Hong Kong & Macau Market Profiles

Market Overview:

Euromonitor reports that Hong Kong's economy was already in a technical recession prior to the advent of the Covid 19 virus. Months of domestic civil unrest, a sharp economic downturn in China and spillovers from the trade war between China and the United States, are hampering the economy in 2019. Then in February 2020 an outbreak of the coronavirus hit Hong Kong and increased distrust of mainland China and put an already exhausted and nervous population on edge.

Experts feel that the economy will continue into recession this year at the deepest rate since Asian financial crisis in 1997-1998, as the effects of domestic abatement measures and weaker growth in China will weigh on the economy.  Toward the end of the year recession may reach nearly -4% in 2020 with the economy forecast to grow 3.5% in 2021.

Hong Kong has largely phased out its manufacturing sector, relying instead on the service sector.  In the medium term, large-scale infrastructure projects and a rise in real wages will drive domestic demand.  The city has significant advantages for further development in industries such as medical services, education services, innovation and technology, testing and certification services and environmental industries.

Hong Kong is one of the world's largest recipients of foreign direct investment (FDI). The total stock of inward direct investment is more than five times greater than Hong Kong's GDP.  Mainland China alone accounts for nearly a third of this total.  Hong Kong is also a key offshore capital-raising center for Chinese enterprises.  Hong Kong, China has signed free trade agreements with Chile, New Zealand, and Australia, Association of Southeast Asian Nations (ASEAN) and European Free Trade Association (EFTA) and hopes to conclude an agreement with Taiwan.  The city-state also hopes to join the Asian-China Free Trade Agreement.

Population reached 7.5 million in 2019, up from 6.7 million in 2000.  Most population gains are the result of immigration.  The number entering the country soared in the 1990s but fell over the course of the next decade. More than four-fifths of all immigrants come from mainland China.  The median age in 2018 was 44.6 years and is steadily rising. If present trends continue, the number of people aged 65 and over will account for almost third of the city’s population by 2030.

The government faces increasing spending pressures as a result of population ageing.  The labor force could peak in just the next year or two.  To address this constraint, the government is implementing policies to boost labor force participation and improve the quality of the workforce. Additional programs to attract immigrants are also being introduced.  

USDA’s Foreign Agricultural Service (FAS) Agricultural Trade Office (ATO) in Hong Kong, hereinafter referred to as “Post” reports Hong Kong is now the 6th largest export market for U.S. consumer-oriented agricultural products by value; having been surpassed by China in 2019.  With a dynamic food culture, sophisticated and affluent buyers, and a world-class logistical infrastructure, Hong Kong is an attractive market for innovative U.S. food and beverage products as well as a gateway to the region. 

In addition to being a dynamic market, Hong Kong is also a trading hub where buyers make purchasing decisions for a vast range of consumer-oriented products that are transshipped to China and other parts of Asia. Most of Macau’s food imports are purchased, consolidated, and shipped via Hong Kong.

Post advises that the U.S. has advantages and challenges in the Hong Kong food market.

Advantages: 

  • Hong Kong is one of the top markets in the world for food and beverages, processed, fresh, and frozen gourmet products
  • Hong Kong is a major trading hub where buyers make purchasing decisions for a vast range of consumer-oriented products that are transshipped to China and other parts of Asia
  • U.S. food products enjoy an excellent reputation among Hong Kong consumers, as they are renowned as high quality and safe
  • Hong Kong is a quality and trend-driven market, so price is not always the most important factor for food and beverage purchases

Challenges:

  • Transportation time and costs, combined with U.S. products’ availability and seasonality (e.g. fresh produce) can make them less competitive than products available from regional suppliers such as China, Australia, and New Zealand
  • The importance of Hong Kong as a transshipment point and buying center for regional markets is not widely known to U.S. exporters
  • Strengthening U.S. dollar will make U.S. products less price competitive
  • Hong Kong labeling requirements and residue standards can impact trade

U.S. exports of consumer-oriented products to Hong Kong reached US$2.8 billion in 2019, a massive decline of 25% from that of 2018.  That number is over 96% of the agricultural total.  Hong Kong has also dropped to the 10th largest export market from the U.S. for processed foods totaling US$899.2 million in 2019, a significant decrease of 17% from the prior year.  Top U.S. exports of processed food products to Hong Kong in 2019 included:

