Executive Summary / Key Takeaways

• Compañía Cervecerías Unidas S.A. (CCU) is executing a strategic pivot towards profitability, driven by robust revenue management and efficiency programs, successfully reversing a challenging first half of 2024 into a strong second half and continued positive momentum in Q2 2025.
• The company's core Chilean operations demonstrate significant pricing power and brand equity, achieving 6% average price increases and 3.2% volume growth in Q2 2025, leading to a 59.1% EBITDA expansion in the segment despite cost pressures.
• CCU's strategic expansion in International Business, particularly through acquisitions in Argentina and Paraguay, aims to build scale and synergies, though short-term profitability in Argentina remains challenged by macroeconomic volatility and aggressive competition.
• A key technological differentiator, the CirCCUlar PET recycling plant, underscores CCU's sustainability commitment but introduces notable manufacturing costs, impacting gross margins in the Chile segment by approximately ThCh 3 billion in Q2 2025.
• Long-term outlook is shaped by global declines in alcohol consumption, particularly wine, necessitating CCU's focus on innovation in low-alcohol, non-alcoholic, and flavored products to drive future growth and margins, alongside disciplined capital allocation towards efficiencies and regulatory compliance.

A Legacy Forged in Beverages, Adapting to New Realities

Compañía Cervecerías Unidas S.A. (CCU), a venerable institution celebrating 175 years of history in 2025, has evolved from its 1850 Chilean origins into a diversified beverage powerhouse across Chile, Argentina, Uruguay, Paraguay, Colombia, and Bolivia. The company commands leading market positions, including being Chile's largest brewer and a significant producer of soft drinks, wines, and waters. This extensive history has shaped CCU's resilient business model, allowing it to adapt to dynamic market conditions and macroeconomic shifts across its diverse operating regions.

CCU's strategic responses to market dynamics are deeply rooted in its history of expansion and operational integration. Recent strategic moves, such as consolidating distribution systems in Argentina in late 2023 and forming partnerships like the one with Vierci Group in Paraguay in October 2024 for PepsiCo (PEP) beverages and snacks, highlight a continuous drive for scale and efficiency. These initiatives are foundational to the company's 2025-2027 Strategic Plan, which prioritizes profitability, growth, and sustainability.

Technological Edge and Operational Innovation

Central to CCU's strategic initiatives and competitive positioning is its commitment to operational innovation and sustainability, exemplified by the inauguration of its modern PET recycling plant, CirCCUlar, in Chile in February 2024. This bottle-to-bottle recycling facility represents a significant technological differentiator, aiming to enhance the company's environmental footprint and potentially secure long-term packaging supply.

The tangible benefits of CirCCUlar, however, come with notable financial implications in the short term. In Q2 2025, the plant contributed approximately ThCh 3 billion in manufacturing expenses and additional recycling costs, impacting the gross margin of the Chile operating segment. On a year-to-date basis for 2025, this impact totals around ThCh 7 billion, representing roughly 7% of the Chile operating segment's EBITDA for the quarter. Management acknowledges the difficulty in fully passing these costs to consumers, particularly in the non-alcoholic categories where price increases in Q2 2025 were in line with inflation. This highlights a strategic trade-off between sustainability investment and immediate profitability.

Beyond physical infrastructure, CCU is leveraging digital transformation to drive operational efficiencies. The company is actively replacing traditional sales functions with technology, utilizing artificial intelligence programs to enhance client recommendations and streamline order placement. This shift allows for a more efficient sales force, focusing human capital on in-store execution and client relationships, thereby contributing to lower MSD&A expenses and improved overall efficiency. This technological adoption is a critical component of CCU's strategy to maintain competitiveness and protect its bottom line in volatile markets.

Competitive Landscape and Market Positioning

CCU operates in a highly competitive beverage market across Latin America, facing off against global giants like Anheuser-Busch InBev (BUD), Ambev (ABEV), Coca-Cola (KO), and regional powerhouses such as Fomento Económico Mexicano (FMX). CCU's market positioning is characterized by strong regional brand equity and diversified product portfolios, allowing it to tailor offerings to local tastes and regulatory environments.

In Chile, CCU is the largest brewer and a leading producer across multiple non-alcoholic categories. Its strong brand equity in Chile has enabled significant pricing power, with average prices increasing by 6% in Q2 2025, well above inflation, while maintaining or recovering market share in alcoholic products. This contrasts with competitors who experienced negative growth in the alcoholic segment during the same period. However, in the non-alcoholic segment, while CCU's Pepsi brand is gaining equity, Colas, where CCU is not the market leader, continue to capture a larger share of the mix.

The competitive dynamics in Argentina are particularly aggressive, exacerbated by the challenging macroeconomic environment. CCU's International Business segment faces intense pricing pressure, with beer prices significantly below inflation year-to-date 2025. This competitive aggression, coupled with the devaluation of the Argentine peso, has made it difficult to recover volumes and profitability despite CCU's efforts in revenue management and efficiency. Competitors are similarly impacted by the economic volatility, but the fight for market share remains fierce.

