On a typical Tuesday, the tranquil town of Cognac in southwestern France would be buzzing with industry. However, a recent dispute has caused a disruption in this peaceful region, home to the production of cognac, the world-renowned French brandy. On this particular day, the Hennessy plant, a pillar of the town’s economy, and part of the vast LVMH group luxury empire, is eerily quiet.
Hennessy, known worldwide for its superior cognac, is facing a significant hurdle. The renowned cognac maker is grappling with Chinese tariffs, imposed amid a bitter spat with the EU. This has triggered a response from Hennessy’s workforce, with 500-600 employees going on strike, refusing to accept the measures Hennessy proposes to evade these added costs.
At the heart of the dispute is an experimental plan to export the cherished drink in bulk containers, as opposed to the signature bottles. This proposal comes as a response to an anticipated 35% tariff on bottled exports, as reported by France’s CGT and FO unions.
Impact on Local Employment
“We can well imagine the impact on employment,” warned Frederic Merceron, FO representative at Hennessy, painting a grim picture of potential job losses. The proposed changes have sent shockwaves through the cognac industry, with Matthieu Devers of the CGT union predicting other cognac producers may follow Hennessy’s lead.
The strike remains open-ended, casting a shadow over the Hennessy plant, which employs over 1,100 people. A source close to the matter hinted at the possibility of dialogue, suggesting a resolution may still be possible.
China’s Anti-Dumping Investigation
This conflict comes on the heels of a new directive from China, which has been in effect since October 11. The directive requires importers of European brandies, 95% of which are cognac, to provide a deposit or a bank guarantee letter to Chinese customs authorities. Beijing describes this measure as part of an anti-dumping investigation, but many view it as retaliation for the EU’s tariffs on imported Chinese electric cars.
Devers revealed plans for a test delivery to be conducted by the end of 2024. This test will determine whether the quality of the drink can withstand the rigors of transport. He expressed skepticism about the proposal to ship necessary materials, including glassware, labels, corks, and boxes, to China for bottling.
The BNIC’s Stance
The BNIC, France’s umbrella cognac producers association, refrained from commenting on individual company strategies. However, it acknowledged that some houses might be forced to consider alternative avenues to maintain their presence in the Chinese market, given the escalating situation.
Compounding these concerns is the specter of additional tariffs in the United States, cognac’s largest market, following the election of Donald Trump. The industry now fears he may increase customs duties across the board.
As the situation continues to unfold, the eyes of Suwannee County and the broader North Florida community remain on this global dispute and its potential local impacts.
