As Melburnians are rousing from sleep, Shane Priest is nearing the end of his morning at the city’s major wholesale market.
While the sprawlingMelbourneMarket in the city’s north is closed to the public, the fruit and vegetables sold here are destined for the shelves of independent grocers and supermarkets, restaurants and cafes.
Priest, a fourth-generation fruit grower and wholesaler, has leased a stall at the market in Epping for the past decade. He now finds himself in a legal standoff over his expired rental agreement at the market.
Last week, the Victorian government-owned Melbourne Market Authority (MMA) launched legal action to evict wholesalers at Epping who refuse to sign up to new leases with yearly rent increases of up to 3.6% in addition to CPI. At the current rate of inflation, this equates to annual rent increases of up to 6%.
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Priest says he is unsure of his future as a trader at the market, where he has leased a stall for the past decade.
“We really don’t know what we’re going to do,” he says.
“If I sign up to what they want, in 10 years’ time I don’t know how I can afford to be here without maybe lifting my commission off the growers.”
Priest, who also works as an apple farmer on his family-run orchard, says growers simply cannot afford the increases.
“Everything’s gone up so much over the last few years, whether it be transport to power, to wages, to everything. We’re already at our limits,” he says.
The authority has given a dozen hold-out tenants until 9 May to agree to the new leases or vacate their stalls.
Danny Martin, a senior analyst at market research company IBISWorld, says the rent increases could flow to consumers and result in higher produce prices.
While fruit and vegetable prices have eased over the past two years since the pandemic-induced spike, Martin says higher rents could have an impact.
“These rent spikes could intensify pricing pressure on wholesalers in Victorian markets, reverting this easing trend. Wholesalers currently operate with slim margins that will likely cause any price hikes to be passed on,” he says.
IBISWorld analysis found that fruit and vegetable wholesalers currently have an average profit margin of just over 3%, Martin says.
“Should these types of incidents become a pattern across Australia, overall industry rent prices will reflect as such and downstream consumers will likely see long-term price increases across the board.”
The commencement of legal action followed a months-long dispute between the MMA and Fresh State, a representative group for wholesalers at the Epping market.
Last September, the authority first proposed a fixed rent increase of 7.62% a year over a 10-year period for expired leases.
The authority has now proposed rent increases ofbetween 2.4% and 3.6%in addition to CPI over the next nine years, in what it describes as its final offer.
Peter Tuohey, chair of the authority, said the rent increase would have “little to no impact on the cost of fresh fruit and vegetables.”
“Wholesaler rent makes up only a small part of the consumer price. The main cost drivers are seasonal supply and demand, and the impact of weather changes on crops,” he said.
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Tuohey said the new lease agreements included additional cost reduction measures including reducing the security bond from six months to four months and eliminating annual bond ‘top ups’.
He said the latest offer delivered fairness for all parties.
Jason Cooper, chief executive of Fresh State, says the rent increase means wholesalers will be forced to choose between slashing the growers’ profit margins by increasing their commission, or passing costs on to retailers.
“At the end of the day, everyone’s going to pay for this,” Cooper says.
Priest sells about half of his orchard’s apples at the Melbourne market as well as in wholesale markets in Sydney, Brisbane and Perth.
To sell more produce interstate would cost more in transport, he says.
Fresh State confirmed alongside the 12 traders with expired leases, who have not signed up to the new rent terms, about 100 lease agreements will come up for renewal later this year. There are more than 400 traders at the market.
The authority said it had waived the requirement for back-payment of increased rent between last August and February.
Cooper, who has previously called for a rent freeze, criticised what he described as the “heavy handed” approach by the market authority, which last week informed stall owners it would commence legal action in the state’s supreme court.
“For a government landlord, you would just expect better,” he says.
“You’d expect it from a bad landlord. You shouldn’t expect it from a government authority treating tenants so poorly.”
A Victorian government spokesperson said the issue was a “matter for the Melbourne Market Authority”.
“As legal proceedings are to be before the courts it would be inappropriate for us to comment further at this time,” the spokesperson said.