INITIATING COVERAGE

CCU — Compañía Cervecerías Unidas S.A.

Beverages — Beer, Wine, Spirits & Non-Alcoholic | BCS (Bolsa de Comercio de Santiago)

Bear: CLP 5,350 | Base: CLP 7,100 | Bull: CLP 9,150

2026-04-14

Executive Summary

We initiate coverage of Compañía Cervecerías Unidas S.A. (BCS: CCU) with a HOLD rating and a 12-month target price of CLP 7,100, implying 9.2% upside/(downside) from the current price of CLP 6.500. CCU is Chile's dominant multi-category beverage company, commanding ~52% of the beer market and ~45% of the non-alcoholic beverage market, with operations spanning six LatAm countries.

Our HOLD rating reflects a fair valuation at current levels: CCU's Chile franchise is exceptional — a near-duopoly market position with 16.3% EBITDA margin and 7-8% EBITDA growth — but this strength is offset by material headwinds in Argentina (29.5% EBITDA decline in 2025) and the structurally declining Wine segment (14.9% EBITDA decline). At 6.7x EV/EBITDA, CCU trades at a 21% discount to LatAm peers, but this discount is warranted given the Argentina drag and margin compression.

Our target price is derived from a blended DCF valuation (WACC 7.7%, terminal growth 3.0%) and exit multiple analysis (7.0x EV/EBITDA), with symmetric Bear/Bull scenarios providing a CLP 5,350–9,150 range. The rating would shift to BUY if Argentina stabilizes or the wine segment is restructured, and to SELL if Chile market share erodes or leverage exceeds 2.5x net debt/EBITDA.

Investment Thesis

Our investment thesis rests on five pillars — three structural strengths and two cyclical challenges that define the risk/reward:

Pillar 1: Chile Franchise — The Crown Jewel (Positive)

CCU's Chile segment is one of the highest-quality consumer franchises in Latin America. With 52% beer market share, 45% non-alcoholic beverage share, and iconic brands (Cristal, Escudo, Bilz & Pap, Cachantun) with 100+ years of consumer loyalty, the Chile business generates 83% of consolidated EBITDA at a 16.3% margin — and this margin is expanding. The distribution moat (14 plants, 24 distribution centers, 150,000+ retail points) is virtually impossible to replicate. Premiumization is driving revenue per hectoliter up 5-7% annually as mix shifts toward craft (Austral, Kross) and imported brands.

• KPI to watch: Chile EBITDA margin — expect 16.5-17.0% in FY2026E if premiumization continues.
• Conviction: High — this franchise has proven resilient across multiple economic cycles and competitive challenges.

Pillar 2: Multi-Category Diversification (Positive)

CCU is uniquely positioned as the only multi-category beverage company in Chile, spanning beer, soft drinks, water, juices, wine, and pisco. This diversification provides (1) revenue stability — weakness in one category is offset by strength in others; (2) distribution efficiency — shared logistics for all categories; (3) cross-selling power — retailers benefit from one-stop ordering via CCU Digital. No competitor in Chile matches this breadth.

• KPI to watch: Chile revenue growth by category — non-alcoholic and premium beer should drive 4-5% top-line growth.

Pillar 3: Premiumization Tailwind (Positive)

The structural shift toward premium and craft beer in Chile is a multi-year margin expansion driver. Premium beer (Austral, Kross, imports) grows 8-12% annually versus 2-3% for mainstream. CCU has proactively positioned itself by acquiring/partnering with craft brands and developing premium line extensions. This trend is 3-5 years behind Europe/US, suggesting significant remaining runway. Health-conscious trends (zero-sugar NAB, non-alcoholic beer) are complementary and drive category expansion.

• KPI to watch: Premium beer as % of total beer volume — currently ~20%, targeting 30% by 2028.

Pillar 4: Argentina Headwind (Negative)

Argentina represents ~22% of CCU's revenue but is the primary source of earnings volatility. The International segment's EBITDA declined 29.5% in FY2025, driven by hyperinflation, currency devaluation, and consumer demand destruction under the Milei government's austerity program. Historically, Argentina has been a boom-bust cycle for CCU — strong recoveries followed by inevitable crises. We model a gradual recovery (EBITDA improving from CLP 55B in 2025 to CLP 70B by 2028), but significant uncertainty remains.

• KPI to watch: Argentina beer volumes and ARS/CLP exchange rate — the two key drivers of segment profitability.
• Risk scenario: If Argentina deteriorates further (EBITDA approaching zero or negative), CCU's consolidated EBITDA could drop below CLP 340B, pushing net debt/EBITDA above 2.5x.

