Wine Consumer behavior in Hong Kong

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  1、Introduction
  Production of wine is both art and science, it is a cooperation of nature’s creativity and techniques. However, for most of wine merchants and consumers, wine production is also regarding as a business, which is developing globally. Nowadays, wine industry became one of the most globalized industries in the world while wine has been traditionally consumed in Europe. Comparing to the past, the European market is declining in terms of consumption. During the period from 1970 to 1999, in “old world” countries as Spain, France and Italy, the per capita consumption has decreased 40 to 50%, meanwhile, the per capita wine consumption in the United States, one of the “new world” country, has almost doubled (Figure 1). According to researches, European wine consumption per capita has decreased from 53 liters in the period of 1991 to 1995 to 44 liters in 2009 in average (USDA, 2011). The European Union therefore decided to expand wine export so as to maintain the consumption level. The main export destinations are several developed countries like the United States, Canada and Japan as well as the BRIC economies referring to Brazil, Russia, India and China.
  Figure 1: Changes in total consumption of wine by country during the period of 1970-1999
  Emerging wine markets are the proof of globalization of wine industry. The increasing amount of markets brings the need for examinations, especially, the need to understand consumer’s behavior. In order to be profitable and successful in the modern markets, a wine marketer must be aware of a reliable understanding of the intrinsic and extrinsic factors underlying wine purchase motivations (Linda et al, 2002). Knowledge for the emerging markets and consumers is beneficial not only for domestic professionals to make decisions on what wines to import and sell, but also for worldwide marketers to better target new consumers.
  The influences of globalization in the wine industry are particularly evident in Asia. The volume of wine consumption in Asian countries like Japan, China, Singapore, and South Korea has increased rapidly during the last five years and currently they demonstrate high potential in export markets (Lee, 2009). In 2008, after repealing the alcohol tariffs and excise tax for most alcoholic beverages, Hong Kong has experienced a boom in the alcohol industry, especially in wine trading, it has become the largest wine auction center in the world, moreover, the gate to Asian wine market (Yui-yip, Adolf& David, 2014). Hence it is a significant market to consider for wine producers and traders who seek export opportunities. This paper aims to gain insight into Hong Kong wine market and the consumer’s behavior in terms of consumption behavior, purchasing behavior, preference and information source.   2、Overview of existing information on the Hong Kong wine industry
  2.1 Demand Booms
  An increasing awareness of health benefits of wines had been spread throughout Hong Kong in the 1990s, which had brought revolutionary changes to the city’s alcohol consumption scene (Speece, Kawahara and So, 1994). Not only wine consumptions increased exponentially, but it also changed the patterns of wine drinking and, fundamentally, alcohol drinking in general. Hong Kong’s general taste buds have shifted from spirits consumption, including whisky and brandy to wines instead. It is not unusual to see Hong Kong people enjoying their meals with pairing a glass of wine (Schwartz, 2002), despite the fact that wine prices in Hong Kong are much more expensive that most countries at that time. However, Hong Kong entering the economic boom period since 2000, the wine market had experienced tremendous growth (Dewald, 2003). Wine lovers and collectors had shown great interests towards the finest wines of Bordeaux.
  2.2 Taxation change
  Taxation of alcoholic products is widely implemented worldwide as a method of funding public health system. The heavy high wine tax had gone through gradual amendments and increased to 80% from 60% from 1994-2000(The Economists, 2010). Hong Kong as capacity of managing a free trade port, the government had made a decision to reduce 50% taxation on beers and wines in order to further strengthen the strategic position. The taxation on beers and wines was further reduced and eventually removed in February 2008 (HKTB, 2015). This revolutionary reform greatly incited the wine business scene in HK in various ways. Professional wine storage warehouses and facilities were erected in order to meet the requirements of the zealous wine collectors. The huge inflow of international investments and talents from all over the world was truly remarkable at the time: wine merchants and companies flooded to HK and have their headquarters set in HK (Debra M, 2013). By the end of the 2000s, HK has arguably become the wine hub of Asia.
