Executive Summary / Key Takeaways

• Embotelladora Andina (AKO-A) demonstrates robust recovery and strategic expansion, particularly in Argentina, driving strong consolidated sales volume growth of 5.3% in Q2 2025 and a significant 51.3% increase in net income attributable to controlling shareholders.
• The company's digital platforms are a key differentiator, generating 75.5% of Q2 2025 net revenues, marking a substantial 33.7 percentage point increase and enhancing market reach and operational efficiency.
• Strategic investments in new, multi-category production lines in Brazil and Paraguay are set to expand capacity, improve efficiency, and bolster sustainability, supporting future growth and solidifying its "Total Beverage Company" vision.
• Despite regional economic volatility, currency fluctuations, and raw material cost pressures, AKO-A maintains a strong competitive position through its Coca-Cola licensing, extensive distribution networks, and localized operational expertise.
• The outlook is positive, with an estimated 11-12% total return potential, combining a 6-7% distributable yield with 5% long-term growth, though currency and inflation risks in key markets warrant close monitoring.

A Bottling Powerhouse's Strategic Evolution and Digital Leap

Embotelladora Andina S.A. (AKO-A) stands as a formidable force in the Latin American beverage industry, distinguished as one of the three largest Coca-Cola bottlers in the region. Founded in 1946 in Santiago, Chile, the company has evolved from a dedicated Coca-Cola bottler into a "Total Beverage Company," a strategic transformation aimed at capturing a broader spectrum of consumer demand. This evolution is evident in its expansive portfolio, which now includes not only Coca-Cola trademark beverages but also fruit juices, various flavored waters, sports drinks, iced tea, energy drinks, and a diverse array of alcoholic beverages under brands such as Campari, Aperol, Skyy, and Estrella Galícia. This comprehensive offering positions AKO-A as a critical player in a regional beverage market valued at approximately $25 billion in 2022, projected to grow at an annual rate of 5% over the next five years.

The company's operational footprint spans Chile, Brazil, Argentina, and Paraguay, serving nearly 57.80 million people and delivering 909 million unit cases in 2024. This extensive reach is underpinned by a robust distribution network and deep regional expertise, which serve as significant competitive advantages. AKO-A's strategic initiatives are centered on efficiently and sustainably utilizing existing resources, fostering strong relationships across its value chain, and ultimately increasing Return on Invested Capital (ROIC) for shareholders. A testament to its commitment to sustainability, Embotelladora Andina was recognized in May 2025 as one of the most sustainable companies globally in the beverage industry, ranking in the top 15 worldwide and achieving the highest score in Latin America.

A critical differentiator for Embotelladora Andina is its advanced adoption of digital platforms for sales and distribution. In the second quarter of 2025, an impressive 75.5% of the company's total net revenues were generated through these digital channels. This represents a substantial 33.7 percentage point increase compared to the same period last year. This significant digital penetration underscores a technological edge, enabling enhanced customer convenience, broader market reach, and improved operational efficiency in sales and order fulfillment. The ability to leverage digital ecosystems effectively provides a competitive moat, allowing AKO-A to streamline its sales processes and adapt more swiftly to evolving consumer purchasing habits.

Beyond digital sales, the company is also investing in manufacturing technology to enhance its operational capabilities and sustainability. In the second half of 2025, Embotelladora Andina plans to launch three new production lines. These include a multi-category line in Duque de Caxias, Brazil, capable of producing both soft drinks and beer, a mineral water line at the same location, and a returnable beverage line in Paraguay. These projects, part of a broader investment of over US$500 million between 2025 and 2026, are designed to meet growing consumer demand, improve production efficiency, and further the company's sustainability goals. Notably, the multi-category line in Brazil, a US$90 million investment, will make AKO-A the first bottler in the Coca-Cola system to produce beer on such a line, showcasing an innovative approach to product diversification and operational flexibility. Furthermore, the Re-Ciclar plant in Chile, the first "bottle by bottle" plant in the Coca-Cola system in the country, is set to recycle over 350 million bottles annually into recycled resin, directly contributing to cost reduction and environmental stewardship. These technological and operational advancements are crucial for maintaining a competitive edge, optimizing cost structures, and supporting long-term growth.

