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[36]. Bottler Agreements - The company relies on bottler agreements with The Coca-Cola Company, with agreements expiring in December 2024 (Chile), October 2027 (Brazil), September 2027 (Argentina), and March 2028 (Paraguay)[40]. Market Competition and Consumer Trends - The beverage market is highly competitive, with local and regional brands posing significant challenges, potentially affecting market share and financial performance[46]. - Increased health concerns regarding sugar and sweeteners may lead to reduced demand for beverages, impacting profitability[45]. - The company must adapt to evolving consumer preferences and environmental concerns to maintain market position and financial health[43]. Economic and Regulatory Risks - Raw material costs, particularly for concentrate, sweeteners, and packaging, are subject to volatility and may adversely affect profitability due to exchange rate fluctuations and inflation[47]. - Water scarcity and quality issues could increase production costs and limit capacity, impacting overall profitability[51]. - The company faces risks from energy price fluctuations, which could significantly affect operational costs and financial performance[49]. - Regulatory changes regarding water usage and ownership may lead to increased operational costs and affect production capabilities[53]. - The company is subject to complex regulations that may increase operating costs and affect financial performance[81]. - Environmental regulations may lead to increased operating costs and changes in consumer demand, particularly concerning plastic products[84]. - The company must comply with personal data protection laws, which could result in significant penalties for noncompliance and increased operational costs[76]. Financial Performance and Inflation - The company generated 24% and 28% of its net sales from Brazil in 2022 and 2023, respectively, and 26% and 18% from Argentina[94]. - As of December 31, 2022 and 2023, the company's operations in Chile represented 42.3% and 45.5% of its net sales, respectively[100]. - Inflation rates in Chile were 7.2% in 2021 and 12.8% in 2022, with a decrease to 3.9% year-on-year by December 2023[110]. - The Brazilian economy grew by 4.8% in 2021, 3.0% in 2022, and 2.9% in 2023[115]. - Brazilian annual inflation rates were 10.1% in 2021, 5.8% in 2022, and 4.6% in 2023[122]. - Argentina's inflation rates were 50.9% in 2021, 94.79% in 2022, and 211.4% in 2023[140]. Currency Fluctuations - A significant portion of the company's raw materials is priced in U.S. dollars, making it vulnerable to currency fluctuations[109]. - The company cannot predict the future fluctuations of the Brazilian real against the U.S. dollar, which may adversely affect its business[127]. - The Argentine peso depreciated by 22% in 2021, 72% in 2022, and 356% in 2023 against the U.S. dollar[148]. - The Brazilian real depreciated by 7% in 2021, appreciated by 7% in 2022, and appreciated by 8% in 2023 against the U.S. dollar[125]. Legal and Tax Risks - The company faces risks from potential adverse judgments in legal proceedings, which could significantly increase operational costs[86]. - The company is subject to judicial proceedings related to alleged monopolistic practices, which could impact its operations[87]. - The company faces a potential tax liability of approximately R960 million concerning corporate income taxes[132]. - The Brazilian government approved a tax reform aimed at simplifying the tax system, which is considered one of the most complex in the world[128]. - The company has experienced a significant reduction in tax credits due to changes in the value-added tax on industrialized products since 2018[129]. Strategic Partnerships and Acquisitions - The company holds a 65% ownership stake in VJ S.A., which focuses on juices and non-carbonated beverages, following a restructuring in 2011[185]. - The merger with Embotelladoras Coca-Cola Polar S.A. in 2012 resulted in a 19.68% ownership interest for former Polar shareholders, enhancing the company's market presence in Chile and Paraguay[187]. - In 2018, the company completed the acquisition of 100% of Comercializadora Novaverde S.A., a producer of juices and ice cream, expanding its product portfolio[190]. - The company began distributing AdeS products in Chile in July 2017 after acquiring the vegetable protein-based beverage business from Unilever[189]. - In August 2021, the company and Embonor Empaques S.A. established Re-Ciclar S.A. to produce recycled resin, supporting sustainability initiatives[195]. - Andina Brazil acquired 50% of the Therezópolis beer brands for R141,952 million in 2021 to Ch22,102 million in 2021 to Ch$16,495 million in 2023, reflecting a downward trend[223]. - In 2023, capital expenditures were primarily related to new projects in Argentina, indicating a focus on growth in that market[224]. - PARESA began distributing AdeS and Monster products in July 2017 and May 2019, respectively, expanding its product portfolio[220]. - In October 2022, PARESA signed a 5-year Logistics and Sales Master Agreement with Cervepar S.A. to distribute alcoholic beverages starting September 2023[222]. - The company incorporated Circular-PET S.A. in February 2021 to manufacture and commercialize post-consumer recycled PET resins[221]. Operational Challenges - Weather conditions and natural disasters could negatively impact consumer patterns and distribution capabilities, affecting sales[66]. - The company may experience adverse effects on sales and operations due to significant labeling or warning requirements imposed by countries where it operates[59]. - Maintaining brand image and product quality is crucial, as negative publicity or product defects could materially affect financial performance[60]. - The company may face challenges in successfully implementing expansion strategies and achieving operational efficiencies from acquisitions[63]. Environmental and Social Governance (ESG) - The company faces risks in achieving its environmental, social, and governance (ESG) goals, which could harm its reputation and sales if not met[56]. - Investor advocacy groups are increasingly focused on ESG matters, which may influence investment decisions regarding the company[57]. - Climate change and regulatory responses may adversely impact the company's operations and results, with potential increased costs due to compliance burdens from new SEC rules effective for fiscal year 2025[55].
Embotelladora Andina S.A.(AKO_A) - 2023 Q4 - Annual Report