  • Food Preparations
  • Prepared/Preserved Meats
  • Beer and Wine
  • Prepared/Preserved Seafood
  • Dog and Cat Food
  • Processed Vegetables and Pulses
  • Snack Foods
  • Chocolate and Confectionery

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in Hong Kong reached US$7.5 billion in 2019.  That represents a growth rate of 19.1% or US$1.2 billion since 2015.  By the year 2024 the retail sales in the packaged food market in Hong Kong is expected to reach US$9.8 billion, a growth rate of 23.9% and nearly US$1.9 billion.  High growth products in the forecast include:

  • Dairy products
  • Baked goods
  • Baby food
  • Savory snacks
  • Breakfast cereals
  • Soups
  • Sauces, dressings and condiments
  • Processed meat and seafood
  • Ice cream and frozen desserts

Post reports that in 2018, Hong Kong’s retail food sector sales rose 4.2% to US$12.8 billion.  The Hong Kong food retail market is made up of supermarkets, convenience stores, and traditional markets.  Supermarkets account for nearly 56% of retail food sales.  Major supermarkets include Wellcome, ParknShop, DCH Food Mart, U-Select, CitySuper, CR Vanguard, AEON, YATA, SOGO and APITA.  Major convenience stores are 7-Eleven and Circle K. 

There are more than 800 supermarkets, 1,300 convenience stores and over 100 traditional markets in Hong Kong, making food shopping very convenient.  Online food sales were US$167 million in 2018.  This new form of shopping is expected to expand as rents rise, more product varieties become available on e-commerce platforms and consumer confidence and trust in online stores grows.

Euromonitor reports that with intense protests in Hong Kong affecting local consumers’ weekend routines and their emotions, many consumers turned to grocery retailers for daily necessities in 2019, boosting demand for grocery products at supermarkets.  Many Hong Kong consumers shop and dine out during the weekend and on bank holidays for leisure.  However, because of the outbreak of the anti-extradition law amendment bill movement in Hong Kong in 2019, many shops and restaurants were closed at weekends, disrupting the normal routines of many consumers.  Also, the protests brought a gloomy atmosphere to society, making shopping or dinning out difficult to enjoy for some consumers.  Consequently, many consumers chose to stay at home during weekends and public holidays and shopped for daily necessities from supermarkets, which resulted in increased demand for consumer goods through this channel in 2019.

Many consumers went early to supermarkets during the weekends before the protests started in order to purchase fresh food or staples for preparing meals at home and avoid the disruption. This shift in consumer behavior and the resulting higher local consumption enabled supermarkets in Hong Kong to record decent value growth in 2019.

According to Euromonitor economic uncertainty during the last year has caused consumers in Hong Kong to be more price-sensitive, bringing the concept of “supermarkets must be economical” back into consumers’ minds.  The US-China trade war and the protests in Hong Kong contributed to ongoing economic uncertainty in 2019, followed by low consumer confidence.  Against this backdrop, consumers have become more price-sensitive and cost-conscious.

In order to address consumers’ changing sentiment, retailers have aggressively launched promotional campaigns, ranging from deep price cuts to product substitution.  For example, AEON regularly hosts Super Day on which customers can shop for fresh food at all AEON stores with Super Day discounts every Wednesday.  In some organic categories, some supermarkets have substituted premium products with more affordable options.  With massive marketing efforts, supermarkets have successfully created the perception among the general public that “supermarkets are economical and always think for consumers”.  This has had an impact on consumers’ purchasing process in that it has become more likely for customers to choose retailers they think of as more economical during the economic uncertainty.

Despite the slight drop in its number of stores and its value share, Wellcome was able to maintain its position as the largest player in supermarkets in 2019. Wellcome’s stores have remained relatively stable amid economic uncertainty in Hong Kong.  High accessibility and visibility to consumers have contributed to Wellcome’s lead.  In addition to its extensive store network, it has also started installing in-store self-checkout machines which has helped Wellcome to consolidate its branding as the leading supermarket in Hong Kong.  Over the forecast period, Wellcome is expected to be more proactive and aggressive in terms of upgrading its in-store digital infrastructure to further enhance consumers’ shopping experience.

