Case Studies

Management Meetings in Santa Cruz and Santiago

In the third quarter of 2019 we met with the CEO and CFO of the Fund holding Coca-Cola Embonor in Santiago.  Embonor bottles and distributes beverages in parts of Chile and most of Bolivia.  Consistent with what we are seeing across the Coke system, Embonor is expanding its product portfolio.  The purpose is to find accretive ways to take advantage of Embonor’s superior distribution reach. Two recent and ongoing examples are instructive.  First, Embonor joined up with fellow bottler Andina and The Coca-Cola Company to buy the local Chilean brand Guallarauco, which manufactures and distributes high-end juices, ice creams, jams & preserves, and other meal and dessert items.  These product extensions complement Embonor existing offerings, and the brand is growing quickly now that it has superior access to the market.  The bottlers expect to innovate other new products under the Guallarauco umbrella to take advantage of the positive positioning in consumers’ minds.

The second example is the Embonor partnerships with Diageo and Capel to distribute alcoholic beverages.  Diageo distills Johnnie Walker, Smirnoff, Captain Morgan, and many other popular spirits.  These global brands now have much broader availability in the country thanks to the agreement with Embonor.  On the other hand, Capel is a distinctly Chilean business.  It is a cooperative of grape growers that manufactures and sells pisco, which is a brandy that is widely celebrated as the national drink of Chile[1] (and Peru).  Capel is the leading producer of pisco in the country and offers labels at a variety of price points.  Even though these brands were already widely available, Embonor has materially increased Capel’s addressable points of sale and has captured incremental profits in the process.

We also spent a day with Embonor CEO Cristian Hohlberg and the local management team in Santa Cruz, Bolivia.  Santa Cruz has grown dramatically in the last five years.  This region of Bolivia holds the most promise for volume and revenue growth for Embonor.  Fittingly, when we toured the plant in Santa Cruz, we noticed how much it had grown and modernized since our last visit five years ago.

We took the picture on the left of the growing Santa Cruz skyline from the side of the city’s new mall, which is similar to what can be found in an American suburb. The food court included KFC, Burger King, and Sbarro, while Nike, Under Armour, and Swarovski had stores. On the right, Richard is touring the Embonor Santa Cruz plant with the production team.

[1] Piscola, pisco mixed with Coke, is a favorite Chilean drink.  Talk about synergies!