Personal Care & Cosmetics Products Country Guide: Hong Kong Executive Summary Hong Kong is a bifurcated market in that it serves both the local population of 7.2 million, as well as serving as an import hub for China and catering to a large number of tourists and business travelers. In 2014, Hong Kong hosted 60 million tourists, of which an estimated 47 million came from China. As products can be imported duty free from Hong Kong into China, a significant portion of products imported into Hong Kong are repackaged and processed for the Chinese mainland market, with an estimated 55% of Hong Kong’s total imports then re-exported to China ($3.65 billion USD in 2015). With a total national level sales estimated at $2.7 billion in 2015, Hong Kong’s personal care and cosmetic products market is dominated by imports, as it has a very small manufacturing sector of its own. China is Hong Kong’s largest supplier, followed by France, Japan, South Korea, and the U.S. In 2015, Hong Kong’s imports of cosmetics and toiletries increased by 2.4%. Hong Kong’s imports of personal care and cosmetics products will likely grow at about 2 to 3% in 2016 and 2017, despite a slower rate of spending on these products from mainland Chinese visitors to Hong Kong. Domestic demand from Hong Kong consumers will also remain strong. Hong Kong is an important launch pad for marketing cosmetics and skincare products into the mainland Chinese market; it acts as a showcase for the Chinese tourists (45.8 million in 2015) that annually visit Hong Kong, often with shopping for personal, family or even re-sale use as a primary travel objective. There are tremendous opportunities for U.S. suppliers to export to Hong Kong, as local retailers and distributors are eager to increase the variety of products that they can offer to the mainland Chinese tourists, and also eager to cater to the needs of the local population, which is increasingly looking for skincare with the latest anti-aging and skin “whitening” technology. Hong Kong imported US$517 million worth of personal care and cosmetics products from the U.S. in 2015. In 2015 and 2014, US exports to Hong Kong declined by 1% annually. This decrease is likely due to a variety of factors, including the rising popularity of Korean products, which are increasingly vying for the attention of both premium and mass market consumers, as well as the devaluation of the Japanese Yen and Euro, which made these products more price competitive. There are no import duties on cosmetics, toiletry and skincare products in Hong Kong and registration is not required for cosmetic products. Demand within the market is highly concentrated, with the top ten brands accounting for about 70% of the market. Skincare products generate the lion’s share of Hong Kong beauty business, followed by make-up and nail products, then perfumes and fragrances. To remain competitive in the local market, it is important to work closely with a Hong Kong distributor to promote the brand, and adapt the products and packaging to suit local tastes. U.S. cosmetic and toiletry products are well received in Hong Kong and enjoy a reputation of high quality, high product safety and hygiene standards, and competitive prices. 2 Overview of the Domestic Market Size and Growth Trends in the Domestic Industry Domestic Production There are about 70 manufacturers of cosmetics and toiletries in Hong Kong, producing mostly lower- priced to mid-priced products under their own labels for export to China, Macau, the U.S., SE Asia, Japan, the EU, South Korea and Taiwan, as well as OEM /private label production for local skincare salons, spas, dermatologists and medical practitioners. China and Hong Kong signed the Closer Economic Partnership Agreement Table I: Overview of Hong (CEPA) on June 29, 2003 allowing several categories of goods, including Kong's Cosmetics Trade Flows (thousands) cosmetics and toiletries, to be imported into China through Hong Kong free of any tariffs (subject to Hong Kong origin requirements.) Under 2015 CEPA’s rules of origin for cosmetics and toiletries, mixing, blending and Imports $6,351,929 heating are processes that must be performed in Hong Kong to qualify as Local a Hong Kong-origin product. Domestic production of cosmetics, Production $129,366 toiletries, and skincare products is expected to increase as more local Exports manufacturers take advantage of CEPA to produce for export to mainland Local $2,700,000 China and for private labels. To qualify for the duty-free access to China, Consumption U.S. manufacturers must transfer some blending and mixing processes to Exports $3,522,563 Hong Kong. % of Imports 43% Sold in HK Some leading domestic manufacturers include Voles International Ltd. % of Imports 55% (brand: O’slee skincare products); Whealthfields Lohmann (Hong Exported Kong)Ltd. (brand: Walch liquid soaps and bath products). Local skincare brands include Seve and JaneClare. Owing to the high production costs in Hong Kong, many local manufacturers have set up offshore production facilities in China, and in a number of SE Asian countries notably, Thailand, Indonesia, the Philippines, and Malaysia. Hong Kong’s domestic exports of personal care and cosmetic products, 2012-2015 – See Appendix Table 1 Market Size In 2015, the size of the personal care & cosmetic products imported for direct sale in Hong Kong was estimated at US$2.7 billion. The total value of products imported for direct sale in Hong Kong is project to grow at about 2 to 3 percent in 2016 and 2017. In 2016, it was projected that direct sales in Hong Kong would decline due to 3% fewer tourists from mainland China; however sales to Chinese tourists remained strong throughout the first three quarters of the year, as did local demand and from other international visitors. Hong Kong’s total imports, including re-imports to China, were valued at $6.35 billion in 2015. These sales are expected to remain the same or increase in 2016, based on the latest consumption data from mainland China; however if the slowing of Chinese gross domestic product slows in future years, it is 3 possible these levels as well as overall sales to mainland Chinese tourists visiting Hong Kong could decline. Imports Hong Kong’s imports of cosmetics and toiletries increased 2.4 % in 2015 comprising skincare products, make-up, manicure and pedicure products, travel sets of personal care products, hair, bath and oral hygiene products, and scent sprays. The five largest suppliers were China, France, Japan, South Korea, and USA. There is little demand for “Chinese” brands; the majority of imports from China were branded products of foreign companies like Procter & Gamble, Wella, L’Oreal, Unilever, Kanebo, Kao, and Colgate-Palmolive that have manufacturing plants in China. Many foreign manufacturers of cosmetic products have established factories in China to avoid the high import tariffs and other restrictions on domestic retailing and wholesaling. Hong Kong’s imports is expected to increase 2-3% in 2016 and 2017, with imports from South Korea, Japan, and the U.S. fueling the increase. Growth in imports is also expected to come from sales of smaller and mass market brands, and products for daily use such as shampoos, bath products, oral hygiene products, deodorants, men’s grooming, premium baby and child specific products, and hair coloring products. For Hong Kong’s imports of personal care and cosmetic products, 2012-2015 – See Appendix Table 2 Consumer Profile Hong Kong’s per capita GDP was around US$42,291 in 2015. Hong Kong consumers between 30-49, comprising Hong Kong’s largest age group (31.3% or 2.3 million) and having the highest disposable income, are the biggest buyers of imported cosmetics and toiletries. It is not possible to estimate the average cosmetics spend per domestic consumer, given the high number of international visitors to Hong Kong, who purchase these products. Estimates by Euromonitor show that men’s grooming current value sales increased 3% in 2015 to reach US$98 million, which indicates a growing market for men’s skin care. The increasing number of men in Hong Kong using cosmetics and skincare products prompted Shiseido Hong Kong to start a Shiseido Men’s Club in 2005 and Shiseido has since then been conducting grooming seminars for men. President and Managing Director of L’Oreal Hong Kong said, “we see emerging segments that probably didn’t exist a few years ago,” citing men’s and sun care markets, , among trends that will drive the market in the next few years. Another large group of prospective buyers is Hong Kong’s 45.8 million visitors from China. A Nielsen survey on mainland Chinese tourists’ purchases revealed that cosmetic and skincare products were among the top shopping purchases, followed by electronics/photographic products, clothing, and jewelry/watches. The owner of an international Italian fashion and cosmetics brand commented at their Hong Kong flagship store opening, its first in Asia, that Hong Kong “ …increasingly represents a launch pad into the Chinese market; it creates the trends and acts as a showcase for this market.” While China has reduced import duties on cosmetics and skincare products brought directly into mainland China, thereby reducing the retail price difference between Hong Kong and China, Chinese tourists are still attracted to buying these products in Hong Kong rather than in China. According to industry sources, the perceived authenticity and reliability of the products in Hong Kong stores outweighs the price consideration. Apart from import tariffs that the mainland imposes on cosmetics imported