(Photo: Donald Traill/Invision for Hennessy/AP Images)
On Tuesday, Bloomberg reported that Hennessy owner LVMH is temporarily halting plans to bottle its cognac in China. The move comes days after nearly 600 workers walked off the job in protest of the rumored scheme, which was intended to circumvent tariffs recently placed on European brandy imports.
According to Frederic Merceron, a Hennessy employee and Force Ouvriere union representative, upper management notified staff this week that it would suspend shipments of cognac vats to China. A statement from LVMH obtained by Terre De Vins reiterated the same message, with the company adding that it would closely monitor "the evolution of the political and diplomatic situation" in months to come.
The cognac industry was rocked in mid-October when Chinese officials announced tariffs between 30%-40% on all brandy imports from the EU. The decision — the latest in a tit-for-tat over electric vehicle subsidies — has the potential to devastate brands like Hennessy. China is the second-largest consumer of cognac worldwide, importing $1.7 billion worth of the liquor in 2023 alone. Heavy hitters like LVMH and Pernod Ricard have already begun to report losses.
The fate of the tariff battle now lies in the hands of French and Chinese authorities.
Last week, French President Emmanual Macron announced that Prime Minister Michel Barnier will visit China next year to seek a solution to the trade scuffle. Elsewhere, the dispute has found its way to intergovernmental bodies. The Spirits Business reported on Tuesday that the case has been referred to the World Trade Organization in the hopes of a "fair and impartial investigation."
Workers remain cautious. According to union delegates interviewed by Bloomberg, another protest is planned this Thursday with the hope of recruiting employees from Rémy Martin, one of the so-called "Big Four" cognac houses alongside Hennessy, Courvoisier and Martell. The protest will reportedly push for a designation of origin law that would require cognac to be bottled in France.
"It's a suspension and not a stop, today the feeling shared by employees is above all a mixed feeling ," General Confederation of Labor delegate Matthieu Devers told Terre de Vins. "The house is giving way to political negotiations, suspending, but the project is not abandoned. We still have this sword of Damocles hanging over our heads."
The industry employs approximately 70,000 people through direct and indirect jobs according to the Bureau National Interprofessionnel du Cognac. An estimated 1,000-1,500 work in bottling. Under the current designation of origin laws, cognac need only be grown and distilled in the eponymous Cognac region of France — bottling can technically occur anywhere. If negotiations come to a halt, it's possible that Hennessy and other cognac houses would reassess their bottling plans in China, though it's not presently clear if the move would be enough to circumvent tariffs.
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