Coca-Cola FEMSA S.A.B de C.V. (NYSE:KOF) Q1 2019 Earnings Conference Call Transcript

Apr 26, 2019 • 09:30 am ET


Coca-Cola FEMSA S.A.B de C.V. (NYSE:KOF) Q1 2019 Earnings Conference Call Transcript


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John Santa Maria Otazua

by positive performance of Coca-Cola Sin Azucar in many of our markets, primarily in Brazil where Coca-Cola Sin Azucar is growing at double-digit rates. And surprisingly, even in Argentina where under such difficult circumstances, Coca-Cola Sin Azucar continues to grow 3%.

In non-carbonates, we are taking important steps towards gaining scale and improving profitability. As an example, in Brazil, we have restructured our portfolio and improved our competitiveness, which resulted in double-digit growth in these very promising categories, as compared with the previous year. In Mexico, our Santa Clara dairy portfolio and Monster Energy drink products both grew double-digits, while our Powerade brand grew mid-single digits. We are very encouraged by the innovation pipeline that we have developed together with the Coca-Cola Company.

As announced this week, there are launches coming across categories like the new (inaudible) products that we're launching in Mexico that will boost our play in the higher-growth enhanced-hydration category. And once we prove this concept here, we will roll to Brazil as well. Other initiatives such as Coca-Cola Coffee, which we already launched last year in Brazil, we have very positive results. We will be launching in different parts, in different markets. And we will also be participating in the new product category developed by Coca-Cola and Coca-Cola Energy as the year develops.

Importantly, highlighting the flexibility of our portfolio, we continually -- we continue successfully rolling out affordability initiatives in territories that are going through a challenging macro-economic environment like Argentina. Just to give you a sense, the decline in disposable income in Buenos Aires, the region where we operate, has been much deeper than the rest of the country affecting the consumption and social mood much more so in Buenos Aires than in other territories. And here what we're doing very quickly is responding with different packaging alternatives to ensure that we continue to engage with consumers, both from a returnable and non-returnable perspective.

Our operating model transformation keeps on moving as well. As part of this strategy, we have developed important capabilities with digital expansion of Coca-Cola FEMSA by implementing transformational initiatives, in the commercial distribution and logistics and procurement fronts. Our analytics capability in Mexico and Colombia has delivered very positive results for us highlighted by an improved point-of-sale execution and improvements with the return to our promotional activities at retail. We are encouraged by expanding these analytics capabilities to Brazil and Argentina during 2019.

Our transformational initiative in distribution and logistics are already generating savings. As an example our cost logistics services platform has generated $50 million worth of savings in 2018 and we continue -- and we have all countries already rolled out on the logistics platform as of the end of 2018. Importantly, the integration of our recent acquisition in Guatemala is going according to plan with synergies of more than $4 million. Furthermore, completing these acquisition allows us to create favorable operating conditions to ensure new business sustainability and strong growth plans for this operation and gives us