LVMH has reportedly “suspended” its controversial plan to ship Hennessy Cognac in bulk to China for bottling.
According to specialist French news site Terre de Vins, the luxury-goods group has halted the plan, drawn up in response to tariffs imposed by China but which has sparked anger in the Cognac region.
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Just Drinks has approached LVMH, its Moët Hennessy wine-and-spirits division and the Hennessy Cognac business for comment.
A source at the FGTA-FO trade union told this publication LVMH had “suspended its test”, pointing to the “scale” of a demonstration planned for Thursday outside the offices of industry body the Bureau National Interprofessionnel du Cognac (BNIC).
At the time of writing, Just Drinks could not confirm if the demo is still scheduled to go ahead.
In a statement carried by Terre de Vins, Hennessy said it had “decided to suspend the test project of sending bulk Cognac … while closely monitoring the evolution of the political and diplomatic situation”.
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By GlobalDataLast week, LVMH and Hennessy sparked anger with the proposal to bottle Cognac in China, one of the world’s two largest markets for the product.
The company said it was looking at options to manage the tariffs China introduced last month on brandy imports from the EU. Beijing has accused exporters of dumping products in China. Industry watchers have said Beijing’s move is linked to the EU levying tariffs on imports of electric vehicles from China.
LVMH’s admission led to two days of strike action at Hennessy’s central office and at a bottling site in south-western France.
Hennessy is one of the four largest producers of Cognac. Courvoisier owner Campari has told Just Drinks it has “no plans” to bottle the spirit in China. Pernod Ricard and Rémy Cointreau declined to comment.
Yesterday, the EU said it had started a World Trade Organization case against China’s tariffs on the bloc’s brandy exports.
In a call with analysts when LVMH reported its sales figures for the first nine months of 2024 in October, LVMH said demand for Cognac in China had been “weak” in the period, signifying another tricky quarter for the industry in the country.
When asked how LVMH expected the tariffs would affect its position in China, deputy finance director Cécile Cabanis said at the time the duty was “not good news, especially in a market where the demand is weakened”.
She added: “As far as our business and impact is concerned, probably the mitigation factor is that we carry a bit more stock and inventory that we would do usually, so we won’t face any concrete impact in the next few months.”
Speaking on the long-term impact, however, Cabanis was slightly more cautious.
“As far as the impact overall and on a running basis is concerned, it will obviously depend on different … decisions we can take, whether it is about the consumer going through substitution in duty-free, especially on XO, whether we would be inclined to pass price increases and with which amplitude,” she said.
“And what would be the competition response, so we are looking at all of this, and we will come back with more detail probably in the next quarter.”