directly into China, there are also VAT and product registration costs which do not exist in Hong Kong. U.S. cosmetic products enjoy an excellent reputation among Chinese consumers. Predictions that 2016 sales to visiting 4 mainland Chinese tourists would drop in 2016 have not manifested as predicted. Sa Sa, a cosmetic specialty retailer in Hong Kong and Asia reported improved sales revenues between April and June 2016 largely due to continued robust spending by the Chinese visitors in their stores Advertising Consumers in Hong Kong chose their cosmetics brands from reading ratings of products in fashion magazines, blogs on the internet and other media. If there are no advertisements for the brand, it will be perceived by the Hong Kong consumer as unknown and therefore not a good product. Advertising on local television, on buses, minibuses, trams or outdoor billboards and in the print media, and the Internet as well as celebrity endorsements are essential to promote a brand. As Hong Kong is one of the world’s largest centers for Chinese language publications, it is essential for the appointed distributor to cultivate good relationships with the local media to ensure regular features on their products. Fashion/beauty/lifestyle magazines such as Marie Claire, Cosmopolitan, Elle, and Bazaar publish their Chinese editions in Hong Kong, some of which are distributed in mainland China, Southeast Asian countries, and in Taiwan. These write-ups are essential in building brand and product awareness in the Chinese-speaking markets of Asia. Editors of these publications expect product samples together with product literature and photographs when requesting publicity through their magazines. Social media such as internet beauty forums, blogs, Facebook, and Weibo have become the latest platforms for promotions of skincare products and cosmetics as they are one of the major influencers to consumers’ purchasing decisions. U.S. brands of cosmetics and skincare products are often discussed in the blogs, featured in the product reviews and some also advertise in these websites. Beauty Exchange, Elle, She Critiques and She are a few of the more popular beauty websites. Other brand-building and promotional activities include make-up demonstrations by overseas make-up artists, makeovers at cosmetic counters, celebrity endorsements of products and engaging bloggers to attend product launches, and to review products. Direct sales of cosmetics and skincare to consumers via the Internet are gaining popularity in Hong Kong. Many local consumers not only use the internet for market research on new products, blogging and comparing prices, but also for purchasing products not yet available in Hong Kong and products whose online prices are cheaper than retail prices in Hong Kong. The increasing importance of online shopping is reflected in a Mastercard survey of Hong Kong domestic consumers, which reveals that approximately 84% made at least one online purchase of cosmetics in last three months. Another survey done by Nielsen states that the online purchase intentions of these same consumers—e.g. their use of the Internet to search, select and purchase—cosmetics increased to 23% in 2014 from the prior survey. Popular retail websites for Hong Kong cosmetics consumers include Sephora Hong Kong and StrawberryNet as well as a number of U.S. websites. In developing a distribution strategy for Hong Kong, U.S. companies may need to consider which products to distribute via online versus in-store channels, as well as their pricing strategy as local distributors working with traditional brick and mortar retail channels may demand exclusive access to products. These distributors are increasing concerned that if products are available via the Internet, it will hurt their sales, particularly if the products are available online at a lower price. 5 Distribution Channels and Marketing As a channel for retailing cosmetics, department stores in Hong Kong tend to operate more like landlords than retailers. Most do not purchase their own stock but lease their floor space to local distributors of branded cosmetics to operate as concessionaires. They charge between 25% and 35% of the lessees’ sales turnover as rent. Having a facial treatment room behind the concessionaire counter has proven to be effective in marketing products in the competitive environment of department store cosmetic floors. Apart from the department stores, Watsons and Mannings are the two largest personal care chain stores. Suppliers to these chain stores must provide 3-6 months credit along with listing and promotional fees for introducing new products into their stores. The minimum listing fee is about USD 6,500 per SKU. In addition, Watsons has a global buying team and a regional buying team based in Hong