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Cerebos Gregg's announced yesterday it would consolidate its coffee and food production to Dunedin and Sydney - a decision expected to result in the loss of up to 125 jobs from its Auckland plant when it shuts on December 19.
Cerebos Gregg's New Zealand country manager Andre Gargiulo said millions of dollars had already been invested in the Dunedin plant.
A further $10 million would be injected into the Forth St factory in the short term, to redevelop the site and install new plant and packaging machinery.
At present, the facility only produces instant coffee, but by December it was expected roast and ground coffee would also be manufactured at the site.
The facility would become the centre of the company's coffee production in New Zealand.
Mr Gargiulo said the Dunedin expansion would require only an extra ''handful'' of employees to run it in the short term.
About 40 people worked at the plant, he said.
He would not be drawn on future job numbers and could not say by how much production would increase at the Dunedin plant.
''Our view at the moment is it will certainly contribute more to the local community and to the economy with increased production, increased activity in Port Chalmers, et cetera,'' he said.
Cerebos Gregg's chief executive Terry Svenson said the company would close its East Tamaki plant because it was becoming too costly and inefficient.
''Our East Tamaki factory now needs major capital investment, but we can't justify continuing to invest money in this ageing plant when we already have more modern manufacturing facilities capable of increased volumes,'' Mr Svenson said.
''To position ourselves for future growth, we have to consolidate our manufacturing operations.
''Shifting our coffee and food production to our sites in Dunedin and Sydney is the only feasible option.''
The company employs about 450 people in New Zealand and 500 in Australia.
The company's head office would remain in Auckland, he said.
Dunedin Mayor Dave Cull said he was a little surprised by the announcement.
Cerebos Gregg's approached Dunedin City Council staff several months ago, seeking advice about refurbishing and upgrading its Dunedin factory, he said.
But he was unaware the company planned to close its East Tamaki plant and move its entire coffee production to Dunedin.
''Clearly, this is a very positive development for Dunedin,'' Mr Cull said.
''We've worked really hard with them to make it as easy as possible.
''I'm delighted that our council efforts have been able to come out with such a good result for the city and Cerebos Gregg's.''
Otago Chamber of Commerce chief executive John Christie said the company's decision would provide significant economic benefits for the city.
''Obviously, capital investment of this magnitude is something that Dunedin is always wanting to attract,'' Mr Christie said.
Regional centres such as Dunedin were attractive in terms of operation costs and its readily available infrastructure, he said.
''We know Dunedin's a cost-effective place to do business from, and I think when you look at a company like Cerebos Gregg's making that decision to be here, it's an entirely sensible one.
''I'm surprised there's more companies in New Zealand that don't do that,'' Mr Christie said.