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Sustainability Report 2016 Table of contents 4 Message from the Chairman of the Board of Directors 10 Our Company • Andina in numbers • Our value chain • Management and Corporate Governance we value your opinion 43 Beverage benefits 57 Healthy Active Lifestyle For us, it is important to have your opinion to improve our sustainability management. 65 Water Stewardship 75 Energy management and climate protection We invite you to send us your suggestions, questions or any comments related to this 89 Sustainable packaging Sustainability Report or our work at Coca-Cola Andina via email: [email protected] 105 Work environment as well as to the offices of our operations. 127 Community • Our customers For more information on this Report or to see our previous reports please go to: • Our suppliers www.koandina.com • Social investment in the community 150 Challenges for the upcoming years 153 Report Characteristics 155 GRI-G4 table of contents 177 Verification letter 178 We value your opinion Company Identification Embotelladora Andina S.A. Open stock corporation Chilean Tax ID (RUT): 91.144.000-8 Address: Miraflores 9153, Comuna de Renca, Santiago de Chile This year Coca-Cola Andina saw its GRI Message from the Chairman of 70th anniversary and we fully celebrated G4-1 GDMA the Board of Directors it, strengthening our role as one of the region's largest bottlers. n behalf of the Board I preside, I am Macroeconomic context in the region Financial challenges and results O pleased to submit the Annual Report It is important to review the macroeco- 613 million unit cases of soft drinks and and Financial Statements of Coca-Cola nomic situation of the countries where 166 million unit cases of other beverages volume Andina S.A and its subsidiaries, along we operate, in order to place this year’s were sold in 2016. This represented a drop Paraguay with the Sustainability Report for the 2016 results into context. of 8.8% compared to the previous year, 8% Fiscal Year. attributable to the slowdown in regional In Argentina we saw a strong adjustment economies, since approximately 60% Argentina En At Coca-Cola Andina, we are in a process after the change of Government. 2016 was of our volume comes from Argentina 28% of constant innovation and growth in each complex in macroeconomic issues with a and Brazil, both countries that suffered Chile of our markets. Team work, perseverance year-on-year inflation around 40%, while, consumption declines. Simultaneously, and openness to new and innovative ideas in terms of growth and consumption, the there was a stronger trend to consume 30% have been the drivers in this task within our year was negative, significantly impacting categories different from soft drinks, which group. 2016 was marked by a permanent our volumes. In addition, the exchange include juices, waters, isotonic and energy effort with our different partners on a ste- rate devaluation considerably affected our drinks. Taking this into account, we see a Brazil ady path to profitability and sustainable cost structure. great opportunity to keep on growing these 34% growth. This way of working allows us to segments. Along with that, we have the sales face adverse macroeconomic and political Brazil suffered the deepening of a ma- challenge of maintaining soft drinks growth, Paraguay contexts and even so continue delivering croeconomic and political crisis. In terms which continues to be our main category. 8% positive results. of growth, 2016 was a negative year for the Brazilian economy, which translated Our EBITDA reached 311,004 million Chilean Argentina This year Coca-Cola Andina saw its 70th in an approximate 3.5% decline in GDP. pesos, representing a variation of -1.7% with Chile anniversary and we fully celebrated it, Unemployment exceeded 10%, hitting respect to the previous year. This resulted 30% 29% strengthening our role as one of the region's consumption. Political uncertainty has from the strong impact of the translation of largest bottlers. Much has changed since affected all social strata, and has delayed figures mainly from Brazilian reais to Chilean the beginning of the 20th century: the new economic recovery. pesos, due to the 54.2% devaluation of consumption trends, the role of technology the Brazilian currency against the Chilean Brazil in society, among others aspects; but what Chile did not experience the macroeconomic peso. Operating income was 213,670 million 33% has not changed is that we continue to face impacts of the other countries. However, Chilean pesos. However, EBITDA margin ebitda each challenge eagerly and with a sense of the country continues with low growth rates improved by 1.4 percentage points and Paraguay urgency, seeking excellence in everything and increased unemployment. The main operating margin by 1.2 percentage points, we develop, maintaining a positive perfor- challenges were posed by the Labelling reflecting the excellent work performed 11% mance, capturing opportunities, anticipating