International Markets Bureau MARKET INDICATOR REPORT | OCTOBER 2012 Consumer Trends Cooking Oils in Hong Kong Consumer Trends Cooking Oils in Hong Kong MARKET SNAPSHOT INSIDE THIS ISSUE The Hong Kong Special Administrative Region (Hong Kong) is a Market Snapshot 2 political and administrative subdivision of China. Hong Kong has a high degree of autonomy in all of the region’s economic, social Trade 3 and political issues except for diplomatic relations and national defense. Retail Sales 4 The total population of Hong Kong exceeds 7.1 million (July 2011, estimate, Central Intelligence Agency [CIA] World Factbook, New Product Launches 6 2012). The region’s population is ethnically diverse, as immigration contributes to the growth of the population. The majority of Hong Kongites are Chinese, but other major ethnic New Product Examples 8 groups include Filipinos and Indonesians (CIA Factbook, 2012). Company Shares 10 Hong Kong has shown strong economic growth over the last decade. The region’s gross domestic product (GDP) registered at US$224 billion in 2010. Hong Kong’s economy is mainly Brand Shares 11 supported by the service industry, which accounted for approximately 93% of the region’s total GDP during the last five Sources 12 years (World Bank, 2012). Annex A: Hong Kong displayed a robust trade performance during the last New Canola Oil Products 13 couple of decades. For example, the region’s total trade was 440% of the region’s total GDP in 2010. In the same year, the Annex B: 17 export of goods and services was 223% of the region’s total GDP New Food Products (World Bank, 2012). Containing Canola Oil According to Euromonitor (2011), more than 95% of Hong Kong’s total exports were, in fact, re-exports of imported goods whose final destination was mainland China, which is also the region’s biggest agri-food and seafood trade partner. In 2011, Hong Kong’s total value of agri-food and seafood imports was US$23 billion, while exports were valued at US$8 billion. In terms of domestic food consumption, total consumer expenditure on foods saw an upward trend during the 2006-2011 period with a compound annual growth rate (CAGR) of 10.1%, reaching US$20.5 billion in 2011. Consumer expenditure on oils and fats accounted for 1.5% of total consumer expenditure on foods, at US$305 million in 2011. Expenditure on oils and fats increased during the 2006-2011 period at a CAGR of 11.2%. Hong Kong’s culinary styles include Cantonese and Chinese, which require frying and steaming methods. Therefore, oils and fats are considered essentials for cooking in Hong Kong. According to Euromonitor (2011), there have been changes in the consumption of oils and fats over the last five years due to increasing health consciousness. This contributed to an increase in demand for higher quality cooking oils and fats with less trans-fat or with fortified contents such as docosahexaenoic acid (DHA) and omega 3. PAGE 2 TRADE Hong Kong was a net importer of oils and fats in 2011 (including edible animal fat). Hong Kong imported US$253 million of oils and fats products from the world and exported just US$61 million in 2011. In 2011, Hong Kong imported US$49 million of canola oil products, and exported US$15 million. Traditionally, China has been Hong Kong’s major trade partner for canola oil products. However, over the last five years, Hong Kong’s canola oil exports to Macau have increased, reaching US$11 million, or 69% of the region’s total canola oil exports in 2011. The total import value of canola oil products from China was US$2.7 million in 2011, while canola oil exports to China dropped by 66% in 2011 from the previous year, recording US$3.6 million. Canada is the major exporter of canola oil products to Hong Kong. Canada exported C$31.3 million of canola oil products to Hong Kong in 2011, according to Statistics Canada (2012) . The total export value of Canada’s canola/rapeseed oils to Hong Kong fluctuated during the 2006-2011 period. In 2008, they registered a big drop, but showed a strong recovery in 2009, maintaining