China Launches Anti-Dumping Probe into French Brandy
China has commenced an anti-dumping investigation into French brandy imports, escalating trade tensions with the European Union. This move by the Chinese commerce ministry follows after domestic manufacturers raised concerns. Brandy, predominantly sourced from France, is the most imported spirit in China. The initiation of this probe is seen as a retaliatory action against the European Commission’s earlier scrutiny of Chinese electric vehicles, led by Ursula von der Leyen.
Impact on the Liquor Market and Stock Prices
The announcement of the investigation has significantly impacted the financial market, especially for major liquor producers. Rémy Cointreau’s stock plummeted by over 12%, while Pernod Ricard experienced a 3.6% decrease. Other companies like Diageo and LVMH (owner of Hennessy cognac) also saw their shares drop by 2.1% and 1.3% respectively. This development reflects the growing concerns and instability in the global liquor market due to the ongoing trade disputes.
French Cognac Industry’s Response
The French cognac industry, represented by the BNIC, has assured its full cooperation with the Chinese authorities. They are confident that French brandies comply with both Chinese and international regulations. The BNIC expresses hope for a constructive resolution to these bilateral disputes. Simultaneously, France’s economy ministry, in coordination with the European Commission, is determined to defend their companies, stating no evidence of any French brandy maker involved in dumping practices.
Comparative Duty Rates and EU’s Stance
Pernod Ricard highlighted the disparity in import duties, noting that the current rate of about 5% in China is significantly lower than in other countries like Brazil (20%), Vietnam (24%), and Thailand (60%). The proposed increase to 16% is still below these figures. Meanwhile, the EU, led by Ursula von der Leyen, has been vocal about the significant trade deficit with China, nearing €400bn in 2022, and is advocating for a reduced reliance on Chinese products.
Global Cognac Market Dynamics
The global cognac market has been under pressure, primarily due to changing drinking habits post-pandemic and the reopening of bars. Major brands like LVMH, Rémy Cointreau, and Pernod Ricard reported declining sales in cognac, especially due to weakened demand in the US. China, a crucial market for cognac, was expected to help stabilize sales. However, the ongoing investigation and the potential implications of changing trade policies might further challenge the industry’s recovery and growth.