Hong Kong Industry Profiles

• Hong Kong is a famous international sourcing centre for houseware products, including tableware, kitchenware, non-electric domestic cooking/heating appliances and sanitary ware made of a vast variety of materials.

• In response to the intensified competition from indigenous Chinese companies and other Asian suppliers, Hong Kong companies are shifting from original equipment manufacturing (OEM) to original design manufacturing (ODM). A few also develop and market their own brands. They are also moving upmarket by using more advanced technology in production, providing innovative designs and improving product quality.

• The retail scene in overseas markets is dominated by giant retailers who have bigger bargaining power than suppliers. They push hard for low prices, resulting in an ongoing trend of outsourcing production to low-cost areas, including the Chinese mainland.

Industry Features

Hong Kong is a well-known international sourcing centre for houseware products. The industry itself covers a wide range of products including tableware, kitchenware, non-electric domestic cooking/heating appliances and sanitary ware which are made of an array of materials, such as ceramic, metal, glass, paper, plastic, porcelain and china.

Companies in the field of metal cookware and kitchenware provide a comprehensive selection of products, including saucepans, casseroles, frying pans, Dutch ovens, steamers, egg poachers, double boilers and frying baskets. Stainless steel is the most commonly used material due to its durability. Aluminium-made cookware is also available, with porcelain-enamelled exterior and the interior coated with non-stick material.

Others focus on plastic-ware, including tableware, kitchen utensils, water pots, trash bins and bathroom accessories. The majority of them are small to medium-sized companies since production of plastic houseware, especially the smaller items, requires comparatively less labour input and capital investment. Sophisticated moulding techniques are generally not required for lower-end products. As such, some toy makers also engage in plastic houseware as their sideline business. On the other hand, the production of larger plastic houseware, such as buckets, basins and baskets, is dominated by a few large manufacturers since heavy capital investment is required for installing large machinery.

Hong Kong companies are also noted for producing convincing replicas of artefacts dating from the Tang Dynasty. These imitations are accurate reproductions in every detail, ranging from small ceramic horses to large pieces of Tang Dynasty tomb servants.

Owing to the high production cost in Hong Kong, most Hong Kong manufacturers have relocated their production to the Chinese mainland. Other high value adding functions, such as sourcing, logistics, product development and marketing are maintained by the Hong Kong offices.

Most Hong Kong houseware production is on an OEM basis. Facing intensified competition from indigenous Chinese companies and other Asian suppliers, Hong Kong manufacturers are shifting from OEM to ODM. A few also create and market their own brands (OBM). Some manufacturers apply more advanced technologies in the production process, such as gas-assisted and injection compression moulding in plastic houseware production. More resources are used in product design and maintaining product quality to increase the competitiveness of Hong Kong products. According to the latest HKTDC survey conducted in 2007, 89% of respondents in the houseware industry were involved in OEM business, while 72% were in ODM and 46% were in OBM.

Performance of Hong Kong Exports of Houseware Products^

Hong Kong's total exports of houseware products saw a slight decline of 4% in the first ten months of 2011, after increasing by 12% in 2010. The EU and the US were our largest markets, which together accounted for some 60% of the total. Yet exports to these two major markets deteriorated in the first ten months of 2011, registering year-on-year declines of 7% and 12% respectively. Other major markets included Chinese mainland, Japan and ASEAN, which in sum made up another one-fifth of total exports of houseware products. Among these markets, exports to the Chinese mainland saw the biggest rise of 22% year-on-year in January-October 2011.

Plastic houseware, and metal cookware and kitchenware, were the two largest export categories of the industry, which together accounted for over 80% of the total. Among other major categories, ceramicware, which accounted for some 4% of the total, expanded rapidly by 36% year-on-year in the first ten months of 2011.

Household goods, covering not only most houseware products, but also electrical appliances and electronic products such as radios, shavers, dish cleaning machines, refrigerators, etc, surged by 16% year-on-year in the first ten months of 2011, after increasing by 18% in 2010.

Notes: ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies

# Household goods cover not only most houseware products, but also electrical appliances and electronic products such as radios, shavers, dish cleaning machines, refrigerators, etc

Sales Channels

Department stores, retail chains and mass merchants are the most popular retail channels for houseware products in mature markets like the US, EU and Japan. Many Hong Kong manufacturers deal directly with these overseas retailers or through their buying offices or agents in Hong Kong. Hong Kong companies also enter into licensing agreements for production with some overseas brand holders. This is especially common for kitchenware and cookware. For markets with smaller order sizes, trading firms are often involved as an intermediary. A few well-established manufacturers have their own overseas offices responsible for marketing and other liaison activities.

