By Andrea Figueras
Shares in European drinks makers took a hit on Friday following the launch of an anti-dumping investigation by the Chinese government. The probe specifically targets brandy imported from the European Union (EU), marking an escalation of trade tensions between the two regions.
The investigation will focus on brandy products from the EU that come in containers smaller than 200 liters. The China Alcoholic Beverages Association filed a complaint on behalf of the domestic brandy industry, prompting the Ministry of Commerce to initiate the probe.
The news triggered a decline in shares for France's renowned brands Remy Cointreau and Pernod Ricard, both of which sell brandy or cognac in China. Pernod Ricard's shares dipped 4.9% to EUR145, while Remy Cointreau's shares fell 11.5% to EUR96.40. Meanwhile, U.K.-based Diageo saw its shares drop 2.3% to 2,743.5 pence.
This move further intensifies the trade tensions sparked by the EU's anti-subsidy investigation into China's electric vehicle makers. The EU had launched a probe in September to determine whether state subsidies for Chinese electric car manufacturers unfairly impacted Europe's car industry by keeping prices artificially low.
In October, China's commerce ministry criticized the lack of evidence supporting the EU's anti-subsidy investigation and argued that it contradicted international trade rules.
Both Pernod Ricard and Remy Cointreau declined to comment on the matter, while Diageo has yet to respond to requests for comment.
Citi analysts expressed skepticism about the possibility of cognac being sold below fair market value in China or tariffs being imposed on cognac imports as a result of this probe. They stated in a research note that although the European spirits industry may continue to face uncertainties and concerns about the probe expanding to other imported spirits categories, the initial negative reactions from shareholders were exaggerated.
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