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Wine makers whine over Woolworths

Woolworths (ASX: WOW) has solemnly sworn to adhere to a voluntary Aussie winemakers code of conduct, according to The Australian. “We’ve been looking at it for three months,” said Woolworths Liquor Head Brad Banducci. “It’s an important part of engaging with the industry.”

The “Wine Industry Code of Conduct” originated in December 2008 and has served as a basis for winemakers and retailers to define proper processes and best practices. The Code includes such items as standard terms for supply contracts and payment timeliness to grape growers.

While Woolworths has signed on the dotted line, Banducci told The Australian that his company already adheres to all the guidelines set forth by the agreement. Still, Woolies is not without its worries. The supermarket’s relationship with winemakers has been stressed at times, as winemakers worry that superstores like Woolworths and Wesfarmers (ASX: WES)-owned Coles are exercising too much market power.

The two corporations collectively control a whopping 77% of domestic wine sales, and groups like the Winemakers’ Federation of Australia (WFA) are fed up with what they believe is the shorter end of the sales stick. Among WFA’s specific complaints are at-loss pricing for wine, as well as retroactive squeezes on signed supply deals.

Foolish takeaway

While this latest agreement may seem like a step forward for Woolworths to mend relations with winemakers like Treasury Wine Estates (ASX: TWE) and Australian Vintage (ASX: AVG), it’s no game changer for any company involved. The voluntary agreement is just that – voluntary.

And even if Woolworths agrees to pay its winemakers in a timely manner, the deeper dilemma of how much it pays producers is still up in the air. With the Australian Competition & Consumer Commission at the ready to investigate “unfair dealing” against wine companies, Woolworths hasn’t won the wine war yet.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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