  2.3 Product diversity & taste change
  Accompanied by the influx of international wine ventures, the number and the range of products available to consumers have increasing in last decade. First of all, the total volume of imports has increased greatly. According to the government report, the import of wine reached HK$8.4 billion at the end of 2014, compared to that in 2007 merely HK$1.6 billion. Secondly, there has been a much greater diversity to the range of products coming into Hong Kong. For example, French wine has been the origin and main imports (more than 40% market share) into the HK wine market in the end of 1990’s (H.K. Trade Statistics Reports – Nov-Dec 1999). But according to recent statistics, between 2012 and 2014, the total percentage of French wine import has decreased, whereas the percentage share of New World Wines such as Chile and Australia has increased tremendously. Furthermore, the preference for wine of Hong Kong customers has also change gradually from red to white wine, with a ratio about 3 to 1 choosing red wine. Hong Kong as the culinary center in the region, it is popular to has wine pairing with Asian cuisine thus enrich wine sales in restaurants and hotels as wholesales, meanwhile the more full-bodied red wines with fruity characteristics appeal to the Asian palate (Bolcina, 1997).   2.4 Wine trade
  In the capacity of Asia’s Wine Hub and with the aid of the government, Hong Kong has established strong sales channels with different parts of the world (AFP News, 2008). Not to mention the existing cooperation agreements signed with major wine producing countries including France, Australia, Chile and Spain etc. Hong Kong is also home to some of the most diversified and creative wine marketing channels and mechanisms in the world (Mark G, 2006). The various marketing and promotional events aim to boost promotional activities including wine-related trade, tourism and investment. Hong Kong has held various promotional activities for wine industry including wine seminars, tastings, receptions and food-wine pairings (O'Neill, 2002). Vinexpo is probably the most famous among various wine fairs that take place in Hong Kong. Trading and re-exporting is also another key role of the Wine Hub. According to the strategic proximity to Mainland China, Hong Kong is the best candidate to fulfill the “intermediary agent” role for wines that tempt to enter China. As major wine imports in Hong Kong, Chinese mainland & Hong Kong government has signed up an agreement about exported and imported in China customs for Wine on February 2010 (LCHK, 2010).
  2.5Related industry
  Last but not least, it is without doubt that the tax reform surrounding wines has created countless job opportunities for Hong Kong, which directly gives rise to the development of both vocational and interest-based wine education. WSET, the most famous wine qualification examination, is among the most popular mechanism of wine education in Hong Kong, attracting both wine amateurs and professionals. On a higher education level, HK Poly U has recently established a graduate-level program and is willing to train the most promising wine talents of tomorrow. There are also quite a few Master of Wines that are based in Hong Kong, for example who greatly contribute to the development of the local wine scene (Moulton, 2001).
  3、Methodology
  Considering the two purpose of the study, both quantitative and qualitative methods were employed in this study, also the secondary data is used as a supplement. For the Hong Kong's wine consumer behaviors, the data were collected through distributing online questionnaires and focus group interviews. While data for the wine market analysis of the Hong Kong came from the Hong Kong Trade Development Council (HKTDC).
  3.1 Quantitative Method   Firstly, Hong Kong consumer data were collected through questionnaires in a quantitative method. For the purpose of data collection, the researchers employed the online questionnaire designed by Dr. Steve Pratt from The Hong Kong Polytechnic University to obtain the data about Hong Kong wine consumer behaviors. Compared with pen-and-paper surveys, the online questionnaire tends to be more convenient, economic, environmental-friendly and less time-consuming.
  Moreover, the online questionnaire allows the researchers to approach potential respondents more easily, which also provides a pressure-free environment. Meanwhile, random sampling was possible and applicable since this study mainly focuses on Hong Kong residents. The online questionnaire included demographic information, consumer preference for wine consumption, purchasing behavior as well as source of information. A total number of twenty-one questionnaires were received and collected for data analysis.
  3.2 Qualitative Focus Group
  Additionally, in this study, qualitative focus group method is considered practical and appropriate because it facilitates to reveal the consumer behaviors (Liu, F. & Murphy, J., 2007). Focus group is an interview involving the researchers as moderators and six to twelve respondents to discuss the topics introduced by the moderators (Zikmund & Babin, 1997). In this study, the targeted respondents were Hong Kong residents over 20 years old.
  A total of twelve participants were invited to join the focus group interview. The participants were categorized into four groups according to age and gender: males under 30 years old (Group A), males over 30 years old (Group B), females under 30 years old (Group C), females over 30 years old (Group B). The researchers adopted 30 years of age was intended to unveil if there is any age difference in wine consumer preference like purchasing behavior, consumption behavior and source of information. The researchers took the role as facilitators to raise questions and to guide discussions (Krueger & Casey, 2014). Each focus group was about 15 to 20 minutes in length during lunch time and dinner time for two days. The facilitators made sure that all the questions were discussed and the participants in the group had equal opportunity to express their viewpoint.  four focus group interviews were recorded through pen-and-paper in order to enable the researchers to conduct the analysis. The data were decoded and categorized based on the frequency of answers in the discussions.   4、Findings
  4.1 Quantitative method
  4.1.1 Wine purchasing behavior
  The participants on average purchase 4.79 bottles of wine every month. And the average spending on wine per month is about 1167.86 HKD. The majority of the Hong Kong wine consumers tend to buy wine at liquor stores, followed by supermarkets and restaurants/bars. A very small percentage of participants buy wine through online/mail order. This results showed that Hong Kong wine consumer still prefer to buy wines mostly at liquor stores, only a small percentage will choose to order online or via emails. Hong Kong is a developed place economically and socially, however the e-commerce grew slowly. Consumers seldom order wines online not only because of the higher barrier for free delivery (often purchase over 1000 HKD for free delivery) but also thanks to the fierce competition among retailers and the convenient shopping environment in Hong Kong. In this competitive wine market, consumers are able to compare prices among retailers and tend to purchase onsite.
