Below I reproduce a news release from a Hong Kong trade promotion office, outlining a memorandum of understanding between US and Hong Kong. You can read what it entails.
USA Ag policy has been "get big or get out" for at least 150 years. One exception to this is the wine business, particularly in California, where the state and fed govt subsidized the rich and politically connected to set up wineries and live the charmed life in Northern California.
This subsidy has led to massive overproduction. If you have market locally for 5000 bottles of $49 merlot, but you produce 25000 bottles do you cut your price to move the extra 20,000 bottles? What if the price to move it all is $3 a bottle locally, but that will slaughter your image and no more customers at $49?
The average price paid by Hong Kong importers for red wine from USA is $3 a bottle. (I show you how to research that here...)
5000 bottles at $50 is $250,000. 20,000 at $3 is $60,000, or $310,000 total.
If you price cut here USA, and you market price drifts down to say $5 a bottle, then you'll end up earning 25000 times $5 is $125,000. If you are only getting by at $310,000, you are out of biz at $125,000. Exporting allows you to keep your domestic prices higher than otherwise.
A quick biz to get into is re-importing wines. Know your USA wines. Set up an office in Hong Kong. Buy excellent USA wines cheap.. . negotiate cheap regular shipping, buy the wine from usa, bring it into hong kong, and ship it back. As USA wine it will come in duty free. (If you test this, make sure you do it first with a small shipment, only as much as you would like to drink, if this there is some rule I am not aware of... work with a customsbroker on this.)
This is in essence what was going on the pharmaceutical re-importations and plenty of other products whose exports are subsidized.
It does not surprise me in these times of economic distress the US govt is subsidizing this waste fraud and abuse (and it does not surprise me Hong Kong merchants are smart enough to take the money.) many of those villas in Northern California are owned by politicians, or politically connected, so they voted themselves another pay raise.
Such subsidies distort the markets, and lead to USA consumers overpaying for many items, such as wine.
As for the best way to export USA wine to China without govt subsidies and assistance, I have a video coming up on that. As to the memorandum of understanding, there is not a single element in it that would be useful to a start-up company.
Notes from the Article:
Gist of the HK-US
Memorandum of Understanding (MOU) on
Co-operation in Wine-related Businesses
The MOU is an extensive one, covering some common areas of co-operation that also feature in our MOUs with other wine producing countries/regions, including promotion of wine trading, investment, wine-related tourism, education / manpower training, and combat against counterfeits.
It also embraces a number of special elements relating to :
(i) promoting wine alongside regional and local cuisine – both sides will encourage enhanced partnership to promote food products and culinary arts relating to wine as well as regional and local cuisine;
facilitating as appropriate the organisation of wine auctions in Hong Kong for US wines – for example, Invest Hong Kong stands ready to assist US auction houses to set up a base in Hong Kong and/or identify business partners; and
encouraging the provision of quality wine storage facilities in Hong Kong - for example, the US side may help us publicize the wine storage certification scheme recently launched by the Hong Kong Quality Assurance Agency, which seeks to enhance confidence of wine traders and investors in using Hong Kong’s storage facilities.
The common elements are :
facilitation of business visits, exhibitions and wine-related trade fairs – to strengthen wine-related trading activities, both sides will facilitate business visits and encourage each other’s participation in wine fairs organised in Hong Kong or the US;
investment promotion activities – the investment promotion agencies of the two sides will facilitate exchange of information on wine-related investment activities and services;
education and manpower training – the two governments will encourage the training institutes in Hong Kong and the US to enhance partnership so as to improve education and training on wine-related subjects, such as courses on wine appreciation, wine culture and wine storage, and programs for meeting the manpower needs of enterprises engaged in wine-related businesses;
wine-related tourism and wine culture – we will encourage enhanced partnership on promoting wine-related tourism and wine culture through trade shows, festivals, individual and group travel programs, and exchange activities between Hong Kong and the US; and
co-operation in combating trade in counterfeit wine and smuggling of wine – the two governments will endeavour to provide assistance to each other to prevent, investigate and prosecute illegal activities and illicit trade involving counterfeit wine and smuggling. Hong Kong has a clean record on wine counterfeiting. We will upkeep our vigilance through such enhanced co-operation.
Government of the Hong Kong Special Administrative Region
May 2010
2 comments:
Looking forward to your video. Have you started to import wine in China? Is there special licenses/permits for wine exports?
Hey Kim,
I am not in the wine business, not my thing. But plenty will do well in it. I have no passion for wine.
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