Australian grape growers could be forced to pull out the vines as the watchdog puts major winemakers on notice for bullying tactics

Kouryangelo / GettyWinemakers come under fire from the ACCC for lack of competition.
  • The Australian Competition and Consumer Commission is calling out anti-competitive behaviour in the wine industry, calling on large winemakers to be more transparent in their pricing and contracts with smaller wine grape growers in regions such as the Riverina and Murray Valley.
  • If the winemakers don’t improve efforts to be more competitive, the watchdog will consider imposing mandatory codes of practice.
  • In addition to lack of competition, the wine industry is under threat from water and land restrictions.

The Australian Competition and Consumer Commission is considering tougher reforms for winemakers as lack of competition threatens the country’s wine industry.

Speaking at the Australian Wine Industry Technical Conference in Adelaide on Monday, ACCC Deputy Chair Mick Keogh said there is an imbalance of bargaining power between small wine grape growers and the big winemakers.

“The imbalance in bargaining power results in growers accepting contracts with sub-optimal terms, with limited ability to resolve disputes, and having to wait sometimes up to nine months for payment for their grapes,” Keogh said at the conference.

The comments follow after a study the ACCC conducted into competition, contracting practices and price transparency in Australia’s wine grape market.

The study focused on three “warm climate grape growing regions” including the Riverland, Murray Valley (which includes the Murray-Darling and Swan Hill regions) and the Riverina.

Approximately 1,500 growers operate in this region – producing around two thirds of Australia’s wine grapes – with these small grape growing companies catering to just a handful of large-scale winemakers, according to the ACCC.

Most of the winemakers in the region are involved in producing “commercial, low value wine destined for export markets”, the study said.

The study was sparked by complaints from wine grape growers about competition and pricing issues, with the commission holding two public forums in November 2018.

Speaking at the conference, Keogh condemned the lengthy payment contracts between winemakers and growers. “Such long-term payments are not consistent with any other industries, and put growers at a significant financial disadvantage,” he said.

He also called for these long payment terms to be phased out and another standard introduced. “A best practice standard of payment within 30 days of grape delivery should be adopted by all winemakers with processing capacity over 10, 000 tonnes.”

Koegh identified another threat to wine grape growers — the varying prices they received for their products.

“In the wine grape market study we found that winemakers do not publicise the prices they pay to growers, and often have confidentiality terms in supply contracts intended to prevent growers from disclosing prices to other growers,” he said.

“Consequently, information about price offers being made by individual winemakers’ can be difficult for growers to access. This makes it hard for growers to assess the competitiveness of available price offers for their grapes from competing winemakers.”

Keogh called for price transparency, which will encourage buyers to make better offers and thus support the wine industry.

While the ACCC had previously introduced the Australian Wine Industry Code of Conduct to address competition issues, none of the major winemakers in the Riverina have signed onto it.

As a result, the Keogh told the conference that if there isn’t an improvement in winemakers adhering to the code of conduct, the ACCC might introduce a mandatory code.

“The ACCC has undertaken to revisit this issue in one year, and if all major winemakers have not become signatories to the voluntary code by that time, there will be a need to seriously consider a mandatory code,” Keogh said.

“The lack of competition in the market for wine grapes will be a major impediment to the future growth of the industry, and unless this is addressed, the industry faces a strong risk of long-term decline.”

Keogh also highlighted how the region is threatened by water and land restrictions, which further impacts grape production.

“Over the last 20 years these natural resources have become increasingly limited, with Australian and state governments imposing a cap on additional water extractions in the Murray–Darling Basin in 1995, and bans on the clearing of additional land for agriculture from 1995 onwards in most states,” he said.

With the access to land and water now limited, Keogh said wine grape growers will need to invest in better grape varieties and water monitoring technology. But that can only be once growers are confident that they are operating in a fair market.

“In the absence of this confidence, wine grape growers will find it increasingly attractive to sell their water, and to pull out their vines,” he said.

Business Insider Australia has contacted the ACCC for more information on the study and complaints that led to it.

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