Pillar 5: Wine Structural Challenge (Negative)

CCU's Wine segment (VSPT — Viña San Pedro Tarapacá) faces structural headwinds: global wine consumption declining 3% annually, rising input costs, and generational shifts away from wine. Wine EBITDA fell 14.9% in FY2025 to CLP 35.6B. Management has limited options: (1) accelerate premiumization (focus on reserva/premium wines with higher margins), (2) rationalize production capacity, or (3) divest VSPT to unlock value. We estimate VSPT could fetch CLP 200-250B (~10% of CCU's EV) in a sale scenario.

• KPI to watch: Wine segment EBITDA margin — stabilization at current levels (~10%) would be constructive.

Company Overview

Business Description

Compañía Cervecerías Unidas S.A. (CCU) was founded in 1902 through the merger of multiple Chilean breweries and has grown into Latin America's third-largest multi-category beverage company. The company operates through three reporting segments:

• Chile (66% of revenue, 83% of EBITDA): Beer (Cristal, Escudo, Austral, Royal Guard, Morenita), non-alcoholic beverages (Bilz & Pap, Cachantun, Watt's), and spirits/pisco (Mistral, Control). Market leader in beer (~52% share) and #2 in non-alcoholic beverages (~45%).
• International Business (22% of revenue, 15% of EBITDA): Operations in Argentina (Cervecería Santa Fe — beer and NAB), Bolivia (Cervecería Boliviana Nacional — #1 brewer), Colombia, Paraguay, and Uruguay. Argentina is the dominant market within this segment.
• Wine (12% of revenue, 9% of EBITDA): Viña San Pedro Tarapacá (VSPT), Chile's second-largest wine producer. Key brands: San Pedro, Tarapacá, Altaïr, Sideral. Exports to 80+ countries.

Ownership & Governance

• Controlling shareholder: Quiñenco S.A. (Luksic Group) — Chile's largest conglomerate, holding ~60% economic interest in CCU. The Luksic family's involvement provides governance stability, capital markets access, and strategic patience through economic cycles.
• Strategic partner: Heineken International maintains a commercial partnership for brand licensing in Chile (Heineken, Amstel, Sol). This relationship provides CCU access to premium global beer brands without capital-intensive brand building.
• Free float: ~40% institutional and retail investors. CCU ADRs also trade on NYSE (CCU) for international investors.
• CEO Patricio Jottar: Long-tenured executive with deep sector knowledge. Credited with navigating CCU through the 2018-2019 Argentina crisis and executing the premiumization strategy.

Financial Analysis

Revenue Trends

CCU's revenue has grown from CLP 2.57T in FY2023 to CLP 2.91T in FY2025, a 6.4% 2-year CAGR. However, FY2025 revenue was essentially flat versus FY2024 as Chile growth (+4.7%) was offset by Argentina contraction. We project 4-5% revenue growth resuming in FY2026-2030, driven by premiumization, Chile volume growth, and a gradual (not dramatic) Argentina recovery.

Margin Analysis

Consolidated EBITDA margin compressed from 14.3% in FY2024 to 12.9% in FY2025, driven by Argentina's margin collapse and wine headwinds. We model gradual margin recovery to 14.3% by FY2030E as: (1) Chile continues premium mix shift (+50bps/year); (2) Argentina stabilizes from trough levels; (3) wine rationalizes production. Key risk: another Argentina crisis could reset margins to 11-12%.

Balance Sheet & Leverage

Net debt/EBITDA rose to 2.03x in FY2025 from 1.5x in FY2023, driven by higher debt (CLP 1.28T vs. CLP 900B) and lower EBITDA. Management has guided for deleveraging to <1.5x by FY2028 through organic cash flow generation and capex discipline. We model 5% annual debt reduction and expect net debt/EBITDA to reach 1.5-1.7x by FY2028, assuming no major acquisitions.

Cash position: CLP 519B (FY2025), down from CLP 707B in FY2024. Dividend: CLP 74.53/share for FY2025 (CLP 27.5B total, ~24% payout ratio). The dividend is conservative and leaves ample room for debt reduction.

Valuation

DCF Analysis (Primary Method)

Our DCF model yields a base case fair value of CLP 7,100 per share, implying 9.2% upside/(downside) from the current price. Key assumptions:

Note: WACC derived from CAPM (Ke = 10.1%, Kd after-tax = 4.0%, 60/40 E/D target structure). No quality premium applied. Bear/Bull WACC spreads are symmetric (±130bps).

