Overview

• Under CEPA, more Hong Kong foods are exported to China. The latest items include bird's nest, mixed edible oil and processed duck etc. Meanwhile the best selling CEPA products remain to be festival foods like moon cakes.
• Food safety has become a prime concern of consumers over the globe. Increasing number of countries, including the Chinese mainland and Japan, have implemented more stringent controls on food safety, whether locally produced or imported.
• Hong Kong's total exports of processed food and beverages enjoyed 33% growth to reach HK$29.1 billion in 2008. The Chinese mainland was the largest export market for Hong Kong's processed food and beverages (accounting for 48.1% of the total), followed by Taiwan (15.9%) ASEAN (12.9%) and Macau (10.6%).
• The food and beverages industry in Hong Kong is largely related to re-export activities. In 2008, Hong Kong's re-exports of food and beverages accounted for more than 90% of Hong Kong's total exports of food and beverages. In terms of market, the Chinese mainland accounted for half of Hong Kong's total re-exports. Hong Kong is a major gateway through which the Chinese mainland's growing demand for western food is met.

Industry Features

Note: Industry statistics cover activities in Hong Kong only.

The processed food and beverages industry in Hong Kong is characterised by its active trading activities. Major food importers/traders in Hong Kong include Dah Chong Hong, Four Seas, Asia Pacific (HK) Ltd, EDO Trading Co, Kwan Hong Yuen Trading Co Ltd, Yu Kee Trading Co Ltd, Sun Shun Fuk etc.

There is a considerable scale of food and beverages production in Hong Kong. Most of this production is for local consumption. Major products include instant noodles, macaroni, spaghetti, biscuits, pastries and cakes. Others include canning, preserving and processing of seafood (fish, shrimps, prawns, and crustaceans); manufacture of dairy products (fresh milk, yoghurt and ice cream); seasoning and spirits. With growing Western interests in oriental food and condiments such as soya sauce, soya milk and oyster sauce, there has been increasing demand for Hong Kong's food exports. Some Hong Kong brands, such as Vitasoy and Lee Kum Kee, have expanded their markets vigorously in both Chinese mainland and overseas markets, and received high recognition.

The industry has attracted substantial foreign investment. A notable foreign investor is Nissin from Japan, which produces instant noodles in its factory in Tai Po Industrial Estate and is now the leader of Hong Kong's instant noodles market. In 2006, Amoy, a frozen dim sum and sauces producer in Hong Kong, was acquired by Ajinomoto, a Japanese food conglomerate.

China is currently the largest market for Hong Kong's exports of processed food and beverages. Hong Kong manufacturers, such as Garden, Hop Hing and Lam Soon, have been targeting at the mainland market. For example, Garden has established joint ventures with Hua Jia Co. Ltd. in Dongguan, and Gong Yang Co. Ltd. in Yang Zhou. Hong Kong's guaranteed food safety gives it an edge over China-made products. Changing lifestyles, rising income, and the growth of supermarkets to replace wet markets have all led to a boom of packaged and convenience food in China. As the number of working women increases along with growth in the number of elderly and single person households, consumers continue to look for ways to reduce cooking time and grocery shopping time. Pre-made sauce/condiments and frozen/ canned food are popular items among general households.

Large Hong Kong manufacturers have expanded their global network and set up offices or factories in major markets. For example, Lee Kum Kee has factories and regional offices in Chinese cities, the US and the UK, and Vitasoy has factories in Shenzhen, Shanghai in China, and the US and Australia.

Performance of Hong Kong's Exports of Processed Food and Beverages ^

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies.
* Insignificant

Sales Channels

Many Hong Kong food and beverages manufacturers deal directly with overseas importers and supermarket chains. However, Hong Kong's food and beverages trading companies play a pivotal role to introduce western food to mainland consumers through Hong Kong, and to assist smaller producers in Hong Kong and the Chinese mainland in selling overseas.

Many Hong Kong brands have successfully entered overseas markets. Garden (biscuits, cakes and candies), Doll (instant noodles), Vitasoy (soft drink), Amoy, Lee Kum Lee (cooking sauces) and Lam Soon (edible oils) are the leading local brands. Many of these brands appoint distributors and/or establish overseas offices to promote overseas sales. These Hong Kong brands have expanded vigorously to the overseas markets and received increased international recognition. For example, Vitasoy Group has spread far beyond Hong Kong and now sells its products in more than 30 markets throughout the world including the US, Canada, China, Europe, Papua New Guinea, Australia, New Zealand, South East Asia, Trinidad, Venezuela and Israel. In most markets, Vitasoy Group has appointed local distributors.

