Cognac house Hennessy, a subsidiary of LVMH, announced on Monday the suspension of its bulk cognac export project to China, which had sparked a massive strike by almost 600 employees last week.
This decision comes a week after the announcement of an upcoming visit to China by Prime Minister Michel Barnier to address the issue of surcharges imposed by Beijing on European brandies, in response to a similar procedure applied by Brussels to electric cars produced in China.
“The Chamber has decided to suspend the test project for the shipment of cognac in bulk (…) while closely monitoring the evolution of the political and diplomatic situation,” the company said in a statement.
“A suspension and not a break”
Hennessy, a subsidiary of the LVMH luxury group and market leader, planned to experiment with exporting its cognac in vats to avoid surcharges estimated at 35% on bottles sold in China.
“The Chamber leaves room for political negotiations, it is suspended, but the project is not abandoned. We still have this sword of Damocles over our heads,” he warns, while unions fear that this will ultimately translate into relocations and job cuts in France. Despite this suspension, the inter-union organization maintains its day of mobilization on Thursday in Cognac, confirmed Matthieu Devers.
For its part, the Chamber “formally denies any project to transfer its production to Cognac.” And he specifies that “the harvest, distillation, maturation in oak barrels, assembly… will always be carried out in Cognac, with a maintenance of [son] supply of dry materials (bottles, labels, etc.) under the same conditions as today without any impact on the employment of House employees.
Export dependence
The cognac industry (72,500 jobs in France) is highly dependent on exports, which represent 98% of its sales, amounting to 3.35 billion euros, with the United States being its main customer (38% of shipments ), ahead of China (25%).
Since October 11, China has required importers of European brandies, including cognac, which represents 95%, to provide a bond or bank guarantee, a measure described as anti-dumping by Beijing.
This confrontation led the EU to turn to the World Trade Organization (WTO) on Monday to challenge these practices, considered a retaliatory measure for its own surcharges imposed on Chinese electric vehicles.
Source: BFM TV
