According to Euromonitor, retail sales in the packaged food market in Hong Kong will reach US$5 billion in 2022. That represents a very slight decline in growth of .3% or US$2.5 million since 2018. By the year 2026 the retail sales in the
packaged food market in Hong Kong is expected to reach US$6 billion, a growth rate of 20.9% and US$1 billion from 2022.
High-growth products in the forecast include:
- Baby Food
- Confectionery
- Ice Cream & Frozen Desserts
- Ready Meals
- Soup
- Baked Goods
- Sweet Biscuits, Snack Bars & Fruit Snacks
- Cheese
FAS Hong Kong reports that in 2020, Hong Kong’s retail food sector sales maintained at US$12.7 billion. The Hong Kong food retail market is made up of supermarkets, convenience stores, and traditional markets. Supermarkets account for
over 62% of retail food sales. There are 790 supermarkets, 1,300 convenience stores, and nearly 100 traditional markets in Hong Kong, making food shopping very convenient.
“Supermarket/Department Stores” include
sales of supermarkets, convenience stores, and food and beverage sections at department stores. They are the modern grocery outlets that provide consumers with convenient and high-quality options. In addition to groceries, these stores offer
a more comprehensive shopping experience with increased items of fresh food, bread and pastry, organic options, and hot takeout meals. “Other outlets” refers to the traditional markets, also called wet markets, mom-and-pop stores,
bakeries, fresh fruits stalls, etc.
Two major grocery chains, Wellcome and ParknShop, dominate the supermarket category with nearly 70% market share combined. Both chains recently expanded their premium and upscale outlets as consumers
continue to seek high-quality, imported gourmet products. Expansion of health food, confectioners, and chain stores such as “759”, “Kai Bo18”, “Best Mart 360” and “PrizeMart” are increasing competition
for supermarkets and convenience stores. Although the number of supermarket outlets is expected to remain stable, the market share for supermarket sales is expected to continue growing in the future at the expense of traditional street markets.
The supermarket’s share in terms of total retail sales rose from 44% of total sales in 1995 to 62% in 2020.
Euromonitor reports that Dairy Farm Group rebranded as DFI Retail Group in mid-2021, with a new logo with a navy-blue background,
which was its latest strategic focus to create further synergies between the portfolio companies of the group across its stores in Hong Kong, China and Southeast Asia, with businesses spanning food, health and beauty, home furnishings, restaurants,
and other retailing. The customer reward program yuu was another strategic move, which merged all loyalty programmes across Wellcome, Mannings, KFC and the other portfolio brands of DFI Retail Group, and allows consumers to collect and redeem
reward points seamlessly.
Moreover, Meadows, a private label line from DFI Retail Group, launched since 2019, rapidly expanded its assortment in 2021. The private label line already covers 1,700 products spanning across 65 categories,
including fresh food, packaged food, homewares and others. This successful private label initiative earned the range the Home Brand of the Year (Hong Kong) trophy in the FMCG Asia Awards 2021. The vast supermarket network of DFI Retail
Group, including brands such as Market Place by Jasons, ThreeSixty, Wellcome and Oliver’s the Delicatessen, allow Hong Kong consumers to gain access to the affordable assortment of Meadows products. Since other supermarket chains do not
offer Meadows products on their shelves, the success of Meadows created a strong competitive edge for supermarkets under the DFI Retail Group to compete against their rivals.
In 2021, a rebranding strategy also applied at brand level in
supermarkets. CR Vanguard Supermarket, a supermarket chain owned by China Resources Enterprise, which also owns the U select supermarket brand in Hong Kong, decided to rebrand all remaining CR Vanguard Supermarket stores as U select.
Before the rebranding happened, the positioning of CR Vanguard Supermarket in Hong Kong was to provide consumers with affordable grocery and non-grocery products, focusing on products produced in Greater China, as well as the Southeast Asia region.
In comparison, the China Resources supermarket brand U select has a wider product selection, imported from the U.K. as well as other parts of the European market. This is because U select was formed as a joint-venture between China Resources
Enterprise and Tesco, the British supermarket operator; hence U select is able to offer goods from the UK and other European markets at an affordable price.
Since the outbreak of the COVID-19 pandemic, the higher willingness of Hong Kong
consumers to purchase goods from overseas during the travel lockdown benefited the performance of U select. As a result, to better cope with the change in consumer preference, China Resources Holdings made the decision to rebrand, and now all
supermarkets under the group in Hong Kong are branded as U select to focus on Hong Kong consumers’ growing demand for overseas products. In addition, the Wan Fen Fans customer rewards program, which is similar to yuu, was also launched
during the COVID-19 pandemic, retaining and further building customer loyalty through the application of a loyalty program that applies to both U select and VanGo.
When talking about other grocery and non-grocery retailers in Hong Kong,
the latest threat is those new players that entered Hong Kong and grew rapidly over the review period. Amongst these new competitors, Don Don Donki, the Japanese variety stores brand which has offered a wide Japanese product assortment in Hong Kong
since 2019, is now the biggest threat to local supermarket chains.
Unlike the majority of supermarket outlets in Hong Kong, the average outlet size of Don Don Donki outlets is relatively larger, providing a comprehensive shopping journey
for Hong Kong consumers to purchase all kinds of grocery and non-grocery products through one single visit to a physical outlet. In addition, during the travel lockdown because of the COVID-19 pandemic, the retail environment within Don Don Donki
outlets offered a Japanese shopping experience to local consumers, which they had missed for almost two years since 2020. The combination of in-store experience as well as the complete Japanese assortment offered has made Don Don Donki a key threat
to local supermarket chains. In the latest expansion plan announced by Don Don Donki in February 2021, the variety stores brand will open 18 more outlets from 2022 to 2025.
Furthermore, another Japanese retailer, Matsumoto Kiyoshi, a well-known
chained operator in chemists/pharmacies, has confirmed its plan to expand to Hong Kong in 2022. This expected new entry could cause a further threat to supermarkets in Hong Kong. Therefore, over the forecast period local supermarket chains will need
to react and rethink how to counter the threats brought by these Japanese retailers before their competitive positions become vulnerable.
According to Euromonitor, convenience stores in Hong Kong experienced a positive impact from the COVID-19
pandemic in 2021. Consumers relied on outlets near both their living areas and offices to purchase grocery products in order to reduce the time exposed to outdoor or crowded areas that have a higher chance of infection. This positive impact
was more significant in the first quarter of 2021, as several lockdowns happened across Hong Kong that kept consumers alert to social distancing measures and reduced the overall foot traffic in the city.
Spotting the opportunities during
the pandemic, key leading players including Circle K and 7-Eleven both expanded in terms of number of outlets in 2021, to further drive sales from the consistently higher demand for both personal hygiene products and groceries. As a milestone, 7-Eleven
in Hong Kong opened its 1,000th store on Des Voeux Road in Central, marking the 40th year since it set foot in the territory.
Best Product Prospects:
FAS Hong Kong reports that products with the highest sales
potential in this sector include tea, dog and cat food, fresh vegetables, fresh fruit, eggs and products, processed vegetables, soup and other food preparations, condiments and sauces and beef and products.
