Hong Kong’s spirits market is undergoing a major transformation following a substantial tax cut that came into effect on October 16.
Announced by Chief Executive John Lee in his 2024 Policy Address, the reduction slashes the tax on spirits priced over HKD 200 (US$25) from 100% to just 10%. This move is expected to invigorate demand for high-end spirits, including China’s Baijiu, as the tax cut makes premium products more accessible, setting the stage for a shift in the city’s luxury spirits landscape.
Shirley Wong, Chief Executive Officer of Wine’s Link International Holdings Limited, a listed alcoholic beverage company in Hong Kong, believes the tax cut positions Hong Kong as a more competitive destination for spirits imports compared to neighboring Macau. Wong is also the founder of the Hong Kong Baijiu Association, a non-profit organization set up earlier this year to promote Baijiu in Hong Kong.
In Macau, spirits with more than 30% ABV are subject to a consumption tax of 10% of their CIF value (cost, insurance, and freight value), in addition to a fee of 20 patacas (US$2.5) per liter. As Wong explained, although the import tax in Macau is still lower than in Hong Kong at certain price points, the logistics and insurance costs gave Hong Kong an edge. This advantage is due to its larger port that accommodates freighters, making Hong Kong a more cost-efficient option for exports and transitions.
According to local media HK01, Kweichow Moutai, the most well-known Baijiu, will see a 20.7% price cut on its 2024 vintage. Originally priced at HKD 3,380 (US$435), its price was cut to HKD 2,680 (US$345). This change makes it cheaper than the CNY 2,700 (US$380) retail price in mainland China’s duty-free shops.
Moutai did not confirm the price cut in response to inquiries from Chinese media, but its Hong Kong distributor told Xinhua Finance, China’s state media, that Moutai would cut its price in the Hong Kong market, although the exact percentage is uncertain.
ZJLD Group, the only Baijiu company listed in Hong Kong, has also indicated a readiness to enact a price reduction to expand its Hong Kong market. “We will pass on the benefits of the tax cuts to the market,” said Paul Ng, the Executive Director and Head of International Operations of ZJLD Group, “allowing those who love and want to try Zhenjiu products to enjoy value-for-money and high-quality baijiu, thereby further expanding our brand’s influence and enhancing the capital market’s valuation of our Group.”
Tomy Wu, the founder and director of MyiCellar, which exclusively distributes ZJLD in Hong Kong, also agrees that there will be a substantial price reduction for Baijiu. “Especially for high-end Baijiu, the price difference between mainland China and Hong Kong will be greatly reduced,” Wu said.
Retailers Brace for Increased Demand
Retailers in Hong Kong are bracing for more premium products at a lower price. “More clients, including Watson’s Wine, are asking us if there is a price change for spirits,” Betsy Haynes, the Managing Director of Northeast Wines and Spirits, told Vino Joy News. “The mainland will probably push more of their premium Baijiu, such as Moutai, into the market.”
However, Wong of Wine’s Link cautioned that while the tax cut opens up opportunities, currently limited number of Baijiu brands in Hong Kong—fewer than ten—means that producers still exert significant control over pricing.
This leads to tighter price control from the producer side, she said. Nonetheless, she expects that more Baijiu brands will enter the market, increasing the level of competition, as well as fostering stronger Baijiu culture.
In addition to Baijiu, imported spirits like Japanese whisky and The Macallan, whose prices have soared to speculative levels, are expected to become more affordable to end consumers.
Tugdual Iquel, Head of Asia for Berry Bros. & Rudd, the oldest wine and spirits merchant headquartered in the UK, noted how Hong Kong’s spirits market has evolved over the years. “In the early 2000s, Hong Kong’s market was dominated by traditional spirits, with Cognac and whisky taking the lion’s share,” Iquel explained. “By the mid-2010s, the city experienced a cocktail boom, driven by the rise of high-end cocktail bars and mixologists, which elevated the local taste for premium spirits. This shift fueled a craze for Japanese whisky and brands like The Macallan, pushing prices to speculative levels.”
Iquel also highlighted how the previous high tax regime contributed to the rise of grey markets for these high-end spirits. “As the hub for wines in Asia, Hong Kong’s high taxes on spirits only encouraged a grey market for these products,” he said. The recent tax reduction is expected to curtail that grey market and normalize prices, making premium spirits more accessible to consumers.
Due to the high spirits tax, Hong Kong had not been a focus of BBR, but this is about to change with the spirits cut.
“With the tax reduction, it is almost like we are opening a new market,” Iquel described the impact of the new tax policy. Before the official announcement, BBR had already increased the frequency of high-end spirits offers to Hong Kong collectors, from one to two offers per month to two offers per week, in anticipation of the potential tax cut.
“It will take time for the market to adapt, like it did with the wine, for all the grey stock to be eliminated, and importers to diversify and take more risk with their offers. The cost of risk to offer categories such as high-end tequila or high-end rum, won’t be as high as before, so the market will be more adventurous,” Iquel continued, “like it did for wines, people don’t drink more than before, but they do drink better.”
The lower import tax also comes with its challenges particularly with parallel imports and smuggling. With well-developed e-commerce platforms and logistics in mainland China, there’s concern that Hong Kong could become a gateway for parrell imports and smuggled spirits from other markets.
Wong highlighted this issue using Moutai as an example: “Any of Moutai’s exported products to Thailand, Europe, the US, and Australia that do not sell out there will enter Hong Kong through parallel importing,” Wong explained, noting that parallel imports will drive down market prices, complicating efforts to maintain stable pricing.