The prestigious Cognac industry, long regarded as a symbol of French craftsmanship and global luxury, is facing an economic crisis due to trade tensions with China and the United States.
The situation has already led to layoffs, canceled contracts, and financial distress across the Cognac-producing region, raising alarms about the future of this centuries-old sector.
At the center of the storm is the Bureau National Interprofessionnel du Cognac (BNIC), which recently reported the first workforce reductions in the industry. With exports to China plummeting by 65% in the past four months, the region’s economy is under severe pressure, prompting urgent calls for political intervention at both the national and European levels.
Tariffs and Trade Wars: The Root of the Crisis
The Chinese government’s recent tariffs on French spirits have dealt a heavy blow to Cognac producers. This comes on top of the looming risk of a trade war between the U.S. and the European Union, which could further disrupt exports. These two markets alone account for 70% of Cognac’s global sales, making any disruption in trade a critical threat to the industry’s stability.
According to Florent Morillon, President of the BNIC, these tariffs are not just an isolated economic setback but a direct consequence of national and European political decisions:
“The situation endangers the economy of the entire Cognac region. We are at the mercy of international trade disputes, and without urgent political intervention, the consequences will be devastating.”
Impact on Producers: Layoffs and Contract Cancellations
The economic shockwave has already begun affecting Cognac growers, distillers, and affiliated industries. Key developments include:
🔹 Job Losses – The first layoffs in the Cognac sector have been reported, with companies adjusting to falling demand and rising trade barriers.
🔹 Contract Cancellations – Several grape supply contracts between distilleries and independent producers have been either canceled or not renewed, leading to uncertainty for winegrowers.
🔹 Struggling Ancillary Businesses – The crisis extends beyond Cognac houses, affecting barrel makers, transporters, and distillers, many of whom are reviewing their workforce needs due to declining production.
The Union Générale des Viticulteurs pour l’AOC Cognac (UGVC) has warned that if conditions don’t improve soon, growers' incomes will collapse, making it difficult for them to repay recent loans taken out for vineyard investments and expansions.
China’s Rapid Market Shift and U.S. Trade Uncertainty
Patricia Gaborieau, Vice President of the Cognac appellation organization, has emphasized the speed at which the Chinese market is closing:
“The Chinese market is shutting down faster than we anticipated. If we don’t act now, Cognac producers will face severe financial hardship.”
Meanwhile, uncertainty looms over the U.S.-EU trade relationship, as escalating tensions could lead to additional tariffs on French wine and spirits. If the U.S. imposes further duties, Cognac exports to its second-largest market could take another hit, compounding financial losses.
Industry Leaders Demand Immediate Action
Faced with a crisis that threatens to cripple the entire region, Cognac industry representatives are calling for swift political action at both the French and European levels.
Florent Morillon insists that upcoming EU trade discussions will be crucial in determining whether the industry can recover:
“We need a clear, decisive response from national and European leaders. Without intervention, we risk long-term damage to one of France’s most iconic industries.”
The next few months will be pivotal in shaping the future of Cognac. As producers, growers, and industry workers await political decisions, the stakes have never been higher for a sector that has built its reputation on tradition, excellence, and global demand.
Source: Vinetur