AS Watson Group, the largest supermarket company owning several banners in Hong Kong has shifted its focus from mass to premium supermarkets.  There was a sharp decrease in store number and value sales for AS Watson Group’s flagship mass supermarket, ParknShop, while its premium supermarkets, Fusion and TASTE, expanded in both store number and value share.  Fusion recorded the strongest growth in store number and value share among all supermarkets in Hong Kong during the review period. This tactical switch aligns with AS Watson Group’s corporate strategy on controlling and boosting profit margins. The AS Watson Group is expected to pull more resources into its premium supermarkets from mass ones over the forecast period.  Nevertheless, given the economic environment in Hong Kong, premiumization may not be a good way for supermarket chains to pursue growth.

Although Hong Kong supermarkets are dominated by big players, smaller players have started to gain more popularity.  Smaller players grew in terms of both store number and value sales in 2019.  Among these players, there are several Japanese supermarkets that have actively engaged with customers through new product mixes and new store designs, gaining popular attention.  For instance, in late 2018, new supermarket SODA Mall was launched in Mong Kok, a main business district in Hong Kong, adopting the concept of a total retail store selling fresh food, home care merchandise, organic goods, and health and wellness products.  The supermarket is decorated with a minimalist design in wood color, offering an ambience of relaxation and freshness.  

Euromonitor has reported that facing numerous challenges including fierce competition and high expectations from consumers, convenience store players continuously reinvent themselves to stay competitive in Hong Kong.  Firstly, they remain committed to their position as consumers’ go-to destination for both goods and services through the continuous development of convenience services.  Various players stay focused on improving the customer’s experience through new in-store offerings such as pick-up services.  

For example, following in the footsteps of 7-Eleven in collaborating with delivery companies, Circle K has started to develop similar services by partnering with SF Express, a Hong Kong-founded delivery giant in Greater China, to set up EF Lockers at selected stores for self-collection by consumers.  Secondly, retailers continue to invest in digital initiatives to appeal to Hong Kong’s digitally-savvy consumers.  For instance, Circle K has continuously drawn traffic into its stores through its OK Stamp It mobile app, a customer loyalty program through its online-to-offline (O2O) platform launched in 2016.  The retailer has continued to invest in the app with the expectation that the O2O business model will drive better results than its peers.

In 2019, 7-Eleven continued to dominate convenience stores, registering positive value sales growth, slightly increasing its value share, and positioning itself ahead of other brands such as Circle K and VanGo.  Its dominance is primarily due to its wide store network in Hong Kong. During 2019, its outlets highly outnumbered those of the second largest brand, Circle K.  In addition to its expansive store network, 7-Eleven’s success can also be attributed to its efforts to develop new customer service initiatives such as e-commerce delivery collection in collaboration with Zalora and new product assortments including imported Japanese goods.

In 2019, Circle K remained the second-placed player in convenience stores and achieved a slight increase in its value share. Similar to leading brand 7-Eleven, Circle K benefits from its extensive store network. In addition, in 2019, Circle K continued to invest in its digital initiatives, engaging consumers through its OK Stamp It mobile app. The app continuously drives in-store traffic and enables Circle K to utilize the data gained in order to better understand its consumers. Circle K is also developing its convenience services further, for instance by collaborating with SF Express to offer customers delivery collection.  Over the forecast period (2020-2025), Circle K is expected to remain focused on enhancing its engagement with consumers through its digital initiatives and convenience service.

Best Product Prospects:

Post reports that products with the highest sales potential in this sector include processed vegetables, fresh fruit, dog and cat food, wine and beer, snack foods, condiments and sauces, eggs and products and non-alcoholic beverages.

Food Service Sector:

Post reports that Hong Kong boasts around 14,000 restaurants, which range from local favorites to high-end fine dining outlets.  The Michelin guide 2019 stars 63 Hong Kong restaurants, including seven three-starred establishments, were outnumbering the five restaurants in New York City and three in London that won the same three stars recognition.  In 2018, Hong Kong restaurant food and beverage purchases, valued at US$4.9 billion, generated estimated sales of US$15.33 billion, an increase of 4.6% and 5.8%  respectively, over 2017.  Purchases and sales receipts in 2019 were expected to slow down because of uncertainties of external environment and dampening domestic consumption.  Major restaurant and food service groups include Maxim’s, Café de Coral, Starbucks, Fairwood, Pacific Coffee, Pizza Hut, Hung Fook Tong, Sushi Express, KFC, and Genki Sushi.