  In terms of Top-3 countries of origin for wine, the participants ranked France as the Top 1 favorite wine region, followed by Italy, New Zealand, Spain, Australia, South Africa and Chile. When it comes to France, the first thing came to people’s mind might be about wine and perfume. French wines have been successfully constructed as the national symbol of France. This survey revealed that the Hong Kong wine consumers still prefer wines old world such as France and Italy than that of new world. However, they are willing to try and accept new world wines since several new world wine regions like New Zealand, Australia, South Africa and Chile.
  4.1.2 Information sources
  In order to allow marketers to take appropriate promoting strategies, it is necessary for researchers to obtain the information on sources that Hong Kong wine consumers mostly depend on. Hence, the questionnaire included a question about the sources that consumers use to obtain information about wine. The results showed that the retail display, word of mouth/ friends' recommendation are considered to be the most widely-accepted information sources, followed by restaurant sommeliers, supermarkets, magazines and educational courses. However, the Facebook, YouTube, Google and Television were perceived as less reliable sources of wine information. Retail display is the most direct way to present wine information, which is highly effective and more reliable for Hong Kong's wine consumers. However, the modern social networks experienced difficulties in promote wine information in Hong Kong and were less valued by the local wine consumers.   Linda et al..(2002). The Present and Future of the International Wine Industry. Nature, 418(10), 696-699
  Liu, F., & Murphy, J. (2007). A qualitative study of Chinese wine consumption and purchasing: Implications for Australian wines. International Journal of Wine Business Research, 18(2), 98-113
  Mark M. G, Tim H. Doddb R, M. Guydosha ,(2006), Attitudes towards wine-service training and its influence on restaurant wine sales, International Journal of Hospitality Management, Volume 25, Issue 3, September 2006, Pages 432–446
  Moulton, K. and Lapsley, J. (2001), Successful Wine Marketing, Aspen Publishers, Inc., Gaithersburg, MD
  O'Neill, M., Palmer, A., & Charters, S. (2002). Wine production as a service experience-the effects of service quality on wine sales. Journal of Services Marketing, 16(4), 342-362.
  Parry S: Wine tax strangling city’s potential. Hong Kong: South China Morning Post; 2005.
  Schwartz, S. (2002) Wine levy rise uncorks backlash, South China Morning Post, March 7.
  Sim, J. (1998). Collecting and analysing qualitative data: issues raised by the focus group. Journal of advance nursing, 28(2), 345-352
  Simon Somogyi, Elton Li, Trent Johnson, Johan Bruwer, Susan Bastian. 2011. The underlying motivations of Chinese wine consumer behaviour. Asia Pacific Journal of Marketing and Logistics 23:4, 473-485
  Speece, M. W., Kawahara, Y., & So, S. L. (1994). Imported beer in the Hong Kong market. British Food Journal, 96(1), 10-18.
  The Government of the Hong Kong Special Administrative Region: Budget Speech for 2001–02:
  http://www.budget.gov.hk/2001/english/efile.htm.
  The Government of the Hong Kong Special Administrative Region: Budget Speech for 2002–03:
  http://www.budget.gov.hk/2002/eframe2.htm.
  The Legislative Council of Hong Kong: Submission to the Bills Committee (Revenue Bill) from the Hong Kong Beer Industry Coalition. Paper No. CB(2) 1570/00-01(01),
  http://www.legco.gov.hk/yr00-01/english/bc/ bc65/papers/b1570e01.pdf.
  Trade & Industry Bureau and the Trade Development Council: Hong Kong as a regional Wine Trading and distribution Centre: Prospects and opportunities. Hong Kong: Hong Kong Trade Development Council; 2000.
  USDA Foreign Agriculture Service (2011). Wine annual report and statistics, prepared by J. Dever, Approved by J. Dever, March 1.
  Vinexpo (2002) Latest Figures and Forecast up to 2006 of the World's Wine and Spirits Market, Vinexpo Asia-pacific 3rd Edition, France.
  Yui-yip, L, Adolf, K.N & David, G. (2004). Becoming a major hub in the distribution of wine: Hong Kong as a gate to Asian markets. International Forum in Shipping, Ports and Airports, 3(10), 22.Zikmund, W. G., & Babin, B. J. (1997). Exploring market research.
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