Ownership and Influence - The Coca-Cola Company owns 14.65% of the Series A shares, representing 7.33% of total shares, significantly influencing the company's operations and financial results[33]. Bottler Agreements - The company relies on bottler agreements with The Coca-Cola Company, with key agreements expiring in January 2025 (Chile), October 2027 (Brazil), September 2027 (Argentina), and March 2028 (Paraguay)[37]. Market and Consumer Trends - Increased health concerns regarding sugar and sweeteners may lead to reduced demand for sugar-sweetened beverages, impacting profitability[42]. - The beverage business is highly competitive, with local and regional brands posing significant price competition, which could adversely affect net profits and margins[43]. - The company faces risks from potential changes in consumer preferences towards health and environmental sustainability, which could affect sales and market share[40]. Cost and Supply Chain Risks - Raw material costs, including concentrate, sweeteners, and packaging, are subject to volatility and may impact profitability if prices increase due to market conditions or currency fluctuations[44]. - Water scarcity and poor water quality are critical risks, as water is the main ingredient in products, and shortages could lead to increased production costs[48]. - Climate change may result in increased costs and operational disruptions due to extreme weather conditions and regulatory responses aimed at reducing greenhouse gas emissions[52]. - Instability in utility services and oil prices may adversely impact operational costs and overall financial performance[46]. Regulatory and Legal Challenges - The company must navigate complex regulations and potential legal challenges that could affect its operations and financial results[31]. - The company is subject to complex regulations that may increase operating costs and affect financial performance[77]. - New labeling and advertising restrictions in various countries may adversely impact product sales and operational results[55]. - Legal proceedings and investigations related to monopolistic practices could result in significant liabilities and reputational damage[82]. Environmental, Social, and Governance (ESG) Concerns - The company faces significant risks related to environmental, social, and governance (ESG) goals, which could harm its reputation and sales if not met[53]. - Investor advocacy groups are increasingly scrutinizing the company's ESG practices, potentially affecting investment decisions[54]. Operational and Strategic Risks - Maintaining brand image and product quality is crucial, as any defects or negative publicity could materially affect financial performance[56]. - The company is pursuing expansion strategies through acquisitions, but success is not guaranteed and may involve significant risks[59]. - Weather conditions and natural disasters could negatively impact consumer demand and distribution capabilities[62]. - The implementation of strategic business plans could be undermined by a failure to recruit or retain key personnel, impacting financial performance[88]. - The imposition of exchange controls could significantly limit the Company's financial capacity and ability to repatriate profits[90]. Economic Conditions and Currency Fluctuations - Geopolitical and economic risks, including trade tensions and inflation, could materially and adversely affect the Company's business and financial condition[92]. - The Brazilian GDP grew by 3.0% in 2022, 3.2% in 2023, and 3.5% in 2024[109]. - Inflation rates in Brazil were 5.8% in 2022, 4.6% in 2023, and 4.8% in 2024[113]. - During 2023, inflation in Chile decreased to 3.9% year-on-year in December, but increased to 4.5% by the end of 2024[104]. - The Chilean peso had an average value of 944 Ch during 2024, reaching an average of 983 Ch in December[102]. - The Company reports its results in Chilean pesos, which can be negatively affected by currency devaluation in countries where it operates[89]. - The Brazilian real appreciated 7% in both 2022 and 2023, but depreciated 28% in 2024 against the U.S. dollar[116]. - A significant portion of raw materials in Brazil is priced in U.S. dollars, making the depreciation of the Brazilian real adversely affect costs and margins[117]. - The Argentine peso has experienced significant fluctuations, impacting the ability of the government and companies to meet foreign currency obligations[145]. - The Argentine government's ability to obtain financing from international capital markets may be limited, potentially increasing borrowing costs and affecting economic growth[153]. - The informal foreign exchange market in Argentina has led to higher currency rates, impacting the company's ability to remit dividends abroad[152]. Taxation and Financial Liabilities - The Brazilian government approved a tax reform on consumption in late 2023 aimed at simplifying the tax system, which is currently considered one of the most complex globally[119]. - The tax reform will replace existing indirect taxes with three new taxes: the goods and services tax (IBS), the contribution on goods and services (CBS), and the excise tax (IS)[121]. - The company is involved in tax proceedings with Brazilian authorities, with potential liabilities totaling approximately R173,675 million in 2022 to Ch302,519 million in 2024, primarily due to higher productive investments in Argentina and Brazil[220][221]. - In 2024, capital expenditures in Brazil are expected to rise significantly to Ch54,082 million in 2023[220]. - Argentina's capital expenditures are projected to increase from Ch89,694 million in 2024[220]. Market Presence and Acquisitions - Argentina's operations represented 17.1% of the company's assets and 24.8% of net sales in 2024, highlighting the importance of the Argentine market[133]. - The company has maintained its position as the principal manufacturer of Coca-Cola products in Chile since 1946, despite no longer being the sole bottler[179]. - In 2012, the company completed a merger with Embotelladoras Coca-Cola Polar S.A., granting former shareholders of Polar a 19.68% ownership interest in the merged entity[183]. - The company acquired 100% ownership of Comercializadora Novaverde S.A. in October 2018, a company dedicated to the production and distribution of juices and ice cream[186]. - In August 2021, the company signed a distribution agreement with Viña Santa Rita for wine products, expanding its beverage portfolio[189]. - The company has entered into multiple distribution agreements, including with Monster Energy Company and Campari, to enhance its product offerings in Chile and Brazil[185][205]. - In September 2021, the company acquired 50% of the Therezópolis beer brands for R$35 million, further diversifying its beverage portfolio in Brazil[204]. - The company holds a 10.26% ownership interest in Leão Alimentos e Bebidas Ltda. after increasing its stake in August 2017[201]. - In 2016, Andina Brazil closed its Cariacica production facility, consolidating operations to two facilities in Rio de Janeiro and São Paulo[199]. - The company has restructured its juice and non-carbonated beverage business, incorporating other Coca-Cola bottlers as shareholders in Vital S.A.[181]. - The company has established a new entity, Re-Ciclar S.A., in August 2021 to produce recycled resin for the Coca-Cola system and third parties[190]. - EDASA's ownership interest in Alimentos de Soja S.A. has increased to 14.82% as of the date of the annual report[213]. - EDASA began distributing AdeS products in July 2017 and has been involved in the energy drinks market since February 2018 through a partnership with Monster Energy Company[214][218]. - A distribution agreement with Grupo Peñaflor S.A. was signed in June 2022, valid until June 2026, for alcoholic beverages in specific provinces[215]. - PARESA started distributing alcoholic beverages, mainly beers, in September 2023 under a Logistics and Sales Master Agreement with Cervepar S.A.[219]. - The Coca-Cola Company and its bottlers in Latin America completed the acquisition of the AdeS vegetable protein-based beverage business from Unilever in March 2017[217]. - PARESA has been operational since 1965 and became part of Grupo Coca-Cola Andina in 2012 following a merger[216].
Embotelladora Andina S.A.(AKO_A) - 2024 Q4 - Annual Report