An imbalance in bargaining power and the need for a mandatory code of conduct are two of the 14 recommendations put forward by Dr Craig Emerson, following his 10-month review of the trade and competition dynamics in the grape and wine sector.
Released today by Wine Australia, the report looks at fair trading, competitive relationships, contracting practices, and risk allocation between grape growers, winemakers and retailers.
Emerson found winegrape growers in warm inland growing regions – the Riverland, Murray Darling, Swan Hill, and Riverina – had weaker bargaining power than those in cooler regions, but even so, “harmful commercial conduct by winemakers in these regions, such as protracted payment terms for their grape suppliers, can similarly shift risk inordinately from winemakers onto their grape suppliers”.
Power imbalances also existed further along the supply chain between independent wine makers and oligopolistic liquor retailers.
“Endeavour Group, Coles Group, Metcash Limited and ALDI comprise around 80 per cent of the domestic retail market, with Endeavour Group and Coles Group having a combined market share of around 60 per cent,” Emerson said.
He said the current industry-led voluntary code of conduct was unenforceable, that a mandatory code was the only viable option, and outlined ways it should operate.
Emerson said informed choice was necessary for wine consumers, with clear indicators whether a wine is own-brand or not.
Small independent winemakers should have timely access to wine sales data through vertically integrated, oligopolistic liquor retailers, and larger winemakers should have access to the market data at the same level of granularity as that for retailers’ own-brand wine labels.
The Wine Equalisation Tax (WET) also needs to be reviewed to ensure it is meeting its policy objectives without unintentionally providing advantages for vertically integrated winegrape production, winemaking and wine retailing businesses.
Emerson consulted with more than 20 different key stakeholder groups including grape growers, wine makers, liquor retailers, and industry representative organisations across Australia.
Emerson said the impact analysis shows that the benefits of the recommendations outweigh the costs, and that he ruled out other proposals where the costs would clearly outweigh the benefits.
The full report and recommendations are here.
