05 Jun Wine Grape Industry Pressed by ACCC – caution for growers, wineries and commercial lawyers
An investigation by the Australian Consumer Watchdog and subsequent interim report by the Australian Competition and Consumer Commission (ACCC), focusing on the warm climate regions such as the Riverland in SA, has revealed concerning practices. These range from disputes over quality assessments to some wine grape growers experiencing wait times of up to 9 months in order to receive payment for their grapes. There is typically a significant disparity between wineries and growers. The ACCC noted that this imbalance is restricting the growth of the Australian wine industry.
4 key points were highlighted in this interim report:
- Quality assessment – the lack of an objective measure for quality assessment is causing difficulty for growers on delivery.
- Uncertainty on pricing – the lack of certainty in pricing causes difficulty for growers in managing profitability for their vineyards. The ACCC has recommended implementing indicative pricing for growers. Nevertheless there may be legal ramifications to winemakers by way of price signalling.
- Long term payments – the Wine Industry Code of Conduct implements a staggered payment method, which takes into consideration both the timing for growers cash flows, and also the timing for wine production after delivery and for orders from retailers and distributors. The ACCC’s report has identified many growers are waiting for periods of up to 9 months to be paid in full after the delivery of the grapes. The ACCC has proposed payment within a significantly shorter timeframe, which would impact wineries and the industry significantly.
- Long term supply contracts – the ACCC raised concerns about the use of long term supply contract. There is popularity surrounding long-term supply contracts, deriving from the evolving supply and demand nature of the wine industry. Growers may currently use long-term supply contracts as a means of security to attain access to finance.
At this stage, the ACCC is formulating a final report to be provided to the Government in September, and is asking for industry comments over the coming few months.
Wineries and growers should use this time to review the terms of their grape sale and purchase contracts and consider any amendments in the light of the ACCC’s comments.
Please contact one of our experienced team at Belperio Clark on (08) 8212 1322 for guidance on what you should be looking out for when reviewing grape sale and purchase contracts.