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

Apr 26, 2019 • 09:30 am ET

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

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Q & A
Operator
Operator

(Operator Instructions) We'll take our first question from Fernando Ferreira of Bank of America.

Analyst
Fernando Ferreira

Hi. Good morning, everyone and thanks for taking my question. I have two if I may. My first question is related to Brazil. And you reported an outstanding volume growth. So I was wondering if you can comment on your outlook on consumption in the country? And also I know it's the first quarter of the year, but does these result changes in some way your volume outlook for the year? And what should we expect for in this case for the remaining of the year? That's my first question.

And the second one is related to innovation. Coca-Cola Company mentions several times the word innovation on its conference call. So given this new approach how do you expect this to -- in your case how do you expect this to evolve maybe in the next five years? And if you can give us an idea of how much new launches represent of your sales and if there is any significant difference by country. Thank you so much.

Executive
Constantino Spas Montesinos

Hi, Fernando. Thanks for your questions. This is Constantino. In Brazil, as you mentioned, we're very encouraged by the results that we have seen. The positive performance is mainly driven by our relentless focus on point-of-sale execution. Our analytical capabilities in Brazil in order to segment the market and provide targeted initiatives in Brazil by point of sale continue to improve and we're starting to see the impact of that.

At the same time, as we mentioned, we have done a pretty -- we believe we have done a very good job at redefining our portfolio both on CSDs and NCBs. As we mentioned in our last call last year we launched about 100 SKUs in Brazil and this is starting to pay-off in the market. And at the same time within our CSD category, we have developed a very strong affordability initiatives in the portfolio that are allowing us to capture consumption from the market. So we expect and continue that to be present during 2019. Good weather has also been a favorable element in our beginning of the year.

And our expectation is that although this is very difficult to predict if weather should continue to be benign in the upcoming months that would be a positive element going forward. But to summarize, I think, it's a matter of much improved execution in the points of sale and at service levels adding customers on one hand; and on the other hand, we have developed a very strong portfolio that's suited for Brazilian dynamics. At the same time, we do not ignore the fact that there is optimism in Brazil right now and that consumption overall is starting to improve in different categories. So that is definitely something of great value for us now going forward.

On the innovation piece, as we mentioned previously, we are strongly focused on developing our NCB category much more. A great example