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July 13, 2020

(Photo by ISAAC LAWRENCE/AFP via Getty Images)

Social distancing measures aren’t stopping Hong Kong’s foodies from scouting the latest fad.

The city’s vibrant, diverse food culture has been welcomed after months of lockdown, despite a slowing economy and the political uncertainty that has spilled over onto the streets.

Large food-and-beverage companies are responding, with some even pursuing expansion plans.

Japanese lifestyle retailer Muji in June opened a flagship store spanning over 20,000 square feet largely dedicated to food at Telford Plaza in Kowloon Bay. A major selling point for the outlet is the brand’s first coffee bar and bakery in Hong Kong.

Japanese discount retailer Don Don Donki is expected to open three more outlets soon – in the Monterey Place residential complex in suburban Tseung Kwan O, the Pearl City Mansion in Causeway Bay, and on Queen’s Road Central. After the company opened its first Hong Kong location last summer, shoppers have been drawn to the fresh produce and delicatessen sections.

U.S. coffee brand Blue Bottle debuted in Hong Kong in April. Despite serving only take-away coffee whilst social distancing rules are in place, coffee aficionados have not been deterred and lined up for a taste of the roaster’s single-origin brews.

Hong Kong remains an important market for international and local F&B retailers, especially mid-market ones, which are now taking advantage of softening rents to build a presence in the city,” says Oliver Tong, JLL’s head of retail for Hong Kong and Macau. “We’ll see an increasing shift to targeting local consumers in Hong Kong and in other retail markets.”

Retail sales fell 36 percent in April from the year earlier, as the city began to emerge from the outbreak, a slower decline than the 42 percent drop in March, according to Hong Kong’s Census and Statistics Department. Sales of food, liquor and tobacco – which mostly rely on local spending power and among the more resilient retail categories – fell only 14 percent in April.

“Hong Kong’s retail scene is set to see significant recovery in the coming months on a sequential basis, simply because of an extremely depressed first half of the year,” says Nelson Wong, head of research for Greater China at JLL.

The gradual relaxation of social distancing measures and travel restrictions, people’s proclivity for off-line shopping and on-site dining, and the ease of transportation will further bolster sales, Wong says.

Landlords for shopping malls and mixed-use projects in the city are re-assessing their tenant mix and allocating more space to F&B tenants, says Terence Chan, senior director for retail at JLL Hong Kong.

“In the past, around 20 percent of shops may be reserved for dining,” he says. “We’ve seen this number go up in the past few months, notably with the opening of several food halls like Eaton Hotel’s Food Hall in Tsim Sha Tsui and Basehall at Jardine House in Central.”

Often brands test the waters by opening a shop in prime locations with high foot traffic to cater to a mix of local and international customers who are more adventurous in trying new food options, Tong says. “Once they have achieved some success and a following, retailers will then consider a more diversified store strategy to capture a wider customer base.”

For instance, Singaporean luxury tea brand Tea WG opened its fourth boutique in Hong Kong in the more suburban Sha Tin in the New Territories, having already set up shop on Hong Kong Island and Kowloon.

Product pricing is a factor for new-to-market retailers assessing their Hong Kong store strategy. Japanese restaurant chains Sushiro and Sukiya, known for their affordable conveyor belt-style sushi and beef rice bowls, took a different approach by first opening in Whampoa, Lai Chi Kok, Wong Tai Sin and Yau Ma Tei, outside the major shopping districts.

Opening shop in relatively more residential areas has the benefit of ensuring a steady flow of foot traffic compared to the traditional commercial areas, Tong reiterates.

F&B operators can stay ahead of the curve if they adapt to the latest food trends that are characterising the Hong Kong restaurant scene.

“Customers want customised food that’s value-for-money and most importantly, Instagram-able!” says Michelle Chiu, head of F&B and lifestyle at JLL Hong Kong. Mid-market F&B restaurants that meet this need while staying true to their brand can satisfy Hong Kong foodies, she adds.

Some F&B brands have replicated the culinary experiences on the menu at their restaurants with some success. A number of premium hotels in Hong Kong will deliver their signature afternoon tea sets – with warm scones and clotted cream included – to your doorstep.

Mid-market restaurants would do well to do the same and offer “more than a take-out box” to customers, says Tong. He cites Mainland Chinese hot-pot restaurant chain Haidilao, from whom diners can order sets comprising the soup base and various food items that they can cook at home.

Those brands that make the effort to build and strengthen the new revenue stream from online orders will likely have more budget to allocate to renting and furbishing their restaurant outlets, he adds.

Click to read about how investors are getting creative in Hong Kong’s co-living market.

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