Embonor bottles, markets, and distributes Coca-Cola products in most parts of Chile outside of Santiago and across Bolivia. We first met with the company in Santiago in 2009 and have followed its progress closely since. As part of his trip to Chile in March of this year, Richard sat down again with management and conducted market visits both inside and outside of the company’s territory in Chile. He was also able to meet with a key competitor as well as the other Chilean Coke bottler. Our research suggests that Embonor growth prospects are excellent, particularly in Bolivia where per capita consumption is very low. This market is growing at a fast pace, and it will be bigger than the existing Chilean business as time goes on. We have found that consumers steadily switch to prepackaged beverages (ready-to-drink) as their per capita incomes go from $5,000/year to $20,000/year. Although the progress will not be smooth in Bolivia, this demographic and economic transformation is underway. These decades of growth are a very attractive time to be selling ready-to-drink products if you have adequate market share to distribute to the “mom and pop” stores that control most of the retail market.
Broader interest in the company among the financial community appears to be limited because of its smaller size, the relative illiquidity of its shares, and its decision to make some of its financials available only in Spanish. The tendency for the share prices of less-followed companies to diverge more widely from their intrinsic values helped provide this opportunity in Embonor, and may allow us to add to the Fund stake over time at modest valuations. We hope to be long-term shareholders.