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LONDON - High Chinese tariffs on EU brandy would leave French companies with vast amounts of cognac that could be hard to sell elsewhere, according to Reuters' calculations, analysts, and investors who fear firms could be forced to discount.
Chinese President Xi Jinping was due to visit France on Monday. French authorities would raise the country's investigation into cognac during the visit, French officials said during a recent press briefing. While low tariffs could be covered by price increases with relatively little disruption, higher tariffs could deal a substantial blow to that demand, Laurence Whyatt, analyst at Barclays said.
If China's portion stayed at around 19%, that would mean at least 368.6 million bottles worth of ageing cognac was destined for China in the future, according to Reuters calculations based on that data. Some of that will be aged for a decade or more. "They are left with all that cognac sitting in a warehouse just north of Bordeaux. It's very difficult to see how they solve that problem," Whyatt said.
However, companies would look to avoid this, said Chris Beckett, head of equity research at Quilter Cheviot, a Pernod investor.
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