Hope of recovery for Hong Kong wine market despite slump

With imports down 40% from its heyday of 2018, can the Hong Kong wine market recover from the economic slump it finds itself in? Nimmi Malhotra reports.

At Vinexpo Asia, industry specialist Rob Temple presented an in depth look into the current state of wine industry.

Last year, at a similar session at Vinexpo Singapore, Temple had hoped for a full recovery for the off-trade sector by 2024 and a ‘cautious journey’ for the on-trade sector.

“Twelve months ago, the assumption was that the interest rates would come down and it would kickstart an economic recovery and return of consumption patterns, but that has not happened,” he shared with db.

Instead, Hong Kong is facing an unprecedented economic downtown. Rising interest rates, shifting demographics and low tourism numbers are resulting in significantly reduced consumer consumption and spending on the island.

Add to that, a new movement of locals flocking to wine and dine across the border in Shenzhen (part of the Greater Bay Area, otherwise known as GBA) is taking a toll on both on and off trade sales.

According to government records, the 2023 net wine imports (after re-exports) of 20.2 million litres are down 40% from 34.6 million litres in 2018.

Temple’s prognosis is grim: “Hong Kong is as bad as it has been in 30 years. It’s an extremely challenging market in all channels right now.”

Economic recovery in all channels

All is not lost though. Temple gathered a panel of experts to bring hope and strategies on how Hong Kong can find its way back as Asia’s wine capital. His first panelist, Philippe Chan, general manager of YouGov Greater China brought some cheer to the room.

Chan, who possesses over two decades of market research experience, leaned on findings from a new consumer survey of Hong Kong and GBA consumers, which offered glimmers of hope. The survey found that Hong Kong consumers are drinking more whisky at home than at restaurants. But red wine consumption at home was on par with on-trade consumption.

While the consumption of wine at home is picking up, the on-trade sector is still suffering and hasn’t quite recovered from the loss of 2500 premises which shuttered in the midst of Covid downturn.

The numbers point towards intention to drink, but also, the desire to pay less, as 48% consumers are “influenced by special price promotions”.

Notably, unlike other hyper connected Chinese cities, Hong Kong buyers still prefer their wines sold at bricks-and-mortar outlets, over online channels, and 49% still rely on word of mouth for wine recommendations.

Based on these findings, Chan called for a creative approach to connecting with new consumers. “Lots of operators are still living in the past, following very traditional route to markets. That needs to change. Customers have changed, and the industry needs to change to be closer to the customer,” he said.

He also stressed on the importance of mobilising all channels including retail, point of sale, online and enabling KOLs to engage the consumer. “Instead of big above the line and online campaigns, we need to do very targeted campaigns with F&B and retailers to target different locations,” he said.

The path to recovery

Recovery was the crux of the second half of the discussion. According to Temple, “a recovery would mean a return to pre-Covid (2018) levels of consumption. That requires an economic recovery, a return of expatriate residents, a return of visiting tourists, which can only open when US interest rates drop.”

He was joined by three regional specialists – Mario Aaron, ex COO of ASC wines, Jamie Martin Chocano of Edrington and Thibaut Mattieu, managing director at Corney and Barrow – to provide solutions to brand owners, distributors and importers on how to influence their clients to engage with the brands and stimulate spending.

Chocano emphasised the importance of being present in the market. The Macallan parent company sees Hong Kong as “the number one place to invest in Greater China” based on the results of a study they commissioned in GBA markets to find out which market influences consumers luxury purchase decision. Over 80% of the respondents affirmed Hong Kong and Macau as the number one drivers of a luxury purchase.

Heeding its own advice, Macallan has launched a 6000 sqare foot flagship store in the heart of Central, Hong Kong, which is “the biggest investment the company has made outside of the distillery”, Chacano shared.

Thibaut of Corney and Barrow added his observations on premium wine consumer habits which have changed in recent times. “Customers still have money, but now good offers get traction. It’s all about price, price, price,” he said.

Mario Aron, former COO of ASC Wines, believes that the new efforts must keep consumer needs in focus. Historically, the wine industry has been more trade led than consumer led, he said. Now, the communication from brands and producers should be consumer centric.

This time around, there was no talk of a time frame as there’s no telling when a full recovery of Hong Kong wine trade may be achieved. But all four participants were hopeful that Hong Kong’s wine trade will, one day, recover.