Investors wiped nearly 10 billion euros off the combined market capitalisation of French drinks trio LVMH (LVMH.PA), Pernod Ricard (PERP.PA) and Remy Cointreau (RCOP.PA) on Friday, after Chinese authorities announced the launch of an anti-dumping probe on European brandy makers. If Beijing’s move is part of a wider trade row with the EU, and a tit-for-tat response to Brussels’ probe on Chinese electric vehicles, the reaction may be excessive.
Remy, the 5 billion euro group where cognac sales are 65% of revenue, was hit harder than French peers less dependent on the brandy. Its shares fell 12%, against 5% for Pernod and 2% for LVMH. Still, Jefferies points out that a similar probe on European wines 10 years ago ended after both sides struck a deal on their trade dispute of the moment – in that case on solar panels.
But cognac makers’ problems predate the Chinese probe, and they will persist even if it does not materialise. After a bumper 2021 when sales jumped more than 30% globally as drinkers tried to forget the pandemic, they have faced unrelated headwinds. Back in November, Remy announced first-half cognac sales in free fall, down 30% because of the Chinese economic slowdown and the diminished appetite of U.S. consumers for bling-bling drinks. Even if this trade spat fizzles out, investors may still need a stiff drink. (By Pierre Briancon)
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