Of Tassilo Hummel

Cognac, France – The family property of Christophe Fillioux in the South Surname region – France has survived for five generations, through wars and financial crises. Now, however, he has begun to tear some of his vineyards on his roots.

The decision of the President of the United States, Donald Trump, this week, to give 20% of rates to all European assets, is deepening the pain for the Cognac industry of about $ 3 billion from France, which was already being blowing by world commercial tensions.

In October, the 4,000 producers in the region were Beijing objectives with rates after European Union rates in Chinese electric vehicles. Since then, Cognac’s sales in China, their second largest market for volume, have fallen into more than half.

With the US, the world’s highest consumer in the world, which has one in two bottles sold, Trump’s rates have let many producers passionate.

Fillioux, the 45-year-old owner and teacher of Jean Fillioux Cognac House, founded in 1894 by his great-grandfather-Gran-Gran, had already started half a hectare of ancient vineyards. It plans to uproot another and a half hectare next year as part of a plan of the whole industry to help producers through the crisis.

“The situation is very difficult to navigate. We have a great problem of visibility,” said Fatioux, located in a vineyard planted by his father in 1980, the year he was born.

Worse it can be coming. Trump has threatened 200% wine rates and European spirits if Europe hits us with Bourbon with additional duties.

COGNAC exports to the United States last year amounted to about a billion euros ($ 1.10 billion). And the United States is also the maximum export market in France: sales increased by $ 8% to $ 2.3 billion last year, according to the Federation of Wine and Spirits Exporters, partly when buyers were stored in anticipation of Trump’s policies.

The property of Fillioux works with its distribution partners to try to develop new markets in countries such as Thailand, Vietnam and Nigeria.

But he is more fortunate than some other producers: he has little debt and owns his brand, making him less confident in contracts with large houses like Hennessy, owned by LVMH, the greatest manufacturer of Cognac.

“Problems are part of the life of a twenty, with all the good and bad surprises,” he said.

Global slowdown

Even before commercial tensions with China and the United States, which include much more than three quarters of Cognac’s income, Cognac’s sales had fallen for the last two years due to a global slowdown in luxury spending.

Prior to that, the industry expanded production volumes to meet booming demand during Covid-19 Pandemic. As recently in 2022, Cognac Houses encouraged producers to buy more land vineyards and plants.

Many of the more than 4,000 producers in the region are now debt when their income deteriorates.

“ We are going to manage these situations as much as we can with the banks, ” said Florent Morillon, president of the National Interprofessionnel du Cognac (BNIC), an industry organism that represents the producers and the houses of Cognac, such as Hennessy, Remy Cointreau’s Remy Martin, Pernod Ricard’s Martell and Courvoisier de Campari.

“All investments made by the houses of Cognac, winemakers and distillers were based on business decisions. And then external factors came,” added Morillon.

Complicated fall

Explaining about 97% of its production, the COGNAC industry in France has always relying on international trade, said Bertrand Blancheton, a professor of economics at the University of Bordeaux. “Cognac was born of an alliance of foreign merchants and local producers.”

Since the 17th century, when Dutch businessmen has made their knowledge in the region and taught local inhabitants how to make brandy, Cognac has always been intended for consumption abroad, with Irish, English and Scandinavian merchants who open their homes and send abroad.

In February, the BNIC industry body, which oversees production, reduced the annual production limit for a third consecutive year to only half of the levels of 2022, citing a “strongly deteriorated economic environment and an unprecedented fall in global consumption”.

“We are only at the beginning of the crisis,” said Jerome Sourriseau, a local politician and president of the group of municipalities formed by the villages around the Cognac.

Unemployment is increasing, as COGNAC houses and suppliers stopped hiring short -term employees, while some began to say goodbye to the staff, he said.

COGNAC producers and suppliers, including bottling facilities, packaging companies and barrels, cork and containers, occupy approximately 70,000 people in the region.

Some, such as Tonnellerie Vicard, a century barrel manufacturer, are in addition, as they export their assets to American winemakers.

“We already had customers to tell us the same night as they have to review the orders they have already made, reducing the volumes for the number of rates that they will probably have to pay,” said CEO Jerome Schmitt.

“Special Bond”

Blancheton told the United States, Cognac has a “special bond” with the black community. North black soldiers -Americans discovered the drink during World War II and brought it home, said, before Cognac Brands led by Hennessy began to advertise strongly in the 1990’s and 2000’s.

In 2012, rapper Jay-Z established the USE Cognac brand in collaboration with Bacardi, while Hennessy reached a sponsorship agreement with the Basketball League NBA in 2021.

But even before commercial tensions, COGNAC sales in the United States were largely reduced due to the aggressive price hikes in recent years affecting middle -class consumers, said Thomas Mesmin, from Paris’s luxury consultancy.

“North -Americans not only started drinking less cognac, but also changed their consumption attitudes to other spirits such as tequila and whiskey.”

Although most high-end cognacs are exported to Asia, the United States is dominated by less expensive bottles, which sells $ 36-60 and mass sales brands like Hennessy so far did not expand their consumption base, said Mesmin.

“It’s just part of the population in a few cities,” he said.

The President of the Industry, Morillon, predicted that Cognac would lose the market share in the United States, and the producers could not convey the total cost of consumer rates.

“It is up to each house to decide, but today we know that in the current context, even if they only increase $ 1 or 2, this can cause interruptions,” he said.

Pascale Dupuy, 67, said he would probably distill less this season and would sell more grapes to bulk buyers who make cheap wine to limit their losses.

“A more added problem in the stack,” said Dupuy, who lives in Ambleville, a village near Cognac, when he asked him about commercial tensions with the United States.

Dupuy said that the larger cognac Brand Remy Martin has already reduced his contracts with him by almost half, and hopes that Hennessy also buy considerably less, causing a 40% decrease in his planned income this year. Companies did not respond to a comment request.

With his daughter, who was not interesting to take on the fighting business, Dupuy said he would probably be the last generation of Cognac manufacturers in his family.

“Start questioning -you are still worth it,” he added.

($ 1 = 0.9097 euros)

(Tassilo Hummel Report, Hamaide’s Additional Sybille Reports; Editing Daniel Flynn)