Cognac workers protest as Hennessy weighs bottling in China

Cognac workers threatened to resume strikes next week after LVMH’s Hennessy said it’s studying the option of bottling in China in a bid to avoid tariffs the country recently imposed on European brandy.

Workers at the French luxury conglomerate’s Cognac brand could be joined in a walkout by other local producers, said Frederic Merceron, a representative of the Force Ouvriere union who’s a Hennessy worker. Around 500 of the label’s’ workers went on strike Tuesday and Wednesday over concerns about jobs, he said.

Merceron said Hennessy workers found out last week about proposals to test the bottling of Cognac in China rather than the eponymous region of France. The company would seek to send the liquor in vats in a bid to avoid the recently adopted duties. Those tariffs were imposed on Oct. 11 and are part of wider trade tensions between China and the European Union over the bloc’s imposition of new levies on imported Chinese electric vehicles.

Hennessy’s goal is to “fight on all fronts to find solutions” to protect the industry, it said in e-mailed comments, adding that bottling “could potentially and temporarily be entrusted to a provider based in China.”

Key production processes including harvesting, distillation, maturation in oak barrels and blending “will always be carried out in Cognac,” Hennessy said. 

Rival producer Remy Martin has no plans to relocate its bottling line, owner Remy Cointreau SA said. Pernod Ricard SA, the owner of Martell, declined to comment.

Overall, the industry employs about 70,000 people via direct and indirect jobs, according to the Bureau National Interprofessionnel du Cognac, a trade group. 

“In more than 30 years at Hennessy, I’ve never seen such a big strike,” Merceron said in a telephone interview. “Hennessy workers don’t want to be the precursors of a movement to relocate part of the jobs to China. That would be a catastrophe for the region.” 

In addition to employment, workers are also concerned about quality and counterfeit issues that could arise by moving bottling to China, he said.

Hennessy workers will urge the trade group to include a local bottling requirement in Cognac’s protected geographical designation of origin, similar to the rules for Champagne, Merceron said. 

Hennessy employees are also concerned about the possibility of any tariffs the US might impose under Donald Trump when the president-elect takes over, Merceron said.

French President Emmanuel Macron said earlier this week he intended for Prime Minister Michel Barnier to visit China in the first quarter of next year in a bid to find a solution on tariffs. The comments came as Cognac producers warned of “looming disaster” if nothing is done.

LVMH’s wines and spirits arm has been the company’s worst performing unit in the first nine months of this year as well as last year, amid a downturn in demand for Champagne and Cognac worldwide. The company announced an overhaul of the division’s leadership last week.