Chapter 3The Code of Conduct for Australian Winegrape Purchases
3.1The Code of Conduct for Australian Winegrape Purchases (the code) was developed to provide a framework for fair, equitable, and mutually beneficial trading arrangements between growers and winemakers. The code, which is voluntary and only applies to signatories, aims to set minimum standards that must be included in grape purchasing agreements, including payment terms, quality assessments, mechanisms for determining prices, and dispute resolution processes.
3.2The committee heard evidence that the code is not currently working as effectively as it could be in creating a fair and equitable trading environment for all industry participants. A lack of effective enforcement and inadequate incentives for compliance are viewed as major issues affecting the effectiveness of the code.
3.3This chapter will explore some of these issues, including:
structural power imbalances in the Australian wine industry;
dispute resolution processes;
lengthy payment terms;
indicative winegrape pricing;
information and data sharing;
grape quality assessments; and
adequacy of industry representation.
Growers’ and regulators’ concerns with the code
3.4Evidence received from growers suggests that the code is not currently working as intended and is not effective at protecting growers’ rights. A focus on increasing signatories at the expense of effective enforcement, and a lack of penalties for not abiding by the code, were recurring themes raised throughout the inquiry. This, in addition to a lack of information for growers and consolidation of large winemakers, has effectively created a power imbalance between growers and winemakers that leaves growers feeling disempowered.
3.5In its 2019 Wine grape market study final report, the Australian Competition and Consumer Commission (ACCC) identified a range of concerning practices resulting from the bargaining power imbalance and information asymmetry in grower-winemaker relationships, including:
growers being largely ‘price takers’ and unable to effectively negotiate with winemakers;
a lack of transparency and certainty over pricing and quality assessment procedures;
supply agreements without price certainty or verifiable price benchmarks;
delayed payment terms for growers, sometimes up to nine months after delivery of grapes;
imbalances in supply agreements which disproportionately allocate transactional risk to growers and allow winemakers to act unilaterally; and
low levels of competition between winemakers acquiring grapes in warm climate regions.
3.6The Australian Government’s Viticulture and Wine Sector Working Group (Working Group) reported that ‘many growers noted commercial contract arrangements with wineries have a range of issues, in particular, pricing, long payment terms and inconsistent fruit quality standards’ and that the code was viewed by some as ‘not being effective to resolve disputes, promote contractual fairness and build a culture of better transparency throughout the supply chain’. Despite recent efforts to improve the code, ‘concerns regarding fairness in commercial dealings remained prevalent during the Working Group’s consultation period’.
3.7The South Australia Wine Industry Association (SAWIA) submitted that the voluntary code ‘establishes a framework for fair and equable dealings between growers and winemakers’ and that ‘SAWIA remains committed to promoting further adoption of the voluntary Code by non-signatories’. However, it is this focus on expanding the number of signatories to the code that has led some growers to feel that increasing signatories has become a priority at the expense of actual enforcement. Ms Amanda Dimas, Riverland grape grower, expressed her view that the code has created a two-tiered system:
Currently the Voluntary Code allows wineries the ability to sign onto the Code if they want to. Many wineries have not signed onto this Voluntary Code, which I believe is why the industry is in the mess it is currently. Pairing this with the lack of repercussions for wineries not abiding by the Voluntary Code, when they freely signed onto it. You cannot have half an industry doing things however they like and then the other half trying to do it fairly.
3.8For those wineries that are signatories, there is a belief amongst growers that signing on is a way to benefit from the code without being beholden to any of its negative aspects. Riverina Winegrape Growers expressed that the lack of repercussions for breaches of the code provides no incentive for adherence, even by signatories:
The current administration of the voluntary code is insufficient, with limited accountability and enforcement. Many wine processors do not adhere to the code's guidelines, knowing there are no substantial repercussions for non-compliance. This undermines the code's credibility and its intended purpose of protecting growers from unfair practices.
3.9Murray Valley Winegrowers noted that, although there is a dispute resolution process built into the code, there are very few notices of dispute recorded each year. However, according to Murray Valley Winegrowers, this is not a true reflection of what actually occurs. Regional organisations often intervene to broker a resolution on behalf of growers, as many individuals do not want to go through the formal dispute process for fear of reprisal from large winemakers. This view was further expressed by Mr Jason Perrin, Riverland grape grower, who noted that recent market consolidation has increased the bargaining power in favour of large winemakers:
In the last 10 years, our wine industry has become more corporatised, just as we have seen in the supermarket business in Australia. We now have a few major players as winemakers. In particular, Accolade-Pernod Ricard, and Treasury Wines. With their increase in market power, so has been the resulting pressure on contracts, grape prices, [and] a lack of supply and demand transparency.
