KOF - Earnings call transcript Q3 2021 | Coca-Cola FEMSA, S.A.B. de C.V.

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Operator

Good morning, everyone, and welcome to the Coca-Cola FEMSA's Third Quarter 2021 conference call.

As a reminder, today's conference is being recorded and all participants are in a listen-only mode. At the request of the company, we will open the conference for question-and-answer after the presentation.

During this conference call, management might discuss certain forward-looking statements concerning Coca-Cola FEMSA's future performance and should be considered as a good faith estimate made by the company. These forward-looking statements reflect management's expectations and are based on current available data. to company's and actual subject materially which are the impact performance. results future uncertainties, events can Actual At this time, the conference I would like to to Mr. over now turn Executive John FEMSA's Maria, Chief Santa Coca-Cola Officer. ahead, go Mr. Please Santa Maria.

John Santa Maria

Welcome to quarter conference Good morning, our everyone. XXXX third earnings call.

you strategic joining capital career appointed you Collazo, great Matias him Matias Coca-Cola results, you Chief and Coca-Cola in operation. in of today, markets and planning I'm solid has Financial to Spas, director Head our joined wish his know Relations. this now know to Officer; appreciate our for we success we FEMSA. since who continued Jorge in been will We your director deliver we of XXXX, the always, Investor continue his to Molina, us As Constantino the and interest FEMSA. new thank serve finance morning and throughout Mexico role by

are the report by me to positive that pleased for we results quarter. Let saying begin third

marked face enabling of growth pricing environment and strong was Resilience in responsible raw is hedging material Our volume disciplined to Notably, one-time gains are protect strategies material and especially and across an of chain worldwide. during the profitability excluding territories. our will industries effects, this unprecedented evident when we be morning. raw is as affecting performance describing by us that most call our share supply the

first-ever milestone in all development, results complements Coca-Cola great market. provide in a as general for profitable to markets want bond our as ability wave next third position our and a to to first you results accelerated FEMSA and and affordability key deliver of continue take across of fronts. successful of our update. strategic vision issuance operating growth. such expand and we beer to Mexican initiatives will I From Additionally, I underscore sustainable portfolio and ambitions next our our of company's management, discuss moment from sustainability-linked our year, highlights for I strategic our will Brazil the Today, the significantly also sustainable our portfolio with with for results to quarter an on our to

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quarter. for Moving on our to results the

XXXX. year-on-year markets again, most growing, consolidated markets, X.X% of Once increased the as acceleration compared and Notably, remarkable of performance baseline. same Our Colombia, sequential Brazil, in an X.X% key we recovery seeing saw we XXXX to period Guatemala, our with volumes and to of compared Argentina. are many of the our of

leveraged one-way to enabling categories. gain us our we and more continue and key bottles consumers address to affordability, presentations to in share markets for affordable both look refillable As capabilities price points, across

in across most growth our in a solid while growth X.X% territories. For X.X% our give category Brand personal continue market of to and continues Flavors, grew both category sparkling Flavors. growth our beverages Coca-Cola by and water and led to post you categories and volumes post beverage our X.X% sense, Brand example, in year-on-year, volume still beverage Coca-Cola double-digit To

offset Importantly, driven continued period faster most driven we channels mainly year-on-year previous by channel. recovery pace. was at our reopening the across than to year-on-year, With category of XX% during Notably, Holiday to and challenging they This on-premise recover more single-serve the on-premise at an ahead forecast, across in Volume in of Argentina, mix, the pace by significant resiliency, when key see our markets. decline achieved than X% fuel beverage XX% weather by XXXX, margin of most by a compared growth impressive mix of show to to And that volumes continued is year-on-year single-serve across channels growth a X%. our Colombia highlighted marked our our year. ahead are while markets, in same stills, more compared by presentations previous growth volume are as the traditional the water continue XX% personal Mexico recovery which beverage grew channel driven trade the of XXXX. continue grew regards The than sparkling to quarter. mainly the and the had X.X%, by such in XXXX. already certain grew our for a partially with that channels territories,

the total beer part unfavorable For solid unfavorable the pricing of volume Gross profit led operating mainly year-on-year. growth the driven of which was X.X% effects. a Brazil, increased a responsible revenues XX% one-time an included offset Heineken's mix by U.S. main the our achieved X.X% effects performance, in This three approximately and by favorable operations. and price favorable to that of approximately currency quarter. hedging total to currency coupled translation portfolio resilient led to depreciation increased excluding currencies decline quarter, performance, raw pesos; material our revenues and effects, the with of top-line second, raw costs transition as first, growth material Notably, revenues factors: year-on-year. for dollar. the tax our in our consolidated was the This our of beer by increased most into increased MXNX comparable this third, in strategies compared Brazil translation tough face base We comparison billion; and Mexican in across efficiencies performance partially of X.X%,

recognition our X% a Brazil, performance during concentrate in Trade gross resumed from of XXXX. call, credit supported we on Operating also purchased previous Zone as the years. performance income our Manaus the with have Free quarter declined second tax versus which compared discussed as margin Additionally,

from operating X.X%. declined a the cash normalized for same billion our increased for X.X in the normalized period Brazil, excluding the effects, for third mentioned XXX flow of year-over-year, and However, by increased tax previous effects XXXX Operating XXXX, of solid which MXN X.X% MXN when X.X%. when quarter nonrecurring million income

by MXN period nonoperating expenses to in billion, impairments reach a the consolidated driven year's Azul, other mainly income increased of last sale recognized Panama, X.X venture the during joint XXXX. in XX.X% same Estrella Finally, dairy related to and decrease the of net

