The Australian Competition & Consumer Commission (ACCC) says the wine grape industry may require further regulatory action unless reforms recommended two years ago are implemented.
The ACCC’s review of the industry’s commercial practices is a follow-up to its 2018/19 Wine Grape Market Study.
The market study identified concerns in the wine grape sector supply chain, highlighting a lack of competition, potential unfair contract terms, scarce price transparency, and imbalanced risk allocation which favours wine makers at the expense of grape growers.
The study made 10 recommendations based on five key areas including improvement on grape quality assessment processes; price transparency; reducing grape buyers’ timeframes to pay growers; reinforcing and expanding the industry’s voluntary code; and improving winemakers’ contracting practices, which included the removal of unfair contract terms in grower agreements.
ACCC deputy chair Mick Keogh said the past few years have proven difficult for the grape wine industry because of Covid-19 and exporting issues.
“The wine grape industry has made important progress in addressing some of the issues identified in our market study, but we believe more work is needed to improve price transparency and shorten payment times.
“For example, our initial market study found that some grape growers were being paid up to nine months after their grapes were delivered to wineries. While there have been some improvements, lengthy payment terms remain prevalent throughout the sector,” Keogh said.
Keogh said a significant number of winemakers have not reduced the length of their payment terms regardless of the ACCC recommending best practice of payment within 30 to 60 days of grape delivery.
A major increase in the number of signatories to the voluntary Code of Conduct for Australian Winegrape Purchases was noted by the ACCC in the warm climate regions of the Riverland, Murray Valley, and Riverina. The Code of Conduct has more than 60 signatories including Treasury Wine Estate, Accolade Wines, Pernod Ricard Winemakers and Australian Vintage.
The ACCC said its main concern is a lack of timely and accurate price information available to growers.
Australian Grape & Wine chief executive Tony Battaglene told Food & Drink Business they will review the report in detail and implement necessary actions to improve on these areas.
“We are pleased with the acknowledgement of the good work undertaken by the sector to respond to the market study recommendations. We understand there are areas we can improve on, in particular on improving price transparency,” said Battaglene.
Keogh added that price transparency is important as it allows grape growers to make decisions on contract renewals, choosing which winemaker to supply grapes to and if the price being offered is fair or not.
“The sector has achieved some important progress, however, we will consider recommending or taking further regulatory action if improvements aren’t made on price transparency and lengthy payment terms,” Keogh said.
