Hennessy on Strike: Hundreds of Cognac Workers Protest Rumored Production Shift to China

Tractors protesting on the streets of Cognac, France in September. (Photos: AzPost/ Youtube)

On Monday, French newspaper La Tribune reported that around 500 employees at Hennessy Cognac have walked off the job in protest of a rumored relocation to China.

According to the CGT labor union, Hennessy-owner LVMH is considering a plan to export distilled cognac to China, where it will be bottled on-site in an attempt to avert brandy tariffs recently imposed by Chinese authorities. Striking employees have described the plan as a “test” that reportedly may take effect before the end of the year.

LVMH has yet to confirm or deny the rumors. However, a representative from the National Interprofessional Cognac Bureau added in a statement that brands may be “forced to explore all the avenues” in order to mitigate negative impacts to the industry.

“We see this as a relocation of our production, we are giving the Chinese the opportunity to control our tool, it would be a loss of quality and identity,” Matthieu Devers, CGT representative at Hennessy, told La Tribune. “Everything we control would be done elsewhere, without our control and by offering them even more elements to produce their own copy.”

Spirited Debate

The protest is one of several to come on the heels of a lengthy trade scuffle that’s positioned cognac as an intended casualty.

At the end of September, the EU voted to impose tariffs on “unfairly subsidized” electric vehicles imported from China. The move provoked an immediate reaction from Chinese authorities, who followed suit with tariffs of over 30% on European brandy. Though generalized in scope, the tariffs were specific in effect — cognac makes up over 98% of European brandy shipped to China, amounting to some $1 billion in annual sales for heavy hitters like Hennessy and Courvoisier.

Employees voice concern that they’ve become pawns in a political game. Days before the electric vehicle vote, hundreds of union members, winegrowers and distillers flooded the streets of France with tractors, calling upon the EU to postpone its decision and reconsider the ramifications. Anthony Brun, the union head for Cognac’s brandy makers, wrote one of several pleas to French Prime Minister Michel Barnier.

“The situation is urgent,” Brun said per The Daily Gazette. “For a year now, we have been warning French and European authorities about this risk and the need to stop this downward spiral […] We are the victims without being in any way responsible… We have not been listened to.”

The vote has since come to pass, as have a series of dour earnings calls from the industry’s biggest names. LVMH recently reported a 12% slump in wine & spirits revenue that it attributed largely to “weak local demand in the Chinese market.” Pernod Ricard, the French firm behind Martell Cognac, reported a dramatic 26% drop in Q1 sales to China.

China has historically been the second-largest consumer of cognac worldwide behind only the U.S.

Despite the EU’s show of force, negotiations have reportedly continued behind the scenes. The Bureau National Interprofessionnel du Cognac said in a statement that French and Chinese officials renewed “a thread of dialogue” at the Shanghai trade fair earlier this month. Cognac and armagnac representatives claim that positive developments have been made with the relevant authorities, though it’s yet unclear if an agreement can be reached without input from the EU.

It now appears that Hennessy — and perhaps other cognac producers — are taking matters into their own hands. Bottling liquor on-site in China would come as a saving grace to winegrowers who can pivot to large-volume exports. French subcontractors tasked with bottling cognac, however, may be put out of the job.

“It’s just a study, are they going to implement it on a large scale? We don’t know,” an anonymous employee said of the alleged relocation to China. “But there’s no smoke without fire, if the first house does it, it opens the way for the others. Behind it, the social crisis is going to be very violent.”