Many manufacturers attend international trade fairs in order to increase their exposure in overseas markets. Below is the schedule of some major trade fairs:

Industry Trends

The retail industry continues to consolidate, and the market is often dominated by a few large chain stores or discount giants. This trend has created huge purchasing power from the fast-growing nationwide general merchandise stores. They place large-volume orders but push hard for low prices. Retailers are also reducing the number of suppliers to become more efficient, and be able to ask for lower prices. More brand holders outsource their production to low-cost areas including the Chinese mainland. Hong Kong manufacturers can benefit from this ongoing outsourcing trend.

Nonetheless, more overseas buyers choose to engage indigenous Chinese companies which offer competitive prices and improving quality. Confronting with the fierce competition, Hong Kong manufacturers undertake more ODM and licensing business with overseas manufacturers. Licensing is especially common in the kitchenware sector for many US and European brands. Consumers respond well to brand-named products as well as other private label items owned by department stores and chain stores. In order to stay competitive, Hong Kong companies also have to introduce innovative designs frequently so as to appeal to both quality and price-conscious customers.

On the distribution side, internet sales of houseware have continued to grow, particularly in the US. Market analysts believe that the number of online shoppers will rise in the coming years. A more sophisticated logistic system may be needed to streamline the distribution and keep an optimal level of inventory.

CEPA Provisions

Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland has given all products of Hong Kong origin, including houseware, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin can enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. Non-Hong Kong made houseware products are subject to tariff rates up to 24.5% when entering the mainland.

The promulgated rules of origin for houseware products to benefit from CEPA's tariff preference are basically similar to the existing rules governing Hong Kong's exports of these products, requiring the performance of specific manufacturing processes in Hong Kong, such as die-casting/blanking, forming and assembling for table articles. Detailed information is available from the following hyperlink:

http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2011.pdf

General Trade Measures Affecting Exports of Houseware Products

Houseware exports are subject to certain food sanitation laws and ordinances, especially for kitchenware and other products which have direct contact with food. For example, the Japanese Food Sanitation Law stipulates regulations and standards not only for food, but also for food containers and packaging. In Japan and the US, ceramic and porcelain tableware is subject to lead and cadmium leaching standards.

In the EU, a new regulation called Plastics Implementing Measure (PIM), which comprises of regulations of contents, testing conditions and documentation requirements, has been adopted since May 2011. The regulation applies to materials and articles made entirely of plastic, as well as plastic layers that are used in multi-material articles. The PIM lists all permitted substances and indicates restrictions for individual substances. Substances not included in the lists will not be authorised for use in food contact plastics. On testing requirements, the transition period is quite long for the industry to get prepared. Only from 2016, tests must be conducted according to the new requirements.

On the other hand, the EU has also tightened importing rules for polyamide and melamine plastic kitchenware from China and Hong Kong since July 2011. Kitchenware from China and Hong Kong now can only be imported into the EU with a declaration certifying their compliance with requirements on primary aromatic amines (PAAs) and formaldehyde.

Product Trends

Cocooning trend: After years of threat of terrorist attacks and an uncertain economy, the US shoppers recognise the value of their family and connecting with friends. Products that encourage family gathering at home and those intended to equip hosts to entertain their guests are expected to be popular, such as fondue pot or sterno-fired table wok for cooking at the table in the evening, and oversized platters for serving arrays of dips and vegetable.

Multi-functionality: More and more products have multiple functions and are in modular sets. Many people practise little crafts work at home, such as cross-stitching, home-décor painting, cake decorating, crocheting and scrapbooking. Hobby supplies are selling well due to the cocooning trend. This trend also drives the demand for organizers and storage units for the specialized, small and often expensive materials, supplies and tools of the home hobbyists.

Flexible attitude towards eating: Anything that provides a more flexible attitude towards eating will continue to be popular. People tend to use cookware and kitchenware with non-stick surface which are easy to clean up. Growth for plastic containers that can be used in microwave ovens is also sustaining. Steamers and pans which require less oil for cooking appeal to the European customers.

Houseware gift sets: Fewer people purchase premium ceramic and porcelain products for their own use. Instead, they would purchase them as gifts for friends. Some new gift sets offer several kinds of products, instead of the traditional gift sets which contain a large quantity of the same item. For other kitchen giftware and accessories, opaque and transparent coloured plastics have replaced stainless steel and aluminium as the preferred choice of materials.

Increasing awareness of the environment: Consumers have become more conscious of global warming and other environmental impacts. There are studies showing that some people buy certain brands because their products are eco-friendly. While consumers are buying more green products, manufacturers also realize the potential of cost savings from materials and packaging, making pro-environment designs and materials become the hot choice of houseware producers and buyers.