the top position. The total export volume of Canada’s canola/rapeseed oils also fluctuated during the 2006-2011 period. In 2009, total export volume reached 31 million kilograms, the highest export volume during this period. Canada’s total export volume of canola/rapeseed oils has decreased since, recording 26 million kilograms in 2011. Canada’s Exports of Canola Oil Products to Hong Kong 35.0 30.0 25.0 s n 20.0 o Milli - 15.0 $ C 10.0 5.0 0.0 2006 2007 2008 2009 2010 2011 Rape or colza oil, (Refined) Rape or colza oil, (Crude) Low erucic acid rape oil (Refined) Low erucic acid rape oil (Crude) Source: Statistics Canada, 2012 PAGE 3 RETAIL SALES Retail Sales Overview  The total oils and fats market in Hong Kong was valued Vegetable and Seed Oil by Type* – % Breakdown at US$122 million in 2011, which was up by 3.7% from by Retail Value Sales in 2011 the previous year. By volume sales, the market expanded by just 2% during the same period. The vegetable and seed oil sub-category represented the majority of the oils and fats market both by value and by volume terms. During the 2006-2011 period, vegetable and seed oils accounted for approximately 69% of total value sales, and 84% of total volume sales. Within the vegetable and seed oil category, canola oil accounted for approximately 28% of total vegetable and seed oil sales by value throughout the 2006-2008 period. The butter sub-category showed fast growth in value sales at a CAGR of 10.6% during the 2006-2011 period. Considering the low volume sales growth at a CAGR of 2.7%, value sales were largely driven by price Source: Euromonitor International, Oils and Fats in Hong Kong, 2012 * Note: Vegetable and seed oil does not include olive oil. increases during this period.  The olive oil sub-category experienced a big drop in value sales following fast growth during the 2006-2008 period. However, considering the high volume growth during the 2008-2011 period at a CAGR of 4.1%, market expansion was led by consumption growth during this period.  The unit price of vegetable and seed oils saw an upward trend between 2006 and 2008. However, it has declined since the 2008 peak price of US$4.2 per kilogram, reaching US$ 2.9 per kilogram in 2011. Hong Kong’s Oils and Fats Market Size by Retail Value Sales (Historic) in US$ Thousands 2006-11 Category 2006 2007 2008 2009 2010 2011 CAGR Total oils and fats 109,731.3 127,923.6 153,980.3 128,871.0 118,020.5 122,355.6 2.2% Butter 1,229.4 1,290.9 1,833.0 1,924.7 1,963.2 2,037.8 10.6% Olive Oil 7,833.0 8,459.6 9,178.7 7,801.9 7,255.8 7,582.3 -0.6% Spreadable oils and fats 26,295.2 28,924.8 30,515.6 31,431.1 29,859.5 30,635.9 3.1% Vegetable and seed oil 74,373.6 89,248.4 112,453.0 87,713.3 78,942.0 82,099.7 2.0% Hong Kong’s Oils and Fats Market Size by Retail Volume Sales (Historic) in Tonnes 2006-11 Category 2006 2007 2008 2009 2010 2011 CAGR Total oils and fats 29,708.5 30,768.1 31,696.2 32,153.4 33,082.4 33,732.7 2.6% Butter 132.0 133.3 134.9 140.9 146.6 151.0 2.7% Olive oil 488.3 507.8 530.6 551.9 576.7 598.6 4.2% Spreadable oils and fats 4,130.1 4,295.3 4,424.1 4,534.7 4,625.4 4,694.8 2.6% Vegetable and seed oil 24,958.1 25,831.7 26,606.6 26,925.9 27,733.7 28,288.3 2.5% Source for both: Euromonitor International, Oils and Fats in Hong Kong, 2012 PAGE 4 RETAIL SALES (continued) Retail Sales Overview (continued) The commodity price hike during the 2008-2009 period contributed to increased prices of oils and oil products in Hong Kong. From 2009, as commodity prices went down, oil and oil product prices went back to pre-2008 levels. Retail Sales Forecasts  Hong Kong’s total oils and fats market is projected to grow during the 2011-2016 period at a CAGR of 3.8%, reaching US$147 million by 2016. Total volume sales are expected to grow slowly at a CAGR of 1.1%, a decrease of 1.5 percentage points from the CAGR recorded during the 2006-2011 period. According to Euromonitor (2011), the slow growth rate may be attributable to rising health consciousness and governmental healthy eating campaigns regarding the use of less