Mitsuzokbal, which has its headquarters in Hongdae, Mapo-gu, Seoul, opened its first overseas branch in Causeway Bay, Hong Kong's largest shopping district, at the end of last year. As soon as the restaurant opened, it gained popularity on social media, becoming a sought-after dining spot for locals. Kim Yoon-mo, CEO of LKK Limited, which operates Mitsuzokbal in Hong Kong, noted, "Recently, as interest in Korean cuisine has risen in Hong Kong, there has been an increase in Korean restaurants specializing in specific Korean dishes."
As the domestic economy remains trapped in a tunnel of stagnation, food franchise corporations are seeking opportunities in Hong Kong. Last year alone, new branches were opened in Hong Kong by central haejang, located in Samseong-dong, Gangnam-gu, Seoul, and Saemaul Sikdang, operated by Baek Jong-won, as well as Sam-sam-beoguk. According to global real estate services company JLL (Jones Lang LaSalle), the number of new Korean F&B (food and beverage) franchise branches opened in Hong Kong last year increased by 111% compared to the previous year.
Food corporations are hurrying to enter the Hong Kong market. From 25th to 27th of last month, a delegation of 12 food corporations, called the 'Korean franchise F&B envoy,' visited the Hong Kong Investment Promotion Agency with the support of the Hong Kong Economic and Trade Office to discuss the establishment of joint ventures with local food corporations. They also looked around local markets where they could enter, such as the Central Market. Among them, Jokbal Yashijat & Mukcheong Gamjatang plans to open a branch in Hong Kong within a few months.
This is not the first attempt by domestic food corporations to enter the Hong Kong market. In the 2000s, as the drama 'Dae Jang Geum' gained great popularity in the Chinese-speaking world, Korean restaurants like Seorabeol began to open in Hong Kong. In the 2010s, due to the explosive popularity of the drama 'My Love from the Star,' chicken franchise corporations like BHC entered Hong Kong. However, many corporations ultimately closed due to high rents and the effects of COVID-19.
Nevertheless, the reason the food industry is knocking on the door of the Hong Kong market again is that, unlike the stagnant Korean food market, the growth potential in Hong Kong is high. Hong Kong's population is around 7.5 million, which is not large, but when including foreign tourists, the market size exceeds 50 million. About 45 million tourists visited Hong Kong last year, which is three times the 16 million level in Korea.
In particular, Hong Kong is sensitive to changes in trends and has a simple tax system, resulting in low market entry barriers. Accordingly, domestic corporations are considering using Hong Kong as a test bed before entering the mainland China and third-country markets. In Hong Kong, a corporate tax rate of 8.2% applies to corporations with an annual taxable income of less than 2 million Hong Kong dollars (approximately 370 million won), and there are no various taxes such as value-added tax (VAT), excise tax, or tariffs, which are important for food corporations.
The fact that Hong Kong's food market is gradually expanding to surrounding regions through high-speed rail and the Hong Kong-Zhuhai-Macao Bridge is also attracting the interest of Korean food corporations. The Chinese government is promoting the "Greater Bay Area (GBA)" project, which aims to create a vast integrated economic zone combining Hong Kong, Macao, and nine cities in Guangdong province. The total population of the GBA reaches 86 million, and it is considered the region with the highest per capita gross domestic product (GDP) in China.
Lee Jong-seok, chairman of the Hong Kong Korean Restaurant Association, stated, "Due to COVID-19 restrictions on overseas travel, the food service industry, especially Korean restaurants with a positive image tied to K-culture, has greatly expanded," adding, "After COVID-19, as movement between Hong Kong and other regions in the GBA becomes more active, the stage for Korean corporations' activities has broadened." In fact, Kyochon Chicken opened its first store in a new shopping mall in Shenzhen, one of the GBA regions, last month.
This movement is expected to accelerate further due to the CEPA (Comprehensive Economic Partnership Agreement between China and Hong Kong) signed between Hong Kong and mainland China. Under the CEPA, which was signed during the second revised agreement last October, the regulations on the proportion of investment and scope of business are relaxed when Hong Kong corporations establish companies in the mainland, and the eligibility requirements for Hong Kong professionals to provide services in the mainland are also relaxed. It becomes easier for domestic corporations with branches in Hong Kong to enter mainland China.
Local Hong Kong corporations are actively reaching out to domestic corporations. Benson Chan, founder of the Hong Kong F&B corporation THAC Catering Group, noted, "While the popularity of Korean food is increasing in Hong Kong, the proportion of Korean restaurants in the Hong Kong food service market is still small," adding, "We are discussing cooperation with Korean corporations that present menu items like Gamjatang that Hong Kong people can easily accept."
Wynsum Au, chief representative of the Hong Kong Economic and Trade Office, stated, "Thanks to the global popularity of K-culture, interest in Korean food continues to rise in Hong Kong," adding, "The office will actively support joint cooperative projects that enhance mutual understanding between Hong Kong and Korean corporations, and through this, we hope for more active investment and cooperation in various fields."