Australians are looking out for Australians. Woolworths (ASX: WOW) announced Sunday that it has signed a $7 million deal that will switch some of its fruit sourcing from overseas to Coca-Cola Amatil's (ASX: CCL) SPC Ardmona.
SPC Ardmona has been put in a tough spot recently, with an uptick in imports taking the majority of its market share. Woolworths is looking to reverse the trend, and will use SPC Ardmona growers to source 13 different fruits for its Select canned fruit line.
"We are passionate about Australian food," said Woolworths Managing Director of Supermarkets and Petrol Tjeerd Jegen in a statement. "Our customers share this passion and have clearly told us that they want us to support Australian producers and manufacturers wherever possible."
SPC Ardmona is already Woolworths' largest supplier of canned fruit, and this latest move puts the two companies closer than ever.
Foolish takeaway
Sourcing locally isn't just about going green or supporting jobs. For Woolworths, its relationship with SPC Ardmona is a calculated move to give customers what they want – at a price to match. Although Australian products may cost more than cheap imports, an increasingly health-conscious customer base is demanding higher quality. Look no further than the astonishing popularity (and soaring share price) of the U.S.' Whole Foods Market as proof of fat margins for premium product.
On top of that, Coca-Cola Amatil is inching ever closer to a regulatory win for its locally-produced food. The Australia Anti-Dumping Commission began investigations last month into trade dumping for foreign peaches and tomatoes. If tariffs are tacked onto these fruits, precedent will be put in place for future fruit, and SPC Ardmona (and long-term customers like Woolworths) will be more cost competitive than ever.
If Woolworths' latest move is any evidence, there's still plenty of money to be made in Australia. The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
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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.
