French cognac makers experienced a surge in exports to the United States in December 2024, with major producers like LVMH's Hennessy and Campari-owned Courvoisier significantly increasing shipments.
The rise in exports reflects both a strategic response to potential tariff threats under the incoming Trump administration and an encouraging recovery in U.S. demand for luxury goods.
Preparing for Possible Tariffs
The United States is France's largest cognac market by volume, making the industry particularly vulnerable to potential trade disputes. Memories of the tariff war during Donald Trump’s first term as president have sparked concerns about a possible resurgence of retaliatory measures. Trump has proposed across-the-board 10% tariffs on foreign-made goods, and the European spirits industry could face additional pressures if trade tensions with the European Union reignite.
In anticipation of these risks, French cognac distributors have been stockpiling in the U.S. market. Hennessy, the leading producer, increased its shipments by 17% compared to November and by over 33% compared to December 2023, according to U.S. import data from ImportYeti. Courvoisier’s December shipments more than doubled both month-over-month and year-over-year, further emphasizing this trend.
U.S. Demand for Luxury Goods Rebounds
Despite global challenges, the U.S. market is showing promising signs of recovery for luxury goods, including cognac. December saw U.S. credit card spending on high-end brands turn positive for the first time in over two years. Swiss luxury group Richemont also reported robust U.S. sales in the final quarter of 2024.
Barclays analysts noted a positive shift for Hennessy in the U.S., with LVMH’s wines and spirits division beginning to see improvements in the market. This rebound in demand aligns with the broader trend of luxury consumption gaining momentum in the U.S., offering a glimmer of hope for French cognac producers.
Challenges in the Chinese Market
While the U.S. market shows promise, the French cognac industry faces significant challenges in China, traditionally another major market. Cognac exports to China plummeted by 75% in December 2024 compared to the previous year, exacerbated by a recent ban on cognac sales in duty-free locations. Weak demand and trade tensions with China have further compounded these difficulties, limiting opportunities for growth in the region.
Source: Reuters