Cognac Hanged in China – Whisky Might Just Explode

Cognac Hanged as part of the tit for tat trade handbagging with Europe has just stepped forward to the next level, with provisional tarrifs likely to hit cognac imports as early as August 2024! While we’re no fans of cognac here at Whisky-Galaxy.com, we are keen to see the impact that this might have on the whisky market in China.

Cognac Hanged – The Back Story

The backstory to this is really simple. When anyone goes out to bat against China, whether that’s tariffs, taxes or duties on Chinese products, or kicking up a shit storm with anti-China narrative, then China always has a way to deal with this. More often than not, it’s a tit-for-tat deal where China will pick a product category or an industry to retaliate with. The rights or wrongs of any of these actions are not something we have an opinion on but there is something very human about the thought that if someone walks up to you in the street and slaps you around the face, it’s probably justified to give them a slap back right?

China first announced its anti-dumping probe on brandy from the EU back in January. China’s view is that European brandy is being sold into China at below market rates. Logic would infer that this is directly related to the EU trade case of tariffs being imposed on Electric Vehicles made in China, slapping provisional duties of between 17.4% and 37.6% on each vehicle.

China’s Brandy Market

China is actually a massive producer of local brandy producing in excess of 250,000 tons in 2022 and has been producing since 1892. In fact, one of the bigger brandy producers, Changyu, won a gold medal in the 1915 Panama Pacific International Exposition in San Francisco. Changyu typically produces around 40,000 metric tons per year and prices its products on par with Hennessy VSOP at retail within the Chinese market.

In terms of imported brandy, China currently imports about $1.57 billion worth of brandy (of which cognac is a type of) with 99.8% of this coming from France.

Why Brandy?

It’s not quite tit-for-tat. 1 in every 5 electric vehicles made in Europe, is actually made in Saxony in Germany. So logic would suggest that hitting something from Germany would be the right step. However, all the major German car manufacturers have a massive presence in Germany. They are huge employers and contribute a significant amount to the Chinese economy.

The second largest producer of electric vehicles in Europe is France, led by French owned manufacturers. This ties in with the ongoing history of souring Franco-Sino relations which have been degrading since 2018. Too much drama for a whisky website, but it brings us all to where we are now, with an impending monster tariff about to be slammed onto cognac, which would decimate the export market for french producers.

Whisky FTW

With cognac seemingly about to being priced out of the market, this could be a catalyst to take whisky to the next level in China.

While the market has been slowly waking up to the fact that cognac is generally a complete rip off to Chinese consumers, it still has a massive presence in China and dominates imported spirits.

With XO only being matured for 10 years, and being priced past the average cost of an 18 year old Scotch, and the market dominator VSOP only clocking up 4 years in a cask but being priced higher than a typical 12 year old Scotch, Chinese consumers were already flocking to whisky in droves. We were already on the path where cognac hanged itself.

These anticipated tariffs are only going to accelerate that process……..which probably explains why Pernod Ricard and Camus have piled in on producing whisky in China. Three cheers for President Macron for helping whisky in China!