Accolade Wines has put forth an offer of $4000 per hectare to all members of the CCW co-operative wishing to exit their existing contracts.
Currently, these contracts stipulate that all grapes supplied to the CCW by its 540 members must be sold to Accolade, and that Accolade must purchase all available supply. For about 25 running, Accolade has honoured this agreement for the ongoing supply of its Banrock Station brand.
The buyout offer follows on from building economic pressures in the region that have seen wineries offer grape growers rates as low as $120 per tonne, less than half the cost of production. $120 per tonne is comparable to the region’s standard rate in the 1970s. The severity of the situation recently spurred the South Australian State Government to work with Riverland Wine to supply immediate and direct support to the struggling industry in the form of emergency grants of up to $1,500.
“This additional funding to assist grape growers help cover routine costs through this challenging season continues our strong commitment to South Australia’s growers and local industries that underpin regional communities,” said Clare Scriven, South Australia’s minister for primary industries.
“The support work through Rural Business Support will provide assistance to the wine industry which has been heavily impacted by disrupted market conditions and global over-supply.”
While necessary, the government grants are a temporary solution to a problem that is expected to worsen. Another proposed solution is that of a moratorium on the planting of grapevines.
Accolade is pitching its buyout offer as a solution to the currently unsustainable trading conditions that are putting pressures on both growers and suppliers.
The buyout offer is being presented to the cooperative over a series of meetings in Riverland this week. Key terms of the package include:
- Voluntary buyout.
- Relief (of $11 per tonne) from CCW’s separate bulk wine contract.
- Pricing to be “transparently set” by the weighted district average.
- Accolade’s total contracted volume to be reduced to 150,000 tonnes.
While participating growers would be free to continue growing and selling grapes to other producers should the offer be accepted, it is highly likely that many will take the opportunity to exit the industry altogether.
The offer also follows on from Accolade’s recent financial troubles that resulted in Australian Wine Holdco Limited, a consortium of international institutional investors, taking equity ownership of Accolade Wines to implement a recapitalisation plan that aims to improve the financial stability of the company.
“As an industry, for us to continue as if no response is required simply isn’t sustainable,” said Robert Foye, CEO at Accolade Wines.
“We have a shared responsibility to face into this challenge and respond.”
