Some growers have to wait as long as nine months for winemakers to pay them in full for their grapes, the competition watchdog says.
The Australian Competition and Consumer Commission has called out harmful market practices it says are restricting competition in some wine grape growing regions and limiting the wine industry’s potential for growth.
Its concerns include a lack of transparency and certainty over how grapes are priced and assessed for quality, and supply contracts that run for multiple years but do not offer price certainty to 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 chairman Mick Keogh said on Monday.
“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.”
While the industry recently emerged from a 10-year period of oversupply of grapes and low grape prices, the ACCC said most growers had prioritised securing a buyer in the medium term over receiving the best price.
In an interim report, the ACCC said it was concerned about delayed payment terms for growers that can sometimes stretch up to nine months after grapes have been delivered to a winery.
It said well-resourced, large winemakers were in a much better financial position to bear the cost of holding inventory than growers.
The ACCC wants payment terms shortened so growers are paid in full within 30 days of delivering grapes.
It said a number of winemakers had offered improved payment terms amid increased demand for grapes, or indicated they would make changes if required.
Mr Keogh said there were significant bargaining power imbalances between large winemakers and the small growers who supply them.
“Increased transparency over indicative and final prices is likely to lead to greater competition between winemakers, and better outcomes for growers,” he said.
The ACCC’s interim recommendations include requiring winemakers in warm climate regions to provide indicative and final grape prices to an independent third party for simultaneous public release.
About two-thirds of Australia’s annual wine grape production occurs in warm climate regions including the Riverina in NSW, Riverland in South Australia and Murray Valley in NSW/Victoria.