Due to its history as a global trade hub, sophisticated and affluent Hong Kong consumers have an enthusiasm for a range of international cuisines made from high-quality ingredients. Footprints of restaurants offering non-Chinese cuisine options include Western, Japanese, Korean, Thai, Vietnamese, Indian, and more, are found everywhere in Hong Kong, leading to numerous opportunities for usages of U.S. foods and beverages as ingredients and for pairing.

Fast food outlets suit Hong Kong’s quick-paced lifestyle where dining out twice per day at convenient locations is not uncommon.  Competition among fast food chains is intense as brands strive to retain customers and raise brand awareness.  McDonald’s and KFC are the leading Western style fast food chains, and Café De Coral and Fairwood are the leading local fast food chains, by brand share of foodservice value.  Western style outlets including Pret A Manger and Oliver’s Super Sandwich are often located at areas easily accessed by office workers who appreciate healthy and light options such as salad and sandwiches.

In 2018, tourist arrivals reached 65.1 million, with visitors from Mainland China representing 78 percent of travelers. Visitor numbers grew by 11 percent in the first seven months of 2019, showing opportunities for the hospitality industry and demand for accommodation at every price level. To meet the continued rise in the number of visitors, Hong Kong’s hotel room supply continues to increase. Up to March 2019, there were 297 hotels offering 83,138 rooms, compared with 225 hotels and 70,017 rooms in 2013, reflecting growth rates of 32% and 19%, respectively.  The room occupancy rate was 92% in 2019 (March). Hotels in Hong Kong offer premium dining experience including buffets and occasional menus by celebrity chefs from overseas.  Local residents fill dining outlets in hotels, especially during festivals when families and friends gather for celebrations.

Best Product Prospects:

Post reports that top consumer oriented imports into Hong Kong from the U.S. include fish products, beef and beef products, fresh fruit, dairy products, pork and pork products, wine and beer, poultry meats and tree nuts.

 

Food-Processing Sector:

Post reports that Land is limited and extremely expensive in Hong Kong. Therefore, the local food processing sector is small.  2019 imports of bulk and intermediate agricultural commodities from the U.S. were US$33.3 million and US$105 million, respectively, representing less than 5% of the agricultural total.  The total output of the local food processing industry is estimated at below US$1 billion.  Major local production includes instant noodles, macaroni, spaghetti, biscuits, pastries and cakes for both domestic consumption and export.  Other significant sectors include canning, preserving and processing of seafood (such as fish, shrimp, prawns, and crustaceans); manufacture of dairy products (fresh milk, yogurt and ice cream); seasoning and spirits.

Best Product Prospects:

Post reports that the best prospects for U.S. exporters of processed food ingredients for this sector include shelled nuts, fats and oils, protein concentrates, flavoring, oilseed flour meal, baking inputs, potato products, processed eggs and beverage ingredients.    

Macau Market Overview

Euromonitor reports that Macau is one of the world’s largest gaming centers and has one of the highest levels of per capita Gross Domestic Product (GDP) in the world.  That level will be reduced this year as measures introduced to contain COVID-19 have seriously slowed the economy in 2020.  The coronavirus pandemic was confirmed to have spread to Macau in January 2020 and later that month, the government temporarily closed all educational establishments with closures of all public spaces and all 81 casinos and non-essential businesses to follow.  These measures will have a serious economic impact.

The government has begun to invest aggressively in non-gaming tourism and financial services.  However, a drag on investment is expected to emerge following the end of the tourism-related building boom.  The economy was already in recession before the outbreak and dropped to -4.9% on the year for 2019.  This will have a large impact on tourism arrivals and gambling expenditure, and they are further downgrading their forecast that real GDP will contract by -29.6% in 2020.  Growth of real GDP will improve slightly in the medium term, beginning with growth of an astounding 32% in 2021.  

