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How to react to Chinese surcharges on European spirits? It is this multiple choice question that has been asked by cognac houses for several months. The possibilities are clear: do not work with the Chinese authorities, cooperate a little or collaborate a lot. To preserve its second market, cognac could slide towards the more complacent option.
Hennessy employees in Cognac will be on strike this Tuesday, November 19 to denounce, according to their union representatives, their management's desire to try bottling cognac in China. According to the CGT, the LVMH branch would consider exporting cognac already assembled by container in order to circumvent the taxes of more than 30% announced by the Chinese Ministry of Commerce on bottled cognac, in response to European taxes on vehicles manufactured in Asia. This ” test » could take place by the end of the year.
“We see this as a relocation of our production, we are giving the Chinese the opportunity to control our tool, it would be a loss of quality and identity”critic Matthieu Devers, CGT representative at Hennessy. Glassware, corking, labeling, packaging: “Everything we master would be done elsewhere, without our mastery and offering them even more elements to produce their own copy”worries the worker, whose management would also like to study the effects of transport on the quality of the brandy.
Subcontracting on the front line
When contacted, Hennessy management has not yet responded. The option of bulk transport rather than by bottle is necessarily on the table of large houses. The idea was mentioned during a Rémy Cointreau CSE. If the companies take this route, they will therefore decide to cut part of the activity from the downstream value chain established in the Charentes. A sacrifice by subcontractors to preserve the commercial outlet and anticipate possible surcharges, considered the worst-case scenario by the sector.
It is also a way of gaining the approval of winegrowers because by ensuring large volume shipments, marketing is maintained. And the estates will be able to sell off stocks which have been overflowing in the cellars for two years. After the first difficulties recorded by the glassworks this year, subcontracting would still be hard hit. It is all the more on the front line as no specifications require cognac to be bottled in its territory of origin.
“It’s just a study, are they going to implement it on a large scale? We don't know anything about ittempers an employee of one of the three big cognac houses. But there is no smoke without fire, if the first house does it, it opens the way for the others. Behind, the social crisis will be very violent. »
Requested by La Tribune, the National Interprofessional Cognac Bureau does not comment on Hennessy's study but explains the “individual strategies” by the emergency context. « DWhile waiting for a negotiated solution, and faced with the observed deterioration, certain Houses could be forced to explore all avenues which would allow them to maintain the presence of the appellation on the Chinese market in order to try to limit the impacts negative across the entire sector and region »he writes, mentioning that “France's priority must be the search for a negotiated solution to get Cognac out of this procedure. »
After the European Union's vote on electric vehicles at the end of September, the diplomatic route seems to be the last chance to avoid the arrival of surcharges. But with 2024 results expected to fall sharply, houses will not wait for government negotiations to react in their own way.
Diplomacy, the last resort of cognac and Armagnac in the face of Chinese taxes
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