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Hennessy staff on strike over China bottling plans
Staff at Hennessy Cognac have gone on strike in protest against parent group LVMH’s plans to trial bottling the spirit in China in a bid to circumvent Beijing’s sanctions against European brandy distillers.
LVMH, which shook up the top management of its Moët Hennessy drinks arm only last week, believes that if it exports its Cognac to China in bulk and then bottles it locally, it will avoid paying the average extra 35% duty China is levying on Cognac as part of its tariff war with the EU over cheap electric cars in Europe.
The move is the first by a Cognac house to switch bottling operations away from the Charente region of France. Hennessy stressed that the move was an experiment in the first place.
Frederic Merceron, a local union in Cognac, told AFP: “Management told us they wanted to do tests on exporting the product in vats with a view to bottling in China by a service provider. We can well imagine the impact on employment.” Merceron described the plan as “a cold shower”.
Other staff representatives said it seemed bizarre to ship materials such as bottles, labels and stoppers all the way to China.
The BNIC, the Cognac industry’s overall body said: “While waiting for a negotiated solution [to the dispute with Beijing] and in view of the deterioration that we have noted, certain houses could be forced to explore all avenues that would allow them to maintain a presence on the Chinese market.”
Cognac is the most popular spirit imported into China, and producers fear that after being hit by tariffs in their second largest export market, they could soon face penalties in the largest, the United States.
Incoming President Donald Trump has threatened to impose tariff barriers on all goods brought into America in a bid to redress trade imbalances and to encourage Americans to buy home-produced goods.
The Chinese tariff penalties do not apply to bulk shipments of brandy, hence the loophole that LVMH is potentially looking to exploit. Rémy Cointreau, on the other hand, told Reuters it will not do bulk shipments.
Pernod Ricard, which owns Martell, is yet to comment.
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