Power imbalances
3.10The power imbalance signalled by winegrape growers has been extensively reviewed and noted by other inquiries and reports. In its inquiry into perishable agricultural goods, the ACCC determined that the ‘winemaking market is heavily concentrated, and there are low levels of competition between winemakers acquiring grapes in warm climate regions’. This has led to ‘a significant imbalance in bargaining power between winemakers and growers’.
3.11Central to the issue of power imbalance is the highly perishable nature of winegrapes and the inability to quickly pivot to grow other varieties or crops. According to the ACCC, winegrape growers have little control over the amount of product they supply to the market in the short term and are unable to quickly source an alternative buyer if problems arise when delivering grapes. Winegrapes are specifically for wine production and are not suitable to be sold as table grapes, further limiting options available to growers. Growers are therefore incentivised to take what is on offer when they can, since there is little scope to withhold supply as the quality of grapes may be reduced if harvest is delayed. Ms Dimas illustrated how quickly the turnaround is for growers when harvesting and delivering their grapes and the consequences if delivery is not made in time:
Winegrapes are not a product that we can harvest and keep in a cool room or in a silo for weeks or months while the pricing market changes. Once they have reached the wineries preferred Baumé level, growers have all of 4-7 days to have them off the vine, within the specified Baumé level acceptable to wineries, or we have the fear of being rejected at the weighbridge on delivery. They need to be delivered at the winery within 24 hours of being harvested. Wineries can take 1 day to 4 weeks to find a booking for your grapes to be delivered. By the time we are at 4 weeks there is barely a grape to be harvested. There is no compensation for the loss of berry weight to grower, as the grapes are shrivelling on the vine waiting to be booked into the winery.
3.12The powerlessness of growers was also conveyed by others who told of growers being at the mercy of wineries’ scheduling. Ms Simi Gill, Riverland grape grower, provided a similar story of waiting for wineries to approve delivery, where any delays come at a cost to the grower:
[M]y experience with booking our grapes with the winery has been extremely distressing. Many times, I have gone into the office and literally begged for my grapes to be booked, as I can see that they are drying up on the vineyard. The winery has penalties regarding that, which Jason and Amanda have both spoken about, so I won't go into that.
I have also experienced when my vulnerable varieties of grapes, such as gordo, do not get booked or picked up on time, a rejection causing us a loss of business. This has cost us hugely. Just that one patch, which is about five acres, cost us up to 30 grand. The winery has come back and said, 'Sorry, but your grapes had disease,' but they were booked and were not picked up on time due to the winery, so that's not our fault.
3.13In its Winegrapes market study, the ACCC found that the uncertainty created by the oversupply of grapes, combined with the power imbalances in the industry, was leading to some growers agreeing to unfair contracting terms in a bid to guarantee a buyer. The need for a buyer means that growers are unlikely to raise concerns with the ACCC regarding unfair contract terms because of fear of retribution. Riverina Winegrape Growers asserted that the high level of consolidation among wine processors means that a few dominant companies control the majority of winegrape purchases. With few other options to turn to, ‘growers have little ability to influence contract terms or pricing’, resulting in systemic disadvantages for small growers.
3.14Ms Dimas illustrated the growers’ precarious positions as price takers and the desperation leading them to take whatever price is on offer:
Our block is a small property, so we don't have the push that big companies that plant up big grapes would have. So, if we go in questioning the price, as I said before, they'll let it shrivel on the vine so they get the price that they want it at. I heard from a winemaker that Accolade let so much of their shiraz shrivel on the vines and then added so much water that CIT, which is an irrigation company, had to turn them off a year or two ago. So we're not going to get a fair price, no matter whether we question them or not; we're better off just taking what they put out and dealing with it.
3.15Mr Paul Derrico, Chief Executive Officer, Murray Valley Winegrowers, relayed a similar story of a grower who felt pressured by a winery to accept an offered price:
I was dealing with a grower who was saying they had to accept the winery's offer in contract by 5 pm yesterday. Obviously, prices were released broadly within the industry yesterday, and the pressure was on that grower to accept the prices, otherwise today the prices would drop—so that sort of stuff happens. I think, generally speaking, in the difficult conditions that the industry has at the moment, growers feel intimidated enough just to take the offer that's on the table. Otherwise they might not be able to sell their fruit because another grower will always accept that offer.