Let significant some across quarter. lower increased me for provide and challenging operating additional are territories. by we Mexico, implementing the key of faced characterized color strategies and temperatures rainfall the we average a part on In weather conditions environment

started of Mexico sale. mobility hours and as key certain August, increase and country, regions the operation during at reintroduced points restrictions COVID-XX Additionally, City, as to cases July such to of of

are XX as we continuous decrease according restrictions As in light regions transition measures a encouraged green and that epidemiological country Mexico. light of are, October key City the our enabled to cases the as to and ease these of in to Mexico understandable other traffic

approach this to to the consumers. focus the our consumer-centric dynamic and of affordability environment, Importantly, in provide our to on we continue face ability

during such strategic were Notably, XXXX As to a the our on result, key X.X% able increase regions continue and southeast, weather year-on-year are volumes in the invest significantly Mexico numbers. priorities. baseline milder to quarter, our that we as conditions faced reaching

Also, regard to our identity universal share which visual the to provide our provides For rates. Coca-Cola example, affordability and double-digit refillable our grew of our with gains. of the new consumers, substantial bottle, coverage to focus formula on increasing continues portfolio,

this on-premise year. of a lockdown of in Our mainly continue order-taking to the year. channels, last and The WhatsApp feature from execution reach exceeded Mexico BXB to Mexico, regards the especially after such result long platform by we traditional scores approximately end XXX,XXX With in expectations. clients expect improving, our the in

have a reaching value with as We card average channels home while January, units delivery by and Mexico in tickets territories. XX%. encouraging compared almost home As proposition registered, client continue with routes has complementary our continue XX%, of reinforcing delivery these has significantly. we very over Initially, operate this grow XXX,XXX in to clients increased by now credit for taking all acceptance all our increased and emerged in payments, Mexico clients in operating XX%, growing

these of during we quarter result initiatives, the operation third affected that believe are a that the transitionary. our As Mexico headwinds

the quarter X.X% is in by categories. our year-on-year. volume strong Brazil, by energy to This share juice, and on the the driven sparkling, Moving underscored gains, mainly increased performance tea,

further quarter the that say the rollout and Heineken At in Heineken Coca-Cola Tiger, disruptions of included major completed continued Company, with network, we same and brand a the beer no to encouraged we transition our we Although we the the of Eisenbahn brands time together portfolio. to consumers. wasted distribution marked complement transition I'm to without Amstel Heineken executing and and options have our our network. additional that we clients evaluating distribution and time, to

distribute Andina. we SeaGalicia Therezópolis Then system of announced craft Brazilian announced in beer distribution First, together agreement a to we with in the August, together with acquisition September, Brazil. in Coca-Cola Coca-Cola brand that portfolio is the

of rollout Brazil WhatsApp Importantly, the continues our BXB lead platform. to

and increased the have We clients. the for effectiveness relevance our

onboard, are they clients purchasing more increasing items bringing and are more satisfaction consumer metrics. We while

As December in have total and XXXX. up a of country clients XX% in XXX,XXX result, our close already from orders we XX% digital, to are up set the

overall our volume Colombia, the by Growth macro Moving with a Remarkably, coupled on-premise this portfolio to XXXX. solid on XX% the volumes of of recovery, this ahead driven market and reopening posted is growth. the initiatives year-on-year XX.X% is our channel. in

execution, universal captured such portfolio, double year. enjoyed number quarter, our to bottle, and solutions of our us And has expanded we [Indiscernible] of BXB as active In XX% the result, The have universal Notably, bottle share allowed Guatemala, grow During as This since sales. already pandemic, omnichannel gain XXXX. cooler third than digits a we outstanding continue of more execution represent supported a the initiatives, continued the previous many by in active is gains, and sales clients sustain our affordability the consumers. by a launch country. performance before X% of in number and for the opportunities points coverage. we our consumer-centric we enabled to versus winning Colombia of surpassed in increases grew volume successful to growth. two developing the our up has omni-channel share to

of regain environment, plans our strategic momentum. to want us I a the Argentina. By our enabled Finally, has to highlight performance in complex execution

now us enabling quarter, of growth. in now of Results the is our categories, positioned volumes restaurants, are such the as category to higher cyclical a portfolio XXXX. capacity encouraging as XX.X% in drinks, XXX% with gain borders gradual reopening capacity X, eased country have than For Monster October X.X% for leader energy events, allowing high-growth and in as In share. are of massive restrictions increased that initiatives double-digit our and

Our line, mainly an driving are revenue mitigation encouraging has by With to our driven favorable actions us and enabled growth in during profitability, our recovery to management package XXXX regards the on top-line mix. undertook top grow focus we profitability.

actions the position we we a a taking scenario, forward, our Argentina Going our within recovery. that we position resilient the we are business each of the long-term are and markets. targets long-term investments for to strategic capabilities for adapting necessary At needs are have confident priorities still context ensure sustained In despite we that transformation, and volatile the summary, confident to of are time, same model ensuring in clear will year. achieve and the our behind to order the our our growth

want to beyond. and on some I share Finally, thoughts our XXXX for vision

on with best our mind, this environment. customers FEMSA and time, adapting and are investments With the COVID-XX for their transformation, new reshaped the digitize reshaping have new substantial categories. this preferences of trust standard are emerged Coca-Cola brands. a consumers across same shop. X% of have and a consumer reconfiguration way Part We wallet, and new in how they interactions of making and companies and of excellence is occasions different the thriving consumer changing technological worldwide. has consumer more retailers brand consumption share to more Waste At to

partners, multi-card We exploring our portfolio with our the to opportunities our consumer-centric continue worked relationship Company plans, have and strategic a five-year building markets. across growth with Coca-Cola strengthened winning our align hand-in-hand while

positioning cooperation previous we in beverages, complimentary markets. products with Company. to roll FEMSA certain our the July to for in earnings announced over With to actions for taking, programs distribution continue vision brands, value we alcoholic for consumer right we the call Coca-Cola company the many confident am I now and set that, of consistent test As and out categories, the Coca-Cola our will spare the is and are creation our to enhancement This to years with Constantino. growth hand releases, last I leading of that framework are come. our long-term on other continue building such Reflecting the pilot we leading as capabilities

