ACCC warns over 'harmful' practices in wine industry
Late payments to wine growers and a lack of transparency over how grapes are priced are two of the "harmful" practices that could limit competition in the industry, the regulator has warned.
In a wide-ranging report, the Australian Competition and Consumer Commission (ACCC) said wine grape growers were not paid until nine months after their fruit was delivered in some cases, and that the wine grape industry was "characterised by imbalances in bargaining power between major buyers (winemakers) and growers".
"We found that winemakers do not publicise the prices they pay to growers and often have confidentiality terms to prevent growers from disclosing their indicative and final prices to other growers," ACCC deputy chair Mick Keogh said.
"Meanwhile, 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 report focused on the three Australian areas considered warm climate production regions, the Riverina in NSW; Riverland in South Australia; and Murray Valley in the Murray Darling area.
The vast majority of grapes produced in these distinct regions were "used for commercial, low-value wine destined for export markets," the report said, adding that "Australian winemakers competing in global markets are price-takers".
Because of the reliance in these regions on export markets, growers and winemakers are significantly exposed to changes in market conditions and prices, which can change significantly from year to year. But growers, because of the long lead times associated with producing wine grapes, have only a limited ability to respond to changed market conditions, the ACCC said.
The regulator highlighted other "concerning practices" that it said resulted from the power imbalance in the industry. These included a lack of competition between winemakers buying grapes in warm climate regions, and an imbalance in supply agreements meaning that growers wore too much risk.
"These industry features result in practices which ultimately produce inefficient outcomes in grape production and pricing. The ACCC is considering options to improve industry contracting practices, to foster stronger competition between winemakers, and to provide a greater level of certainty and transparency to growers," it said.
More to come.