The Australian Competition & Consumer Commission (ACCC) has said that the growth of the country’s wine industry will depend on reforms to improve competition for wine grapes.

ACCC deputy chair Mick Keogh said, at the Australian Wine Industry Technical Conference in Adelaide, that the low level of competition currently between winemakers buying grapes leads to inefficient outcomes in production and pricing. Also, it discourages innovation and capital investment.

According to Keogh, imbalances in bargaining power between a few dominant buyers and several small-scale sellers characterise the wine grape growing industry.

He said: “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.

“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.”

ACCC launched the study in September 2018 after feedback from participants during previous ACCC engagements with the industry.

It focuses on warm climate grape growing regions such as the Riverland, Murray Valley, which includes the Murray-Darling and Swan Hill regions, and Riverina.

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These three regions account for almost 1,500 growers, producing two-thirds of Australia’s wine grapes.

Keogh said: “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.”

The ACCC official said that a lack of pricing transparency is also hindering the market operation.

He said: “Increased pricing transparency will provide better price certainty to the market, and not only improve growers’ bargaining power but also boost competition between winemakers.

“We are conducting the market study because of the 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.”

ACCC has sought feedback from the industry on its interim report.