Competitive Landscape and Strategic Positioning

Embotelladora Andina operates within a highly competitive beverage market, facing direct challenges from global giants and regional powerhouses. Key direct competitors include PepsiCo , Ambev , and fellow Coca-Cola bottler Coca-Cola Femsa , as well as Fomento Económico Mexicano (Femsa, TICKER:FMX) through its retail and distribution channels.

AKO-A's strong Coca-Cola licensing provides a significant competitive advantage, translating into robust brand recognition and customer loyalty. This often leads to stronger pricing power and consistent revenue streams through established retail partnerships, allowing AKO-A to effectively counter the broader product diversification and aggressive marketing of a global player like PepsiCo . While PepsiCo (PEP) benefits from its global scale and diversified snack business, AKO-A's focused regional model and deep understanding of local markets enable superior operational execution and potentially lower distribution costs, particularly in fragmented retail environments.

Against Ambev , a leading Brazilian brewer and beverage company, AKO-A leverages its exclusive Coca-Cola branding to foster customer loyalty. Ambev's (ABEV) broader portfolio, encompassing both alcoholic and non-alcoholic segments, offers greater market versatility. However, AKO-A's localized production and distribution strategy can yield higher efficiencies in its core non-alcoholic segments. When compared to Coca-Cola Femsa , another major Coca-Cola bottler, AKO-A shares similar operational structures. AKO-A's deep regional knowledge and established networks differentiate it in customer relationships and cost management, though KOF's (KOF) larger scale might offer broader market positioning and greater financial resilience. Against Femsa (FMX), which leverages its integrated retail ecosystem, AKO-A's strength lies in its beverage-specific expertise and product performance.

AKO-A's competitive moats are primarily its strong Coca-Cola licensing, extensive distribution networks, and regional expertise. These advantages enhance brand recognition, ensure widespread product availability, and facilitate efficient operations tailored to local market dynamics. However, vulnerabilities exist, notably its dependency on Coca-Cola licensing agreements and exposure to regional economic fluctuations. These factors could impact financial performance if agreements change or if economic instability in its operating countries persists. Barriers to entry in the beverage industry, such as the necessity for strong brand partnerships and established distribution networks, help AKO-A defend its market position against new entrants.

Financial Performance and Operational Resilience

Embotelladora Andina's recent financial performance highlights its resilience and strategic effectiveness, particularly in navigating challenging economic environments. For the second quarter of 2025, consolidated Sales Volume reached 207.50 million unit cases, marking a 5.3% increase compared to the same period last year. This growth was significantly propelled by a 23.7% increase in volume from the Argentine franchise, which recovered over 75% of the volume lost during the severe economic crisis of 2024. Chile also contributed positively with a 3.5% volume growth, driven by soft drinks and water categories. Brazil saw a modest 1% increase despite a tough comparative period, while Paraguay experienced a slight 0.7% decline due to an unusually cold winter.

Consolidated Net Sales for the quarter rose by 9.8% to CLP 738,154 million, reflecting revenue growth across all four operating countries. This was partially offset by the negative impact of translating figures from Brazilian and Paraguayan local currencies to the Chilean peso, the reporting currency. Consolidated Adjusted EBITDA increased by 9.2% to CLP 119,323 million in the second quarter. Crucially, on a currency-neutral basis, consolidated adjusted EBITDA grew by a robust 12.7% compared to the prior year, underscoring underlying operational strength. Net income attributable to owners of the controller saw a substantial 51.3% increase, reaching CLP 37,233 million for the quarter. For the first half of 2025, consolidated Sales Volume increased by 7.7% to 458.50 million unit cases, with consolidated Net Sales growing 8.5% to CLP 1.61 million. Net income attributable to owners of the controller for the first half increased by 21.4% to CLP 113,589 million.

