French cognac makers surge as Macron hints at cooling of China trade dispute

Shares of several French cognac makers rallied on Tuesday after France’s President Emmanuel Macron suggested that trade tensions between China and the European Union, which could impact the drinks makers, may ease.

Two of France’s biggest cognac producers, Pernod Ricard and Remy Cointreau, were up 2.7% and 7.6% respectively as of midday London time on Tuesday.

Remy Cointreau declined to comment, while Pernod Ricard did not immediately responded to CNBC’s request for comment.

France’s Macron on Monday addressed the ongoing trade dispute with Chinese President Xi Jinping and gifted him a top-range bottle of French cognac which reportedly retails at over $3,200. Xi is currently visiting Europe and meeting leaders across the continent.

“I thank the president for his open attitude regarding provisional measures on cognac and for his wish not to implement them,” Macron said in a press conference on Monday.

Earlier this year, China had launched an anti-dumping probe into EU brandy and cognac makers, which could lead to tariffs being imposed on imports of the spirit. China’s ministry of commerce at the time said it had received the request for the investigation from the China Liquor Industry Association on behalf of the domestic brandy industry, according to a statement translated by CNBC via Google translate.

The launch of the probe was widely seen as a so-called tit-for-tat move by China. It came just months after the EU began a similar investigation about potential dumping into Chinese electric vehicle makers. Dumping can be defined as a practice that sees foreign companies sell products at a lower price abroad than domestically, thereby putting pressure on local producers and markets.

China has denied a link between the two probes, Reuters reported last month citing an unnamed source from the French finance ministry.

The previous announcement of the probe weighed on shares of Pernod Ricard and Remy Cointreau, dragging them to multi-year lows from which they have yet to recover.

Ahead of the meeting between Macron and Xi, the Bureau National Interprofessionnel du Cognac (BNIC) which represents the French cognac industry called for the leaders to come to an agreement about the issue.

Additional tariffs “would be extremely damaging for an entire region whose economy and agricultural activity are based on Cognac sales,” the body said. Over 95% of European brandy that is exported to China comes from the French Cognac and Armagnac regions, it added.

According to BNIC data, 32 million bottles of cognac were exported from France to China in 2023, second only to the U.S.