Financial Performance and Market Dependency - The Coca-Cola Company accounted for 61% and 64% of the company's net sales in 2021 and 2022, respectively, highlighting the significant reliance on this relationship[29] - As of December 31, 2022, Chile represented 44.1% of the company's assets and 42.3% of net sales, indicating significant reliance on the Chilean market[96] - Operations in Brazil represented 31.5% of the company's assets and 24.0% of net sales in 2022, highlighting the importance of economic conditions in Brazil[114] - Operations in Argentina accounted for 13.1% of the company's assets and 25.9% of net sales in 2022, reflecting the economic dependency on Argentina[131] - Paraguay operations represented 11.3% of total assets and 8.0% of net sales in 2022[166] Competition and Market Challenges - The company faces increasing competition in the beverage market, which may adversely affect net profits and margins[38] - The company may face challenges in successfully implementing expansion strategies and achieving operational efficiencies from acquisitions, which could adversely affect financial results[55] - Adverse weather conditions and natural disasters can disrupt production and distribution, impacting sales volumes[58] - The COVID-19 pandemic has created significant economic uncertainty, affecting sales channels and potentially disrupting supply chains[60] Regulatory and Compliance Risks - The company is subject to complex and changing regulations, which may increase operating costs or alter consumer demand[30] - The company is subject to significant advertising restrictions and labeling requirements in countries like Chile and Argentina, which may adversely affect product sales and operational results[51] - The company is subject to increasing environmental regulations, which may lead to higher operating costs and changes in consumer demand[77] - In Chile, Law No. 21,368 limits the generation of disposable products and regulates plastic use, potentially impacting product consumption[78] - The company is subject to complex and changing regulations across its operating territories, which may increase operating costs and affect financial performance[75] Economic Conditions and Inflation - The Chilean economy contracted by 5.8% in 2020, grew by 11.7% in 2021, and grew by 2.4% in 2022, impacting the company's operations[98] - Inflation in Chile rose significantly to 12.8% in 2022, up from 7.2% in 2021, primarily due to government economic aid measures[109] - The Central Bank of Chile increased the Monetary Policy Rate to 11.25% in 2022 to combat inflation, which may restrict credit availability and economic growth[109] - Inflation in Brazil was recorded at 5.8% in 2022, following 10.1% in 2021, which may impact the company's costs and profit margins[121] - Argentina's inflation rates were recorded at 36.1% in 2020, 50.9% in 2021, and 94.79% in 2022, indicating severe inflationary pressures[140] Currency and Geopolitical Risks - The company reports results in Chilean pesos, with 24% of net sales generated in Brazil and 26% in Argentina, making it vulnerable to currency depreciation[89] - The Chilean peso experienced high volatility, ending the year at /US1.051 CH in July 2022[106] - The Brazilian real depreciated by 7% in 2021 but appreciated by 7% in 2022 against the U.S. dollar, indicating significant currency volatility[124] - The company is exposed to geopolitical risks, including tensions between Russia and Ukraine, which could disrupt global markets and impact financial results[93] Environmental and Social Governance (ESG) Concerns - The company faces risks related to achieving its environmental, social, and governance (ESG) goals, which could negatively impact its reputation and sales if not met[48] - Investor advocacy groups are increasingly prioritizing ESG matters, which may lead to reconsideration of investments if the company's actions are deemed unsatisfactory[49] - Water scarcity and poor water quality pose risks to production costs and capacity, with potential reputational damage[42] - Climate change may lead to increased costs and disruptions in supply chains, affecting the availability of key agricultural commodities[47] Labor and Operational Risks - Collective bargaining agreements are critical, and failure to renew them satisfactorily could lead to work stoppages, impacting operations and revenues[74] - The company may face challenges in recruiting and retaining key personnel, which could disrupt business operations and financial performance[88] - Instability in utility services and oil prices could adversely impact operational results, particularly due to recent global fuel price increases[41] - The company recognizes cyber threats as a risk and has implemented a cybersecurity strategy to enhance resilience against potential attacks[66] Taxation and Financial Liabilities - The company faces significant tax liabilities in Brazil, with ongoing proceedings amounting to approximately R546.32 million) related to value-added tax[86] - In Argentina, the income tax rate increased from 30% to 35% as of June 2021, affecting the company's financial condition[84] - The company faces risks from potential changes in tax laws in Brazil, which could increase tax burdens and negatively affect profitability[127] Strategic Partnerships and Acquisitions - The merger with Embotelladoras Coca-Cola Polar S.A. granted former shareholders a 19.68% ownership interest in the merged entity[192] - In 2018, the acquisition of 100% of Comercializadora Novaverde S.A. was completed, expanding product offerings[195] - The company signed distribution agreements for various brands, including Monster Energy and Diageo, enhancing its product portfolio[194][196] - The establishment of Re-Ciclar S.A. aims to produce recycled resin for the Coca-Cola system and third parties[200] - In September 2021, Andina Brazil acquired 50% of the Therezópolis beer brands for R$35 million[213]
Embotelladora Andina S.A.(AKO_B) - 2022 Q4 - Annual Report