oils and fats when cooking. The vegetable and seed oil sub-category is expected to expand at a CAGR of 3.8% during the 2011-2016 forecast period, to be valued at US$99 million by 2016. However, by volume, the vegetable and seed oil sub-category is expected to record slower growth than the 2006-2011 period, at a CAGR of just 1.1% over the period. Considering the consumption trends, Hong Kong’s oils and fats market will continue to show shifting sales trends as consumers choose healthier and high-quality oils. This shift in consumption will likely contribute to price changes of oils and fats products. Hong Kong’s Oils and Fats Market Size by Retail Value Sales (Forecast) in US$ Thousands 2011-16 Category 2011 2012 2013 2014 2015 2016 CAGR Total oils and fats 122,355.6 128,117.7 133,139.4 137,983.0 142,648.9 147,135.4 3.8% Butter 2,037.8 2,140.9 2,231.7 2,319.5 2,403.7 2,483.8 4.0% Olive oil 7,582.3 7,926.9 8,222.6 8,504.0 8,768.9 9,025.3 3.5% Spreadable oils and fats 30,635.9 31,965.2 33,124.7 34,258.4 35,395.8 36,539.5 3.6% Vegetable and seed oil 82,099.7 86,084.8 89,560.4 92,901.0 96,080.6 99,086.8 3.8% Hong Kong’s Oils and Fats Market Size by Retail Volume Sales (Forecast) in Tonnes 2011-16 Category 2011 2012 2013 2014 2015 2016 CAGR Total oils and fats 33,732.7 34,229.2 34,664.2 35,034.8 35,343.0 35,586.4 1.1% Butter 151.0 155.2 159.2 162.7 165.7 168.0 2.2% Olive oil 598.6 619.6 639.4 657.9 674.4 688.5 2.8% Spreadable oils and fats 4,694.8 4,741.7 4,779.7 4,808.3 4,832.4 4,851.7 0.7% Vegetable and seed oil 28,288.3 28,712.7 29,085.9 29,405.9 29,670.5 29,878.2 1.1% Source for both: Euromonitor International, Oils and Fats in Hong Kong, 2012 Distribution  The supermarket accounts for approximately 54% of the Hong Kong’s total food retail shopping. Wet markets, including small grocery shops, are still popular places for everyday shopping. However, for oils and fats products, supermarkets represented 83% of total sales in 2011. This has been a consistent trend that is not likely to change in the near future. PAGE 5 NEW PRODUCT LAUNCHES According to the Mintel Global New Product Database, there were 134* new cooking oil products introduced in Hong Kong between January 2007 and December 2011. The new product launches peaked at 49 in 2009, representing 37% of the total sample for the entire search period. The number of new product launches has dropped significantly since 2009. Launch Types  The majority of the launches were completely New Cooking Oil Product Launches new products (83 products, 62%). The other in Hong Kong from 2007-2011 by Year major launch types were new packaging (29 products, 22%) and new variety/range 60 extension (21 products, 16%). There was one 49 product launched as a new formulation. s 50 ct Major Companies & Brands du 40 35 Pro Onulimtabliae r aonfd n Leawm p rSoodounc t relacuonrcdheeds thdeu rhiniggh tehset er of 30 21 2007-2011 period, with eight products. Six b 20 14 15 m were released under the Olitalia brand and u two under the Oleal brand. N 10 0 Lam Soon also had eight new products over 2007 2008 2009 2010 2011 the 2007-2011 period under the company’s brands: Knife (five products), Vecorn (two products), and Red Lantern (one product). Source: Mintel, 2012 New Cooking Oil Product Launches in Hong Kong from 2007-2011 by Top Companies and Brands Number of Company Brand Products Olitalia 6 Olitalia Oleal 2 Knife 5 Lam Soon Vecorn 2 Red Lantern 1 Lion & Globe 4 Hop Hing Oils & Fats Camel Brand 2 King Chef 1 Colavita Colavita 6 Novello Di Macina 1 Stupor Mundi 1 Manfredi Barbera E Figli Puroliva 1 Frantoia 1 Cooking oils in AS Watson, Hong Kong Source: Planet Retail, 2012 Other 101 Total 134 Source: Mintel, 2012 * Note: The initial search result was 135 products including one non-cooking oil product. The non-cooking oil product is excluded from all analyses. PAGE 6 NEW PRODUCT LAUNCHES (continued) Claims New Cooking Oil Product Launches in Hong Kong from 2007-2011 by Major Claim The most popular claim for new cooking oil products was low/no/reduced cholesterol with 26 