3.16A further example of the power held by wineries over growers can be found in grape quality assessments. Contracts between growers and wineries may have subjective or unclear methods of assessing grape quality and the resulting payment value. These assessments are typically made after the grapes have been delivered, eliminating growers’ ability to source another buyer if there is disagreement over the quality. Mr Harry Vlassopoulos conveyed the helplessness and uncertainty felt at the determination of these assessments:
Winegrape colour schemes [were] introduced for red varieties whereby samples are analysed for colour content & growers payments penalised on a reducing sliding scale according to the colour score determined by the winery. This scheme opened up a helpless scenario for (contracted to deliver) growers, who were compelled to deliver their perishable products not knowing what the monetary return would be. Again from personal experience I can inform you that, any questions raised with the wineries regarding the colour results meant certain repercussions would be enforced, such as the withholding of rollover contracts for future seasons.
3.17Growers’ bargaining position has been further weakened by increased vertical integration in the winegrape market. Processors own an increasingly large proportion of the produce they require, weakening the bargaining position of the non-integrated producers. The ACCC reported that ‘vertically integrated processors have incentives to discriminate in favour of their own produce’ which ‘potentially comes at the expense of more efficient or better quality, non-vertically integrated producers’. The ACCC said that these concerns are more likely to arise ‘where there is limited capacity at the processing level and non-vertically integrated producers have limited options for selling their goods’, as can be seen in the inland growing regions, particularly the Riverland.
3.18The allegations of a power imbalance in the Australian wine industry were disputed by processors. Mr Joe Russo, Chief Supply Chain Officer, Accolade Wines, told the committee that ‘we don't hold increased power from a market point of view—not in grape purchasing, not in grape processing, nor in the wholesale sale of wines’. Mr Russo advised that Accolade Wines holds approximately 250 products and is competing on-shelf against around 2 250 others. This represents roughly ten per cent of the market, a level that Mr Russo does not see ‘as being unreasonable’.
3.19The evidence from Accolade Wines hints at issues with power imbalances at the other end of the supply chain. While the focus of much of the evidence was on the relationship between growers and winemakers, it is important to note that similar power imbalances exist between winemakers and retailers. The Working Group reported that 70 per cent of the retail market is held by the four largest retailers (Endeavour Group, Coles, Metcash and Aldi). Professor Kym Anderson noted that the power of the large supermarkets allows them to develop their own private labels and use those labels to crowd out shelf space in the supermarkets.
3.20Planting and harvesting of winegrapes is a long-term investment. Newly established vines typically take at least three years to fruit, limiting growers’ ability to scale production up or down in response to changing market conditions. Riverland Wine acknowledges that there ‘always will be issues faced by growers and winemakers’, but that when time pressures, fear of retribution, and legal or financial strength are factored in, growers and winemakers often feel powerless or compelled just to accept what is put in front of them by their customer. More important than these issues, according to Riverland Wine, is the process by which those disputes are resolved.
Expert determination process
3.21The process by which prices can be disputed was the source of much angst for growers. Under the code, a grower must submit a ‘Notice of Dispute’ to the code secretariat specifying the nature of the dispute, whether the dispute is time-sensitive, the desired outcome, and reasoning as to why that desired outcome is just. The secretariat will then notify the winemaker and liaise with both the grower and the winemaker to facilitate resolution of the dispute.
3.22If the dispute is not resolved, the parties may agree to having an independent expert settle the dispute or, if they cannot agree, the secretariat will select an impartial expert who will then make a determination. Under section 6.3(b) of the code, ‘the parties shall be bound by an independent expert’s determination, in the absence of manifest error or misconduct’. Failure to comply with a determination will be considered a breach of the code.
3.23The code acknowledges that disputes over price reductions or grape rejections are often time-sensitive and need to be resolved quickly to avoid deterioration in the grapes. It notes the importance of factoring in the time-sensitive nature when determining the appropriate time frame for a dispute resolution process.
3.24In the Riverland region, the largest grower and winemaker relationship is between Accolade Wines and the CCW Co-operative (CCW). CCW represents approximately 600 growers who collectively supply an average of 180 000 tonnes of grapes per year to the Accolade-owned Berri winery. The relationship is built around a 15-year rolling supply contract—the largest in Australia—the scale of which means a significant level of dependence of each party on the other. This is particularly true for CCW which counts Accolade Wines as its only customer. Riverland Wine advised the committee that ‘the relationship between the two parties can often be strained, particularly during price negotiations, with dispute resolution processes enacted on numerous occasions’.
