(News Bulletin 247) – The two spirits groups have been suffering for several sessions, penalized by political uncertainty with the threat of sanctions from China against European “brandy”.

These are not the first stock market victims of the dissolution of the National Assembly by Emmanuel Macron. Banks, motorway concessionaires and TF1/M6 were more directly (and heavily) penalized. But the alcohol companies Pernod Ricard and Rémy Cointreau are clearly in second place. Values ​​also lost further ground this Monday, Rémy dropping 2.4% and Pernod 1.7% around 11:10 a.m. And over the last three sessions, Rémy Cointreau shares lost 8%, while Pernod Ricard lost almost 3%.

The two alcohol producers are suffering from the general selling movement which has affected all French stocks. But added to this is a political risk specific to both values: potential sanctions from China on cognac imports.

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An outcome called into question

At the start of the year, the Chinese Mofcom (“Ministry of Commerce”) opened an investigation into European “brandy”, alcohols which include in particular cognac and French Armagnac. But last month, Emmanuel Macron reassured. At the end of a meeting with Chinese President Xi Jinping, the tenant of the Elysée declared that the Chinese leader “wished” that provisional sanctions on cognac would not be applied. A commitment, certainly, ambiguous, but which was enough to give a boost to the Pernod and Rémy actions.

The dissolution of the National Assembly casts a shadow over this promise reported by Emmanuel Macron. “We can think that the dissolution and the prospect of a (political) alternation call into question this beginning of an amicable outcome between France and China, with a temperate solution,” judges an analyst.

Especially since French political uncertainty is compounded by tensions between the European Union and China. Last week, Brussels announced the implementation of additional customs duties on Chinese car manufacturers. This raised fears of the threat of trade retaliation from China.

Pig investigation

This Monday, Beijing announced an anti-dumping investigation into imports of pork and pork products from the European Union, AFP reported.

“Any element of tension created in commercial relations between China, France and Europe increases the risk of sanctions and any element of political uncertainty reduces the probability of a favorable outcome,” underlines the previously cited analyst. “There are both risks in what starts the fire and what can put out the fire,” he summarizes.

In a previous article, Pierre Tegner, of Oddo BHF, indicated that cognac sales in China represented 25% of revenues at Remy Cointreau and 8% to 9% of those at Pernod Ricard.