Remy, Pernod surge as China holds off on tariffs for now

Shares of Remy Cointreau SA and Pernod Ricard SA surged after China said it won’t impose temporary tariffs on brandy from the European Union, at least for now.

Remy, the maker of Remy Martin Cognac, rose as much as 12% in Paris trading. Pernod, which produces Martell Cognac, gained as much as 9.7%, the most since 2008.

Chinese authorities began an anti-dumping investigation into brandy makers after the EU started looking into electric vehicle subsidies. Although China said it found evidence of dumping in a preliminary probe, it stopped short of levying tariffs, a sign Beijing wants to negotiate with the EU over various trade issues spanning multiple industries.

Remy, Pernod and other premium spirits makers have been grappling with sluggish demand in China and the US after the pandemic-era boom fizzled — a slowdown that has dragged on longer than some producers anticipated. Pernod, which published full-year earnings Thursday, said its outlook for the current quarter remains soft, but that it sees a pickup later on and expects to return to growth this fiscal year.

“The environment, as you know very well, is still volatile,” said Chief Executive Officer Alexandre Ricard on a call with analysts. “But what we can say for this new fiscal year is that we do expect full-year organic net sales back to growth with continued volume recovery.”

Market Share

China’s commerce ministry, in its report on the probe Thursday, said the dumping of brandy from the EU has helped increase its market share in China to more than 50%, hurting domestic producers. Such practices have also kept inventories at elevated levels, damaging the domestic industry, it said. 

The European Commission said the merits of China’s probe are questionable and that the bloc’s cognac exports are in line with all World Trade Organization rules.

“The commission will therefore follow the investigation carefully to ensure WTO rules are being followed, examining in detail the basis of these measures and will not hesitate to take all necessary actions to defend EU exporters,” spokesperson Olof Gill said Thursday in an emailed statement.

Although Remy, Pernod and other producers sidestepped tariffs for now, that doesn’t mean they’re out of the woods. Similar probes typically take a year or more, so China could still put measures in place at a later date.

Meanwhile, the EU has pushed ahead with plans to impose tariffs on Chinese EVs. The bloc is set to publish a final regulation on those levies by Oct. 30 unless the two sides reach a negotiated solution. China has threatened to retaliate with duties of its own on a range of sectors, also including pork and cars with large engines.