3.25A particularly contentious dispute process occurred during the 2023 vintage. In March 2023, CCW initiated a dispute process with Accolade Wines over pricing, with both parties agreeing to enter the independent expert dispute process. Ultimately, the independent expert sided with CCW and ruled that Accolade Wines should pay a further $69 per tonne for cabernet shiraz grapes. This was one of four disputes in five years between the two parties. However, it was the first dispute in which the decision went against Accolade Wines.
3.26What followed is contested. Growers claim that Accolade Wines ignored the decision and refused to abide by the ruling. In November 2023, almost eight months after the ruling and further mediation, growers claim that Accolade Wines offered an extra $61 per tonne, with the provision that CCW sign a Deed of Settlement locking them into a new supply contract.
3.27Accolade contends that the decision of the independent expert ‘was not made in accordance with the Preferred Supplier Agreement or the joint instructions to the expert’:
It was (and still is) Accolade’s position that the independent expert determination was not made in accordance with the Preferred Supplier Agreement or the joint instructions of the expert. The recommendation of the expert was a sliding scale of price against tonnage. The parties had asked for one price for each varietal only, and this was not provided by the expert.
3.28As such, Accolade Wines deemed the decision to be invalid. Accolade reportedly made payment to CCW based on its last offer prior to the negotiation. A further amount—undisclosed due to confidentiality provisions—was paid to CCW as part of the mediation. Accolade Wines claims that it made ‘no extra demands of CCW’ and argued that it is not in breach of the code because ‘the CCW contract with Accolade is not governed by the Code of Conduct as the parties entered into that agreement prior to the enactment of the Code’.
3.29Mr Russo told the committee that Accolade Wines did not make any demands, but it did try to ‘renegotiate a new contract which better reflected current terms’. The current preferred supplier agreement is ‘evergreen and every berry’, meaning that there is no end date for the agreement, and it requires Accolade to take every berry for every variety. According to Mr Russo, Accolade Wines sought to ‘fix that to reflect modern supply and demand, hence the package that was put forward to growers tried to bring a restructure to red grape varietals in the region’.
3.30What the dispute illustrates is the need for a tighter dispute resolution process. Growers feel that part of the issue with the code is that it is a ‘toothless tiger’ that offers no penalty for non-compliance. While this remains the case, only the people and wineries acting in good faith will be willing to sign up to it.
Payment terms
3.31Grape growers expressed the anxiety and insecurity felt due to the lengthy payment terms that are common in the industry. While grapes are delivered shortly after harvest, it is common for payment schedules from wineries to run over eight months after delivery. Lengthy payment terms leave growers in a position as ‘unsecured creditors’ and make it difficult to financially plan for the coming year.
3.32Section 4.2 of the Code of Conduct outlines the following minimum payment terms for signatories to abide by:
4.2 Payment Terms
(a)Subject to the law, the following payment terms must be adopted as a minimum by all Signatories:
(i)one third by the end of the month following the month during which the Grapes were delivered;
(ii)one third by the end of June; and
(iii)the balance by the end of September.
(b)Signatories should pay interest to Growers at commercial rates where Signatories fail to meet the agreed payment terms.
3.33Under these time frames, growers delivering grapes in January can expect one third of the payment at the end of February, one third at the end of June, and the final third at the end of September; more than eight months after delivery. Mr Jeremy Cass, Board Member, Riverina Winegrape Growers, lamented that payment from non-signatories can take even longer:
[W]e've got wineries [in the Riverina] that are still owed 30 to 40 per cent on last year's crop, and we're picking this year's crop, and there's nothing that we can do about that.
3.34The insecurity created by the lengthy payment timeframe affects the ability of growers to employ full-time or part-time employees and expand their business. Riverina Winegrape Growers submitted that financial uncertainty affects growers’ ability ‘to hire and compensate workers fairly’ and that addressing this issue ‘would lead to more stable employment conditions, fair wages, and better working environments for all individuals involved in the supply chain’. Mr Cass pointed out that growers can not afford to pay others when they are unable to even pay themselves.
3.35The ACCC has noted that such lengthy payment timeframes are unusual in comparison to other agricultural commodities. Other industries, with similarly lengthy timeframes between delivery of raw materials and processing and sale of products, utilise shorter payment periods with little detrimental impact. For example, while it can take two years for wool to be processed into consumer products, farmers in that sector are commonly paid within one week of the sale of their wool.