In order to establish connections and explore market opportunities, processed food and beverages manufacturers and traders can join trade fairs and missions organised by HKTDC such as the Food Expo in Hong Kong, Canton Fair in Guangzhou and Style HK Show in Wuhan. HKTDC also organises from time to time study or matchmaking missions for Hong Kong manufacturers to visit specific markets for establishing new business relations.

Industry Trends

Health and wellness offerings are increasingly adapted to meet the expectation of consumers on processed food and beverages. In particular, ageing populations and rising health consciousness are creating a receptive environment for products that aid the "maintenance" of health, such as cholesterol-lowering spreads and high calcium milk. While health issues are creating new openings, microwave and packaged foods also provide a promising growth for the sake of convenience.

As many crops and livestock are already genetically modified (GM), and many food products are made from genetically modified organisms (GMO), consumers have paid more attention to GM food labelling. The Codex Alimentarius Commission of the United Nations is working towards a consensual policy on GM food labelling. However, it is unlikely to be able to set internationally agreed standards in near future. At present, policies on GM food labelling vary in different countries and areas. For example, GM food labelling is mandatory in countries such as the EU, Japan, New Zealand, Australia, South Korea and Taiwan. In China, only five categories of GM crops including soya bean, corn, cotton, rapeseed and tomato, as well as some of their products are required to be labelled. In the US and Canada, labelling of GM foods is only required when the food is significantly different from its conventional counterpart in terms of composition, nutrition and allergenicity. In Hong Kong, prepackaged food items with 5% of more GM materials in their respective food ingredients are recommended to be labelled.

The use of online shopping has become increasing popular for grocery shopping in Asian countries. In Taiwan and Japan, many working housewives would place their orders via internet to buy food, including fresh fruits and vegetables. On the Chinese mainland, online grocery shopping is relatively new to the shoppers, and they prefer buying packaged/processed foods and snack rather than fresh food items online.

Implications of CEPA for Hong Kong Companies

The Chinese mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in 2003 and subsequently expanded. By meeting the CEPA rules of origin, all products made in Hong Kong, including food and beverages, are eligible for duty-free access to the Chinese mainland. Food and beverages is by far the largest beneficiary of CEPA, with 11,031 COs approved as at Feb 2009. Major products include moon cakes, cans of meat, chicken essence, bird's nest, other sauces or extracts, confectioneries, bakeries and drinks etc. Moreover, manufacturers have set up factories in Hong Kong to capitalise on the benefits of CEPA. For more information, please refer to Trade and Industry Department's CEPA webpage: http://www.tid.gov.hk/english/cepa/index.html

General Trade Measures Affecting Exports of Processed Food and Beverages

• The United States

To protect consumers' health, import regulations for food and beverages are normally more stringent than other consumer goods. For the US, all food should comply with requirements of the Federal Food, Drug and Cosmetic Act. Imported food should be prepared, packed, and held under a system meeting the requirements of the Imported Foods Safety Improvement Act of 1999, or satisfy the requirements of the Secretary of Health and Human Services. The Food and Drug Administration (FDA) is issuing a final regulation that requires the submission to FDA of prior notice of food, including animal feed, which is imported or offered for import into the United States. Effective from May 2009, the information must be submitted and confirmed electronically as facially complete by FDA for review no less than 8 hours (for food arriving by water), 4 hours (for food arriving by air or land/rail), and 2 hours (for food arriving by land/road) before the food arrives at the port of arrival. For details, please refer to http://www.cfsan.fda.gov/~lrd/fr081107.html

The new Bioterrorism Act requires that records be kept concerning the sources and recipients of food.
Starting from 2006, new regulations would require at least 51% of alcohol in flavoured malt beverages be derived from malt base if they are to be taxed and treated as beer. The Nutrition Labelling and Education Act of 1990 also requires that nutrition labelling become mandatory on virtually all packaged foods sold to consumers. In April 2008, FDA published "A Food Labelling Guide" for the industry, for details please refer to
http://www.cfsan.fda.gov/~dms/2lg-toc.html#ftn1

• The European Union

For the EU market, all imports of food items are subject to the sanitary and phytosanitary regulations of the European Food Safety Authority as well as strict certification requirements lay down by the individual country's health authorities. In addition, imports of foodstuffs into the EU countries must be accompanied by a Health Certificate. Packaged foodstuffs must also comply EU food labelling, additive, flavouring and packaging legislations. New regulations controlling the type of material that is likely to come into contact with food, as well as their labelling, advertising and presentation were introduced. "Hygiene Package", a body of food safety legislation, came into effect in 2006 and placed stricter controls on food safety e.g. the concept of integrated supply chain management was introduced, with requirements on different steps in the production process.