Comparing financial performance, CCU's TTM Gross Profit Margin of 45.20% and EBITDA Margin of 10.99% are generally lower than global leaders like Coca-Cola (Gross Profit Margin 61%, Operating Profit Margin 21%) and AB InBev (Gross Profit Margin 55%, Operating Profit Margin 26%). However, CCU's regional focus and operational agility allow it to maintain competitive profitability within its core markets. Its Debt/Equity Ratio of 0.86 is also lower than Coca-Cola's 1.84, indicating a more conservative capital structure. CCU's strategic focus on local partnerships and regulatory licenses provides an advantage in market access and product innovation, differentiating it from larger, more globally standardized competitors.

Financial Performance and Liquidity

CCU's financial performance in the first half of 2025 reflects a company actively executing its profitability-focused strategy amidst external headwinds. In Q2 2025, consolidated EBITDA nearly doubled compared to the prior year, reaching ThCh 57.63M, driven by strong contributions from the Chile and Wine segments. This resurgence follows a challenging Q2 2024, where EBITDA plummeted by 78.7% to ThCh 10,053 million, primarily due to adverse weather in Chile, weak demand in Argentina, and significant local currency depreciation. The impact of external factors, particularly the Chilean peso's depreciation against the U.S. dollar, negatively affected Q2 2024 EBITDA by approximately ThCh 16 billion.

For the six-month period ended June 30, 2025, consolidated net sales reached ThCh 1.40B, an increase from ThCh 1.27B in the same period of 2024. Gross margin for this period was ThCh 619.01M, up from ThCh 562.24M, reflecting the impact of revenue management efforts and efficiencies. Net income for the six-month period was ThCh 50.28M, a reduction from ThCh 61.86M in the prior year, though Q2 2025 alone showed a lower loss. The company's TTM Net Profit Margin stands at 4.96%, indicating a solid, albeit recovering, bottom line.

Liquidity remains a strength for CCU. Cash flows from operating activities are the primary source of liquidity, supplemented by access to debt and equity markets. Operating cash flow improved in Q2 2025, benefiting from increased EBITDA and significant working capital efficiencies, including inventory reduction and improved accounts receivables. The company's new planning platform and optimized logistics processes are contributing to these gains.

CCU's CapEx, at approximately 5.5% of net sales, is moderate and primarily directed towards efficiencies and regulatory compliance rather than large-scale capacity expansion, further supporting its financial flexibility. The net financial debt-to-EBITDA ratio improved from 2.2x to 1.8x in the last quarter of 2024, underscoring a healthy financial position and commitment to maintaining its investment-grade rating.

Outlook and Strategic Imperatives

CCU's outlook for the remainder of 2025 and beyond is shaped by a commitment to its 2025-2027 Strategic Plan, with an unwavering focus on profitability, growth, and sustainability. Management acknowledges the continued volatility and uncertainty in the business environment, particularly concerning exchange rates and consumption trends.

In Chile, the expectation is for a soft industry with low single-digit volume growth, aligning with a projected 2% long-term economic growth. Management anticipates maintaining revenue management efforts and efficiency gains to recover margins. For the International Business segment, particularly Argentina, a gradual recovery in volumes is projected, with expectations to reach approximately 85% of pre-crisis levels by Q4 2024. However, a full return to 2023 volumes may take two to three years, contingent on macroeconomic stability and the recovery of real wages. Pricing in Argentina is expected to move in line with inflation, despite an aggressive competitive landscape.

A significant long-term trend impacting CCU is the global decline in alcohol consumption. Per capita alcohol consumption (at 100 degrees) globally decreased from 3.1 liters in 2019 to 2.8 liters in 2024, with Chile showing a similar decline from 5.3 liters to 5.1 liters over the same period. The wine category has been most affected, with per capita consumption in Chile falling from 12.7 liters in 2019 to 10.5 liters in 2024. In response, CCU is strategically investing in innovation, promoting low-alcohol, non-alcoholic, and flavored products across its beer and spirits portfolios to offset these trends and drive future growth and margins.

On the cost front, while some raw materials like sugar (down 14% year-over-year) and barley (down 60% year-over-year) show favorable trends, aluminum prices are slightly higher (up 5% to $2,500 per ton), and orange juice costs are at record highs. The overall cost outlook remains highly susceptible to the volatile U.S. dollar exchange rate. A positive development for future financial flexibility is the expectation that, starting from 2025 results, CCU will be able to repatriate dividends from its Argentinian operations, following new government measures. This is viewed as a long-term benefit, though the immediate priority is settling existing accounts.

Conclusion

CCU stands at a pivotal juncture, leveraging its 175-year legacy and a robust multi-category strategy to drive a profitability resurgence amidst a challenging and evolving market. The company's disciplined execution of revenue management and efficiency programs, particularly evident in the strong turnaround in the second half of 2024 and continued positive momentum in Q2 2025, underscores its operational strength. This focus, combined with strategic investments in technological differentiators like the CirCCUlar PET recycling plant and digital transformation initiatives, is crucial for building a sustainable competitive moat.

While global trends in declining alcohol consumption, especially in the wine segment, present headwinds, CCU's proactive innovation in low-alcohol and non-alcoholic products, coupled with its strong brand equity in core markets like Chile, positions it to adapt and capture new growth avenues. The volatile macroeconomic environment in Argentina and fluctuating raw material costs remain key risks, but CCU's prudent liquidity management and commitment to maintaining an investment-grade rating provide a solid financial foundation. Investors should monitor CCU's ability to sustain its profitability gains, successfully integrate recent acquisitions, and effectively navigate the complex interplay of consumer shifts and competitive pressures, all while leveraging its technological and operational efficiencies to drive long-term value.