China's clampdown on prostitution in nightclubs and bars will hit cognac producers, analysts have warned, as Beijing continues its clean-up of the world's second-largest economy.
Bars and karaoke venues are often fronts for illicit activities like prostitution or other forms of illicit sexual activity in China. The crackdown on the so-called "yellow" sector, which follows on from measures to stop extravagant gift-giving and corruption amongst top Chinese officials, saw over 2,400 venues shut down in the six days following the start of the operation on February 10.
The luxury retail sector has been hit hard by the gift controls, and now analysts are worried that luxury cognac producers could take a hit from the prostitution clampdown.
"There are high-end outlets and they tend to offer high-end liquor and people going are in the mood to treat themselves," Trevor Stirling, European beverage analyst at Sanford Bernstein, who released research on this topic on Monday, told CNBC in a phone interview.