3.36The Code Management Committee advised that payment terms were considered as part of a review in 2023, but that no changes would be made while the focus was on increasing uptake of the code:
A key consideration was to maintain an optimal balance between gaining uptake [and] strengthening the Code to the extent that signing it would put signatories at a competitive disadvantage to non-signatories. The Committee also held a view that recent prohibition of [unfair contract terms] in standard form contracts could potentially address lengthy payment terms. That option would be preferable to a broad-brush approach.
3.37The Code Committee was reluctant to make changes to payment terms that may affect agreements where power imbalances do not exist. Where both parties agree to an arrangement in which the price on offer is compensatory for longer terms, the Code Committee believed that setting out shorter terms may not be beneficial to either party.
3.38Ms Brigid Nolan, General Manager, The Wine Group Loxton, advised that The Wine Group provides payment terms of 50 per cent 30 days after receival and 50 per cent by 30 June. Ms Nolan said these terms are in place because the primary purpose of the code is ‘to establish a framework for fair and equitable dealings between producers and buyers of produce’ and The Wine Group believes these terms reflect that.
Indicative pricing and information transparency
3.39Grape growers also highlighted that the timeframe between when prices are released and the harvest of grapes leaves little time to source alternative buyers or to dispute prices offered. The late notice of prices makes it difficult to plan for the following year’s harvest and makes decisions over whether or not to continue with certain grape varieties difficult.
3.40Under the code, where the price of the grapes is to be the ‘fair market price’, the grower must be notified of that price within the time period set out in the Price Offer Notification Schedule. The Price Offer Notification Schedule requires that the price offer be provided by close of business on the second Wednesday of December prior to vintage in the following geographical regions:
Greater Perth (including Swan Valley, Swan District, Perth Hills or Peel);
Hunter Valley (including Hunter, Broke Fordwich, Pokolbin or Upper Hunter Valley);
Big Rivers (including Murray Darling, Pericoota, Riverina or Swan Hill);
North West Victoria (including Murray Darling or Swan Hill); or
Lower Murray (including Riverland).
3.41For all other regions, signatories must provide the grower with the price offer by close of business on the second Wednesday of January prior to vintage. If an agreement is entered into after the relevant time period, the signatory must notify the grower of the price of the grapes at the time the agreement is entered into.
3.42This deadline of the second Wednesday in December is beyond the point where growers are able to make decisions on the viability of that year’s crop relative to price. Growers will have spent anywhere between 65 per cent and 90 per cent of their annual growing expenses by the time they are made aware of the prices on offer. Ms Dimas advised that this gives growers no direction for planning the year ahead:
Growers have invested lots of money into disease prevention or control, water, fertilisers, labour, harvest and cartage, not to mention the amount of their own time, which many growers haven’t been compensated fairly for, if at all, for many years
…
Currently winegrape growers are going into each season with no direction. Even when speaking with their winery representatives; no definite contracts, desired varieties, or price indicators, no critical information is being given to winegrape growers, at the beginning of each season: July to August. At this time winegrape growers are making yearly decisions for their vineyards, pruning for the harvest ahead. This is when we need that critical information, to enable these decisions to be correct, and ensure the financial sustainability of our businesses.
3.43Ms Dimas further outlined how the lack of indicative pricing has flow-on effects in the financing of grape growing operations and hiring additional employees:
Information given at a fair time allows growers to make employment decisions, it also allows banks to look at growers with certainty. It allows us to run our businesses in the same way that our wineries run theirs and grow. Knowing these questionable payment terms, there is no ability to employ even one Australian Citizen, that has a right, in Australia to be paid weekly or fortnightly, and at a minimum standard wage or hourly price.
3.44Mr Derrico maitained that the key benefit of early pricing information is that it gives the grower options in how they move forward with their crop and harvest. By releasing prices late, those options are removed:
There are multiple options in terms of whether you continue to grow the crop or you put it to rest. There are temporary mechanisms to be able to not produce a crop for a year or two. There's pruning hard. Some choose not to prune at all. There are chemical means of removing the crop, which reduces the demand for fertiliser and water. So there are options.
The biggest thing is that, if you have some indication of price, you can set a budget. You can draw a line in the sand and work towards that. Whether you give it a five-star fertiliser program, a one-star fertiliser program or how much water you're going to apply, the more information you've got, the more power you've got to try and stay afloat. In June or even earlier—I would suggest May—you're trying to guess what will happen now.
Prices were released yesterday. We've probably incurred two-thirds of our costs for the year to that point by just guessing what it would be. That's part of agricultural risk. That's farming. We get that. But, by being a partner in a supply chain, in a complex chain, it would be nice to have a little bit more transparency about where the expectations might be and how we can manage ourselves.
