Hong Kong Seafood Market Profile

Market Assessment:

Hong Kong, home to over 7 million people, enjoys a growing and competitive seafood market. Per capita seafood consumption is in excess of 70kg and about four times the global average of 18.9 kg, which makes Hong Kong the second leading seafood consumer in Asia.  Substantial demand exists for all kinds of seafood, ranging from low-price finfish (e.g. croaker and carp) to expensive gourmet delicacies (e.g. abalone and lobster).  Seafood imports are large due to high levels of seafood consumption, a declining domestic fishing industry and because Hong Kong also serves as an important gateway for the distribution of some seafood products into China and the surrounding region.  Ninety-five percent of the seafood consumed in Hong Kong is imported and much of this is consumed in Hong Kong’s vast foodservice industry. About 30-40% of seafood imported into Hong Kong is re-exported to China, Macau, Taiwan and elsewhere.

According to Global Trade Atlas data, Hong Kong seafood imports in 2014 were valued at US$3.2 billion (down 1.17% from 2013).  The U.S. was the fourth major supplier to the market – behind China, Japan and Norway.  In 2014, U.S. market share, by value, for seafood imports was 5.41%.  Hong Kong worldwide imports of same, or market-same, Food Export-Northeast seafood benchmark products, or market same products (lobster, scallops, monkfish, dogfish, and squid), were US$187 million in 2014, down 38% from the prior year.  The U.S., with exports of US$22.1 million in 2014, and a market share of 11%, was the second leading supplier after China.

According to FAS trade data, U.S. seafood exports to Hong Kong were 11,268 MT valued at US$152 million in 2015. The volume of U.S. fishery products sold into the market increased by 4% over the prior year and the value of U.S. seafood exports sold into the market increased by 7%.  Lobster species (at US$46.2 million, down 12% in value and down 8% in volume from 2014 sales) were the leading U.S. seafood category.  Clams (at US$27.2 million, up 65% in value), eels (at US$10.4 million, up 32%), conch/whelks (at US$10 million, down 6%), and sablefish (at US$7.8 million, up 32%) rounded out the top five U.S. seafood products sold into the market.  

Food Export-Northeast benchmark seafood products (lobster, scallops, monkfish, dogfish, and squid) accounted for 29.4% of total U.S. seafood exports to Hong Kong in 2015.  Sales of benchmark products totalled US$44.7 million and were up 12% by value over 2014.  In 2015, sales of American lobster to Hong Kong totalled US$41 million - up 13% in value and up 6% in volume over 2014.  Hong Kong was the 4th largest market for American lobster outside North America.  Sales of frozen and processed lobster product forms were dominant (53%) for the first time at US$21.8 million, up US$4 million and 23.5% over 2014.  Sales of live lobster totalled US$19 million (up 4%).

Other Pacific Rim countries are traditional suppliers for seafood products that compete with northeastern U.S. seafood products for the same market niche. Australia has traditionally been the largest supplier of lobster - a clawless variety known as rock lobster.  Japan has historically been the dominant supplier for dried scallop meats. Dried scallop is a very popular Chinese recipe served both at home and in Chinese restaurants. Given the geographical proximity, China is the largest supplier of live fish. China also supplies shrimp, prawns, squid, conch and sea cucumber. China’s distinct advantage is being close to Hong Kong and its ability to maintain freshness of seafood products – a key factor in Chinese consumption preferences and standards. 

Market Characteristics:

Hong Kong is a dynamic market with a sophisticated international community where new high quality products are readily accepted. Ranking tops in economic freedom worldwide, Hong Kong’s GDP, in 2014, was US$288 billion (up 5.3% over 2013) and per capita GDP was US$39,758 (up 4.6% over 2013).  The Hong Kong dollar is linked to the U.S. dollar, which provides needed foreign exchange stability among food importers.  According to FAS, while the peg between U.S. dollar and HK dollar offers currency stability, the strength of the U.S. dollar against other currencies over the last two years has reduced the competitiveness of U.S. products. Products from competitor countries in Europe plus Australia, New Zealand and Japan may currently be more price competitive than products from the USA.

Consumers are adventurous and eager to experiment with new and different seafood products. Consumer seafood preferences include dried, fresh and live fish and seafood products that are not widely consumed in many other parts of the world. Hong Kong is among the most competitive seafood markets worldwide due to a strong tradition for seafood consumption and the presence of a large number of seafood importers and traders who are also renowned for their ability to source an extensive range of high-quality seafood products. 

The majority of Hong Kong residents consume seafood on a weekly basis. Key factors and drivers influencing seafood consumption include:

  • Food safety, freshness and price are key drivers for seafood consumption.
  • Older and higher income groups consume seafood more than younger and lower income groups.
  • Top seafood preferences are shellfish and live fish (including shrimps, scallops and prawns).
  • High-end seafood products, such as lobster and crab, are consumed more often at restaurants than at home. Lower-priced seafood items, such as squid, are generally consumed more at home.
  • Among consumers purchasing seafood for at-home consumption, 47% will make purchases at a wet market, 30% will make purchases at fish shops and 23% at supermarkets.
  • Key factors attracting consumers to try new seafood items are price, product promotions and recommendations.

