THE STANDARD HK- Eastern advantage

by Grace Cao

In recent years, several leading French food and beverage companies have set up base in Hong Kong to leverage on the advantages provided by the local market to sell food and wine in Greater China.
Last year alone, 15 French companies began their operations with the assistance of Invest Hong Kong, compared with 11 in 2010.
Among the companies that started doing business locally in 2010 were wine maker Sacha Lichine International and patisserie Paul Lafayet.

“Hong Kong is the best place to sell something in Asia,” said Clement Malochet, commercial director of Sacha Lichine.

The French company introduced the rosé wine label Chateau D’Esclans to Hong Kong in 2010. Located in Provence, southern France, the 55-acre- vineyard produces about 700,000 bottles of four kinds of rosaace every year.
About 60 percent of the wine is exported to the United States, the Caribbean region, United Kingdom, and elsewhere in Europe. Only 5 percent is shipped to China.
“We had no problems starting a business here,” said Malochet, adding that the winemaker even skipped the market research part.
There are at least three key reasons that attract companies to Hong Kong.
The first is undoubtedly the low corporate tax of 16.5 percent and a flat rate income tax.
For foreign wine merchants such as Sacha Lichine, Hong Kong is the first duty free center for wine among major economies, with no value-added tax or general sales tax. Wine duties were removed in February 2008.

In contrast Thailand imposes a 320 percent import tax on wines. At that rate of taxation, a bottle of Whispering Angel, the core rosé wine by Sacha Lichine would cost more than 100 euros (HK$1,024), almost five times the price in Hong Kong.

Hong Kong’s generous tax policy also benefits Toni Younes and his patisserie Paul Lafayet which imports ingredients from France. All desserts – macarons and cakes – are made in Hong Kong.
Since opening its first outlet in Tsim Sha Tsui in 2010, Paul Lafayet has gradually extended its footprint to Causeway Bay, and City Super in Sha Tin. He opened an additional outlet Tsim Sha Tsui, Most are take-way outlets located in shopping malls.
Malls in Kowloon in particular draw huge numbers of shoppers and diners. These include many of the millions of visitors 41.9 million last year alone. The biggest portion of them is high- spending mainlanders.
“Hong Kong people are busy most of the time, but they are also fond of going outdoors to enjoy the extraordinary lifestyle,” said Younes, who has lived in Hong Kong for nearly four years.
To cater to the Hong Kong palate, the French patisserie also added some distinct flavors – oolong, jasmine, ginger and black sesame – into his macaron recipe and reduced the sugar content in desserts.

For wine maker Sacha Lichine, the timing could not have been better.

Following the elimination of wine import duty, business at the wholesale and retail levels as well as wine auctions have taken off rapidly.
According to data from the Census and Statistics Department, wine imports last year amounted to HK$8.9 billion from January to November, up by 46 percent from the same period of 2010. Most of the imports, or 40 percent, are from France, followed by UK and the United States.

“Hongkongers have started to drink rosé in recent years, and we hope to be their first choice,” said Malochet. Touted as the most expensive rosé in the world, its core product Whispering Angel sells for HK$172 a bottle. But Garrus – the brand’s top tier wine is priced at HK$1,188.
The third reason, and perhaps the most important one, that draw companies to Hong Kong is China. A growing middle class that aspires to a better lifestyle is in the sights of winemakers and distributors. Besides, there are mainland collectors willing to pay a premium for vintage wines.
As the standard of living in the mainland improves, people are looking for higher quality food and beverage products, Younes said.

Confectioner Paul Lafayet, which offers 15 types of macarons for HK$15 each and cake for HK$40 per piece, now has Beijing in its sights. As for Sacha Lichine, China’s wine drinkers remain a challenge.
Malochet said: “People in the country only drink the most expensive wine and have no idea about other categories including rosé.

But Chinese learn quickly through education, and I think three years is enough [to promote the brand].”
He is eager to take his wines to Shanghai, Beijing and Sanya.
Paul Lafayet and Sacha Lichine each has its own distinctive advantages.
Paul Lafayet has not changed its pricing strategy since setting up shop in Hong Kong. With products only offered at two price points, the company said it was easier to identify the market.
Targeting mainly female buyers, the French patisserie attaches much importance to the design of packaging and has a design team of seven, which is also responsible for attractive exterior displays.

Sacha Lichine, which has no stores of its own, counts on Jebsen Group to distribute Chateau D’Esclans in Greater China.
The French wine maker also relies on wine fairs and wine-related events in different cities to promote its produce.
Over the past two years, the customer base for Chateau D’Esclans has surpassed 100 including restaurants, hotels, bars and wholesalers in Hong Kong.