Brandy's Bold Move: How EU Producers Are Dancing Past Chinese Tariffs

The global spirit market is in a tango with trade tensions, and EU brandy producers like Pernod Ricard (PDR.PA) and Rémy Cointreau (RCO.PA) are proving they've mastered the steps to avoid getting stomped. China's anti-dumping duties on EU brandy—ranging from 27.7% to 34.9%—might look like a death blow, but these companies are pivoting, pricing strategically, and betting big on markets where their premium brands still rule. Let's break down the dance floor and find the winners in this trade showdown.

The Tariff Tango: How China's Moves Are Shaking Up the Brandy Market

China's tariffs on EU brandy, effective July 2025, were a blunt warning to European producers. But here's the twist: Pernod Ricard, Rémy Cointreau, and Hennessy dodged the bullet by agreeing to minimum price commitments. Instead of paying tariffs, they must sell their premium Cognac and brandy at or above specified prices in China—a trade-off that's far better than the alternative.

The key? These firms control their pricing power. By avoiding tariffs, they've sidestepped a potential 35% hit to margins. But China's market isn't the only ballroom. Let's look at how these players are dancing around risks:

Market Resilience: Where the Action Is

1. The China Dilemma—And How to Survive It

• Problem: China's tariffs and duty-free market exclusion (which accounts for 20% of Cognac sales) have slammed sales. Pernod's China sales fell 25% in H1 2025, while Rémy's Cognac division dropped 32.8% in Q4 2024-25.
• Solution: Both companies are redefining value. By agreeing to minimum prices (e.g., 46 yuan per liter for VS Cognac), they're maintaining margins while avoiding punitive tariffs. This isn't charity—it's a strategic price floor to keep Chinese competitors at bay.

2. The U.S. Market: A Growth Engine on Steroids

The U.S.—the world's largest Cognac market by volume—is where these brands are sprinting ahead. Rémy's U.S. sales rebounded 32.8% in Q4 2024-25, driven by wholesaler depletions (sales to retailers) and a focus on mid-tier products like Rémy Martin VSOP. Pernod's Martell brand stabilized at 2% organic growth in the U.S., aided by pre-tariff stockpiling and a shift to premiumization.

3. Emerging Markets: The New Frontiers

While China's market is a minefield, Southeast Asia, India, and Africa are gold mines. Both companies are pouring resources into these regions:
- Pernod Ricard: Focused on India, Vietnam, and ASEAN, where young, affluent buyers are embracing Cognac.
- Rémy Cointreau: Leveraging Southeast Asia's growing appetite for premium liqueurs (e.g., Cointreau) and spirits (e.g., Bruichladdich).

These markets now account for 10-20% of revenue, and their growth is unstoppable—think of it as Cognac's TikTok moment.

Pricing Power = Profit Power

The real secret to surviving tariffs isn't just diversification—it's brand equity. Rémy's Club cognac and Pernod's Martell Noblige are status symbols in China and beyond. Even with tariffs, wealthy buyers will pay the minimum prices because these brands are non-negotiable in luxury circles.

But here's the kicker: these companies aren't just surviving—they're thriving. Rémy's liqueurs division grew 16.1% in Q4 2024-25, while Pernod's global sales held steady at -4% organically (due to China, but offset by emerging markets).

Investing: Play the Long Game—These Brands Will Rebound

This isn't a sprint; it's a marathon. Here's why both Pernod Ricard and Rémy Cointreau are buys for long-term investors:

1. Pernod Ricard (PDR.PA)

• Why Buy:
• Diversification: Over 50% of revenue comes from non-Asian markets, shielding it from China's volatility.
• Emerging Market Growth: India and Africa are underserved—Martell's expansion there is just getting started.
• Margin Resilience: Even with tariffs, its cost-cutting (€50M+ savings) ensures profitability.
• Action Alert: Buy now at €105/share, targeting a €125-130 rebound by late 2026 as trade tensions ease.

2. Rémy Cointreau (RCO.PA)

• Why Buy:
• U.S. Comeback: Its 32.8% Q4 rebound is a turning point—the Americas now account for 40-50% of sales.
• Liquor Dominance: Liqueurs (Cointreau) and premium spirits are outperforming Cognac, offering a balanced portfolio.
• Cost Discipline: Its €50M cost-cutting plan protects margins even as China drags.
• Action Alert: Accumulate shares at €180-190, aiming for €220+ as the U.S. market fully recovers.

The Bottom Line: Trade Tensions Can't Crush These Brands

China's tariffs are a speed bump, not a roadblock. Both Pernod and Rémy are redefining resilience—using pricing power, market diversification, and brand loyalty to outmaneuver trade headwinds.

For investors, this is a buy-the-dip moment. Stick with these premium players; when trade clouds clear, their sales will surge—and so will their stock prices.

Final Call: These stocks are built to last. Add them to your portfolio, and watch them toast to victory when trade tensions fade.

This is not financial advice. Consult your advisor before investing.