Food safety incidences in China, Hong Kong and Macao (e.g., melamine, mercury, oil fish, norovirus) have driven buyers to source from regulated and reliable supplies. Traceability of seafood production and handling, and sourcing from sustainably managed fisheries to instill buyer confidence in consistency of supply, are issues of growing importance.  Food safety is a key factor for seafood consumption and according to FAS/Hong Kong, consumers and trade alike has strong confidence in the food safety and wholesomeness of U.S. food products.  Hong Kong consumers are increasingly on the lookout for recognizable and authoritative markers of both sustainability and safety. This is providing increased opportunities for sustainable seafood that is recognized by a third party and labeled accordingly.

Euromonitor reports that dining at home is not popular in Cantonese culture or, even in the wider Chinese culture.  Individuals and families prefer dining out for at least one meal a day and more often for two (or all three) of their main meals.  A large number of Hong Kong workers do not arrive home from work before 7pm—more often closer to 8pm—and so finding time for food preparation is often out of the question.

According to FAS, restaurant industry purchases of US$4.41 billion in food and beverages generated sales of US$12.87 billion in 2014. This represented an increase of 2.1% and 3.4%, respectively, over 2013. Restaurant purchases and receipts are expected to show continued growth for 2015.  As Asia’s most cosmopolitan city, Hong Kong boasts about 14,000 restaurants serving a wide range of world cuisines. These restaurants are comprised of 35% Chinese, 58% non-Chinese restaurants, and 7% fast food outlets. In addition, there are over 1,000 bars, pubs and other eating and drinking establishments.

Lobster, crab, clams, conch (whelk), scallops and sea urchins have high demand within the HRI sector. Caterers are prudent in sourcing products from trustworthy suppliers - particularly for food consumed raw such as chilled oysters. A single incidence of food contamination in a high-end restaurant could ruin an establishment’s reputation. Chefs are also creative in handling fish and seafood, including wastes, byproducts and species unknown as food in many other markets. Products of no commercial value in the U.S. can command good prices in Hong Kong, if properly processed.  Fish heads, gas bladders, roe and internal organs are popular.  Adapting to the market’s consumer preferences may offer new opportunities to U.S. seafood companies.

According to FAS, total retail sales of food and drinks in Hong Kong for 2014 reached US$11.47 billion, representing growth of 6.7% compared to 2013.  Relatively steady economic growth prospects should help maintain growth in the food retail sector and food retail sales.  Hong Kong has a highly centralized supermarket retail network in which two supermarket chains account for about 75% of the supermarket turnover. The total number of retail establishments stands at approximately 12,000. Retail shops in Hong Kong generally are very small in size; over 96% have less than 10 employees.

Traditionally, Hong Kong consumers shop daily because of a preference for fresh food. Much of the shopping is still done in traditional markets including street markets and locally owned shops. Overall, street market sales trend toward fresh foods while supermarkets are dominant in processed, chilled and frozen, high-value added and canned food products. The competition between street markets and supermarkets has intensified in recent years.

Although significant growth in the number of supermarkets is not expected, the expansion in market share for supermarket sales is expected to continue in the future at the expense of traditional street markets. The supermarket’s share in terms of total retail sales rose from 44% of total sales in 1995 to 57.4% in 2014.

Sales of finfish are particularly strong within supermarkets. Fish such as mackerel, salmon, halibut and black cod are common. Fish steaks and fillets are popular product forms that are sold in the frozen section of supermarkets and frozen food retail shops.  Wet markets are preferred when shopping for live and fresh fish, and shellfish.  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.

Hong Kong also maintains an important role serving as a re-export center for seafood products. About 30% of Hong Kong’s imported seafood products are re-exported. The largest re-export market is China followed by the U.S., Macau and Vietnam. While China sells primarily live fish to Hong Kong, it buys large volumes of shark fins, crabs, lobsters and abalone via Hong Kong. Some of the U.S. live lobster sold in Mainland China is from imports originating in Hong Kong and marketed through the “grey channel”. Some of the trade is not recorded in Hong Kong statistics because products are shipped in/out of China directly without going through Hong Kong customs.  However, most purchasing decisions still lie with Hong Kong traders who serve as middlemen in facilitating the transactions. 

Factors/Issues Affecting U.S. Sales to Hong Kong:

Regulatory Administration

  • Hong Kong is a special administrative region of China with a high degree of autonomy.   Hong Kong has its own food laws and import control regimes that are totally different and independent from China. It is a free market, without any tariffs, for fish and shellfish products.  There are no restrictions on importing fishery products. However, Hong Kong does maintain specific tolerances for heavy metal content and chemical contamination.