Constantino Spas

year, our while call. quarter volume you, all flat on now remained on today's us Mexico, and Thank thank John, year revenues for you joining on our I earnings In will highlights. division increased expand for X%.

delivered during Our environment and mobility initiatives strong faced mix conditions our weather operations this a in Central very successful offset favorable quarter. America, restrictions In partially tough price pricing performance. were by volume a

in delivered double increased all the period particular digits to this volumes double-digit of Notably, Our same our as growth markets XXXX. region. in of compared this division

translation On Mexican front, average price the currency was Central pesos. effect our into negative over pricing by American the currencies impacted

a compared quarterly revenues to in of Central As as American Mexico increased X.X% result, period the and XXXX. division our X.X% the same and

front, our remained virtually profitability profit for gross the margin the division flat. On

Our by successful concentrate implementing savings and the compared raw costs by a hedging quarter We'll offset efficiencies. prices of commodity and hedging and profitability of strategies partially to to same protect effects material the definitely the higher strategy as XXXX. in disciplined continue were Mexico maintaining increasing

Moving on expenses the to front.

labor, a of marketing, and in and our base mobility operations. Mexico see Central high-profit certain to important our XXXX During the expenses, gradual America to as increase normalization an It very as we the of this highlight we fact such baseline. normalization to as are that result in of is compared a maintenance, maintaining operating a quarter, continued and

Looking points compared basis XX when our operating and increased XXXX. expanded at X.X% income to

our by volume another increase of growth compared delivered volume and XX.X% encouraged leveraging continue we're on Going protecting performance. move raw supply XXXX a we'll baseline. facing. our to on we strategies offset efficiencies compared dynamic XX.X% focus to environment and America, This the as hedging all margins the If South by very material forward, as to chain strong we're to quarter division XXXX to and

As this coupled these in and we mobility, by remarkable performances quarter, John increased with markets. share Colombia, Argentina gains mentioned, saw in driven

currency quarterly revenues management of Moreover, portfolio beer impacted and revenue Our volume Brazil. in initiatives, were headwinds. the growth prudent unfavorable the division offset partial pricing, were in our by by our partially transition

must an payments in John Finally, as to comparison consider base Brazil entitlement effect our billion. reclaim described, to we previously for MXNX one-time a due tax in also approximately

line by slightly X.X%. decreased top Our

the line exclude currency this if increased However, have our during X.X% we would top translation quarter. effects,

in a beer On Manaus sugar our profit representing freight from credits costs, South in U.S. compared XXX driven and partial These Free Trade the an were tax the to profitability margin our mainly front, decrease depreciation the increase of and effects partially effects the on in dollar, of by contraction X.X%, the our offset by resumption This transition. of purchased points. of currency the Zone gross decreased Brazil. as concentrate was America basis

operating the division the XX.X%. for XX% normalizing increases effects decreased as income more we extraordinary year-on-year. tax operating Brazil, Our By in previously income described, than our

very case our lead are point environments this P&L. as couple been this to tax for not we has Although additional anticipate in this time, years, to do of volatility at Brazil dynamic, could that for the last the

we Let have strategies. the of the me remainder on in and paying. provide the year, our with hedging around our needs of our at you than Notably, raw we aluminum for of and Mexico Brazil. an for XX% the material our prices of PET Mexico, needs hedged XX% In have of currently update more have also ones all hedged hedged above in XX% XXXX, needs we’re slightly XXXX remainder we

sugar as that we quarter All XXXX. front, results, have covered confident very we strengthen financial for will we to mitigate our and treasures position. XX% the and than the XX% expand reflect sheet I on now our in sugar Brazil, our to approximately for year move to of our for balance financial On fourth our continue these initiatives prices. profitability will remain needs XXXX more the into which attractive at strategies all, in

debt a the to exposure driven the was by result real. by gain mainly impacted financial exchange U.S. our decrease and in the positively as a peso dollars as year, depreciation Our foreign Mexican compared previous comprehensive of net recorded Brazilian

incurring In addition, driven Mexican during of interest at of quarter the financing XXXX we first expenses, payment the by and recorded bond. mainly peso-denominated lower payment the of short-term maturity a

rate and bonds MXNX.X also and to Consistent in credit the market bond years. billion rate Mexican has represented tranches, fixed in investors, issuance a Mexican FEMSA’s market. our MXNX.X variable due the sustainability. at from first-ever happy to discipline, of strong Coca-Cola confirming our sustainability-linked first-ever priced MXNX.X This bonds two Now transaction due we with the a say in commitment were discipline Mexican our at priced that sustainability, profile, billion. five seven our for and focus billion market successful sustainability-linked years let in expand participation bond on in These on sustainability-linked received financial me broad the the dedicated investment-grade issuance for and financial we’re

liters liter water by X.XX transaction, Coca-Cola benchmark ratio ratio and this use to X.XX XXXX. XXXX of of of produced a of part water we’re use our a publicly by per committing water ratio for liters, use a efficiency achieve Today, beverage of the water is used water of As X.XX system.

