A year ago, Zhen Liquor Li Du Group via Hong Kong, to achieve the listing. A year later, Hong Kong's liquor tariffs have been greatly reduced, especially the tax rate of high-end spirits has been greatly reduced by 90%. Under this favorable situation, can famous mainland wines also follow the example of Li Du, a precious wine, and achieve incremental growth through the Hong Kong market?

On 16 October, according to the latest policy address of the Hong Kong Special Administrative Region: Taking into account the successful experience of abolishing the red wine duty to promote the red wine trade, the SAR Government will, with immediate effect, reduce the duty rate of spirits above HK $200 from 100% to 10% for imports of spirits above HK $200, while the duty rate of spirits below HK $200 and those below HK $200 will remain unchanged.

The new policy is highly favourable to high-end spirits, with tax rates slashed by 90%. Previously, Hong Kong imposed a 100 per cent AD valorem duty on imported spirits.

This means that after the implementation of the new policy, high-end spirits in the port, the cost pressure brought by tariffs plummeted, there is more profit space for businesses to operate, but also to benefit consumers, to significantly reduce prices to stimulate consumption.

For famous Baijiu whose retail price in the mainland market is often as high as about 1,000 yuan, it undoubtedly meets this standard. In that case, with the limited capacity of the Mainland market, can we increase the development of the Hong Kong market for fine wine, so as to achieve a large increase in consumption?

Local wine merchants, associations and other Hong Kong wine industry related parties believe that the spirits tax reduction will be a major positive for the liquor industry, but also conducive to Hong Kong to seize the future opportunities of mainland whiskey.

Despite favorable policies, the current situation should not be overly optimistic.

First, the market capacity of Hong Kong is limited, and the local spirits market is dominated by European and American products. In 2023, the amount of imported brandy and whiskey in the Hong Kong market is less than 400 million US dollars.

So, what is the share of baijiu in Hong Kong? According to the data of the Wine Importers and Exporters Branch of the China Chamber of Commerce for Food, Soil and Animal Import and Export, in 2023, the mainland's liquor exports were nearly 15,500 million liters, of which 5,125 kiloliters were exported to Hong Kong, accounting for 33%; In terms of amount, Hong Kong imported about 189 million US dollars of liquor from the mainland in that year.

From this point of view, the amount of liquor imported by Hong Kong from the Mainland a year is about 1.35 billion yuan according to the current exchange rate, which may not be as large as the consumption of a provincial capital city in the Mainland, and it is not high.

If we look at it from the perspective of development, then the sustained growth in the annual consumption of 1.3 billion may have a certain pulling effect on the mainland liquor enterprises. However, the $1.3 billion import figure does not represent actual consumption. Data show that in 2023, liquor imports from the Hong Kong market were 3,535 kiloliters, equivalent to 60% of liquor exports to Hong Kong that year.

This means that many liquor products, so-called exported to Hong Kong, are only "exported to domestic sales". So, the actual liquor consumption in the Hong Kong market is only a few hundred million yuan at present, and it is difficult to have a large expansion in the future.

Second, even if the famous wine is affected by the great reduction of tariffs in Hong Kong and the retail price is reduced, it may not have much effect on the actual consumption.

According to relevant reports, the price of a bottle of flying Moutai in the Moutai Hong Kong store is 3380 Hong Kong dollars, and the recent discount price of flying Moutai in the duty free shop of the West Kowloon high-speed rail station is 3105 Hong Kong dollars; Wuliangye Hong Kong store 52 degrees Wuliangye price is 1980 HK dollars.

Judging from the recent market situation in the mainland, even if the retail price of these high-end  Baijiu is greatly reduced after deducting the tariff cost, it will not be much cheaper than the retail price on the mainland, and it will not be a price advantage.

In fact, a few years ago, when the price of Moutai and other famous  Baijiu was high, it continued to come from overseas markets because of "export tax rebates" and many other reasons, its high-end wines sold were much cheaper than the mainland market - even in that case, the high-end liquor with low prices failed to make waves in overseas markets.