Profitability metrics show a mixed picture, influenced by cost pressures and currency dynamics. Consolidated Cost of Sales increased by 11.3%, primarily due to higher sales volumes in Argentina, increased PET resin costs in Brazil, Chile, and Paraguay, and higher concentrate costs in Brazil and Paraguay. The devaluation of local currencies against dollar-denominated costs also played a role. These increases were partially mitigated by lower sugar and concentrate costs in Argentina and Chile. Consolidated Distribution Costs and Administrative Expenses rose by 7%, driven by higher distribution expenses from increased volumes and higher labor costs in Argentina, Brazil, and Chile. Operating income in Argentina notably transitioned from a loss in the prior year to a gain of CLP 8,875 million in Q2 2025, reflecting the significant recovery in that market.

From a liquidity and capital resources perspective, the company generated a positive net cash flow from operating activities of CLP 156,676 million in the first half of 2025, a 7.2% increase, mainly due to lower other payments for operating activities. Investment activities resulted in a negative cash flow of CLP 39,700 million, a positive variation of CLP 108,162 million compared to the previous period, largely explained by the sale of financial assets and lower capital expenditure. Financing activities generated a negative cash flow of CLP 156,443 million, primarily due to higher dividend payments and short-term loan payments.

Current liquidity improved by 18.5% compared to December 2024, as the decrease in current liabilities outpaced the decrease in current assets.

However, the debt ratio increased by 9% to 0.70 times, driven by a 19.1% increase in net financial debt, which was higher than the 9.2% increase in total equity. The net financial debt-adjusted EBITDA ratio also increased to 1.40 times. On July 8, 2025, Embotelladora Andina S.A. secured a new bank credit agreement for UF 2.36 million, reinforcing its financial flexibility.

Outlook and Risk Assessment

Embotelladora Andina's outlook is shaped by its strategic investments, continued market recovery, and ongoing efforts to enhance efficiency and sustainability. The planned launch of three new production lines in Brazil and Paraguay in the second half of 2025 is a clear indicator of management's confidence in meeting growing demand and improving operational metrics. These projects are expected to bolster the company's capacity and efficiency, supporting its long-term growth trajectory. Analysts project operating cash flow to increase by 11.15% in 2025, with adjusted operating earnings forecast to yield 12.6% in 2025 and 17% in 2026. This suggests a positive financial trajectory, with an estimated total return potential of 11-12%, combining a 6-7% distributable yield with 5% long-term growth.

Despite this positive outlook, several risks warrant close attention. The company's significant dependence on its relationship with The Coca-Cola Company (KO), particularly regarding licensing and bottling agreements, remains a foundational risk. Volatility in raw material prices, such as sugar and PET resin, and adverse exchange rate movements, especially the devaluation of local currencies against the U.S. dollar and the Chilean peso, can impact profitability. Embotelladora Andina mitigates some of these risks through hedging strategies for dollar-denominated raw material purchases and advance sugar price setting.

Economic instability in its operating countries, particularly hyperinflation in Argentina and broader economic fluctuations in Brazil, Chile, and Paraguay, poses a continuous challenge to demand and financial performance. The potential imposition of new tax laws or modifications to existing tax incentives could also affect margins. Furthermore, the increasing public health concern regarding obesity could impact demand for sugary products, though the company has proactively responded by expanding its sugar-free portfolio and reformulating existing products. The possibility of exchange controls restricting fund repatriation and dividend payments, along with potential disruptions from social unrest or pandemics, also represents material risks to the investment thesis.

Conclusion

Embotelladora Andina (AKO-A) presents a compelling investment narrative, characterized by its strategic evolution into a "Total Beverage Company," robust operational performance, and a clear commitment to technological advancement and sustainability. The significant recovery in Argentina, coupled with consistent growth in Chile and Brazil, underscores the company's resilience in dynamic Latin American markets. Its strong digital platform adoption, generating a substantial portion of its revenues, provides a modern competitive edge, enhancing efficiency and market reach.

Strategic investments in new production lines are poised to drive future growth, improve operational efficiency, and reinforce its sustainability leadership. While regional economic volatility, currency fluctuations, and raw material cost pressures remain inherent risks, AKO-A's proactive mitigation strategies and strong competitive positioning, anchored by its Coca-Cola licensing and extensive distribution networks, provide a solid foundation. The company's focus on expanding its product portfolio, optimizing operations through technology, and maintaining a strong financial profile suggests a continued path of value creation for shareholders, making it a noteworthy consideration for discerning investors seeking exposure to the resilient Latin American beverage sector.