Woolworths goes local – and it pays off up to 124%

Woolworths took a leap of faith to go local – and it’s worked.

Woolworths(ASX: WOW) decision to support local food producers is paying off according to a company announcement released this week. Since Woolies first announced in July that it would source its Select Canned Fruit line from Coca-Cola Amatil‘s (ASX: CCL) SPC Ardmona in Victoria, sales have been skyrocketing.

Overall, the company has seen a 38% sales spike across the country. But local love has hit especially close to home for fruit-growing areas, with sales up as much as 124% in the last three months. At a state and territory level, Queensland has notched 42% gains, while NSW, ACT, and Western Australia have all seen 28% gains.

“We are thrilled that our customers are getting behind this great Aussie product and supporting local growers,” said Woolworths Head of Canned and Frozen Goods Jim Stephan in a statement. “They are clearly telling us that they want to support Australian producers and manufacturers. This is the first time in years that we have seen such a significant uplift in sales of canned fruit and it’s a clear message that Australian supply is integral to the success of such an iconic Aussie product.”

Foolish takeaway

Cheaper isn’t always better, and Woolworths’ decision to source locally put the company in a relatively risky $7 million deal with Coca-Cola Amatil’s SPC Ardmona. SPC Ardmona has seen trouble of its own in recent years, with a strong Aussie dollar and allegedly artificially cheap competitors pushing down company exports by 90% in the past five years.

Rather than deliver imported products at a lower price, Woolworths took a leap of faith to go local – and it’s worked. Meanwhile, the Australia Anti-Dumping Commission continues to explore unfair pricing, putting Woolworth and SPC Ardmona’s deal in an even more stable place. With its pilot project pulling profit, the company is adding on another $3 million to its previous deal, which should allow Woolworth’s 890,000 cans sold in the last three months to expand even further in the future.

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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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