Tassilo Hummel and Julia Payne
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By Tassilo Hummel and Julia Payne
PARIS/BRUSSELS (Reuters) -France's cognac makers have reached a tentative deal on minimum import prices for the Chinese market, but China will finalise it only if progress is made in a separate row over EU tariffs on Chinese-made EVs, five sources familiar with the matter said.
Talks between the two sides have dragged on for months, while sales of cognac in China, the world's most valuable market for the spirit, have shrunk.
If finalised, the deal would bring relief to groups including Pernod Ricard, Remy Cointreau and LVMH, whose sales have also slowed in the United States, the world's biggest cognac market by volume, as a result of inflation and economic uncertainty.
In the absence of an agreement by a July 5 deadline set by China to complete an anti-dumping investigation into European brandy, most of it cognac, China could make permanent its temporary customs duties of up to 39% that are already in place.
The provisionally agreed minimum prices for brandy imports would be "much better" than continuing to pay the existing duties, one of the sources said.
In a June 12 web briefing for cognac makers, lawyers working for the BNIC industry body detailed minimum import prices described as part of the tentative deal obtained after the lengthy technical negotiations, presentation slides seen by Reuters showed.
VS, or Very Superior, the cheapest cognac category, would have a minimum import price of 46 yuan ($6.39) per litre, the slides showed. High-end "Extra Old" cognac, known as XO, would cost 424 yuan per litre, with the XXO category, where retail prices reach thousands of dollars per bottle, costing from 613 yuan ($85) per litre.
For the biggest houses Hennessy, Martell and Remy Martin, two of the sources said minimum import prices would be higher than for smaller producers, but still well below current levels.
One industry insider said his company has committed to the prices detailed in the presentation, and was waiting for the Chinese authorities "to sign them off".
Three other sources at leading Cognac makers said their companies had also signed up to the minimum prices and awaited Beijing's response. They and a fourth industry source said Beijing had linked finalising the cognac deal to movement on the electric vehicle dossier.
In all Reuters spoke to five industry sources. All of them asked not to be named because of the sensitivity of the issue.
The BNIC declined to comment on the prices, saying they were confidential. China's Commerce Ministry did not respond to questions sent by Reuters.