products. Number of Claim Products Other major claims included kosher (17 products), antioxidant Low/no/reduced cholesterol 26 (14 products), organic (13 products) and no additives/ Kosher 17 preservatives (10 products). Antioxidant 14 Most other claims were related to health benefits or health Organic 13 consciousness. No additives/preservatives 10 Types of Oil and Flavours Low/no/reduced saturated fat 6  All natural product 5 Based on classifications by the main ingredients and product Cardiovascular (functional) 4 types, there were 41 olive oil products launched in Hong Economy 4 Kong from 2007-2011, representing 31% of all new oil products. Canola/rapeseed oils saw 14 products and sesame Low/no/reduced transfat 4 seed oils registered 10. Source: Mintel, 2012 The most common flavour was unflavoured/plain with 127 products, representing more than 94% of the total new New Cooking Oil Product Launches products. Other flavours included truffle (2 products), as well in Hong Kong from 2007-2011 as avocado, garlic, lemon, sesame, shallot and spice/spicy, by Oil Type with one product each. Number of Oil Type Packaging Products  Olive oil 41 A glass bottle was the most common packaging type with 87 Canola/rapeseed oil 14 new products, followed by the plastic bottle with 40 products. There were five products in a metal can, one in a metal bottle Sesame seed oil 10 and one in a multilayered carton. Grapeseed oil 8 Corn oil 6 The most common pack sizes amongst the new products Sunflower seed oil 5 were 1 litre, 0.5 litre and 0.9 litre. Peanut oil 5 Soybean oil/ fat 4 Walnut oil 3 Linseed oil 2 Rice Bran oil 2 Tea Seed oil 1 Madacamia nut oil 1 Others 32 Total 134 Source: Mintel, 2012 Source: Mintel, 2012 PAGE 7 NEW PRODUCT EXAMPLES The following are some examples of the new cooking oil products launched in Hong Kong between January 2007 and December 2011, from the Mintel Global New Products Database (2012). Extra Virgin Camellia Cooking Oil Company: Golden Flower Tea Oil Production Package Material: Plain glass Brand: Top. Tea Oil Production Pack Size: 250 ml Date Published: August 2011 Storage: Shelf stable Launch Type: New variety/range extension Private Label: Branded Price (US$): 17.73 Ingredients: Oiltea camellia oil (100%) Package Type: Bottle Product Description: Top. Tea Oil Production Extra Virgin Camellia Cooking Oil is a pale amber-green fixed oil with a sweet, herbal aroma. This product has been certified with HACCP. Scallion Oil Company: Area Farmer's Association Package Material: Plain glass Brand: Sunshin Pack Size: 270 ml Date Published: August 2011 Storage: Shelf stable Launch Type: New product Private Label: Branded Price (US$): 7.39 Ingredients: Sunflower seed oil, chive, vitamin E Package Type: Bottle (antioxidants) Product Description: Sunshin Scallion Oil is said to be natural, healthy and fresh. Grapeseed Oil Company: Envero Aceites Package Material: Coloured Glass Brand: Envero Pack Size: 750 ml Date Published: February 2011 Storage: Shelf stable Launch Type: New product Private Label: Branded Price (US$): 9.22 Ingredients: Grapeseed oil Package Type: Bottle Product Description: Envero Grapeseed Oil is a product from Spain. Source for all: Mintel, 2012 PAGE 8 NEW PRODUCT EXAMPLES (continued) Extra Virgin Tea Seeds Cooking Oil Company: Golden Flower Tea Oil Package Type: Bottle Production Package Material: Plain glass Brand: Top. Tea Oil Production Pack Size: 250 ml Date Published: June 2010 Storage: Shelf stable Launch Type: New product Private Label: Branded Price (US$): 20.53 Ingredients: Oiltea camellia oil (100%) Product Description: Top. Tea Oil Production Extra Virgin Tea Seeds Cooking Oil is a pale amber-green fixed oil with a sweet, herbal aroma. Camellia Seed Oil Company: Edenworld International Package Material: Plain glass Brand: Edenworld Pack Size: 500 ml Date Published: February 2010 Storage: Shelf stable Launch Type: New product Private Label: Branded Price (US$): 11.97 Ingredients: Tea Seed Oil (Seed) Package Type: Bottle Product Description: Edenworld Camellia