Grapeless Hong Kong pursues Asian wine strategy

Hong Kong grows no grapes, but its abundance of hubris could make it the wine distribution hub of Asia.

The city has been ranked as the freest in the world by the conservative Heritage Foundation and prides itself as being the most dynamic, cosmopolitan place on Earth, but it has been searching for another way to burnish its image. What to do?

Even though Hong Kong lacks grape production, it embarked on a journey to become the wine distribution hub for the fast-growing Asian market. Its first major act was to cut its 80 percent tariff on imported wine in half in 2007, and then eliminate it altogether in February 2008.

Hong Kong may not have any vineyards, Financial Secretary John C. Tsang recently told a luncheon attended by California’s Napa Valley winemakers and grape growers, but “we do have a nose for opportunity.”

When Mr. Tsang eliminated wine duties early last year, Hong Kong instantaneously became “the first free wine port among major economies with unparalleled connectivity to Asia,” he told his audience.

“It’s a bit like New York City suddenly coming online overnight,” said wine entrepreneur Stephen Bachman, commenting on the impact of Hong Kong’s zero wine tariff. Mr. Bachman, who spent 17 years as a venture capitalist and investment banker, is the founder and chief executive officer of Vinfolio, a San Francisco-based wine-purchasing, advisory and storage firm.

In the 10 months that followed the tariff’s elimination, Hong Kong’s global wine imports increased more than 80 percent on a year-on-year basis, reaching $350 million, Mr. Tsang declared. U.S. wine exports to Hong Kong more than doubled, climbing to $18 million last year.

Most of the wine imported from the United States comes from Napa Valley, said Donald Tong, the Hong Kong Commissioner for Economic and Trade Affairs, USA. Always in the market for competitive products, Mr. Tong recently accompanied Sen. Jim Webb, Virginia Democrat, on a visit to wineries and vineyards in Virginia’s Shenandoah Valley.

“Senator Webb had a productive conversation with the Hong Kong commissioner about the prospects of introducing Virginia wine into the Asian market,” said Kimberly Hunter, Mr. Webb’s spokeswoman. “He looks forward to trying to facilitate a relationship between the two interests to benefit Virginia winemakers.”

Mr. Tong said he will soon begin making arrangements for Hong Kong wine connoisseurs to tour Virginia’s vineyards and wineries.

Hong Kong’s wine strategy has been emphasizing quality as much as quantity.

“Hong Kong is evolving into a world trade center for fine wine, especially in the last year since the tariff went to zero,” said John Kapon, president and chief auctioneer for Acker Merrall & Condit, a New York-based wine merchant that netted $15 million in sales from two auctions conducted in Hong Kong last year. Local wine collectors were the driving forces, but the auctions also attracted buyers from Europe, Japan and Singapore.

“Hong Kong proved in its first year with a zero tariff that it is no flash in the pan. The Hong Kong market is sustainable. It’s here to stay,” said Mr. Kapon, whose firm has conducted two more auctions this year, including one last week.

Sotheby’s and Christie’s are starting up their own auction operations in Hong Kong, Mr. Tong said.

A big part of Hong Kong’s long-term wine strategy is to use its port “as a springboard for wine exports to mainland China and the rest of Asia,” Mr. Tong said.

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