Company Reports

We will discontinue analyst coverage of Arca Continental on or about April 20.

Arca Continental's organic sales rose 5% in the fourth quarter, led by the US (up 10%). EBITDA margin narrowed 80 basis points to 21.0%, as strength in the US and South America was more than offset by contraction in Mexico on weak volume.

We award a wide moat rating to Arca Continental. We think brand intangibles from its status as a top-five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution footprint, should support the firm’s competitive standing and excess investment returns for more than 20 years.

Arca Continental's organic sales rose 4% in the third quarter, led by the US (up 7%). EBITDA margin ticked up 10 basis points to 20.4%, as gains in the US and South America more than offset the contraction in Mexico.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top-five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution footprint, should support the firm’s competitive standing and excess investment returns for more than 20 years.

Arca Continental's sales grew 8% in the second quarter of 2025, led by the US (up 19%) and South America (up 12%), but they rose a modest 3% excluding currency translation. Arca's EBITDA margin was flat at 20.7% as contraction in Mexico offset gains in the US and South America.

Arca Continental posted 12% sales growth (to MXN 57 billion) in the first quarter of 2025 on strength in the US (up 12%) and South America (up 25%), but Mexico sales were flat. Although EBITDA grew 10%, EBITDA margin narrowed 30 basis points to 18.7%.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution footprint, should support the firm’s competitive standing and excess investment returns for more than 20 years.

We plan to raise our MXN 182 fair value estimate of wide-moat Arca Continental by a mid-single-digit percentage after digesting the bottler's solid 2024 results and strong guidance for the 2025-29 period. In 2024, sales and adjusted EBITDA rose 11% and 15% respectively, outpacing our estimates (9% and 8%), which we attribute to agile in-market execution, distribution efficiency gains, and a favorable currency impact from its US exposure (20% of total volumes). For the next five years, management's outlook calls for currency-neutral sales to grow by 6%-8% annually and adjusted EBITDA by 8%-10%, ahead of our 5% growth projections for both metrics. We think the targets look achievable backed by higher-capacity investments (6%-7% of sales, versus our 5% estimates) to support growth initiatives in traditional trade and on-premises channels and for new categories including beer, spirits, and groceries, and we plan to update our projections. That said, after a 25% rally in the past three months, shares look rich, even after our planned fair value estimate increase.

We plan to keep our MXN 182 fair value estimate after absorbing wide-moat bottler Arca Continental’s solid third-quarter results. Sales rose 10% and net profit expanded 13%, buoyed by strength in Mexico and the US (80% of total volume combined). However, weakness persisted in South America, given macroeconomic challenges. Management deserves credit for agile price-pack strategies and savvy investments in digital capabilities, which bode well for long-term growth. We also view the firm as prudent in continuing to invest in affordability initiatives (including returnable bottles) in South America amid the tough economic backdrop. These should pay off when macro headwinds subside and commercial beverage demand rebounds. We retain our 2024 forecasts for sales and adjusted EPS to rise 9% and 10%, respectively, and our 10-year projections for 5% average sales growth and 15% average operating margins. Shares look slightly undervalued.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution scale, should support the firm’s competitive standing and excess investment returns for more than 20 years.

In its solid second-quarter results, wide-moat bottler Arca Continental recorded sales that rose 5% (9% in constant currency) and net profits that expanded 15%, as strong performance in core markets Mexico and the US (collectively 80% of total volume) more than offset persistent weakness in Argentina and Ecuador amid macroeconomic challenges. We think management deserves credit for sharper in-market execution, multicategory expansion, and heavy investments in channel relationships in Mexico and the US, which should continue to bode well for sales and profit growth. In South America, while we don't expect macroeconomic headwinds to subside, Arca's prudent investment in innovation (including returnable bottles) and promotion should protect its value proposition, positioning the bottler to take share as the market consolidates. Our 2024 forecasts for sales and adjusted EPS to rise 9% and 10%, respectively, remain, and we retain our 10-year projections for a 5% sales compound annual growth rate and 15% average operating margins. Shares look fairly valued.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution scale, should support the firm’s competitive standing and excess investment returns for more than 20 years.

Wide-moat bottler Arca Continental reported flat first-quarter sales and a 1% net profit expansion as economic challenges in Argentina and widespread social unrest in Ecuador offset solid performance in the US and Mexico. We think the bottler’s execution has been strong in areas within its control, including innovation, digital investments, and multicategory expansion. However, we plan to trim our 2024 sales and net profit estimates by a low-single-digit percentage to reflect more severe headwinds in South America than we anticipated. That said, we see no need to change our 10-year projections for a 5% sales compound annual growth rate and 15% average operating margins or our MXN 180 fair value estimate, and we view shares as undervalued.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution scale, should support the firm’s competitive standing and excess investment returns for more than 20 years.

Wide-moat bottler Arca Continental reported a 5% contraction in fourth-quarter sales, missing our 6% growth projection, but this is primarily due to sizable unfavorable currency moves in the U.S. and South America that make up 60% of total sales. Underlying trends remain healthy, with a 2.4% volume expansion and mid-single-digit pricing excluding currency impacts reaffirming the firm’s solid position in beverages and its agility in in-market execution. Net profits still grew 15% (though lagging our 18% estimate), which we attribute to easing input cost pressure, a favorable price mix, more efficient digital selling, and a lower tax rate. We plan to trim our 2023 sales and profit estimates to reflect the fourth-quarter shortfalls but continue to see our 10-year projections for 5% sales CAGR and 15% average operating margins as attainable. As such, we don’t plan any material changes to our MXN 173 fair value estimate.

Arca Continental is well-positioned to ride consumption tailwinds in Latin America, thanks to rising disposable income, favorable demographic trends, and the underpenetration of commercial beverages. We award the firm a wide moat rating given the strong brand affinity arising from its symbiotic, long-term alliance with wide-moat Coca-Cola, and cost advantages from its manufacturing and distribution scale.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution scale, should support the firm’s competitive position and excess investment returns for more than 20 years.