On Friday, October 25th, the Chief Financial Officer of Rémy Cointreau, a French spirits company, informed investors that they would raise the prices of Chinese cognac to help offset the impact of the EU tariffs on cognac imposed by the Chinese government in retaliation.
Following the EU’s vote to impose a maximum of 35.3% anti-subsidy tariff on Chinese-made electric vehicles (EVs), on October 8th, China announced “temporary anti-dumping measures” on cognac imported from the EU.
European cognac manufacturers expressed that China’s retaliatory tariffs were politically motivated.
According to Reuters, Rémy Cointreau’s CFO Luca Marotta stated that the impact of tariffs on the company’s current fiscal year ending March 31st would be minimal due to China’s existing stock levels and declining demand. Marotta mentioned that the company would take actions to mitigate the effects of the tariffs.
During the investor report on third-quarter sales and updates on Rémy Cointreau’s outlook, Marotta confirmed that the company had conducted research to determine the sales impact associated with price hikes, which they would inevitably have to bear.
Rémy Cointreau’s competitors, including Pernod Ricard Group and luxury goods giant LVMH Group, which owns Hennessy cognac, have not responded to the price increase yet, stating they would monitor the actions of their competitors.
Marotta declined to provide specific details on the timing and extent of the price hike, as well as the potential impact on sales volume in China. He mentioned that price hikes were not the only tool available to Rémy Cointreau, as the company could also reduce costs in manufacturing and advertising expenses.
Initially, the tariffs would affect cash flow, with the revenue impact to follow later, visible only when Rémy Cointreau’s local departments sell cognac in China.
Marotta noted that the temporary tariffs still needed confirmation, but their impact was already factored into this fiscal year’s sales guidance, which the company significantly revised lower on Friday.
France is one of the countries that pushed for EU tariffs on Chinese electric vehicles. France is also seen as a primary target of China’s retaliatory measures this time.
Last year, France exported cognac worth $1.7 billion to China, accounting for 99% of China’s cognac imports.