McGuigan Simeon faces a potential legal battle with some of its grape growers as the struggling Australian wine producer slashes costs.

Murray Valley Winegrowers, a body that oversees the interests of 1,300 grape growers in New South Wales and Victoria, is taking legal advice about McGuigan Simeon's proposals to alter or suspend grape supply contracts.

McGuigan Simeon's outgoing MD, Brian McGuigan, last week warned that the company would suspend some grape grower contracts due to excess supply in Australia's wine industry. The company also said first-half profits could halve after a slump in domestic wine sales.

Mike Stone, chief executive of Murray Valley Winegrowers, said legal advice had been sought about McGuigan Simeon's demands, which include changes to dispute-resolution procedures.

Under the proposed changes, final prices would be determined by the end use of the wine, which would seriously harm the dispute-resolution process that enabled growers to challenge prices before the harvest.