Kong handling purchasing for 17 markets and 10 markets, respectively. A U.S. company may be contracted to supply more than one market from the headquarters in Hong Kong. Other retail outlets for cosmetics and toiletries are the 1,500+ independent dispensaries, supermarket chain stores (Park ‘N Shop, Wellcome, Market Place, and Vanguard) and cosmetics specialty stores (Sa Sa, Bonjour, and Colourmix). Sa Sa and Bonjour may include brand cosmetics from parallel import sources or grey market dealers (imported from unauthorized distributors in a third-country), with the majority from products originating from Japan, Taiwan, Korea, U.S. and the EU. The largest of these outlets is Sa Sa, holding approximately 35% of local market share. It is also the largest cosmetics retail chain in Asia, 280 retail stores in Hong Kong, Macau, Singapore, Malaysia, Taiwan, and China that offer more than 600 brands. This includes a range of 17,000 products made of naturally-derived ingredients. Sa Sa imports about 100 brands directly from overseas manufacturers and the rest are from local distributors and suppliers. Sa Sa and Bonjour are extremely popular with mainland Chinese tourists, who account for more than 40% of their sales. Joyce Boutiques, a high-end specialty apparel store, also retails about 60 small and niche premium skincare, hair care, body care, and cosmeceutical brands (such as Eve Lom, NV Perricone,) under the Joyce Beauty brand. 60% of Joyce Beauty brands are sold exclusively at their stores. As a sign of the growing potential of the cosmeceutical market, Harvey Nichols, which opened in September 2005, devoted part of its department store space to a well-being section called “Beyond Beauty” featuring “the best edited selection of beauty brands – global and niche, cult and everyday products,” along with treatment rooms. Beyond Beauty offers skincare, hair care, spa products, fragrances and products for men, with brands such as Ultraceuticals (Australia,) Dr. Brandt (US,) June Jacobs Spa (US,) Intelligent Nutrients (US,) The Organic Pharmacy (UK,) Noesa (Germany,) Strivectin-SD (US,) DDF, Jeneuve (Switzerland,) Cowshed, Zirh, and Maxwell’s Apothecary (for men). The best way to enter a market is through appointing a local agent or distributor. Many Hong Kong distributors have agreements with their overseas principals to include Macau and mainland China. The U.S. manufacturer must, however, provide launch support to the appointed agent or distributor in the form of product samples and sachets for distribution to consumers, salons, doctors, etc. In private distributor market for skincare products, there are about 100 dermatologists, 50 plastic surgeons, 60 private medical practitioners, and about 70 medi-spas (spas with medical practitioners) that offer aesthetic medical treatments such as chemical peels, botox injections, fillers, IPLs, and other skin laser treatments. These institutions also prescribe and retail skincare products classified in Hong 6 Kong as drugs. According to the Hong Kong Census and Statistics Department, there are 10,170 registered beauty-related establishments employing more than 39,710 practitioners including beauticians, nail artists, make-up artists and beauty products’ sales persons in 2015. Exhibiting at local trade fairs is another important way to enter the market. Exhibitors often locate agents and distributors at trade fairs. Cosmoprof Asia (held annually in Hong Kong in November) is an international trade show featuring cosmetics, toiletries, perfumes, hair products, products for professional salon and spa use, along with raw materials for making and packaging cosmetics and toiletries. It is popular with U.S. manufacturers because buyers from around the world, local importers/distributors and beauty industry professionals visit this fair to find new partners, new products or new companies to represent. U.S. exhibitors have enjoyed tremendous success at this show, locating new customers or finding distributors not only in Asia but also from the rest of the world. The U.S. Department of Commerce has certified the show for the past few years. The preferred method of quoting for product order enquiries is “CIF landed,” and in US Dollars. Local importers pay their overseas suppliers through letters of credit, telegraphic transfers, and bank drafts in the preferred foreign currency of the exporter. Payment by telegraphic transfer is the most popular. The Hong Kong dollar (HK$) is freely convertible and there are no regulations that hamper inward or outward remittance of capital or profits. Percentage distribution of products by retail/sales channel: See Appendix Table 3 There are no significant shifts in channels of distribution. Department stores and pharmacies are becoming less popular compared with specialty beauty