The national competition watchdog says winegrape growers should be paid within 30 days of delivering their grapes to wineries, not nine months.
The Australian Competition and Consumer Commission has also recommended standardised testing for wine grape quality and much improved market price transparency.
And, it has threatened to recommend a mandatory code of conduct for the industry because winemakers are ignoring a voluntary code.
In short, an ACCC market study concluded harmful market practices were restricting competition in some grape growing regions and limiting potential for growth of Australia's wine industry.
It proposed a raft of measures to address "concerning practices" it felt were common across high-production, warm climate wine grape-growing regions - the South Australian Riverland, the Murray Valley (including the Murray Darling and Swan Hill regions) and NSW's Riverina.
These regions support about 1500 growers producing about two thirds of Australia's wine grapes.
Various supply arrangements appear to favour incumbent buyers of bulk wine grapes
- Mick Keogh, Australian Competition and Consumer Commission
The ACCC identified a lack of transparency and certainty over how grapes were priced and assessed for quality, as well as supply contracts running for multiple years which did not offer price certainty to growers.
"We found winemakers do not publicise the prices they pay growers and often have confidentiality terms preventing growers from disclosing their indicative and final prices to other growers," said ACCC deputy chairman Mick Keogh.
"Various supply arrangements appear to favour incumbent buyers of bulk wine grapes, such as exclusive supply clauses, automatic and long term contract extensions, and difficult contract termination obligations on growers."
The ACCC was also concerned about delayed payment terms for growers, which it said appeared to sometimes stretch to nine months after delivery.
"There are significant bargaining power imbalances between large winemakers and the small growers who supply them, a dynamic that is common between suppliers and processors across the agricultural sector," Mr Keogh said.
"This power imbalance is particularly evident in the bulk wine grapes industry."
Report recommendations
The ACCC's interim recommendations include:
- winemakers in warm climate regions be required to provide indicative and final grape prices to an independent third party for simultaneous public release
- payment terms for wine grapes be shortened so growers are paid within 30 days of delivering grapes objective
- standardised testing for wine grape quality assessments be developed,
- dispute resolution mechanisms in the Australian Wine Industry Code of Conduct be improved.
"Increased transparency over indicative and final prices is likely to lead to greater competition between winemakers, and better outcomes for growers," Mr Keogh said.
Grapegrowers and other industry parties have been urged to make submissions on the report, or other relevant issues by June 28.
The ACCC would also contact some market participants directly to request further specific information.
It had consulted with a wide range of industry participants for the market study, running two public forums and other meetings last November attended Mr Keogh.
Peak producer group Australian Grape and Wine Inc welcomed the interim report and noted its appreciation of ACCC's efforts to engage closely with its members.
"We look forward to continuing this collaborative approach," said chief executive Tony Battaglene, who represents about 2500 winemakers and 5000 grape growers.
We encourage winegrape growers and winemakers to make sure their views are taken into account in the process
- Tony Battaglene, Grape and Wine Inc
He said the interim report was an important milestone in the ACCC's process of taking a deep and comprehensive look at the wine sector.
"Any opportunity to further strengthen commercial relationships within the sector is positive," he said.
"We encourage winegrape growers and winemakers to make sure their views are taken into account in the process."
Code of conduct
The ACCC's study closely examined the operation of the voluntary Australian Wine Industry Code of Conduct, introduced in 2009, but which has attracted limited winemakers support.
If more big winemakers don't sign up, a mandatory code may be needed to bring about the required industry reforms
- Mick Keogh
Because many major winemakers were not signatories to the code, the inquiry found many growers unable to access its dispute resolution mechanisms.
"The ACCC recommends Australian winemakers with more than 10,000 tonnes of processing capacity sign the code," Mr Keogh said.
"If more big winemakers don't sign up, a mandatory code may be needed to bring about the required industry reforms."
RELATED READING:
The ACCC consulted with a wide range of industry participants during its market study, including through two public forums and other meetings held in warm climate grape production regions last November, attended by ACCC staff and Mr Keogh.
Market participants and interested parties were invited to share their views about competition and fair trading issues concerning them.
Responses to the interim report have been invited by email to winegrapes@accc.gov.au (with the title: Submission re: wine grapes market study).
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
