Commercial practices in the wine grape industry have improved, but further regulatory action may be required unless additional important reforms are implemented, an ACCC review has found.
The review, published today, comes two years after the ACCC’s Wine grape market study, which identified concerning issues in the wine grape supply chain, including 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.
The review provides an update on the industry’s progress in implementing the ACCC’s original recommendations.
“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.”
“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,” Mr Keogh said.
“Despite the ACCC’s recommendation for a best practice standard of payment within 30 to 60 days of grape delivery, many winemakers have not significantly reduced the length of their payment terms.”
The ACCC noted there had 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,” Mr Keogh said.
Signatories are also committing to adopt a standard grape quality assessment process, which, when adopted, will represent 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,” Mr Keogh said.
However, the ACCC found that growers still have challenges 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. 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,” Mr Keogh said.
“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.”
Background
The ACCC conducted a market study into the wine grapes sector in 2018-19 which looked at competition, contracting practices, transparency and risk allocation issues in the wine grapes supply chain. The market study focused on three inland warm climate regions: the Riverland, the Murray Valley, and the Riverina.
The final report was released in September 2019, and made ten recommendations focused on five key areas:
- Improving grape quality assessment processes
- Improving price transparency
- Shortening grape buyers’ timeframes to pay growers
- Strengthening and expanding the industry’s voluntary code, and
- Improving winemakers’ contracting practices, including through the removal of potential unfair contract terms in grower agreements.
In the final report, the ACCC undertook to review the sector’s progress in adopting these recommendations in 12 to 18 months’ time. This report is the product of that follow-up review.