on can related commitments bond confirmed details framework with copy who targets transaction, additional our For aligned ambitious prices. provided second-party proceeds sustainability-linked website sustainable bond Sustainalytics, a of and find our on copy and of use our of our a opinion to the this that are by you

want to strong Coca-Cola reflected and I our financial cash is again flow balance Finally, in underscore once FEMSA’s which sheet solid generation. strength,

position our debt-to-EBITDA end the X we closed to XXXX, of times XXXX, MXNXX of with billion. closed compared X.XX September while As of ratio quarter the at more times a below cash than XX, net

our remainder using our cash in XXXX of cash billion. take regards the flow MXNX.X will capital the for approach very the financial of continue to highlighting a confidence With to control distribution installment will we On generation solid a cash Additionally, CapEx, of allocation, share approximately MXNX.XX per we to total disciplined the tower strength X, and pay Coca-Cola in FEMSA’s position. dividend financing of – terms our a ensure by our November year. second encouraged amount have proud making we and for solid the the environmental I will that of environmental our to have are positive impact, cash quarter am flow efforts only the very sustainable achievements commitments in we maintain that these to very during our not history generation also continue industry. bolster this across as of methodology confident but

we’ll very focus with will and our As continuing principles. back driving call. call the continue for I at listening for growth our hand economic remarks. core and today’s Thank the final create which on you to to company’s you. And now Thank always, that, value, of his much while to John to social patience

John Santa Maria

In you, encouraged Coca-Cola the what for future closing, by holds I’m Thank Constantino. FEMSA.

the We and continue culture, we to strategic our fronts results described have right talent, as we all and strategy, across deliver call. during today’s accelerated

questions Although, our ultimate Thank sustainable deliver our come. for Operator, today. joining and us ever your like as dynamic, you clear value long-term market environments interest, shareholder many is open call and growth trust and for for for goal to now. the I to you support remain as years would continued

Operator

comes Thank Our you. [Operator Ucros Instructions] from first Scotiabank. question with Felipe

Felipe Ucros

for Good John, the my results. the impact. you. Brazil and Thanks Constantino. morning, Thank question, Very on on well taking forecasted congrats

on release, seems the on testing just about pilots. side, mentioned you in agreements agreements, countries in distribution the distribution where Panama it now my you’re comments that Just list in the the wondering, Mexico and of distribution

could about thought a little just was a I in you was would strange, would consumer give have if Also, you’re I what thought have wondering a conducting I little two mention of mentioned saw beverages. product more I those So countries. pilots brands, which detail you us

that wanted just So it. was it Thank just my into pops you. as referring products. confirm I non-beverage to mind to maybe it’s reading I

John Santa Maria

try we’re this. line across you question. legacy of mean, geographies all, Yes. Felipe, Brazil, where – story, Brazil, for business as of running much started first what beyond I consumers our all to enable will beer, Coca-Cola frame to gather couple ago, in And and learn the Sure. mean, mentioned shopper that, our your agreement strategy. ability I we’ve value that we’re in the let and at thank right, framework doing different programs future. to is occasions me of know everything pilot we new where to conjunction we you and we’re a and focus months from But necessary right, proposition with a today. enhancing with so Coca-Cola had with in In our cooperation and now insights for strengthen multi-category us consumption with Company, the retailers our and assess and on

case, thinking customer-centric So mind, this that – with lot sounds to And in a that a – value but us like allowing has I full true a our proposition about cliché, this know leaving our is we’re us this allowed with extent. approach. is start that to in

we’re but our adjacent categories us does and value from right? that to beverages. the looking to proposition, how to that to and proposition add also at value we’re So that value going backwards the that With consumers, are our customer mind, looking in at beyond they’re

accurate. So to that confirm your question, XXX% is

a believe with now, level, So portfolio. that in these disclose some this we right? leading now a includes can by pilots, the one – this at in us we And that we’re them, right? there, agreement significant out sale it being allow but beverages, right check will value currently in for decided are of right we’re points to it’s of the in served pilot patients a companies that the test focus – a the going serves execution program home combined consumption Teva portfolio to boost traditional premise new distribute not of to example, So Mexico, serve an to of brand we’re of only pilot we’re So to you of and sales proposition and and running Coca-Cola and with starting not channels. beyond alcoholic the go with delivery very FEMSA the portfolio city the

household from proposition to occasions one-stop-shop this the trade. region other and believe a in that Mexico, hand, we new program to us care serve another traditional the products beginning world’s we’re will enable one products pilot It has for with in FMCG the of value leading company. strengthen personal On anywhere shopper

lot beer very proposition to the as we working in where on solidifies can market, And program it the approach. to companies that. with quite extensively channels. also running alcoholic of example, confectionery. very So our we leading is with our case recent, we and Panama into the already well focused world. that’s, what moving And value this already of get regions, lines the Brazil, In we’re Mexico, our distribution have with in market in in Panama, pilot that which we’ve we brings it of this in in the customer-centric started placed address a and believe as project And of route process. portfolio. to, new life some there optimism well We the tested we We from enhanced have adding the Biago for we’re beyond a we’re and propositions results and adding sales Brazil, consumer those way terms and we’re beverages are along in good we expanding into other other one also complementary in of

them. in players our more it’s hope And planners. dynamic. our you a with visibility the for of live. exciting. information than in host to we market. see a serve regions, the It’s the the potential so your provide customer, So and pilots up able and consumer, Company, for Coca-Cola believe will you our levers remain addressed is I the And Coca-Cola ourselves, in very win-win This to to and any the on more significant can frequency we up these chain, Felipe. extremely change We phenomenal it’s question, FEMSA that And them way shift has addresses and that be penetration then It value in very many quite will market. the welcome ability focused. And scale fast, our and

Operator

you. Thank

question Simonato comes Bank next from Our Isabella of with America.

