity in Hong Kong.  As previously noted, I'm traveling to Hong Kong on a previously scheduled trip this weekend to explore business opportunities.  Acker Merrall & Condit just announced a few days ago that it is launching wine auctions in Hong Kong in May.  The London International Vintners Exchange (Livex) has indicated its intentions to open an office if duties were dropped.
  2. Further upward pressure on fine wine prices - In April of last year, I wrote a post titled "Global factors affecting trend for higher fine wine prices."  In it, I noted that the lowering of duties will drive more demand, which in a relatively fixed supply market for fine wine, supports longer term price rises.  While Hong Kong's economy is relatively small, it could easily become the "funnel" for wine purchases from wine collectors in nearby high duty countries.
  3. Hong Kong wine storage facilities will boom - Hong Kong has limited local storage facilities for wine collectors. In fact, many local wine collectors are known to store their wine in London.  Expect much of this wine to return to Hong Kong for storage where it will be more easily accessible by its owners.  Hong Kong should also become the logical wine storage depot for wine collectors in nearby countries for the same reason.
What else do you think will happen?  Please add a comment to this post.

7 comments   Permalink   links to this post

7 comments:

WOW! The implications for U.S. export are huge. BTW: Any leads on Hong Kong importers/distributors?

Posted by Oenophilus at Wednesday February 27, 2008

Dear Mr. Bachmann:

Please open a storage facility there. Wine has always been huge in Hong Kong but most people just don't have the space to cellar hundred or thousands bottles of wine. With the tax cut, I can see a lot of room for growth for wine storage business.

I, for one, will use this service if Vinfolio establishes a branch there. My dad, who lives in Hong Kong, needs additional room to cellar his bottles. I can ship him the wines that I have been cellaring for him at Vinfolio SF. I can imagine myself ordering wines for him to take delivery at Vinfolio HK, and vice versa.

Posted by hipo at Wednesday February 27, 2008

1. Based in Hong Kong since 1995, I'm looking for some decent US wineries. If you have some very good contacts, let me know.

2. I have a very large warehouse where I store my own fine wines; if you need some infos, email me or visit : www.vinotecahk.com

3. Mr. Bachmann, email me when you are in HK !
Regards,
Vinoteca

Posted by Vinoteca at Wednesday February 27, 2008

I have been exporting California wine to Hong Kong for the past 8 years. The high tax rate has always been one of the major hurdle for enjoying fine wine in Hong Kong at a reasonable price.

This indeed is the first step toward making Hong Kong a major hub for wine trade in Asia beside Japan. There are several reasons for that:

1) Hong Kong is a relatively mature wine market in Asia (save Japan). Average consumption of wine has been on the rising trend and became mainstream.
2) The general level of wine service professional has increased significantly over the years. There will be 2 local wine professionals getting their master of wine title this year.
3) Restaurants. Hong Kong is known for its culinary excellence rivalling the best in the world. The consumption of wine (especially red wine) in Restaurants is becoming a norm over the years. Yes, it is not uncommon to see customers pairing first growth bordeaux with chinese food. For those who live in US, Chinese food in HK is not the same stuff you have in US. Think French Laundry, Alinea, Daniel, equivalent of food quality.

Then the customer pain point.

1) Storage. Think New York City or Tokyo. In home storage is always a challenge. Having a 200 bottle Eurocave is probably pushing the limit to what a typical wine lover can afford.
2) Efficient Service. Hong Kong is a city that focus on service with high efficiency. A typical middle class family have 1-2 in-home maid to take care of everything from house cleaning to cooking to babysitting. People living a busy life like to avoid chores so that they can be as efficient as possible. I would imagine a just-in-time wine service. Let's say I am having dinner with an important client tonight. My wine advisor, who also oversee my inventory stored in a centrally located warehouse, gets an SMS or VM the day before the dinner and he/she will examine the dinner menu and prepare the wine (chilled / decant hours in advance if needed) so that my client and I will have the best experience, just like what you would do at home for dinner parties. As mentioned earlier, most people's home are too small for hosting dinner parties, so the avenue of choice is usually at a restaurant or at the country club.

Should the country clubs become the next beachhead for fine wine service in Hong Kong? I wouldn't be surprised if the Jockey Club is looking into this opportunity to provide better service to their client and improve client visit frequency and build long term loyalty and engagement to differentiate themselves from the other competitors.

