Is Woolworths doing CCA’s bidding?

Posted by Ian Grinblat on 9th November 2016
Woolworths

Woolworths has confirmed that it is reviewing its purchasing of canned fruits for its house brand from Australia’s major processor, SPC Ardmona (SPC).

Woolworths has already announced that it will not continue to purchase its house brand of canned tomatoes from SPC  but says it will be sourcing its house brand tomatoes from a “local rival”.

There has been no statement from Coca-Cola Amatil (CCA) the owner of SPC Ardmona.

Woolworths entered a 5-year AUD $70million rescue deal with SPC in 2014 which was widely seen as a lifeline for the entire Goulburn Valley region. At the time, SPC was in danger of going out of business.

At the same time the Victorian government invested AUD $22million into SPC to support the continuing employment of 500 people. At present SPC employs about  800 people.

There have been concerns expressed that Woolworths is reneging on the deal, prompting reactions this weekfrom the Victorian Development Minister, Jaala Pulford, the Opposition leader, Matthew Guy, and Suzanna Sheed, the local MP for Shepparton (SPC’s canning facility operates), all urging Woolworths to stay the course for the full term of the deal.

In May 2013, Australian Food News reported SPC was losing money for CCA and more than 3 years later, in August 2016, Australian Food News reported on the recently published CCA Half Year 2016 results.

CCA’s news release of 26 August 2016 stated, “SPC reported a modest loss in the half with declines in both volume and revenue. That said, we are seeing some encouraging signs in our snacking fruit and tomato products”.

Yet since CCA bought SPC in 2005 for AUD $700million, it has not produced a profit.

Is CCA now able to blame Woolworths? Getting out of SPC might become easier for CCA if Woolworths follows on its wind-down of buying from SPC.

 

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