3.45Riverland Wine questioned the benefit of long-term grape supply agreements when the most important factor—price—was absent. If a contract simply reflects the spot market price, then, in Riverland Wine’s view, the contract holds little value for the grower and provides ‘largely zero financial benefit to growers over and above spot market pricing’.
3.46Ms Nolan advised that The Wine Group always releases prices by 30 November via email and by publishing in the local paper. She noted that it is ‘extremely important for growers to have that [price transparency] to make decisions so that they too can change to market conditions’.
3.47Mr Christopher Dent, Chair, Murray Valley Winegrowers, pointed out that, when it comes to pricing, the voluntary code can be detrimental to signatory winemakers. Mr Dent said that the price release date prescribed by the code allows non-signatories to wait for prices to be released by signatories before releasing their own. In general, these prices are lower than those offered by signatories. According to Mr Dent, ‘there is somewhat a feeling of market setting in that process, which certainly was not intended when the code came in’.
3.48The lack of early indicative pricing at the other end of the supply chain is also an issue for the winemakers in their deals with retailers. Bulk winemakers will often commit to sale contracts well in advance of vintage but with no prices attached. This leaves them vulnerable to price fluctuations in the eight-to-12-month period prior to the wine being ready for dispatch. Riverland Wine also questioned whether earlier pricing may have a negative effect for growers, as forcing wineries to release early indicative pricing could result in them being conservative in their pricing projections.
3.49Late price offerings for grapes are part of a broader trend in the industry of little availability and transparency of wine grape market price information. The committee heard that information on in-demand grape varieties, existing stock levels, and other data to make informed decisions about production and sales was difficult for growers to obtain. Riverina Winegrape Growers advised that growers ‘often lack access to timely and reliable data to make informed decisions about their production and sales’ and that the ‘voluntary code has not been effective in promoting greater transparency in pricing’. The lack of information presents a significant challenge for predicting demand and setting realistic price expectations.
3.50In its 2019 Wine grape market study final report, the ACCC made the following recommendation regarding the provision of pricing information:
The ACCC recommends that, for grapes purchased from warm climate regions, wine grape buyers be required to provide pricing information to Wine Australia. Wine Australia should aggregate and publish this information by winemaker, for each variety in each warm climate region, before the end of each financial year.
3.51The ACCC recommended that Wine Australia be given legislative powers to compel winemakers to provide price information. Identifying winemakers in the pricing information was considered essential for growers to be able to ‘identify which winemakers offer the most competitive prices over time’ and allow growers to ‘contact these winemakers to understand their supply requirements’.
3.52The ACCC submitted that the industry had not implemented this recommendation and that ‘winemakers continued to strongly oppose that requirement’. As long as winemakers are not supportive of having their prices made publicly available, ‘very limited reliable pricing information is available to growers’ and growers operating under variable price contracts find it difficult to asses price.
3.53Grape growers are of the belief that the lack of pricing information is used as a means to drive down the price for grapes. The committee heard that wineries have told growers that they are unable to purchase certain red winegrape varieties due to an oversupply, however, these varieties are allegedly then purchased at a lower price. Mr Perrin provided an example of this behaviour:
Accolade Wines [continues] to slash the price of grapes, even those in demand, but particularly the reds; yet their company rubber stamped approval to CCW growers to continue to plant Cabernet Sauvignon and Shiraz in 2022 and early 2023 for that season, and did not share this information to growers until almost the end of 2023. I was given approval with no market information, to remove a saleable variety, Colombard, and plant Shiraz and Cabernet at a replanting cost to me of about $50 000. A grower colleague was given approval in 2022 to plant 25 acres of Shiraz and remove 2 saleable varieties to an approximate development cost of $250 000, then to be told like me, and 170 others at that meeting, the winery didn’t want those varieties. They didn’t want them at sustainable prices of $300 to $400 per tonne; but they were happy to buy them all at $140 to $150 per tonne and expected their supply agreement to be met.
3.54This scenario was corroborated by Mr Vlassopoulos, who relayed that tonnage restrictions are placed on growers by wineries with growers being allowed to deliver a certain amount of grapes at a nominated minimum price. However, further grapes are allowed by wineries to be delivered at the grower’s cost for no monetary gain to the grower. Effectively, ‘the wineries had room in their tanks to take the said surplus winegrapes at no cost to them, but had no room in their tanks to take the surplus winegrapes if they had to pay for them’.
