In France, the looming threat of high Chinese tariffs on European brandy, particularly cognac, has set alarm bells ringing among analysts, investors, and industry insiders. French companies, renowned for their exquisite cognac, may find themselves in a bind with surplus stock and limited avenues to sell. It’s a scenario that’s got everyone talking, from Bordeaux to Beijing.
High Chinese Tariffs Threaten France’s Iconic Cognac
China initiated an anti-dumping investigation into European brandy earlier this year. This move sparked memories of the devastating blow suffered by Australian wine exports under similar circumstances. With tariffs reaching up to a staggering 218.4%, Australian wine virtually disappeared from the Chinese market, leaving producers reeling.
Now, the French cognac industry fears a similar fate. China is a significant market, accounting for nearly a fifth of cognac exports in recent years. The Chinese market offers lucrative returns, making it a prized destination for French spirits.
According to The Australian Financial Review via Reuters, the Bureau National Interprofessionnel du Cognac (BNIC) stresses the importance of avoiding tariffs. The stakes are high for major players like Pernod Ricard and Remy Cointreau. The prospect of tariffs has already taken a toll on their stock prices, signalling investor concerns.
Also Read: For The First Time Ever, Sikkim’s Sacred Sanglaphu Lake Opens For Tourists
Producers Face Uncertain Future
But it’s not just about the big names. The impact could reverberate throughout the Cognac region, affecting thousands of winegrowers, their families, and the entire local economy, as per The Australian Financial Review reports via Reuters.
With billions of bottles of cognac ageing in French warehouses, a significant portion is earmarked for export, with China being a key destination. If tariffs dampen demand, producers could find themselves sitting on vast quantities of unsold stock, a logistical nightmare.
With sales already declining in other major markets, like the United States, finding alternative buyers isn’t straightforward. And slashing prices to move the stock isn’t an attractive option either, as it could erode margins and tarnish brand reputation. However, industry insiders believe that a worst-case scenario is unlikely and express optimism that diplomatic efforts could resolve the dispute.
As French authorities gear up to address the issue during President Xi Jinping’s visit, the world watches closely, hoping for a resolution.
Cover Image Courtesy: Canva