stores. While Internet retailing as a percentage of total sales (0.4% in 2015) is still relatively small, this figure is not reflective of local purchasing habits, as the available sales figure presented in Appendix Table 3, include sales to the large numbers of tourists to Hong Kong. Product Trends The most significant shift in product demand is from the higher end French, Japanese, and U.S. brands of skincare and make-up to Korean brands. Facial masks that contain snail cream from Korea are extremely popular in Hong Kong. Ever since snail cream masks become popular in Hong Kong, consumers have changed their facial care regime to include the use of a mask as much as twice a week compared with once a week a few years ago. Korean fashion trends also influence make-up, and hair colors. In mass market products, the Korean influence in increasingly strong, although U.S. and Japanese brands continue to compete well. Similar to trends in the U.S. and Europe, Hong Kong consumers prefer multi-functional products such as moisturisers and foundation that include sunscreen. BB (Beauty Balm) and CC (Correct and Cover) creams are therefore popular. In premium skincare products, consumers tend to favor cosmetics products that feature dermatological benefits such as those marketed via doctors, medical spas and professional skincare salons. Some retail chains like Watsons and Mannings are increasingly stocking products branded as such, which will increasingly occupy more retail shelf space as demand increases. Pricing: how local distributors determine prices (e.g. markup, other costs) An example of a U.S. brand of nail products: If the cost for the distributor is HK$24.50 for a packet of nail products, the local retail chain ( Mannings) will ask for a 50% discount. The distributor would sell the 7 nail products to Mannings for HK$12.25. Mannings retails the product for HK$60, a markup of almost 5 times. This is an example of a low profit margin for the Hong Kong distributor. The retail prices in Hong Kong for the U.S. product would generally be 15-30% higher than for the same product in the U.S. In many cases, the local retail price is intentionally set higher than that in the U.S. to project a product of a higher image, imported and made in the U.S. Even the display counters, and overall marketing image is set a few notches higher than its market positioning in the U.S. In Hong Kong, the importer is often also the wholesaler and the distributor and sometimes even the retailer. The retailers of Sa Sa, Bonjour, Joyce Beauty and Harvey Nichols import products directly from foreign suppliers. The chain stores of Watsons and Mannings, however, prefer to buy from local distributors. Representative retail prices for the following products (US$) Products Mass Market Premium Low High Low High Perfume $11.6 $16.8 $91 $258 Lipstick $6.4 $12.9 $26 $45 Eye Shadow $4.5 $11.6 $32.2 $41 Mascara $12.9 $19.4 $32.2 $41 Sunscreen $7.7 $11.6 $16.1 $41 Bronzer/Blush $11.6 $17.4 $32.3 $58 Skin Cream $2.3 $5.2 $29.7 $374 Shampoo/Conditioner $9.0 $15.5 $23.2 $32.3 Hair Styling Product $4.2 $6.9 $23.2 $32.3 Deodorant $2.2 $3.3 $9.0 $10.3 Nail Polish $0.64 $6.4 $18.0 $31.0 Shaving Prep $0.52 $9.0 $12.9 $32.3 Source: US Department of Commerce, International Trade Administration Field Research Emerging Product Niches and Consumer Groups Noticeable product niches are those catering to the needs of the aging population such as hair coloring products especially those that contain naturally-derived ingredients, eye brow trimmers that have a light bulb and magnified mirror attached, foot care products and products for very dry feet and hands. Other product niches are those that cater to babies and children with skin allergies, and products for sexual wellness. The latter is popular via both e-commerce and among mainland Chinese visitors. Use-at-home body firming and skincare products are also becoming popular and they compete with treatments offered by spas and salons. Other Trends Owing to the high cost of retail space in Hong Kong, retailers like Watsons and Mannings generally do not stock several sizes of a product. Travel sizes are offered through gifts with purchase or during promotions at Watsons and Mannings. Travel sizes are available instead through retailers like Sa Sa, and Bonjour and some are actually samples but offered for sale to consumers at these stores. 