    Health Certificate in Development

  • The Hong Kong government is in the process of developing health certificate criteria for imported fish and shellfish products. The government is categorizing all aquatic products by risk levels and will institute various control measures accordingly. While the timeframe of the new regulation is not yet set, the Hong Kong government is liaising with various consulates to help adopt a certification protocol.  In the U.S., the National Oceanic and Atmospheric Administration (NOAA) has responded with a draft certificate, which ATO/Hong Kong has submitted, to the Hong Kong government for consideration. Discussion on certification protocol continues.

Working Languages

  • The official written languages in Hong Kong are Chinese and English. The official spoken languages are Cantonese (the prominent Chinese dialect in Hong Kong and South China) and English. In general, all correspondence can be in English. English, as a primary and business language, can facilitate U.S. company market penetration.

Nutrition Claims and Labeling Laws

  • Hong Kong’s Legislative Council implemented a nutrition labeling regulation on July 1, 2010. Hong Kong’s nutrition labeling regulation requires all prepackaged food sold in Hong Kong to label the contents, energy plus seven nutrients namely: protein; carbohydrate; fat; saturated fat; trans fat; sodium; and sugars. A small volume exception may be granted if fewer than 30,000 units each year are sold and if the product does not carry any nutritional claims. Traders applying for exemption must 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 a result, imported foods making nutrition claims must 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 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.

Listing Fees & Incentive Pricing at Retail

  • Hong Kong supermarkets require listing fees 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 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.
  • 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 must 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 must be refunded 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.
  • Major supermarket stores often offer discounts and this cost is passed to suppliers by requesting lower prices for supplies. Given supermarkets’ strong bargaining power, many suppliers are forced to give supermarkets special discounts. 

Distribution:

Though a mature market, Hong Kong’s fish and seafood market is fragmented with a complicated, but highly efficient, channel of distribution.  Hong Kong is also a major conduit for the import and distribution of live and high-value seafood products to China due to distribution efficiencies.  The increasing demand for safer food through improved cold chain management at all levels of trade, including retail and foodservice, is a strong influence that is reshaping food distribution.

Hong Kong seafood importers actively source the best value products globally through visiting trade shows and making trade enquiries. Buyers constantly compare suppliers from around the world to find products offering the highest quality at the most competitive pricing.  Product displacement is common. Business loyalty must be earned and established through efficient business communications and regular personal contact. Marketing support provided to agents/representatives is often essential to gain market share.

According to FAS, Hong Kong’s restaurant and retail sectors offer the best opportunities to grow sales of U.S. fish and shellfish products.  Much of the seafood imported into Hong Kong is distributed through the HRI sector.  Hong Kong’s foodservice industry is vast, consisting of more than 800 hotels and 14,000 restaurants.  Demand for high-quality seafood products, including live fish and shellfish, is strong.

Hong Kong has a highly centralized supermarket retail network, with two supermarket chains accounting for about 80% of the supermarket turnover, and the total number of retail establishments approaching 14,000. Retail shops in Hong Kong are generally very small in size, about 96% of which hire less than 10 employees (Hong Kong Census and Statistics Department). 

Hong Kong consumers shop for food daily because of a preference for fresh food. The shopping is mainly done in traditional markets (wet markets) and small corner stores. While both wet market and supermarket sales are increasing, supermarkets are taking a greater share of total sales, as supermarkets are better equipped to handle and display processed, chilled and frozen, value-added and canned food products.  

There are two dominant supermarket chains in Hong Kong: The Wellcome Co. Ltd. (around 280 outlets) and ParknShop (around 260 outlets). ParknShop and Wellcome account for about 75% of all supermarket turnovers in Hong Kong.  According to FAS/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: China Resources Vanguard Shops (CRVanguard), Dah Chong Hong (DCH) Food Marts, 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.  Hong Kong’s duopolistic supermarkets have a wide distribution network. Cold chain and distribution channels for food products are generally efficient and dependable, as is the customs clearance process.

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 14,000.  Retail shops in Hong Kong generally are very small in size, about 96% of which hire less than 10 employees. (Source: Hong Kong Census and Statistics Department).  According to FAS/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 of retail sales is about 53%.  

Wet markets have a strong reputation for fresh foods, while supermarkets have been regarded as strong in processed, chilled and frozen, high value-added and canned food products.  However, the competition between wet markets and supermarkets has intensified in recent years.  Although there will not be significant growth in the number of supermarkets, the retail sales share of supermarkets is expected to continue to expand.  Many supermarkets in Hong Kong can offer fresh foods at very competitive prices and providing a comfortable shopping environment.  To compete, some wet markets have started providing air-conditioning and provide free shuttles to nearby residential areas.

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