3.55Ms Dimas also questioned the sincerity of the wineries’ claims of oversupply, instead believing that the wineries were using the claim as a means to lower offered prices:
The word ‘glut’ has been used for the past few years to explain why prices are so low. Although if there was a true glut, wineries would be telling their growers, they are unable to purchase the red winegrape varieties in question. The word ‘glut’ used here has the meaning: to lower the price.
3.56Mr Russo advised that Accolade Wines creates a long-term forecast twice a year based on its domestic and global demand. These forecasts are broken down by variety which can then be presented to CCW ‘to give a better steer on what grapes [Accolade Wines] need and in what quantities’.
3.57The need for better information and data was addressed by the Working Group. The Working Group reported that ‘the need for improved vineyard data and market information has been an ongoing issue in the sector’ and that a national register of vineyards has been advocated for as far back as 2005. Such a register would ‘include real time data collection to assist producers winter business management and decision making’ and ‘present new opportunities for growers to compare, benchmark and analyse results from neighbouring regions and production methods’.
3.58Wine Australia explained that efforts to improve information and data transparency are currently underway. In 2022, the Australian Government committed $5.4 million to establish the Improving Market Transparency in Perishable Agricultural Goods Industries initiative. Consultation with the grape and wine sector as part of this initiative identified a need for more powerful analytics. Wine Australia has since established the Grape Price Indicators Dashboard, a digital tool that provides a clear summary of factors affecting inland winegrape prices, including export values, global bulk wine prices, stock-to-sales ratios, grape crush, and sales figures. The information can be filtered by grape colour and variety to aid in forecasting pricing trends for future vintages.
3.59The Australian Bureau of Agricultural and Resource Economics (ABARES) also provides quarterly independent winegrape price forecasts and commodity analysis for commercial grapes. The winegrape price forecasts are designed to offer growers and producers an objective analysis of future grape prices. The first of these forecasts were released in March 2023 and have since been incorporated into ABARES ‘quarterly Agricultural Commodities Report.
3.60Wine Australia submitted that a National Vineyard Register is currently in development as part of the $3.5 million Grape and Wine Sector Long-Term Viability Support Package announced in June 2024. The register will collect and release data in vineyard areas, vine age, grape varieties, and geographic locations. Wine Australia explained that this register ‘will provide a critical foundation for decision-making, helping to balance supply and demand, support biosecurity efforts, and drive sustainable growth in the Australian wine sector’. The register is expected to be completed by June 2026.
Quality assessments
3.61The inconsistent and subjective nature of grape quality assessments was a particular issue for grape growers. Most agreements between grower and producer feature some mechanism by which price can be changed depending on the quality of the fruit, particularly the Baumé level. Baumé is a measurement that reflects the amount of sugar in grapes, with a greater sugar content indicating a more mature fruit. As such, the Baumé level is used to determine ripeness and harvest date.
3.62When entering agreements, winemakers will typically prescribe acceptable Baumé ranges from minimum to maximum. Mr Perrin told the committee that winemakers have previously applied penalties in the form of price deductions for fruit below the minimum range. These penalties would be matched with bonuses for fruit that was above the maximum level. Fruit above the maximum level begins to deteriorate and lose weight, a particular issue in hot weather. The bonuses paid to growers for fruit above this level were to compensate the grower for this deterioration where it was beyond the control of the grower.
3.63Penalties of this type are reportedly no longer commonplace. Riverland Wine conveyed growers’ frustration with maximum Baumé ranges, as grapes exceeding this level are ‘generally the fault of the winery for not being able to process the grapes in a timely manner’. When this occurs, it is the grower who is penalised, due to the loss of weight and shrivelling of the fruit, when the issue was out of their control.
3.64Riverland Wine acknowledged that penalties applied for disease and defects in the fruit are not unwarranted. However, they can be contentious because assessment methods are subjective, and growers are typically only informed late in the season when it is close to harvest—sometimes even after harvest and delivery to the winery. Late notification limits a grower’s opportunity to dispute the penalty or seek an alternative buyer.
3.65Mr Perrin gave an example of the subjective nature of the assessments and argued that wineries change the standards to suit their own needs:
I have seen a neighbour’s variety Colombard rejected 3 times for a higher percentage of bunch rot above their acceptable limit. Then 2 weeks later, when the winery found itself short of that variety due to lower crops and weather conditions, suddenly the grapes were acceptable, the ‘flag’ indicating total rejection was removed, and the 130 tonnes was harvested without penalty. The grower, who had his own harvester, was ready to harvest it and drop it on the ground 2 days before, but his wife insisted he ring the winery the fourth time, because of rumours of lower crops of that variety. He saved approximately $30 000 with that phone call.