Isabella Simonato

have call. morning, I questions. Thank you. Good the everyone. Thank you for two

question, us in color more where per outperforming, pickup some that eventually can look pressure a when expecting question. regarding you more in sales, other that beer brands bit give First and my Tiger you guys saw of the or is are where will of some and consumption understand little XXXX, America? portfolio for and the Brazil how America, the of seeing of second have you’re countries first forecasting the environment left you’re about Thank margins transition eventually country, you you you’re I and rolling countries. the South in be out? tougher completed profitability That the that think in we considering in all, you. we right the How South at that brands ramp-up how can And a eventually saw

John Santa Maria

America. you question. extraordinary would exclude much to in year-on-year. reach we have South basis EBITDA so if for XXX This margin as tax Well, expanded XX% EBITDA. the our mentioned, be points Margins Thank your approximately a effect, EBITDA XX% growth you would

to by explained and better We across this is the America give that overall. in effects. you mix, well. more very are particular So performing markets Colombia, had color, following South volumes division the Two price are recovering Argentina

effect in margins. material these mix, So had markets that, positive conditions price their difficult their recovering and that raw Favorable differently, has are despite the a hedges. very they face they have been

doing margins. we explains the one so of job, South that As that in Brazil, effect, good we in tax hedging And for on right? been of had far America So reduction the a think, mentioned, extraordinary element we’ve hand, other at materials. the despite I that’s the raw tax effect credits quite

transition In the in short mentioned, And that margins more as you addition, initiated, of the on beer elaborate our negative and right? that, has term. impact we’ll portfolio a to

you’re economy have Maybe are structurally, call maintaining brands, dropped? letting premium a the you lower Amstel, hello? Hello? you’re incorporating Heineken of brands and As – that and set go margins of

Jorge Collazo

I’m on call. the

John Santa Maria

u want stopped? where to just You complete

Jorge Collazo

here. call the on I’m John. Hello,

well. I online as back think Constantino is

Constantino Spas

technical if I’m got online. I off, very I’m cut back Yes. sorry difficulties.

John Santa Maria

Okay.

Jorge Collazo

Okay.

think online. I all back we’re

John Santa Maria

Okay.

cut had line. So I we off We saying, that as a difficulty. was – and the sorry technical got for

beer the short portfolio, term. that the has impact in transitioning and We’re negative a

with new that letting you’re mentioned, that but As margins. volume economy in your I margins, go beginning, margin, right? very keeping in very two low adding in positive brands are effect into of products lower and So structurally, the healthy margin brands and the treatment high are that they’re lineup impacts

maintenance seeing expenses of company of size So and this and this Colombia markets, costs picking in take the of evidently, for operations a XXXX, up, our applies to in labor containment. is cost you also and in right? We’re in normalization a and lot sugar of increases most Brazil marketing, our measures

of look Some letting have over of that start when – to also roll the an normalization start impact and has XXXX. at to versus some of you them go them you and it you of

the opinion, to and start Once But the the So strategies about place And expansion that like to our situation. is sorry a your transition the of of margin we markets that, high And for that the once to that are the brands I my effect into the year them, probability very margins. is if effects optimistic And believe portfolio of for that be the hedging new I’m in in gain able mixed with base. don’t out full explanation a It’s we’re in we’ve again, that protect question. are traction. tax once XXXX I interruption. know could be put will Colombia, should addresses some even say – margins. –

Constantino Spas

sales. And of was Isabella, to our how to your other question, part second what was just I think the add the thing,

is doing distribution which according pleased to levels. gaining expectations. First Having of Eisenbahn, is launch the liquid, well doing very And with how we’re craft above of And developing. Tiger there all, premium wonderfully. an historic we’re high It’s the is on very, is extraordinary the Therezopolis, well. portfolio in levels also

premium, configured I of developing terms structure So How developing portfolio cores are beer volumes levels is we’ve Brazil is doing well. and and distribution coming in correctly the think are portfolio our how and coming. super-premium, the and overall, the economy of are in we

to pleased things we’re the of see So developing. are performance how

Operator

you. Thank

from Our next question Recchia Marcella with Credit comes Suisse.

Marcella Recchia

Thank my I Constantino. two you my on for question. Hi, have questions John. Hi, side. taking

performance very Brazil. But and on a on drink soft Dino, volume decline side, one the a quarter. in other solid reported this your again, peer delivered Once you First volumes.

sheet. be hear second So And And the very outlook country? explain is it on thoughts would you could the gap? you solid on from interesting on question in what forward demand going your side basically your this my to balance mainly are the how seeing

You are one mentioned a times. with below that ratio net debt-to-EBITDA you

even or would very good repurchase hear what you your be you shares? much. So if very it extraordinary considering distributing capital to also would dividends priorities Thank from be deployment you are

