Where coke rules: overkill? Embonor CEO Andres Vicuna doesn't know the meaning of the word when it comes to marketing Coca-Cola products in Chile, Peru and Bolivia

Latin CEO: Executive Strategies for the Americas, June, 2000 by Mark Mulligan

Visitors to Arica, the Chilean desert city 20 kilometers south of the Peruvian border, must sometimes wonder if they've arrived at some gigantic set for a bubbly Coca-Cola advertisement. The unmistakable red and white logo is everywhere, from beachside kiosks and pedal-powered mobile vendors, to the ubiquitous vending machines, which appear to have been placed every few meters in some parts of town.

In the hills above this resort and port, the legend looms large in the form of a 400-foot-wide Coca-Cola sign -- the world's largest -- made from bottles. A gigantic can of Coke stands out against the dusty landscape on the road south to Iquique.

The hill, the sign, the can and the franchises in both towns are the property of Embotelladora Arica, recently renamed Coca-Cola Embonor to reflect the company's growth from a one-plant operation in Chile's barren north to Latin America's fourth-largest Coca-Cola bottler. Embonor, with the youthful Andres Vicuna at its helm, now controls nearly all of Coca-Cola's bottling and distribution in Peru and Bolivia, and about 38 percent of Coke sales in Chile.

"The name Arica was no longer what the company was about," says the 40-year-old Vicuna, son of the company's founder, Hernan. "We stepped into Bolivia, and now we're in Peru and in central and southern Chile."

After slow, steady growth for decades, the company leapt into the big leagues last year when it paid US$750 million for the disparate South American bottling interests of UK-based Inchcape. With the stroke of a banker's pen, annual volume at Arica/Embonor surged 260 percent to 988 million litres, while net sales hit US$343.3 million, up 224.5 percent from the year before.

The transaction was financed by a US$160 million US bond, a US$200 million syndicated loan and a capital infusion from the Coca-Cola Company itself, which increased its equity stake from 17 percent of the original company to 44 percent of the new entity. The influence of the Atlanta-based giant was immediately felt at the executive level, with some reshuffling and departures - and the swift promotion of Vicuna from executive vice president of Arica to chief executive of Embonor.

Vicuna is typical of the new breed of Chilean CEOs: young, aggressive and international in outlook. After graduating with a business degree from the Universidad Catolica in Santiago, Vicuna spent time at the country's securities exchange commission before heading to London for post-graduate studies at the prestigious London School of Economics. Shortly after his return to Chile, he joined his father's then-small venture, learning the ropes with a two-year stint in the Arica plant and office.

Now on the top step of the company ladder, one of Vicuna's first tasks will be to oversee the branding of Embonor, complete with a new logo, corporate identity and an investor relations department. The company is also in the middle of a management reorganization to streamline itself in the wake of the Inchcape acquisition. Vuicuna and his finance team are also busy with a debt restructuring. "When we organized financing for the Inchcape acquisition, it wasn't the best time in the markets," says Vicuna "We got what we got, but now we can do much better."

Citibank and BCI in Santiago are arranging a new syndicated loan in local currency, while IM Trust is on the road promoting a domestic bond. These proceeds will be used to pay off the US$200 million loan from last year "This way we cut our exposure to the dollar, and we can save about US$3.5 million a year in interest payments," says Vicuna

The reorganization, too, is partly designed to clean up the assets, making them acceptable to Chile's rigidly policed private pension fund groups, which control about US$37 billion in assets. "The pension funds are not allowed to invest in Embonor until the company's structure has been simplified," says Vicuna

What needs no help is Coca-Cola consumption in the the country, boosted by Embonor's and rival Andina's marketing efforts. Consumption of Coca-Cola products in Chile is a healthy 248 eight-ounce servings per person per year - compared, for example, with Great Britain at 122 servings per capita and US consumption of 395 servings per capita. In the city of Arica itself, consumption is a stomach-bloating 511 eight-ounce servings per capita a year, a rate which in 1997 prompted a visit to the desert city by Douglas Ivester, then president of Coca-Cola, to pick up a few tips from the Vicufias. "What the Vicunas are doing is a lesson to all of us," Ivester said at the time. "Too often people can't imagine the universe. They put limitations on their mental pictures, and they wind up limiting the growth of the business."

Embonor may still be digesting Inchcape's businesses, but it and the parent remain hungry for more opportunities, particularly in Peru, where per capita consumption of soft drinks - at 130 eight-ounce servings a year - is among the lowest in the region. "With a population of roughly 21 million people in the regions served by [Embonor], Peru represents a great growth opportunity for the company," according to a Duff & Phelps report released in April. The credit-rating agency adds that talks between Coca-Cola and the homegrown Inca Cola company could result in a distribution alliance that would throw more business Embonor's way