Houseware (tdctrade.com)

Profiles of Hong Kong Major Manufacturing Industries

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Last updated: 12 March, 2008

Houseware

Overview

Hong Kong is a famous international sourcing centre for houseware products, including tableware, kitchenware, non-electric domestic cooking/heating appliances and sanitary ware made of a vast variety of materials.

In response to the intensified competition from indigenous Chinese companies and other Asian suppliers, Hong Kong companies are shifting from original equipment manufacturing (OEM) to original design manufacturing (ODM). A few also develop and market their own brands. They are also moving upmarket by using more advanced technology in production, providing innovative designs and improving product quality.

The retail scene in overseas markets is dominated by giant retailers who have bigger bargaining power than suppliers. They push hard for low prices, resulting in an ongoing trend of outsourcing production to low-cost areas, including the Chinese mainland.

Industry Features

Hong Kong is a well-known international sourcing centre for houseware products. The industry itself covers a wide range of products including tableware, kitchenware, non-electric domestic cooking/heating appliances and sanitary ware which are made of an array of materials, such as ceramic, metal, glass, paper, plastic, porcelain and china.

Companies in the field of metal cookware and kitchenware provide a comprehensive selection of products, including saucepans, casseroles, frying pans, Dutch ovens, steamers, egg poachers, double boilers and frying baskets. Stainless steel is the most commonly used material due to its durability. Aluminium-made cookware is also available, with porcelain-enamelled exterior and the interior coated with non-stick material.

Others focus on plastic-ware, including tableware, kitchen utensils, water pots, trash bins and bathroom accessories. The majority of them are small to medium-sized companies since production of plastic houseware, especially the smaller items, requires comparatively less labour input and capital investment. Sophisticated moulding techniques are generally not required for lower-end products. As such, some toy makers also engage in plastic houseware as their sideline business. On the other hand, the production of larger plastic houseware, such as buckets, basins and baskets, is dominated by a few large manufacturers since heavy capital investment is required for installing large machinery.

Hong Kong companies are also noted for producing convincing replicas of artefacts dating from the Tang Dynasty. These imitations are accurate reproductions in every detail, ranging from small ceramic horses to large pieces of Tang Dynasty tomb servants.

Owing to the high production cost in Hong Kong, most Hong Kong manufacturers have relocated their production to the Chinese mainland. Other high value adding functions, such as sourcing, logistics, product development and marketing are maintained by the Hong Kong offices.

Most Hong Kong houseware production is on an OEM basis. Facing intensified competition from indigenous Chinese companies and other Asian suppliers, Hong Kong manufacturers are shifting from OEM to ODM. A few also create and market their own brands (OBM). Some manufacturers apply more advanced technologies in the production process, such as gas-assisted and injection compression moulding in plastic houseware production. More resources are used in product design and maintaining product quality to increase the competitiveness of Hong Kong products. According to a TDC survey conducted in 2007, 89% of respondents in the houseware industry were involved in OEM business, while 72% were in ODM and 46% were in OBM.

Performance of Hong Kong's Exports of Houseware Products^

Hong Kong's total exports of houseware products were sluggish in recent years, dropping by 5% in 2006 and 2% in 2007 amid the trend of direct shipment from supplying places to the end markets and the fierce competition within the industry. Re-exports, accounting for over 99% of total exports, also fell in tandem by 2%. They were predominantly originated from the Chinese mainland. Metal cookware and kitchenware, and plastic houseware were the two largest export categories of the industry, each accounting for about 40% of total exports. Exports of these two product categories in 2007 were largely unchanged from the previous year.

The largest export market for Hong Kong houseware was the US (39% of total exports in 2007), followed by the EU (28%) and the Chinese mainland (8%). Nevertheless, in part due to the trend of direct shipment, exports to the US had dropped by 10% each year during 2005-2007. Exports to the EU, however, have regained some momentum, growing by 7% in 2007. On the other hand, exports to the Chinese mainland, after growing by 5% in 2005 and 4% in 2006, fell by 3% in 2007.