Comparable Company Analysis

CCU trades at a meaningful discount to LatAm beverage peers on EV/EBITDA (6.7x vs. median 8.0x) but at a premium on P/E (20.5x vs. median 15.5x). The EV/EBITDA discount reflects Argentina risk and wine headwinds; the P/E premium is distorted by the cyclical trough in net income. Applying the peer median EV/EBITDA of 8.0x to CCU's FY2025 EBITDA implies a share price of CLP 8,200 — higher than our DCF target, suggesting upside if the discount narrows.

Competitive Landscape

CCU operates in a concentrated market structure that supports pricing discipline:

• Chile Beer: Duopoly — CCU (~52%) vs. AB InBev (~30%). The remaining ~18% is split among 300+ craft breweries and imports. Market share has been stable over the past 5 years, with craft growing at the expense of both majors' mainstream brands, but CCU capturing craft value through acquisitions and premium launches.
• Chile NAB: Oligopoly — Coca-Cola system (Andina + Embonor, ~50% combined) vs. CCU (~45%). PepsiCo has limited presence (~5%). This structure supports stable pricing and margins.
• Argentina Beer: CCU (via Santa Fe) competes against Quilmes (AB InBev) in a market dominated by the latter. CCU holds ~20% of Argentina beer market.
• Wine: Fragmented globally but concentrated in Chile. VSPT competes against Concha y Toro (#1), Santa Rita, and Undurraga. VSPT holds ~15% of Chilean domestic wine market.

Disruptive Threat Assessment

• Craft beer (10% Chile share, growing 8-12%): MANAGEABLE — CCU is actively acquiring craft brands and developing premium line extensions. S-curve suggests Chile craft will plateau at 12-15%. Trigger: if a well-capitalized investor consolidates 5+ craft brands with independent distribution.
• RTD / Hard seltzer (~2% Chile share, growing 15-20%): MANAGEABLE — CCU has production flexibility and multi-category expertise to launch competing products. Trigger: if RTD exceeds 5% of alcoholic volume share.
• E-commerce disruption (~10% of beverage sales, growing 15-20%): MANAGEABLE — CCU has invested in B2B digital platform. Trigger: if Amazon/MercadoLibre launches private-label beverages with aggressive pricing.
• Non-alcoholic beer (~3% of beer volume): OPPORTUNITY — Higher margins, no excise tax, expands consumption occasions. CCU well-positioned with Cristal 0.0% and Heineken 0.0%.

Risk Factors

Downside Risks

• Argentina macro deterioration: Further ARS devaluation, recession, or political instability could push International segment EBITDA toward zero, adding ~200-300bps to leverage. Probability: Medium. Impact: High.
• AB InBev price war in Chile: If AB InBev aggressively cuts beer prices to gain share (as it has done in other LatAm markets), CCU's Chile margins and volumes would be pressured. Probability: Low. Impact: High.
• Wine structural acceleration: If global wine consumption decline accelerates from -3% to -5%+ annually, VSPT could become a sustained value destroyer. Probability: Low-Medium. Impact: Medium.
• Regulatory risk: Increase in Chile alcohol excise taxes or more restrictive labeling/advertising regulations. Probability: Medium. Impact: Medium.
• Input cost spike: Sustained increase in barley, aluminum, or glass prices combined with CLP depreciation could compress margins beyond our projections. Probability: Medium. Impact: Medium.

Upside Risks

• Argentina recovery: If Milei's reforms succeed and Argentina stabilizes (GDP +2%, inflation <50%), International segment EBITDA could recover to CLP 80-90B, adding CLP 300-500/share. Probability: Medium. Impact: High.
• VSPT divestiture: Sale of the wine segment at 7-8x EBITDA (CLP 250-280B) would deleverage the balance sheet and simplify the investment story. Probability: Low. Impact: Medium.
• Accelerated premiumization: If premium beer exceeds 30% of Chile volumes faster than expected, Chile EBITDA margin could reach 18%+. Probability: Medium. Impact: Medium.
• Strategic acquisition: CCU acquires a complementary beverage business in Colombia, Peru, or Ecuador, expanding its LatAm footprint at attractive valuations. Probability: Low-Medium. Impact: Medium.

Disclaimer

This initiation report has been prepared for informational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any securities. The analysis is based on publicly available information and forward-looking estimates that may not prove accurate. All financial projections are illustrative and should be independently verified. The rating and target price represent the analyst's assessment based on the methodology described herein and are subject to change. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult with qualified financial advisors before making investment decisions.

Report prepared: 2026-04-14 | Analyst: AgenticFinanceChile AI Pipeline

CCU | BCS: CCU | Currency: CLP | Rating: HOLD | Target: CLP 7,100