Published on Jul 20, 2019

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Future growth prospects for the Australian wine industry will be heavily dependent on reforms to improve competition for wine grapes, according to the Australian Competition and Consumer Commission (ACCC).

The current low level of competition between winemakers buying grapes not only leads to inefficient outcomes in production and pricing but also discourages innovation and capital investment, Commission deputy chair Mick Keogh said in a speech to the Australian Wine Industry Technical Conference in Adelaide this month.

Mr Keogh said the wine grape growing industry was largely characterised by imbalances in bargaining power between a small number of major buyers and a much larger number of small-scale sellers. “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,” Mr Keogh told the conference.

“The ACCC’s wine grape market study interim report found these significant issues represent a very real threat to the growth of the wine grape industry, especially in an era of scarce resources such as water. The wine grape industry will need capital investment by growers to improve irrigation efficiency and to plant improved grape varieties. Only when the growers have greater confidence and certainty in the market will they be prepared to undertake this investment.”

Mr Keogh said a lack of pricing transparency is also hindering the effective operation of the market. “Increased pricing transparency will provide better price certainty to the market, and not only improve growers’ bargaining power but also boost competition between winemakers.”

He said the market study was being conducted because of a significant number of confidential complaints received from growers about how their market works. “Many growers have told us that they were reluctant to raise concerns with their winemakers due to fear of retribution,” Mr Keogh said.

The ACCC is currently seeking feedback from the industry on its interim report.

 

For the full study, go to: Wine grape market study.