Constantino Spas

one, of Thank with you, can have complement Marcella. talk John Well, we I’ll on his Well, thoughts. and take India. I’ll behalf this

of So, I in drinks, growth in have volume portfolio, So sparkling in categories, we perspective, towards including all, the initiatives, gaining market share effort tailoring Brazil? these such understanding record there And with you presence of accelerating decisions with that that to energy allowed heavy with digital has the shopper our digital proposition putting First on portfolio, – capabilities digital higher the behind and to been gearing our penetration what’s returnable. huge levels habits driving our give across our as right? of multipacks, grow. rollout portfolio continue can us, consistent by value our that affordability we’re

we one on we what we that Plus to Juntos of other the business day, in mentioned managing terms is this XX,XXX week. using XX% effort. represents equivalent this front, over than And order in each our injury almost a traditional orders John call digital resellers hand, our XXX Brazil, model platform, a of which in growing WhatsApp We customers in base over by in – and that’s total On right? increasing at And point XXX,XXX that’s are more have platform. time customer XX%, centered in our

conjunction of which at overnight. market, think focus look have different happens is So, we and when very This the the important. put that that tools the not something in the I those consistency, you is

quite for there, as in to been We have it we’re and and a the think, you are volume able few I Brazil, years doing mentioned. well, the resulting navigate now, pandemic

also is else an know, drive something continues to important don’t the… you to that if growth. to add consistency the want volume John, So element I

John Santa Maria

for Marcella, question. the thanks

in for we coming I that value performance high very lot our are of across taken out. And what think of with what’s terms up. What is has Brazil a fact do we to our proposition the is, just spoke it have a basically, of in Constantino I the terms have about digital to sales done force capability we any order taking in never customer.

ability via complementing digital, our stores anywhere. on small And the anytime all keeping for We’re street. to we’re feet the order

per So more we’re more account. lot lot volume getting accounts, from a activity a smaller

looking items getting per per And the as customer a – customer per multi-category growing is we’re sold We’re store. what number enhanced the our the – being ordering portfolio, we perspective, for of consumer from store. complement

that So is large on. key going very I think what’s to a

our strategy multi-packing is an with for thing combined other have performance we portfolio single-serve share really I right of we distinguishing today Brazil. a point getting all-time all-time I now. in highs is And is Brazil we’re are so that what’s the where both think, that, have multi-serve think And and the you where to shutter

what driving really And think footprint – we I with obviously, value for to to speak expand most So, our that’s for determine the Coca-Cola balance the to Andina, the geographic is And on I intent what entire the define Coca-Cola think our companies. the – conversations bring and what’s performance FEMSA. both side is sheet but system are What about expansion – for sense logical for there. will that’s – the our strategy continue can’t I in active Company.

to any out go that to intent go dividend our this So extraordinary not business. out okay, and in point, at and base is deliver the

many reinvestment We inorganic across for we growth. look continued have then and ample opportunity initiatives

Marcella Recchia

clear. guys. That’s very Thank you,

Constantino Spas

capabilities, – deploying we’re And to enhance of and our in for footprint. only we that bottling our be going and in in the mean, expanding our mentioned. expansion only organic collaboration not terms can your inorganic very with capital. framework capabilities line And also these in proposition, that interpreted These fan conversations should example, opportunities complement, looking to different geographical possibilities the in digital John, forward. system enhance The at at I and looking value how have had we’re capabilities

with used Company. in quite conjunction John So the way that as that to. different inorganic mind, right with we’re we than at business mentioned, that now redefining Coca-Cola growth looking the in path, And the is we’re

off bit, I for a got question. think your you thank cut so you little

Marcella Recchia

Very you, clear. both. Thank

Operator

you. Thank

from comes Our Alan next question Alanis with Santander.

Alan Alanis

Thank for results. morning, you. on the Good taking my and and everyone, congratulations thanks question,

me X.X previous I cash. mean, have you follow-up question. billion MXN on the Let of

net one-time debt-to-EBITDA. under You’re

billion, firing grade. investment So MXN power your losing X that your without in Italy, above means

into – you you mentioned first of in we that all this firepower? can these that geographical That – also considering would expansion, incursions Or large prefer be new will deploy but question. a projects? mentioned small series a capabilities way, You is the what is capital of go like to into the the likelihood what is my likelihood

John Santa Maria

to want You that? take

Constantino Spas

on think more What to Yes. we're industry the customer going Hi, if Coca-Cola think doing and allows with low of this the Alan. way consumer or you How new I the in that about become are you? renewed we're first, Listen, finding Company. a looking where is – customer-centric. us framework there relationship is at we have the

Coca-Cola So but in as up our platform forward to approach multi-category add of building only companies think together. those opportunities could actually to and that also we is go open are about a value markets, multi-category that not a all territories, brand that there okay, to acquisitions we're

that's the first part. So

to of them to system. to difference preference to with forward make these our piece to would be we as as the Secondly, bolt able categories; secondary value into to other enhance a continue we learn and And to acquisitions territory the expand system. for for Coca-Cola go be significant expansion FEMSA businesses, about continue

out multi-category. that just and capability. to capabilities, to build Alan, entertain piece don't probably ourselves federating be early tell up acquisition, other we're too think it's to new build partnering digital I third this out about, our the a think think I of also the with when we would or particularly make as to major we joining, opening able about, something go especially to to is thought And need we people know there we'd that

too would that to where tech it us about complement to would be far-fetched platforms, think allow our heading. we're investments partners So and in not that's

Alan Alanis

know correctly, really if the Constantino they're made comments in about year-over-year. single-digit I beer declines different like mean, regarding quarter quickly, here your volumes had high the numbers a business yesterday one-third Brazil. Brazil I'm running really in way but said this in Well, looking for I than mean Heineken mid-teens, the morning said, at volumes. reported in and already question did reported the you and Amstel that. in Last lose Congratulations they and I are you the mean, you in growth I in past. they of I mean, that seeing

the of volume the let in at how recovering mentioned of of brands I So goal? going of Appstore be take see the years, trajectory number Heineken in level back terms the Andina lost Heineken do three years? how to agree would that you the it and in long the you you two to forward the Brazil yesterday, will think brand terms before

John Santa Maria

You want to Constantino? take that,

Constantino Spas

Sure.

prudent a Alan. is years two horizon, that think I

Alan Alanis

Okay.