Macau’s service sector accounts for 90% of GDP and almost all employment.  Macau has attracted significant amounts of foreign investment as new "mega-casinos", which include major hotel developments, replace traditional casinos.  Officials also intend to develop elaborate non-gaming facilities to kick-start growth in the mass market.   The government predicts that non-gaming tourism receipts will grow to as much as US$14 billion by 2025.

Macau imports most of its international food and beverage products through distribution channels in Hong Kong.  This makes an accurate U.S. export assessment of food and agricultural products quite difficult, although there are some direct shipments recorded from the states as well as from Hong Kong.  Macau, like Hong Kong, is a free economy in which there is no restriction on the flow of goods and services, money or capital.  One of the Macau Government’s core economic policies is to maintain a free port status with zero import duty for nearly all products.

In late 2018, the Hong Kong-Zhuhai-Macau Bridge project, consisting of a series of bridges and tunnels crossing the Lingdingyang channel, opened and now connects southern China, Macau, and Hong Kong for vehicular and freight movement.  Once details for freight and cargo transportation on the bridge are determined, this new transport option will substantially cut the shipping time compared to current water transport arrangements.  Spanning 34 miles, the bridge is the longest sea-crossing bridge ever built.

USDA’s Foreign Agricultural Service (FAS) Agricultural Trade Office (ATO) in Hong Kong hereinafter referred to as “Post” and who covers Macau reports that Macau is a budding culinary destination in Asia and received over 39 million visitors in 2019.  Macau registered food retail sales over US$613 million and restaurant receipts of US$1.47 billion.  The fastest growing U.S. products included distilled spirits, spices, fruit and vegetable juices, coffee, poultry, fresh fruit, beef, nursery products, tree nuts, and food preparations.  Macau’s economic growth is slowed significantly due to the worldwide coronavirus outbreak and travel restrictions within Asia.  The Macau Government has launched multiple stimulus measures to help Macau residents and businesses cope with the adversity, and Macau’s economy is expected to pick up in the latter half of 2020 when the coronavirus situation improves.

Due to production limitations, virtually all of Macau’s food requirements are imported. In 2019, Macau’s total global imports of agricultural, food, and fisheries reached US $1.64 billion.  Among them, US$1.18 billion, or 72%, were consumer-oriented agricultural products.  The vast majority of Macau’s imports were transshipped via Hong Kong as Macau lacks a deep-water port.  Major suppliers included China (23%), the Netherlands (9%), France (8%), and the United States (8%).

Advantages

  • Macau’s per capita GDP was over US$123,800 on a purchasing power parity (PPP) basis in 2018 CIA World Factbook Est)
  • Macau is a major tourist destination in Asia. In 2019, Macau received over 39 million tourists
  • U.S. food products enjoy an excellent reputation among Macau consumers and visitors, as they are renowned for high quality and food safety standards
  • Macau is a quality and trend driven market, so price is not always the most important factor for food and beverage purchases

Challenges

  • Order size of importers is small
  • Strengthening U.S. dollar will make U.S. products less price-competitive
  • Transportation time, costs, and product seasonality for U.S. food and beverage products to Macau can make them less competitive than products available from regional suppliers such as China, Australia, and New Zealand
  • The importance of Hong Kong as a transshipment point and buying center for Macau is not widely known to U.S. exporters

US$2 million or 84% of the agricultural total exported from the U.S. in 2019 were of the consumer oriented variety.  That represented a decrease of 46% over 2018.  67% of the agricultural totals were exports of processed food variety, another drastic decrease of 58%. Top U.S. processed food exports shipped directly to Macau in 2019 included:

  • Beer and Wine
  • Condiments and Sauces
  • Food Preparations
  • Snack Foods
  • Fats and Oils
  • Processed Fruit
  • Processed Egg Product
  • Pasta and Processed Cereals

Macau Retail Sector

According to Euromonitor, retail sales in the packaged food market in Macau reached US$327.4 million in 2019.  That represents a growth rate of 23.2% or US$61.6 million since 2015.  By the year 2024, the retail sales in the packaged food market in Macau is expected to reach US$445.6 million, a growth rate of 28.1% and US$97.8 million.  High growth products in the forecast include:

  • Baked goods
  • Soups
  • Dairy products
  • Rice, pasta and noodles
  • Sauces, dressings and condiments
  • Breakfast cereals
  • Savory snacks
  • Baby food
  • Ready meals  

In 2019, retail sales in Macau reached US US$9.6 billion, among them US$613 million, or 6.3%, were goods in supermarkets.  That represented a 7.3% growth compared with 2018.  That is much smaller when compared with US$14.5 billion for neighboring Hong Kong; therefore, U.S. exporters rarely sell directly to Macau food retailers.