8 Trends in US Imports and Competing Products Table II: Imported Products Share of Hong Kong Import Market (Thousands) % Market % Market % Market Country 2013 2014 2015 Share Share Share US $528,831 9% $521,959 8% $516,669 8% France $882,613 15% $932,796 15% $881,708 14% Japan $545,186 9% $552,158 9% $611,463 10% South Korea $255,577 4% $342,856 6% $560,195 9% China $2,363,869 39% $2,248,827 36% $2,182,654 34% Other Countries $1,460,357 24% $1,606,536 26% $1,599,240 25% Total Imports $6,036,433 100% $6,205,132 100% $6,351,929 100% Source: Trade Policy Information System (TPIS), if marked with a *, source is Global Trade Atlas US Imports and Competitors Over the past four years, the U.S. share of the Hong Kong cosmetics and personal care markets, has stayed relatively stable at 8% with $517 million exported in 2015. The U.S. is Hong Kong’s fifth largest supplier following China, France, Japan, and South Korea. In terms of volume the major exports of the U.S. to Hong Kong include make-up/beauty preparations for the skin (US$348 million); perfumes and toilet waters (US$44 million); hair products (US$27 million), safety razor blades (US$25 million); and essential oils, perfume and flavor materials (US$24 million.) Cosmetics and toiletries imports from the U.S. decreased 1% in 2015. The increasing popularity of lower price skincare and cosmetic products from South Korea than those from the U.S. resulted in consumers switching from American to Korean brands. This is most apparent in color cosmetics, skin care products and fragrances in which prior to 2014, U.S. exports to Hong Kong were growing at over 10% annually. American products also face competition from Japanese products that are more suitable for local consumers. The depreciation of the Japanese yen vis-à-vis the Hong Kong dollar meant that imported Japanese products cost less than a year ago. American brands generally enjoy a reputation for product innovations, and stringent quality control on product safety. Procter & Gamble Hong Kong is the market leader in the cosmetics, toiletries and skincare products sector, recording a market share of 10.3% in 2015. Its skincare brands, SKII and Olay, are advertised widely in the local media and enjoy brisk sales. Both SKII and Olay have a comprehensive range of whitening skincare products, which are popular in Hong Kong. Other leading U.S. skincare brands in Hong Kong are Estée Lauder, Kiehl’s, Neutrogena, Clinique, Nu Skin, H2O+, Artistry (Amway’s), Usana, Elizabeth Arden, La Mer, and Skinceuticals. In the nail color sector, the U.S. brand OPI dominates in the nail salons. P&G’s hair products, and the Gillette brand of razor blades are the market leaders. Other emerging personal care product markets for U.S. companies, include feminine hygiene products such as sanitary napkins, tampons and cotton wipes, as well as personal deodorants which are growing at 20% to 40% annually. Local importers frequently cite the need for foreign suppliers to adapt the packaging and size to local tastes. American suppliers should also try to package higher-end potent skincare products in glass jars 9 or bottles to enhance their product image. A local personal care chain store prefers to stock Japanese products on their shelves as they are attractively packaged, especially important given limited shelf space in most Hong Kong stores. This chain store also commented that the Japanese suppliers were willing to adapt packaging to suit the display configurations of their stores. The strength of U.S. cosmetics and toiletries is in skincare and hair care products for both professional use in spa and hair salons as well as mass-market hair products. Extensive brand-building activities and competitive pricing of U.S. mass-market hair product suppliers like Procter & Gamble, Johnson & Johnson, and Colgate-Palmolive contribute to the success of the U.S. as the market leader in this sector. Manufacturing of these products, however, is mostly in China or other Asian countries. For professional skincare products, Hong Kong consumers prefer U.S. products for their technological advances in product formulations and manufacturing. These made in America products are also perceived as being very safe and many local distributors will advertise that their products are USFDA approved, even though the US FDA does not approve cosmetics products for sale in the U.S. Currently, the HK$ is pegged at 7.8 to the US$ and has fluctuated little since the inception of the linked rate policy in 1983. Therefore many Hong Kong importers and distributors prefer to buy products from the U.S., as the prices of US products are stable vis-à-vis the Hong Kong dollar, as global fluctuations in the value of the US dollar do not affect the exchange rate. Competitors France supplied US$882 million or 14% of Hong Kong’s cosmetics and toiletries imports in 2015, including US$665 million of make-up and skincare products and US$196 million of perfumes and toilet waters. Imports of higher-end French brands of make-up and skincare products and perfumes will likely decline as the mainland Chinese tourists, many of whom are bargain hunting,, switch to lower-priced perfumes and Korean brands of skincare products. French