Seed Oil is made from seeds of wild camellia trees found on the highlands. This oil is described as a pure, natural and advanced edible organic oil. It is recommended for use in mixed salads, stir-fries, and deep fries. The product is organic certified. Rice Bran Oil Company: Olitalia Package Material: Coloured glass Brand: Olitalia Pack Size: 1 L Date Published: August 2010 Storage: Shelf stable Launch Type: New variety/range extension Private Label: Branded Price (US$): 10.42 Ingredients: Rice bran oil (bran) Package Type: Bottle Product Description: Olitalia Rice Bran Oil is new to the range. It is produced from rice germ in its natural state and contains several constituents of a healthy diet. It is claimed to be known for its very high smoking point of 49°F and its mild flavour, making this oil suitable for high temperature cooking methods such as stir frying and deep frying. Source for all: Mintel, 2012 PAGE 9 COMPANY SHARES During the 2006-2010 period, the top three companies, Lam Soon Group, Hop Hing Holdings Ltd., and Unilever Group, held a strong presence in terms of company shares, representing 72.8% of the total oils and fats market in Hong Kong by retail value sales. However, Lam Soon Group and Hop Hing Holdings Ltd. lost marginal shares since their peak performance in 2008. According to Euromonitor (2011), this decline is due to the decrease in demand and popularity of vegetable and seed oils, as health-conscious consumers change to oil types perceived as healthier, such as olive. The Lam Soon Group maintained the lead in Hong Kong’s oils and fats market throughout the 2006-2010 period. Lam Soon Group (and subsidiary companies) produces and distributes edible oil products under the company’s brands in Hong Kong and China. The company’s market share increased by 1 percentage point every year from 2006-2008, but experienced a decline in Dah Chong Hong Food Retail Shop and sales and company share since the peak of US$52.7 million in 2008. Distributor in Hong Kong Source: Planet Retail, 2012 Lam Soon Group recorded total sales of US$37.4 million in 2012, representing 31.6% of the Hong Kong oils and fats market. Hop Hing Holding Ltd. maintained the second position throughout the 2006-2010 period, showing a trend similar to that of Lam Soon Group. The company recorded positive growth in company share during the 2006-2008 period, but experienced a marginal decline since then. Hop Hing Holding Ltd. recorded total sales of US$32.9 million, representing 27.9% of the Hong Kong oils and fats market in 2010. Hop Hing Holdings mainly engages in the production of oil products by blending, bottling and distributing the products under the company’s brands. The Da Chong Hong (DCH) Group is a major food trading company in Hong Kong. The company imports and distributes packaged food in both retail and wholesale-level foodservices in Hong Kong, Macau and China. In terms of oil products specifically, DHC is mainly engaged in the repackaging, distribution and marketing of imported oil and fat products through retail outlets, as well as through the company’s retail chains in both Hong Kong and China. Hong Kong’s Oils and Fats Market – Company Shares by Retail Value Sales (Historic) – % Breakdown Company (GBO*) 2006 2007 2008 2009 2010 Lam Soon Group 32.2 33.1 34.2 32.3 31.6 Hop Hing Holdings Ltd. 26.7 27.7 28.9 28.1 27.9 Unilever Group 16.6 13.3 10.0 12.4 13.3 Goodman Fielder Ltd. 6.7 6.1 5.4 6.7 7.0 Snow Brand Milk Products Co Ltd. 3.6 3.6 3.1 3.7 3.6 Sweetyet Development Ltd. - 2.4 2.6 2.7 2.7 SOS Corp Alimentaria SA - - 1.8 1.8 1.8 SALOV - Società per Azioni Lucchese Olii e Vini SpA 1.9 1.8 1.6 1.6 1.7 Da Chong Hong (DCH) Group 2.7 2.1 2.2 1.7 1.6 Fonterra Co-operative Group 0.6 0.5 0.6 0.8 0.9 Arla Foods Amba 0.3 0.3 0.3 0.4 0.4 Burns, Philp & Co Ltd. - - - - - Private Label 4.0 4.4 4.8 4.3 4.0 Others 4.7 4.7 4.6 3.5 3.3 Source: Euromonitor International, Oils and Fats in Hong Kong, 2012 * Note: At the point of writing the report, 2010 was the latest available figure. GBO: Global Brand Owner PAGE 10