Why Coca-Cola Amatil offloaded SPC

A shift change at SPC’s Shepparton factory. Picture: Alex Coppel

After investing $1 billion or more over 14 years and failing to make a sufficient return, Coca-Cola Amatil has sold SPC Ardmona to a locally based private equity firm for $40 million.

Thanks to the wonders of modern day accounting, Amatil boss Alison Watkins said she “made a profit of $10m to $15m” on the deal.

That sadly wasn’t the case after former boss Terry Davis had the bright idea of diversifying into the food business with the initial $480m acquisition of the old Shepparton fruit co-op back in 2004.

Throw in debt and the enterprise value of the deal was closer to $700m and since then the

company has invested over $400m into the company.

Amatil had written the value of the assets down to zero in its last results.

The deal comes on the same day as the RBA is poised to cut interest rates but Watkins told The Australian “the consumer is still a little bit cautious”.

She said the interest rate cut may help but “we hope the government gets moving on energy and other reforms.”

The SPC idea was to build a food platform but Davis didn’t really chance his arm again, so the sliced peaches and baked bean base of SPC Armonda was as far as the food platform went.

He was hit with a wave of external factors like a soaring Australian dollar which made imports cheap, the supermarkets rush into house brand products, which were also import based, and SPC’s volumes suffered accordingly.

Amatil has since decided its main game is beverages, both alcoholic and non alcoholic, and is fighting the good fight as the Coke brand struggles to regain its powerhouse past.

Amatil now sells everything from Grinders coffee to Canadian Club.

The Shepparton Partners Collective, which acquired the business, was selected because it offered the best chance of the business continuing.

It includes the Perma Funds Management business and a host of industry veterans.

The Shepparton cannery employs around 300 people full time and up to 600 at picking time.

Amatil’s stock price was trading up about 1 per cent at $9.46 on the news.