perfumes, cosmetics and skincare products will remain popular with Hong Kong consumers, who continue to place a premium on the long traditions of quality among these products. Popular French brands in Hong Kong include L’Occitane, Lancôme, Clarins, Biotherm, Chanel, Lóreal, Christian Dior, Guerlain, Givenchy, Vichy, YSL, Avene, Darphin, Decleor, and Rene Guinot. Import of cosmetic, personal care and skincare products from South Korea are experiencing double-digit growth for the past few years and in 2015, the increase was 63% resulting in South Korea surpassing US as Hong Kong’s fourth largest source of imports. Make-up and skincare products accounted for 8% or US$495 million of the total cosmetics and toiletries imports. The rise in Korean cosmetic product sales can be attributed to the increasing popularity of Korean pop culture among young Hong Kong women, as well as the suitability of these skin care products to the Asian skin type and skin color. Major Korean skincare and cosmetic companies have also invested heavily in soft advertising via sponsorships of local television shows and Korean film and television dramas are also very popular. Many Hong Kong consumers clamor for the brands of skincare products that the Korean film stars use as both male and female stars are all well-groomed” and have “porcelain-like facial skin” The diversity, innovation and use of natural ingredients in Korean cosmetics also contribute towards the impressive growth in the demand of these products. Popular Korean premium brands in Hong Kong include Sulwhasoo, Whoo, Amore Pacific and Hera, and mid-priced brands including Hanskin, Etude House, Tony Moly, Laneige, Innisfree and Nature Republic. Imports from Korea will continue to grow in 10 the next two to three years as French and Japanese brands lack mass products to compete with the low- priced Korean brands. Japan was Hong Kong’s third largest supplier of imported cosmetics and toiletries in 2015, with US$611 million or 10% of Hong Kong’s total imports of cosmetic and toiletries. About 68% or US$417 million of Japan’s exports of cosmetic and toiletries to Hong Kong were make-up and skincare products. Local consumers cite suitability of Japanese skincare products and color cosmetics to Asian skin type and skin color as the reason they prefer Japanese products to American and European products. In addition, Hong Kong consumers prefer Japanese packaging and consider Japanese products to be fun, modern and stylish. Local importers commented that Japanese manufacturers were willing to adapt their packaging to local tastes and to the tight space configurations of the local retail chain stores. Hong Kong’s imports of Japanese cosmetics and toiletries will continue to remain strong. Popular Japanese brands in Hong Kong include Shiseido, Kose, Fancl, IPSA, Sofina, Kanebo, Menard, and Biore. Consumers who prefer premium skincare products are the main customers of Japanese brands; they trust the quality of the ingredients and the hygiene standards of the Japanese manufacturers. The top 5 suppliers of Hong Kong’s imports are China, France, Japan, South Korea, and the U.S. See the following tables for more information on the U.S. and competing countries’ exports to China : Hong Kong’s Imports from the U.S. by product, 2012-2015 –See Appendix Table4 Hong Kong’s Imports from China by product, 2012-2015 – See Appendix Table 5 Hong Kong’s Imports from France by product, 2012-2015 - See Appendix Table 6 Hong Kong’s Imports from Japan by product, 2012-2015 – See Appendix Table 7 Hong Kong’s Imports from South Korea by product, 2012-2015 – See Appendix Table 8 The top 5 country importers Procter & Gamble HK Ltd., Estee Lauder HK Ltd., L’Oreal HK Ltd., Amore Pacific HongKong Co. Ltd., and Shiseido Hong Kong Co. Ltd.. are the top five importers in terms of products sold via retail channels in Hong Kong. (Source: Euromonitor International’s Beauty and Personal Care In Hong Kong, May 2016) Top Markets/Opportunities Specific to US Products (Ranked –estimate only) 1. Hair shampoos, conditioners and treatments 2. Facial skin anti-aging creams, whitening lotions, and masks. 3. “Dermo-skincare products” for retail distribution 4. Hair coloring products 5. Body treatments, slimming treatments, massage and bath products for use in spas and professional skincare salons 6. Personal care and cosmetic products using organically-grown and naturally-derived ingredients hypo-allergenic, with low concentrations of fragrance and preservatives. The market is still relatively small with a customer base of 25,000. To sell these products in Hong Kong, local distributors sometimes retail them in smaller bottles than non-organic products for the prices to remain competitive. 7. Use-at-home hand held devices for body and facial skin firming and contouring.