An ACCC review has found that while commercial practices in the wine grape industry have improved, further regulatory action may be required unless further reforms are introduced to make the wine grape supply chain fairer for growers.
The review comes two years on from the ACCC’s Wine grape market study, which identified a lack of competition, potential unfair contract terms, a lack of price transparency, and imbalanced risk allocation in favour of wine makers at the expense of grape growers.
“It has been a challenging couple of years for the wine grapes industry,” ACCC Deputy Chair Mick Keogh said. “Many winemakers have experienced increased difficulties exporting to key global markets, and the COVID-19 pandemic affected demand and business operations.
“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,” Keogh added. “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 lamented the fact that many winemakers have not significantly reduced the length of their payment terms, despite ACCC recommendations on the back of the original study that payments are made to growers within 30 to 60 days of grape delivery.
On the plus side, he noted that there has been a large increase in the number of signatories to the voluntary Code of Conduct for Australian Winegrape Purchases in the warm-climate regions of the Riverland, the Murray Valley and the Riverina.
“We are pleased to see more winemakers signing up to the voluntary code since the completion of our study, and we encourage all winemakers to do so,” Keogh said.
He is also encouraged by the fact that signatories are committing to adopt a standard grape quality assessment process, that should result in a significant improvement in industry practices.
“The standardisation of quality assessments should make the process of grading and pricing grapes more transparent for growers when dealing with winemakers who have signed the code,” Keogh said.
Nevertheless, the review reveals that growers are still facing challenges in getting access to timely and accurate price information.
“We urge winemakers to improve price transparency, which is necessary to allow grape growers to make an informed decision about contract renewals or choosing which winemaker to supply grapes to,” Keogh said. “It also allows growers to know whether the price they are being paid by a winemaker is a fair market price, or whether they should seek a better offer.
“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.”