Posted by Richard at Monday April 7, 2008

I have been exporting California wine to Hong Kong for the past 8 years. The high tax rate has always been one of the major hurdle for enjoying fine wine in Hong Kong at a reasonable price.

This indeed is the first step toward making Hong Kong a major hub for wine trade in Asia beside Japan. There are several reasons for that:

1) Hong Kong is a relatively mature wine market in Asia (save Japan). Average consumption of wine has been on the rising trend and became mainstream.
2) The general level of wine service professional has increased significantly over the years. There will be 2 local wine professionals getting their master of wine title this year.
3) Restaurants. Hong Kong is known for its culinary excellence rivalling the best in the world. The consumption of wine (especially red wine) in Restaurants is becoming a norm over the years. Yes, it is not uncommon to see customers pairing first growth bordeaux with chinese food. For those who live in US, Chinese food in HK is not the same stuff you have in US. Think French Laundry, Alinea, Daniel, equivalent of food quality.

Then the customer pain point.

1) Storage. Think New York City or Tokyo. In home storage is always a challenge. Having a 200 bottle Eurocave is probably pushing the limit to what a typical wine lover can afford.
2) Efficient Service. Hong Kong is a city that focus on service with high efficiency. A typical middle class family have 1-2 in-home maid to take care of everything from house cleaning to cooking to babysitting. People living a busy life like to avoid chores so that they can be as efficient as possible. I would imagine a just-in-time wine service. Let's say I am having dinner with an important client tonight. My wine advisor, who also oversee my inventory stored in a centrally located warehouse, gets an SMS or VM the day before the dinner and he/she will examine the dinner menu and prepare the wine (chilled / decant hours in advance if needed) so that my client and I will have the best experience, just like what you would do at home for dinner parties. As mentioned earlier, most people's home are too small for hosting dinner parties, so the avenue of choice is usually at a restaurant or at the country club.

Should the country clubs become the next beachhead for fine wine service in Hong Kong? I wouldn't be surprised if the Jockey Club is looking into this opportunity to provide better service to their client and improve client visit frequency and build long term loyalty and engagement to differentiate themselves from the other competitors.

Posted by Richard at Monday April 7, 2008

I have been exporting California wine to Hong Kong for the past 8 years. The high tax rate has always been one of the major hurdle for enjoying fine wine in Hong Kong at a reasonable price.

This indeed is the first step toward making Hong Kong a major hub for wine trade in Asia beside Japan. There are several reasons for that:

1) Hong Kong is a relatively mature wine market in Asia (save Japan). Average consumption of wine has been on the rising trend and became mainstream.
2) The general level of wine service professional has increased significantly over the years. There will be 2 local wine professionals getting their master of wine title this year.
3) Restaurants. Hong Kong is known for its culinary excellence rivalling the best in the world. The consumption of wine (especially red wine) in Restaurants is becoming a norm over the years. Yes, it is not uncommon to see customers pairing first growth bordeaux with chinese food. For those who live in US, Chinese food in HK is not the same stuff you have in US. Think French Laundry, Alinea, Daniel, equivalent of food quality.

Then the customer pain point.

1) Storage. Think New York City or Tokyo. In home storage is always a challenge. Having a 200 bottle Eurocave is probably pushing the limit to what a typical wine lover can afford.
2) Efficient Service. Hong Kong is a city that focus on service with high efficiency. A typical middle class family have 1-2 in-home maid to take care of everything from house cleaning to cooking to babysitting. People living a busy life like to avoid chores so that they can be as efficient as possible. I would imagine a just-in-time wine service. Let's say I am having dinner with an important client tonight. My wine advisor, who also oversee my inventory stored in a centrally located warehouse, gets an SMS or VM the day before the dinner and he/she will examine the dinner menu and prepare the wine (chilled / decant hours in advance if needed) so that my client and I will have the best experience, just like what you would do at home for dinner parties. As mentioned earlier, most people's home are too small for hosting dinner parties, so the avenue of choice is usually at a restaurant or at the country club.

Should the country clubs become the next beachhead for fine wine service in Hong Kong? I wouldn't be surprised if the Jockey Club is looking into this opportunity to provide better service to their client and improve client visit frequency and build long term loyalty and engagement to differentiate themselves from the other competitors.

Posted by Richard at Monday April 7, 2008

Any one seen any INDIAN wines being imported in Hong Kong...

Posted by sachin at Wednesday December 31, 2008






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