On-trade volume sales of wine suffered substantial losses in 2020 due to a number of measures introduced to combat the COVID-19 pandemic imposed by the Hong Kong, China government. In order to comply with the lockdown measures, on-trade outlets such as bars and restaurants were forced to shorten their business hours for eat-in food and drinks sales and even to close at the height of the local outbreak during the March to April, July to August and November to December periods.
The COVID-19 pandemic clearly resulted in some channel shift from foodservice to retail in 2020, leading to a fundamental rethink in channel strategy for wine companies. On-trade channels were traditionally crucial in the wine business as much higher margins were often earned in this area, while many wine manufacturers relied heavily on consumer foodservice outlets to test their new products and engage their customers.
Despite an overall decline in total volume sales, sake registered the strongest retail volume growth in 2020 thanks to continued consumer interest in the product, as well as the retailing shift evident throughout alcoholic drinks. Indeed, overall demand for Japanese goods remained strong in Hong Kong, China, giving a natural advantage for sake given its Japanese origin.
Sales of wine are expected to register a modest total volume CAGR over the forecast period. Wine is likely to rebound with positive growth in 2021, when on-trade channels are anticipated to partially return to more normal trading, driving consumption demand, followed by strong double-digit on-trade volume growth in 2022, mainly due to the complete normalisation of consumer foodservice establishments as and when the COVID-19 pandemic is brought under control and Hong Kong consumers return to dining tables to enjoy a meal with a glass of wine.
Traditionally, Hong Kong, China has played a strong role in international wine trading due to its supportive policies towards wine, such as zero tax on the product and its proximity to the massive market of mainland China. Given the regulatory regime, it is not easy for wine companies to conduct business in mainline China directly, and as a result, these companies need to use Hong Kong, China as the strategic entrepôt to target the Chinese market, meaning the wine industry in Hong Kong, China is heavily linked with mainland China.
Sake and other sparkling wine are expected to register the strongest total volume CAGRs over the forecast period.
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