• The Chinese Mainland

In Feb 2009, the Food Safety Law was issued to replace the Food Hygiene Law. Border Hygienic Quarantine Law and Food Safety Law govern all imported foodstuffs, food additives, food containers, food packaging materials and food-related tools and equipment. Food products are subject to mandatory inspection by the China Commodity Inspection Bureau. Standards for inspection are specified in the contract of sale, including standards for quality, weight, quantity, packing and inspection methods. Such standards must not be lower than the corresponding national standards. Safety licence and other regulations are also applied to the import of foods. Once a quality certificate for a product is issued, a safety laser label can be affixed. All products sold in China must have Chinese language labels. The labels state types of food, brand name, trademark, manufacturer's name and address, country of origin, ingredients, date of production and expiry date, etc.

• Japan

For the Japanese market, all food products are subject to examination under the Food Sanitation Law. Processed foods entering Japan are subject to three types of inspection: examination for bacterial content, testing for chemical content (including food additives), and visual inspection. Processed foodstuffs must also bear labels. In addition, Japan has control over the usage and import of most additives, which are added to or used with foods, beverages and medicines. Those who wish to import food, food additives, apparatuses or container-packages for sale or business must first notify the Minister of Health, Labour and Welfare on each occasion and inspections may be conducted. In 2006, an amendment on the Food Sanitation Law came into effect, which stipulated the amount of chemical residues in farm produce.

Product Trends

In developed economies like the US and the EU, there has been a shift in taste in favour of healthy foods, partly as a result of the aging population who seek easy-to-prepare, high quality nutritional foods to compensate for their lowered taste sensitivity. A 2004-05 survey by the US FDA indicated many consumers tried to avoid intake of sugar, sodium, fats, carbohydrates, cholesterol and calories. The government's 2005 Dietary Guidelines for Americans also upheld healthy eating habits.

Food manufacturers are introducing low cholesterol/carbohydrate/added sugar foods e.g. cane sugar has substituted syrup as an ingredient of some drinks, and the ice cream's calory and fats contents are reduced. For quest for slimness has given rise to the development by Danone, Unilever and Kraft etc of "dietary foods", which added certain fibres to make the food more filling and delay digestion. This trend requires higher R&D capabilities and advanced production technology on the part of food manufacturers.

Purchase of organic food is a major trend in both developed and developing countries. According to the US Organic Trade Association, during 2000 and 2007, the average annual growth rate of organic food sales in the US was 18.5%, and reached US$20,000 million in 2007. Meanwhile, according to the Organic Food Development Centre of China, the domestic organic sales in China increased from zilch in 1995 to US$9 million in 2006. Organic food encompasses a wide range of products including cheese, meat, wine, spices, nuts, canned goods etc. Organic generally means food grown or produced without the use of chemical synthetic fertilizers, pesticides and preservatives and unaffected by genetic engineering. Official definitions vary among countries, but may require a high standard on the growing practices, processing and handling of the produce. Organic foods are increasingly available in supermarkets.

Ethnic Asian cooking - including cuisines from China, Japan, India, Thailand, Korea, Vietnam, Malaysia and Indonesia - has become popular either on its own or blended with western dishes in recent years in Western countries. High quality exotic foods have been well received. Ingredients such as rice noodles, basmati and jasmine rice, coconut milk, ginger root and curry pastes are all popular items in supermarkets in the US and Canada.

Food aimed at attracting kids has become more colourful in recent years. Heinz started the fad in 2001 with green ketchup (purple has since been added). Parkay now has neon pink and blue squeeze margarine, and Dannon Sprinkl'ins includes "sparkle packets" to stir into cups for boldly coloured yoghurt.

In beverages, energy drinks are taking young consumers by storm, while ordinary soft drinks and other drinks are lagging behind. They are drinks added with vitamins, minerals and caffeine and other ingredients. Drinks that claimed beauty or health effects are also being introduced. They include fruit juices, flavoured water and heabal or floral teas.