“Supermarket/Department Stores” includes sales of supermarkets, convenience stores, and food and beverage sections at department stores.  They are the modern grocery outlets that provide consumers with convenient and high-quality options. In addition to groceries, these stores are offering a more comprehensive shopping experience with increased items of fresh food, bread and pastry, organic options, and hot takeout meals.

The top food retailers by number of stores include Royal, San Miu, ParknShop, Cheang Chong Kei, Vang Kei Hong, and New Yaohan.  The largest convenience store chains are 7-Eleven and Circle K.  Macau’s food market is expected to grow.

Macau Food Service Sector:

Post reports that supported by inbound tourism and gaming resorts, Macau’s Hotel, Restaurant and Institutional (HRI) sector has developed rapidly over the past two decades.  With an average of over three million visitors each month, Macau’s world-class gaming resorts have pushed the demand for high-quality food ingredients to serve their guests and provide staff meals.  

The Macau food service sector consists of Chinese restaurants, local-style cafes, western restaurants, Japanese and Korean restaurants, other Asian restaurants, fast food restaurants, coffee shops, bars and lounges, and cooked food stalls.  Many of these food service outlets are located in hotels and casinos.  Macau has over 120 hotels and guesthouses, and 41 casinos.  Major Five-Star hotels include: Altira, Regency Art Hotel, Conrad Macau, Resort Grande Coloane, Four Seasons Hotel, Royal, Grand Hyatt Macau, Sands, Grand Lapa, Hotel Sofitel Macau de Ponte 16, Grande Lisboa, The Venetian Macau, L' Arc Macau, Wynn, Lisboa, Wynn Palace, MGM Macau, MGM Cotai, Nüwa, and Hotel Okura Macau.

According to the latest statistics a total of 2,345 restaurant and foodservice facilities were in operation in 2018, an increase of 39 facilities over 2017.  The presence of 20 Michelin-starred restaurants in Macau for 2019 bodes well for the HRI sector.  Macanese food, which is a fusion of Portuguese, African, Southeast Asian, and Chinese cooking, is gaining international recognition, as is Macau as a culinary destination following an influx of internationally renowned restaurant brands and celebrity chefs.

In late 2017, Macau was named a UNESCO City of Creative Gastronomy for its unique culinary heritage and significant investment in high-quality dining.  In early 2019, Top Chef’s season finale, which was filmed in Macau, aired and promoted Macau’s gastronomic diversity.

Restaurant receipts amounted to US$1.47 billion (MOP11.83 billion) in 2018, up by 7% year-on year, attributable to an increase in the number of food service outlets and steadily growing economy.  Restaurant expenditures totaled US$1.43 billion (MOP 11.57 billion) and US$527.37 million (MOP 4.23 billion) of which, or 37%, was spent on purchases of goods.

The Macau government intends to expand Macau’s attraction as a tourist and leisure hub including the growth of hotels, family-friendly mega resorts, and accompanying Hotel, Restaurant and Institutional (HRI) outlets.  Macau also looks to diversify into a multi-platform entertainment destination.  Meetings, Incentives, Conferences, and Exhibitions (MICE) are other areas that the Macau government is targeting for development. While the economy is in recession in the near future the medium and long term prospects are very good based on the market potential and strategic planning of the government.

Post advises that food and beverage suppliers from the United States seeking to enter the Macau food service market will need to work primarily with importers in Hong Kong who are engaged in the Macau market and have good connections with Macau’s HRI sector and distribution network. U.S. exporters may also work directly with Macau’s food importers. Hong Kong is the primary trading partner for consumer-oriented products and many U.S. suppliers develop long-term relationships with Hong Kong buyers who provide effective linkages to Macau.

Best Prospects:

Post reports that the best product prospects in the Macau HRI sector include fresh fruit, poultry, food preparations, condiment and sauces, beef, fish, chocolate, tree nuts, processed fruit, and snack foods.

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