Hennessy’s initiative to test bottling cognac in China to circumvent tariffs sparks strike

Hennessy, the cognac producer owned by French luxury conglomerate LVMH, announced its consideration of a plan to bottle cognac in China. The move follows the imposition of antidumping measures by Beijing last month, which has led to unrest among workers at its plant in southwestern France. Approximately 500 workers—half of the staff at the bottling facility in Cognac—staged a strike in response to the news, according to Michael Lablanche, a representative of the CGT labor union. The workers plan to continue their strike into Wednesday.

Hennessy’s management is evaluating various options to address the tariffs, the most significant being the possibility of shipping cognac to China for local bottling. The company stated that a definitive decision would depend on the outcome of a trial shipment designed to assess the product’s stability in Chinese conditions. If successful, Hennessy would relocate its entire VSOP (Very Special Old Pale) bottling line to China to accommodate anticipated sales growth. The test shipment of 1,000 liters is scheduled for December 15, as reported by local media outlet Charente Libre.

China represents the second-largest export market for cognac after the U.S., with a substantial history of profitability, generating $1.7 billion in exports last year. However, recent economic challenges in both China and the U.S. have led to a significant decline in cognac sales, compounded by an unfavorable harvest predicted for 2024. The recent tariffs—exceeding 30% on bottled brandy imports from the European Union—have hit companies like Hennessy, Remy Cointreau, and Pernod Ricard hard.

Lablanche emphasized that the strategy of shipping cognac and bottling it in China would be detrimental to the workforce. Videos and photographs circulating on social media depicted large gatherings outside Hennessy’s headquarters, with many supporters donning jackets emblazoned with the logos of CGT and another union, Force Ouvrière.

Remy Cointreau, a competing cognac manufacturer, has announced plans to increase cognac prices in China to lessen the impact of the new tariffs, although it has stated that there are no intentions to move its bottling operations abroad. Instead, Remy Cointreau plans to reduce costs related to manufacturing and advertising in light of the economic pressures.

In response to the challenging environment facing the cognac industry, the Bureau National Interprofessionnel du Cognac, an industry lobby group, has called on the French government to engage in negotiations aimed at finding solutions to support the sector. The group conveyed that some producers may have to explore every possible avenue to sustain their presence in the lucrative Chinese market.

The situation remains fluid as Hennessy weighs its options in response to the changing economic and regulatory landscape, while workers and unions continue to voice their concerns about the potential repercussions of such a significant operational shift on employment and local labor conditions.