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Expert Q&A: Wine imports and taxes on alcoholic beverages

QUESTION:

Is it true that most of the wine imports go through Hong Kong to China because of taxes on alcoholic beverages? If so, is it best to find importers in Hong Kong to distribute all of your wine in China?

ANSWER:

Thanks for your question.  I am sorry it was not answered sooner, but as our Q&A service is oriented toward those exporting out of China, your question about selling to China was outside of our experts area of focus. But I have some experience in the area and your question was eventually directed to me. Sorry for the delay, but here are my 2 cents:

1. Yes, the tax on wine is much less in Hong Kong than PRC.  But, unless they are smuggled, once the wines are imported into China, taxes will be paid. So that isn’t the main reason why Hong Kong is a hub for wine. As I understand it, the lower Hong Kong taxes make Hong Kong an excellent place for central distribution to the rest of Asia. For example, a shipment arrives from Europe and is stored in Hong Kong (no high import duties) then broken into smaller orders that are shipped across Asia (where taxes are eventually paid).

2. At the moment, Hong Kong has a more sophisticated public in terms of wine knowledge and consumption, but Hong Kong is dwarfed by the PRC in terms of consumption. The wine market in PRC is so hot these days that every vineyard is trying to get in on the action. Unless you have a very well-known famous brand, willing to invest heavy in marketing, or have some sales gimmick that nobody else has, unfortunately you will find it very hard to interest a Chinese distributor.

Selling wine in China these days is almost like trying to get into the chopstick business- it’s high volume, tight margin and only a few people are making any money. So to answer your question, if you can find a distributor interested in representing your product that can show a track record of taking products to market, then jump on the opportunity regardless if they are in PRC or Hong Kong.

Thanks again for your question. Let us know how things work out for you.

 

Question answered by Mike Bellamy, host of Ask the Experts at the China Sourcing Information Center.

Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. He is also the author of The Essential Reference Guide to China Sourcing and founder of PassageMaker Sourcing Solutions.

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