Law, where we became leaders in the im- on cost and price management. Despite Argentina adverse environments and delivering value plementation of Government regulations.In the strong impact of volumes, net income 23% to our stakeholders. We are convinced Paraguay GDP and consumption remained reached 92,049 million Chilean pesos, Chile that we will continue doing so every year. stable, without negative relevant impacts representing a 4.5% growth compared to 35% the previous year. Brazil Juan Claro González 31% Chairman of the Board of Directors 4 • Coca-Cola Andina • Sustainability Report 2016 5 argentina Main achievements of our operations 219 517,059 In Argentina, we exceeded the expecta- An important part of the sustainability of our results is a tions of our results thanks to the great consequence of the strengthening of our corporate governance 71,302 work accomplished in optimizing costs and revenue management. The increase in margins reflects a significant operating Volume Sales EBITDA (MUC) (Ch$ M) (Ch$ M) improvement within an adverse scenario. We consolidated the new Hot Fill line to brazil continue strengthening the growth of the juice and isotonic categories. At the same time, we inaugurated a new deposit for raw materials that allows us to optimize procurement logistics and processes of Commercial challenges and results 266 590,146 key supplies. Paraguay recorded the best EBITDA margin We received the second place in the ALAS20 The commercial aspect is one of our vital in the history of the operation, portraying the recognition of leadership in corporate activities. We had the opportunity of putting 96,957 In Brazil, we continue consolidating and focus and excellence in the work on costs, governance, which takes into account our operation to test during the Olympic improving our efficiencies. The project for achieving a 10.3% EBITDA growth compared corporate governance principles involving Games in Rio de Janeiro, once again taking our new plant in Duque de Caxias is stron- to the previous year. Simultaneously, we recognition of shareholders, consideration part in one of the most important events in Volume Sales EBITDA gly moving forward and seeks to change carried out a process of managing customers of the interests of the various stakeholders the world, exceeding our expectations. The (MUC) (Ch$ M) (Ch$ M) the production paradigm, modernizing directly through our route to market team, (communities, shareholders, workers, etc.) Games were a success, our collaborators chile the productive system and reducing our allowing us to improve service levels and and the outlining of Board responsibilities. carried the torch and participated in com- environmental footprint. This plant will margins in all of our categories, as well as Together, all of these seek to ensure an mercial activities, once more demonstrating enable us to significantly increase our increase our market share. ethical and transparent behavior as a com- that working at Coca-Cola Andina and in returnable PET offer, and thus we will be pany, one of the strengths that we learned the Coca-Cola System is a reason to make able to extend this format to all our fran- Strengthening corporate governance to develop in an environment where there them proud. These Olympic Games were 232 chise, reaching our consumers with more An important part of the sustainability of our has been significant questioning regarding definitely a chance to leave our mark and 540,427 attractive price points. results is a consequence of the strengthe- this aspects. we did it successfully. ning of our corporate governance, receiving 112,499 In Chile the new Labelling Law became major awards and honors this year on this This was a very special year since new On the other hand, we faced major cha- effective during 2016, which we addressed matter. For starters, we were recognized members were incorporated to our Board llenges, the main exponent is the Labelling Volume Sales EBITDA more as an opportunity rather than as a for our third party and suppliers’ code of of Directors, who have a broad and renow- Law in Chile. As a company we adopted (MUC) (Ch$ M) (Ch$ M) problem. In that sense, we reformulated the ethics practices, in the SIPP Global Compact ned experience in issues such as ethics, Government measures with responsibility portfolio in all categories and capitalized Research, Chile chapter. We distinguish the social performance and actions with and initiative, becoming leaders in the paraguay the light segment through Masterbrand. We value of our partners and therefore we put the community. One of our goals was to implementation of labels ordered to be lead changes as protagonists, achieving a special focus on developing relationships achieve greater diversity throughout the placed on products; we seek to always be record 26.5% sales mix in the zero calories with suppliers and outsourced personnel; we Company, an ongoing process that we will proactive and show our goodwill with the beverages within the soft drinks category.