Chinese brandy, led by industry giant Changyu, is gaining traction amid escalating trade tensions between China and Europe. This market battle highlights a pivotal shift in the global spirits industry.
In Brief
The Chinese cognac market, historically dominated by French brands like Hennessy and Martell, is undergoing a significant transformation. Following Beijing's imposition of tariffs in retaliation to European duties on Chinese electric vehicles, French producers have experienced a sharp decline in exports (-70% in November). Simultaneously, Changyu, the leader in Chinese brandy, saw its sales grow by 12% in 2023, leveraging nationalist sentiment and rising local demand. This moment represents a critical juncture in Changyu’s strategy, asserting a quality claim on par with European competitors.
Key Facts to Remember
• 70%: Drop in French cognac exports to China in November 2024.
• 78%: Market share of foreign cognac in China, still dominant but under threat.
• 12%: Changyu’s annual sales growth in 2023, marking a recovery after pandemic-related struggles.
Analysis and Insights
Beijing’s Strategic Counterstrike: Targeting cognac strikes a sector where France traditionally leads, sending a clear message to European businesses. This approach highlights Beijing’s intent to redirect local markets toward domestic brands while leveraging tariffs as a political and economic tool.
Rise of a Chinese Taste Identity: Changyu's success reflects a broader shift towards valuing domestic products. Young Chinese consumers, increasingly supportive of local brands, fuel this "sinicization" of food and beverage preferences. This trend challenges the universal appeal of European premium products.
Vulnerability in the French Model: French cognac producers’ reliance on the Chinese market exposes structural fragilities. Overdependence on a single region amplifies the impact of crises, while cumbersome decision-making processes in large corporations hinder adaptability in rapidly evolving regulatory landscapes.
Competitive Advantage Through Localization: Changyu capitalizes on short supply chains and immersive experiences (e.g., wine tourism) to build perceived value equivalent to cognac but at lower costs. Modern infrastructure and narratives of "equivalent quality" further pressure traditional players.
Global Ripple Effects: Efforts by cognac houses to redirect exports to emerging markets like Africa and Southeast Asia could disrupt local industries and encourage the rise of premium regional spirits. This shift may redefine global trade flows and consumption zones for years to come.
Alice Polac
