This is the fourth and final article in our four-part series on the advantages and disadvantages of selling alcohol in each of the Greater China markets—Mainland China, Hong Kong, Macau, and Taiwan. The focus is on the importation, sales and promotion of foreign alcoholic products. In this article, we will discuss the tiny, yet promising, market of Macau.
Advantages of Selling Alcohol in Macau
High familiarity with imported alcohol
As a link connecting emerging Asian markets to the wider world, Macau has long benefited from global trade and investment. Currently, it is a regional hub for incentive travel, conventions, and tourism. Macau’s economy is based largely on its gambling and leisure sector. In 2017, about 32.6 million visited Macau. Recent expansions in the industry have created a huge demand for food and beverage products.
Macanese consumers have high familiarity with imported alcohols. High-quality wines, both from the Old and New World, are popular with tourists and locals. There is also a growing thirst for cocktails. As for beer, Macau imported about US$1.8 million-worth in the first months of 2017. Preference is for brews with higher alcohol content.
Low barriers to entry
Like Hong Kong, Macau is a free port with no tariffs on general imports. It does not impose duties on foreign wines and beers, as well as spirits with an alcohol content lower than 30 percent. Certain alcohol beverages are subject to an ad valorem tax based on their Cost, Insurance and Freight (CIF) price in Macau.
Licenses/permits and health certificates are also not required. In addition, Macau has a simple taxation system in place. Its corporate and individual tax rates are among the lowest rates in the region. In general, the region provides a favorable business and investment environment for enterprises and investors.
Macau’s culture is a hybrid of Chinese and Portuguese influences, making it the facilitator of cooperation between the two worlds. Portuguese is one of the official languages in the territory. The region’s close relations with Portuguese-speaking countries (PSCs) dates back to the 1500s.
Macau is particularly attractive for PSC companies wishing to enter the Chinese market. It is normal to see multinational firms promoting trade and business partnerships with Chinese companies during annual events in the area. Most PSCs also take advantage of Macau’s proximity to one of China’s biggest trade hub, Guangdong Province.
Disadvantages of Selling Alcohol in Macau
Small and mature market
Due to its tourism and gaming sectors, Macau’s economic growth has remained strong over the years. It has one of the highest levels of per capita gross domestic product (GDP) in the world. Unfortunately for foreign companies, the market for such a small territory is limited. The 650,000 inhabitants, plus visitors, cannot support a high volume of consumption.
In a small market, established brands have the advantage of familiarity over the consumers’ preferences. This is challenging for new entrants. Establishing a high brand reputation requires diligent research and well-crafted strategies.
Highly competitive market
As a world-class tourism and leisure destination, Macau is home to a variety of imported alcohols. The abundance of hotels and fine dining restaurants offer high-quality alcoholic beverages to visitors from all over the world. There is an increasing number of shops sell alcohol from different countries catering to different palates.
The Happy Hour tradition in Macau contributed to the shift in the drinking culture of the locals. Bars have started offering special deals for a large number of office workers gathering after work to socialize. Casinos also offer alcohol drinks to gamblers. With a large selection of booze available in the market, competition is fierce.
Most customers are big companies
Typically, businesses selling to other businesses face a much smaller buying pool than those selling directly to consumers. In Macau, the biggest buyers of alcoholic products are the casinos and hospitality/tourism companies. Sellers are basically competing for a few big customers in the market.
Since most of the suppliers are dependent on these large companies, the loss of one buyer could be crippling. There is also the option of picking up a “long tail” of small business customers, but it is often not very profitable. The modest volume of orders does not compensate for the effort and money poured into the transaction.
Closing Thoughts on the Macau Market
While Macau’s booming economy attracts many foreign businesses, the small size of the market and intense competition can be challenging. Resources must be considered, as well as long-term and short-term goals, to determine if this market is the right choice for their products. Otherwise, one of the other Greater China markets may be a better option for companies seeking to enter or develop their business in Greater China.