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Coca-Cola Amatil Ltd shuffles fruit juice business while keeping local focus

Coca-Cola Amatil Ltd (ASX: CCL) announced Thursday that it is squeezing more out of its juice business. The beverage company will invest $2.9 million to shift part of its juice production to its Adelaide beverage facility.

While the Adelaide upgrade means more work for Thebarton locals, Coca-Cola Amatil is laying off 28 employees at its Ramco facility in South Australia. While juice extraction and blending will continue to occur at this facility, all bottling and packaging will take place in Adelaide by the second-half of 2014.

All redundant Ramco employees will be offered Coca-Cola jobs elsewhere in the country, and Coca-Cola’s South Australia General Manager noted that “[w]e are working with employees and union officials to ensure a smooth transition is achieved over the coming months.”

Foolish takeaway

This announcement may not seem like much, but Coca-Cola Amatil’s continued focus on local production may eventually be its fruit business’ saving grace. Coca-Cola’s SPC Ardmona subsidiary hit hard times in the past few years as increased foreign imports and a strong Australian dollar pushed prices down to non-compete levels.

But a new partnership with Woolworths Limited (ASX: WOW) seems to be paying off as locals demand Aussie produce. When Woolworths announced that it would source its Select Canned Fruit line from Coca Cola’s SPC Ardmona, sales skyrocketed. From October to July 2013, average sales increased 38%, reaching as high as 124% in fruit-growing areas.

Coca-Cola Amatil’s announcement this week follows similar footsteps. Although the company is making strategic decisions to streamline production and increase efficiency, it’s not at a cost to its country. Herbert made clear that Coca-Cola is “not closing down or moving our juice operations offshore, nor are we turning to overseas fruit or juice for our brands. We are instead maintaining our entire fruit juice production within South Australia.”

If Australians keep up their current enthusiasm for locally-sourced products, Coca-Cola’s latest decision will have paid off.

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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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