Just back from a quick trip to Hong Kong to gauge the local market. The opportunity presented itself with an invitation to participate to the Hong Kong Wine and Spirit Fair at a much reduced price and I cannot say no to a good deal. Beyond the good deal, Hong Kong was an interesting market to understand for several reasons. Firstly, a large contingent of US citizens live in Hong Kong (about 30,000) in a city of 7 millions and those folks like wine and are good ambassadors for US wines. Secondly, the average income is relatively high and years of British occupation have raised the awareness of the population to wine and food (and what is better with Chinese food than Riesling, eh!). Thirdly, they are no taxes on alcohol and no sales taxes on any goods; additionally the Hong Kong dollar is 100% pegged on the US dollar – no currency risk for US companies. All that to say that Hong Kong is probably the best market for US wines in Asia right now and an entry door to mainland China. That being said competition is fierce and finding a good agent is tough (I feel fortunate to have a decent importer myself). FOr me the highlight of the trip was definitely the last day of the show where exhibitors could sell their stock at what ever price they wanted (I made $300 that day!). Beyond the amusing fact that it felt like behind at the farmer’s market on that day, I gathered two very interesting learnings.
To start, there is something very refreshing about having a free market for wines: no price fixing, no third party, no licenses – I have noticed that prices would fluctuate out there and often were low which is great for consumers. I guess this fact points out to what a free market can do to prices (remember that Hong Kong has been ranked as the “freest economy in the world” for 12 years in a row by the Cato institute – the USA ranks 6th). That made me think about the US system and all the monies that go to government (think taxes) and to the distributors (think distributor margins) that really inflates the price of wine and brings up barriers to competition because not all wineries can afford that burden of taxes and margins and stay competitive.
Secondly, no one was drunk and, even if they were some drinking ,everyone behaved very well. Same in the streets, never saw a drunk person. That goes to public safety concerns that often are raised as a reason for our US alcohol market control system. It seems to me that there is no a great correlation between the level of control and the behavior of the population.
It reinforced my belief that a free market is totally the way to go for any goods and alcohol should be no different (especially wines and beers). If a tax is levied it should go 100% toward educating the population about alcoholism and the potential negative impact of alcohol on one’s life (our industry would support this 100% and it would allign everyone on the same goal ie safe consumption of alcohol). I would for sure keep the distributors (we could not live without them really) but open the doors to competition and alternative channels of distribution – looks at California, it has allowed many wineries to compete in many different ways keeping intact the distributor system – this is possible.