3.66Mr Cass gave a similar account of winemakers seemingly changing their assessments to suit their needs, to the detriment of the grower:
[T]he winemakers, if it was a year that had plentiful grapes, if there was the slightest sign of disease or an oversupply, would condemn the crop. Yet if there was an undersupply, it was amazing how much more tolerance they would have to that disease, and they would still bring it in as a normal crop instead of downgrading it.
3.67Mr Cass conceded that sometimes there are problems with disease or other quality issues that affect the grading of grapes. However, this would be less of an issue if winemakers were more open, transparent, and worked with the grower prior to harvest. He believed that, ‘if [the winery] are going to divide it up into grades then the winery should specify what parameters they're using to grade those wines’.
3.68Mr Perrin recommended that grape quality parameters should be included in the pricing section of the code and details on assessments should be released by the end of September. Any disputes over the assessments could then be solved by an expert determination process throughout October and locked in well in advance of harvest.
Industry representation
3.69The Australian wine industry has various representative and support bodies at each of the national, state, and local levels. At the national level, Australian Grape and Wine (AGW) are the national representative association for winemakers and winegrape growers. AGW was established in 2019 following the amalgamation of the winemaker’s representative body—the Winemaker’s Federation of Australia—and the grower’s representative body—Australian Vignerons. Each of the six states also each has its own state representative body, and regional associations represent the grape and wine businesses and interests of each of Australia’s 65 designated regions or sub regions. Funding levels and governance structures vary between regional associations.
3.70In South Australia, SAWIA advised that it holds quarterly meetings with each of the seven main regional associations, including Riverland Wine, to share insights and collectively advocate for matters on behalf of the industry. SAWIA also regularly liaises with national and other state representative bodies on policy matters and industry development. SAWIA submitted that this representative structure provides many opportunities for growers and winemakers to share their views, guide policy development, and to promote the long-term sustainability and profitability of the wine industry.
3.71The Working Group reported that it had heard from some growers and commercial wine producers that their views were ‘underrepresented in strategic planning, advocacy, policy making, and that a disproportionate focus was placed on the premium sector and winemakers’. Some of these concerns were attributed to the loss of a grower-specific representative body after the consolidation of national wine organisations in the 2010s.
3.72This was corroborated in evidence from growers suggesting that they are outnumbered by winemakers on representative boards and do not get as much of a say in matters affecting the industry. Mr Perrin called the AGW board ‘possibly the worst constituted agricultural peak board in Australia’ due to the dominance of winemakers. AGW’s board is made up of a Chair plus four representatives each from large winemakers, medium winemakers, small winemakers, and growers, with an additional three permanent alternate members. In Mr Perrin’s view, ‘fifty-fifty winemaker-grower representation in the industry's peak body and any state body where both winemakers and grape growers are currently represented’ should be mandated.
3.73AGW countered these claims, saying that, regardless of the various financial contributions to the organisation, all decisions made by the board require at least 80 per cent support, ‘ensuring no single category can dominate the decision-making process and guaranteeing policy is supported by all’. This requirement effectively means that all decisions have to be agreed to by at least one of the four grower representatives. According to AGW, most decisions are determined by consensus.
3.74The Working Group considered that ‘there is a need for stronger industry leadership’ to address challenges facing the industry and that all stakeholders need ‘to work together to set a long-term vision’. However, the Working Group also noted that concerns regarding representation and strategic planning are predominantly an internal matter for industry to resolve.
Concluding comment
3.75Evidence provided to the committee suggests that the Australian Winegrape Purchases Code of Conduct is not working as intended for industry participants, in particular the growers. Power imbalances and historic structural issues have conspired to leave growers with little bargaining power in their relationships with large processors. This has led to a feeling of powerlessness and insecurity in the grape growing community.
3.76Pricing and payment disputes can leave growers feeling anxious and insecure as the uncertainty over cash flow hinders growers’ ability to operate and expand their businesses. The inability to plan is a clear source of frustration for those who merely want the same opportunities for growth that can be found elsewhere in the wine industry and in other agricultural sectors.
3.77Stronger representation and changes to the code to better reflect the concerns outlined in this chapter would raise the confidence of growers and provide hope for the future. Providing grape growers with a higher level of confidence in their operations and their industry will have benefits for the Australian wine industry more broadly.
3.78The final chapter of this report examines some of the solutions proposed to solve these issues and promote a stronger and more sustainable Australian wine industry.