Constantino Spas

value from capacity definitely great, base. in time, small the there fantastic example, very a seen, mind potential, you've that, the at are at a Estrela liquids is same today and they're exponential the brand, our offensively, brand proposition very, and the the architecture drive that small way growth But in local also and capability has with both best, will distribution craft is enormous a the as for production and Brazil, for expanding very too. looking Therezopolis

initiatives in and the the time, have the And we're we and that I other Heineken conversations that also having very rapidly. pipeline, say at beer complement same portfolio too. in So also grow must the can portfolio

tell early prudent. very would two years be to So it's

example, our of And I growing coverage provides that of in us Eisenbahn, for in light seeing, that system our think some is FEMSA on we're these Coca-Cola has. that brands fast. potential what some super the

would prudent. to more and years, hands So – we'll I in two everything try our in do aggressive faster that to be equipment.

Alan Alanis

Yes.

of in on You partner that who I but best there. out did with I'm degrees terms not mean, comment, you to of have I of going can this question, wish it last is put lot freedom recovery. a a beer. just the

and in Congratulations your But anyway, a questions? to much side going conversation. as their strategic that's thank you departure mistake from we're on think I of Brazil. for this so for my results, kind more look Heineken taking at another

Constantino Spas

Thank you, Alan.

John Santa Maria

for Alan, you, Thank question. your

Operator

you. Thank

comes question next from Carlos with Laboy Our HSBC.

Carlos Laboy

top bit bring Yes. a that specific bit changes earlier. FEMSA. management Good big-picture, to opportunity of that management changes everyone. redirect see if covered for the FEMSA's address working ability on? don't opportunities a your you value-creation this little impact opportunities certain Senior know morning, you the John, how or does sometimes to But to rethink Coke I some you're

John Santa Maria

to talk you. Carlos, Good how are to you.

Daniel that joint that an development FEMSA by senior Coca-Cola is both changes have that agreement is continuity component I been the Eduardo FEMSA. that I would to ensuring framework we to Eduardo. bringing the have. the a at begun has Company management key this interpret come And and think was new FEMSA on something in way

being And of and further brings ability businesses experience so in place internationally somebody by knowledge exactly what global a develop that through FEMSA. has I the put M&A that the the appointment Daniel to was has acquisitions, see complements that is strategy in perspective of and

we in that So via is this think so inorganic strategy to place, a a expansion have boost expansion. I continued

under it's at further team. the we're have – we looking even management probably So new accelerating think this opportunities I

Carlos Laboy

you. Thank

Operator

Thank you.

Lucas from comes question Ferreira with JPMorgan. next Our

Lucas Ferreira

the everybody. different to of your you same the strategy of don't questions. fact think in would regarding I country, say. being multi-category, – going, a ask space probably it's platform, for of sort a weak upgrading John, coke the growing Hello, Thanks the the that system

have in say, to your they of follow-up if with I question. bottlers to – question, And whole multi-category mentioned sense? a to is broader service my This you For in comfortable you're you – second just Can aspect providing of already yourself? customers? have instance, if contributing right? into to more – only CPG a you get actually own of Alan's Would this That's partner initial, actually if between they of you're sort their achieve pure to all have improve all Or a distribution order some Coke also countrywide more these operation, feel satisfied this multinational And any in the partnerships sort coordination the that the same to do partnership, bottlers if is customers companies. idea in your experience bringing the of corporation, you with a to about doing the if this may, a So this order would is sales, strategy? of question. synergic seeing is the talk not to some let's system them. the direction seeing actually are you

is I your today, I portfolio Constantino Brazil of value in too think much to mainstream. and answered of guess, kind But this. skilled kind

Therezopolis, You're [indiscernible]. now with with

since premium the of think you Thank going to market? more you. fastest-growing So don't reinforce you're portion need the this portfolio to is the

John Santa Maria

one last we'll Okay. that build Constantino, other want do then the And you one, take first? to on ones. the

Constantino Spas

Sure.

mentioned I in building portfolio. we're the up As process before, the of

spaces like As mainly doesn't a partners latter that Heineken and we're proposition the with and you Therezopolis. definitely and The portfolio own in is in premium within developing brands, the the in we other Heineken for definitely – right? includes some conjunction happen and super ideal relevant including plants. what portfolio. So brands, combination in other and premium value We it's drives those process overnight, building of out of know, have – partners other are we're with mapped

we answer is yes, We're it. working need definitely the So premium. on

John Santa Maria

the of Okay. of selling thinking that out we sorry selling. that the what metrics lot the that we with groceries already growing the and customer per you're fact store multi-category across selling or more? Listen, growing And you this sense that about number a start whether of when have of I'm you not of indicator is items makes Mexico there on all, are Brazil particularly. for satisfaction an is see experiences. Are not First – asked Are we more? and we this successful in

platform selling the active digital and [Indiscernible] we're put platform put they're multi-category when at that on So top, users, we start looking this items store we we're XX% using, more. the of and signing the number with the at together. with

