RI Pernod Ricard

By Andrea Figueras

Shares in European drinks makers tumbled on Friday after the Chinese government launched an anti-dumping investigation into brandy imported from the European Union in an escalation of trade tensions between the regions.

The probe will focus on brandy products that come in smaller than 200-liter containers from the EU, and follows a complaint from the China Alcoholic Beverages Association on behalf of the domestic brandy industry, the country's Ministry of Commerce said Friday.

Shares in France's Remy Cointreau and Pernod Ricard, both sell brandy or cognac in China, tumbled on the news. At 1127 GMT, shares in Pernod Ricard were down 4.9% at EUR145, while shares in Remy Cointreau fell 11.5% at EUR96.40. Shares in the U.K.'s Diageo were 2.3% lower at 2,743.5 pence.

The move heightens tensions stoked by the EU's anti-subsidy investigation into China's electric-vehicle makers. In September, the EU launched a probe into whether state subsidies for electric-car makers in China unfairly hurt Europe's car industry by keeping prices artificially low.

China's commerce ministry said in October that the EU anti-subsidy probe lacked evidence and was inconsistent with international trade rules.

Pernod Ricard and Remy Cointreau declined to comment on the matter. Diageo didn't immediately respond to a request for comment.

Analysts at Citi said it was difficult to see cognac being sold below fair market value in China, or that the probe would conclude that tariffs on cognac imports would be required.

"Although the lack of clarity on the current situation and worries that the probe could expand to other imported spirits categories may continue to weigh on the European spirits space, we believe the scale of the initial negative share price reactions is overdone," the analysts said in a research note.

David Sachs and Sherry Qin contributed to this article.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

January 05, 2024 06:50 ET (11:50 GMT)

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