PARIS/LONDON (Reuters) – Remy Cointreau will raise cognac prices in China to help mitigate the impact of tariffs imposed by Beijing on European Union brandy amid a trade dispute, its finance chief told investors on Friday.
China imposed provisional tariffs on brandy from the European Union earlier this month, days after the 27-member bloc voted for tariffs on Chinese-made EVs. Brandy makers say the tariffs are political.
A combination of existing stocks in China and lower demand meant the impact of tariffs in Remy’s current financial year, ending March 31, would be marginal, Chief Financial Officer Luca Marotta said. Later on, the company would take actions to mitigate the impact, Marotta said.
It had already conducted research to establish the sales impact “linked to the price increase that, for sure, we will be obliged to pass through,” he told investors when reporting third quarter sales and updating Remy’s outlook.
Rivals, including Pernod Ricard and luxury goods giant LVMH, which owns Hennessey cognac, have so far not been drawn on price increases, saying they will watch what competitors do.
Marotta also declined to elaborate on the timing or extent of price increases, as well as the scale of the potential impact on volumes in China.
Price increases will not be the only lever Remy can pull, he continued, saying it can also cut costs in areas, such as manufacturing and advertising spending.
Initially, the tariffs will hit cash, he said, with the impact on earnings only recognised later when cognac is sold in China by the company’s local unit.
Marotta said that the provisional tariffs still need to be confirmed, but the impact was included in sales guidance for its current financial year, which it slashed on Friday.
(Reporting by Dominque Vidalon in Paris and Emma Rumney in London; writing by Emma Rumney; editing by Jason Neely and Tomasz Janowski)
