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China launches anti-dumping investigation into brandy

harpers.co.uk by James Bayley08/01/2024  

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China has launched an anti-dumping investigation into brandy imported from the European Union, chiefly France.

According to Chinese customs data, France accounted for 99.8% of all EU brandy exports in 2023, valued at $1.57bn.

In response to the investigation, France’s cognac industry association, the BNIC, said it would “fully cooperate with Chinese authorities” to address its concerns. It stated it was assured French products “fully comply with Chinese and international regulations, and that [the] EU and China will find a constructive way to resolve any bilateral disputes”.

Since the news broke last Friday (5 January) shares in major French liquor producers slumped, with Rémy Cointreau down 12% and Pernod Ricard down 3.6%. Shares in Diageo and luxury group LVMH, which owns Hennessy cognac, also traded down 2.1% and 1.3% respectively.

For Rémy Cointreau, which produces Remy Martin cognac, 30% of its group sales ($507m) were derived from China in the fiscal year 2022/2023.

The probe comes four months after European Commission president Ursula von der Leyen targeted Chinese electric vehicle imports in an anti-subsidy inquiry with the backing of French car executives and officials. Senior officials in Brussels at the time warned of Chinese retaliation in the future.

In 2022, brandy made up the largest portion of imported spirits in China at 37.5m litres, according to a Daxue Consulting report.

However, export volumes of cognac fell nearly 19% between August 2022 and the end of July 2023, according to the UGVC, the cognac producer’s association. The US is by far the largest consumer of the drink, importing more than half the bottles produced, according to the Bureau National Interprofessionnel du Cognac, with China in second place.

According to the FT, Pernod Ricard, which owns cognac brands Martell and Augier, said the case was brought to Chinese trade officials by an anonymous domestic producer, which argued import duties on brandy should increase by 5%, in an attempt to level out the playing field for domestic producers.

China counts a dozen local producers of brandy, most of them small-scale. The biggest domestic producer is Yantai Changyu Pioneer Wine which makes Koya brandy.