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SPC Ardoma saved – Coca-Cola Amatil and Vic government pour in cash

Coca-Cola Amatil’s (ASX: CCL) fruit canning subsidiary, SPC Ardmona, has been saved from extinction. SPC is the last remaining major fruit and vegetable processor in Australia.

The beverage maker and the Victorian government have decided to kick in a combined $100 million over a three year period, to help the producer increase efficiency and innovation. The Victorian government is kicking in $22 million over the three years, with CCA contributing the remaining $78 million.

SPC was originally seeking $50 million, split between the federal and state governments, to keep the company alive. But the Federal government declined to commit any funds.

SPC Ardmona managing director Peter Kelly noted,

“This $100 million capital investment package, while not the amount we originally planned, is significant and will be immediately put to work by our business to drive new product and packaging innovation and efficiency measures.”

Coca-Cola Amatil estimates that more than 2,500 jobs are reliant on the ongoing operations of SPC Ardmona.

The fruit processor has been hit by illegally dumped tomato products, and the Federal government is reported to be working on trade measures to defend Australian companies against dumping of cheap imports.

Recent new contracts to supply supermarket giants Coles –owned by Wesfarmers (ASX: WES) and Woolworths (ASX: WOW) with tinned fruit for their generic products will help SPC Ardmona, as will a recent social media campaign, which saw sales soar.

Despite the move to keep SPC Ardmona alive, Coca-Cola Amatil says there will be a material write down of CCA’s investment in SPC Ardmona.

Foolish takeaway

With recent news that car manufacturer Toyota was following Holden and Ford out of Australia in 2017, it’s great to see SPC Ardmona saved from extinction. The food processor will still have to put in the hard yards to stay relevant into the future.

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Motley Fool writer/analyst Mike King owns shares in Coca-Cola Amatil and Woolworths. You can follow Mike on Twitter @TMFKinga

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