Okay.

hours order that – from discoveries you big and we to with the we retailers we're portfolio Coca-Cola there logical purchase is by if a and at we're time the that have. to having of for that them also I more very to if order want, dilemma they better when items a together getting get give one other lot put change So order more late whenever orders in is the

of store, per the important some portfolio. multi-category more So adoption a lot purchases numbers of very entire seeing store more but we're items on we're seeing per

you either sell, we're players or of with working do issue the the And virtuous through of that's lot distributors. start I exactly and system, through goods you obviously a have at there out but we earn to wholesalers preferred when a go the I it's going other in distributor, a – better multi-category. consumer fast-moving as system out options –obviously, is for. when bottlers take distributor, to exclusive continue circle also that Coca-Cola and think Coca-Cola large lead backfill customer to the they more these brands way to becoming they and terms your think to territories looking okay, that brand's is potential is there FEMSA the looking I think world, here you to they're The you what on So that on So forward, becoming smaller or have. a on And in to will have the start and we And right favors interest the the favors that that the bottlers go on in is way what distribution the unique rest you the of are have plenty. have part wherever obviously okay? of go

think do to as the okay? going I say, I it's have opportunity this, weaker for But think second to a will bottlers, So you step the system. be

Lucas Ferreira

Thank you very much.

Operator

Hernandez [Operator you. with next Instructions] Antonio comes Our from Barclays. question Thank

Antonio Hernandez

Thanks questions. morning. taking Good for Hi. my

of Mexico, quarter. a the But are the also product in part how you in weather headwind performance cases that, excluding seeing volumes face you Regarding higher and ahead?

John Santa Maria

question, Antonio. understand. me Could it my in repeat listen least At difficult to was I please? to to question, for your you struggled the case,

Antonio Hernandez

Mexico. in performance volume regarding It's Sure.

and a in quarter. higher headwinds, faced of couple of You restriction, part weather conditions mobility the as such a

and do see your Excluding that, expectations in performance how ahead you Mexico? volume

John Santa Maria

Jorge?

Jorge Collazo

Antonio. Hi, is Sure. Jorge. This

as important weather regional Mexico an look highlighting was see definitely So the was actually weather if versus conditions, faced of yes, the Southeast was did we our remarks, Actually, on easier basically or factor mentioned a flattish you and XXXX in you milder this his during as that Antonio, baseline. John that growth quarter. basis

encouraging us for for going forward. what's So that's

a And Mexico plans affordability. to we into the we're fourth So we been have focus in team, do to then we expect the move optimistic that as are see with they recovery XXXX, going on our quarter. discussing on and

consumers affordability Mexico. in several customers, our our value for to offer continue drive We for push initiatives have and to to

grow that baseline, should XXXX. So that XXXX weather be ahead definitely our that would Antonio. in of they And important will of was an this we course, right? mean volumes factor think quarter, So

Antonio Hernandez

a perfect. Okay, Thanks lot.

Operator

you. Thank

Garcia comes Pactual. from BTG question Alvaro next Our with

Alvaro Garcia

I John, Constantino, factor, Jorge. weather mentioned One the but Mexico. market small Thanks know was this volumes also of market Hi, share, the a losses. in big follow-up call. for Coke sort share on

could year. would given share market this any of obviously, it we And Mexico, from call, up you. of or to is be all came My a So flexibility dynamics this the is, think Coke? read framework not should you tricky front particularly cost into next if great. given apart Thank of on concentrate couple in question operating discuss the on it just maybe that times from is, and environment the on fair at sort how that Or Coke with Coke, into new really? yesterday

John Santa Maria

for you Thank the questions.

term, you one give the First relationship support whether we was alignment other to to of flexibility Coca-Cola you're the have it's we what long-term I all, but something the The and required going to give think is short what and Company need going to – another. not a way with – think going that's we – not the and short have is the certainty. you more understanding ability I And what each or dialogue or term of we

wouldn't were there your Company any from think that to open flexibility. support additional So cases But programs, no, the we of any to answer Coca-Cola I for that. always need have question, do I be think just that particular to there where they're

marketplace a satang. City. So we on the in marketplace in wouldn't you bottles delays secondly, we've And were I I share had Mexico dynamics as availability bottles read given it Mexico some on too Mexico, a the competitive supplier very much that – City, certain think bottles of we into have very of in competitive in and And machineries.

to go And It's probably you future. say. the dynamics. different packaging fully been from of Mexico But not our basically where slight there – Mexico out and to contained is okay? able two led these that that three And than outside to to issues different in what sites how it's decreases, or address execute we fully have strategies, of are has as them we're the City. and aware it understand, We

Alvaro Garcia

Great. Thank very John. much, you

Operator

any is have presenters I our questions That the today. for time closing remarks. all back now you. to we would turn Thank for it like to

John Santa Maria

your you Coca-Cola again confidence interest for and FEMSA. thank Well, in

build And that I are capabilities we this they along think is. bottler are is very those Coca-Cola tomorrow's something As a the making bottle all stated, FEMSA. strides what what different the – countries in very business different were we're understand transforming into than past. to we And capabilities bottling in than enormous very, of

to as is your for So available And always, a questions. remaining our any team thank you good answer your today. participation of day. Have

Operator

ladies and This you, gentlemen. presentation. today’s Thank concludes

may disconnect. You now

Coca-Cola FEMSA, S.A.B. de C.V. (KOF) 29 Oct 212021 Q3 Earnings call transcript