Houseware Products	2005		2006		2007
Houseware Products	Value (HK$mn)	Growth (%)	Value (HK$ mn)	Growth (%)	Value (HK$ mn)	Growth (%)
Domestic Exports	100	-2.3	124	+23.5	123	-0.3
Re-Exports	13,553	-5.4	12,905	-4.8	12,639	-2.1
Of Chinese Mainland Origin	12,807	-5.4	12,102	-5.5	11,834	-2.2
Total Exports	13,654	-5.4	13,028	-4.6	12,762	-2.0

Houseware Products by Market:	2005		2006		2007
Houseware Products by Market:	Share (%)	Growth (%)	Share (%)	Growth (%)	Share (%)	Growth (%)
US	45.1	-9.9	42.5	-10.0	38.9	-10.3
EU	23.9	-3.8	25.3	+0.9	27.7	+7.2
Germany	5.5	-4.7	6.5	+13.9	7.5	+13.2
UK	5.9	-13.1	6.4	+3.3	6.0	-7.3
France	2.9	-5.1	2.6	-15.6	3.0	+11.7
Chinese Mainland	7.3	+4.9	7.9	+3.9	7.8	-3.2
Japan	4.6	+7.6	4.6	-3.9	4.6	-0.9
Canada	4.6	-4.7	4.2	-11.8	3.8	-11.9
ASEAN	4.9	-10.6	2.9	+23.8	2.7	-9.5

Houseware Products by Category:	2005		2006		2007
Houseware Products by Category:	Share (%)	Growth (%)	Share (%)	Growth (%)	Share (%)	Growth (%)
Metal Cookware & Kitchenware	41.2	-5.5	41.3	-4.4	42.3	+0.4
Plastic Houseware	38.5	-2.9	39.8	-1.2	40.3	-0.8
Glass Houseware	5.7	+7.8	5.9	-0.3	5.9	-2.8
Ceramicware	4.9	-30.3	4.9	-4.0	4.1	-18.0
Non-electric Cooking Appliances	3.6	+6.5	2.4	-35.7	1.6	-34.2
Miscellaneous Houseware	6.2	-9.7	5.6	-13.2	5.7	-0.1

Household goods, which cover not only most houseware products, but also electrical appliances and electronic products such as radios, shavers, dish cleaning machines, refrigerators, etc, surged by 19% in 2007, reversing the downward trend in the preceding years. Over 90% of these re-exports of household goods were of China origin.

Household Goods*	2005		2006		2007
Household Goods*	Value (HK$ mn)	Growth (%)	Value (HK$ mn)	Growth (%)	Value (HK$ mn)	Growth (%)
Domestic Exports	883	+4.4	976	+10.5	1,014	+4.0
Re-Exports	176,901	-0.5	170,172	-3.8	202,360	+18.9
Of Chinese Mainland Origin	165,576	-0.6	158,395	-4.3	184,690	+16.6
Total Exports	177,785	-0.5	171,147	-3.7	203,375	+18.8

Note: Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
* Household goods cover not only most houseware products, but also electrical appliances and electronic products such as radios, shavers, dish cleaning machines, refrigerators, etc.

Sales Channels

Department stores, retail chains and mass merchants are the most popular retail channels for houseware products in mature markets like the US, EU and Japan. Many Hong Kong manufacturers deal directly with these overseas retailers or through their buying offices or agents in Hong Kong. Hong Kong companies also enter into licensing agreements for production with some overseas brand holders. This is especially common for kitchenware and cookware. For markets with smaller order sizes, trading firms are often involved as an intermediary. A few well-established manufacturers have their own overseas offices responsible for marketing and other liaison activities.

Many manufacturers attend international trade fairs in order to increase their exposure in overseas markets. Below is the schedule of some major trade fairs:

Country/Region	Major Events
US	International Home & Housewares Show held in Chicago around March
Europe	Tendence Lifestyle held in Germany around August Macef held in Milan, Italy around January Ambiente Frankfurt, Germany around February
Japan	Ambiente Japan around June
Hong Kong	Hong Kong Gifts & Houseware Fair around April Summer Sourcing Show for Gifts, Houseware & Toys around July

Industry Trends

The retail industry continues to consolidate, and the market is often dominated by a few large chain stores or discount giants. This trend has created huge purchasing power from the fast-growing nationwide general merchandise stores. They place large-volume orders but push hard for low prices. Retailers are also reducing the number of suppliers to become more efficient, and be able to ask for lower prices. More brand holders outsource their production to low-cost areas including the Chinese mainland. Hong Kong manufacturers can benefit from this ongoing outsourcing trend.

Nonetheless, more overseas buyers choose to engage indigenous Chinese companies which offer competitive prices and improving quality. Confronting with the fierce competition, Hong Kong manufacturers undertake more ODM and licensing business with overseas manufacturers. Licensing is especially common in the kitchenware sector for many US and European brands. Consumers respond well to brand-named products as well as other private label items owned by department stores and chain stores. In order to stay competitive, Hong Kong companies also have to introduce innovative designs frequently so as to appeal to both quality and price-conscious customers.

On the distribution side, internet sales of houseware have continued to grow, particularly in the US. Market analysts believe that the number of online shoppers will rise in the coming years. A more sophisticated logistic system may be needed to streamline the distribution and keep an optimal level of inventory.

CEPA Provisions

Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland has given all products of Hong Kong origin, including houseware, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin can enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. Non-Hong Kong made houseware products are subject to tariff rates up to 24.5% when entering the mainland.

The promulgated rules of origin for houseware products to benefit from CEPA's tariff preference are basically similar to the existing rules governing Hong Kong's exports of these products, requiring the performance of specific manufacturing processes in Hong Kong, such as die-casting/blanking, forming and assembling for table articles. Detailed information is available from the following hyperlink: http://www.tid.gov.hk/english/cepa/files/mainland_2008.pdf.

Trade Measures Affecting Exports of Houseware Products

The EU has removed import quotas on certain porcelain and ceramic tableware/kitchenware originating from the Chinese mainland since 2005. The US, on the other hand, has imposed anti-dumping duties on porcelain-on-steel cookware originated from the Chinese mainland. Besides, an antidumping investigation by the US Department of Commerce on imports of ironing tables from the Chinese mainland is currently under administrative review. These measures have affected the business of Hong Kong companies since their products are primarily sourced from there.

Houseware exports are also subject to certain food sanitation laws and ordinances, especially for kitchenware and other products which have direct contact with food. For example, the Japanese Food Sanitation Law stipulates regulations and standards not only for food, but also for food containers and packaging. In Japan and the US, ceramic and porcelain tableware is subject to lead and cadmium leaching standards. For plastic products, the main concern is whether the colouring is poisonous.

Product Trends

Cocooning trend: Facing the threat of terrorist attacks and an uncertain economy, the US shoppers recognise the value of their family and connecting with friends. Products that encourage family gathering at home and those intended to equip hosts to entertain their guests are expected to be popular, such as fondue pot or sterno-fired table wok for cooking at the table in the evening, and oversized platters for serving arrays of dips and vegetable.

Multi-functionality: More and more products have multiple functions and are in modular sets. Many people practise little crafts work at home, such as cross-stitching, home-decor painting, cake decorating, crocheting and scrapbooking. Hobby supplies are selling well due to the cocooning trend. This trend also drives the demand for organizers and storage units for the specialized, small and often expensive materials, supplies and tools of the home hobbyists.

Flexible attitude towards eating: Anything that provides a more flexible attitude towards eating will continue to be popular. People tend to use cookware and kitchenware with non-stick surface which are easy to clean up. Growth for plastic containers that can be used in microwave ovens is also sustaining. Steamers and pans which require less oil for cooking appeal to the European customers.

Houseware gift sets: Fewer people purchase premium ceramic and porcelain products for their own use. Instead, they would purchase them as gifts for friends. Some new gift sets offer several kinds of products, instead of the traditional gift sets which contain a large quantity of the same item. For other kitchen giftware and accessories, opaque and transparent coloured plastics have replaced stainless steel and aluminium as the preferred choice of materials.

Increasing awareness of the environment: Consumers have become more conscious of global warming and other environmental impacts. There are studies showing that some people buy certain brands because their products are eco-friendly. While consumers are buying more green products, manufacturers also realize the potential of cost savings from materials and packaging, making pro-environment designs and materials become the hot choice of houseware producers and buyers.

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