Coca Cola Femsa S.A.B. de C.V.
Annual Report 2019

Plain-text annual report

OneV I S I O N P L A T F O R M F U T U R E I N T E G R A T E D R E P O R T 2 0 1 9 We are Coca-Cola FEMSA, and we believe in: O N E V I S I O N That unifies our organization to become an undisputed total beverage leader with sustainable and profitable growth, focused on creating and fulfilling consumer demand anytime, anywhere. O N E P L AT F O R M That ensures our teams work together as a cohesive unit that strives to create sustainable value in collaboration with our stakeholders through our everyday decisions and actions. O N E F U T U R E That requires us to evolve together with our consumers and customers to match their ever-changing needs and generate social and environmental wellbeing as a shared purpose. COCA-COLA FEMSA2INTEGRATED REPORT 2019Contents 26 O U R F R A M E W O R K 26 27 S T R A T E G Y S U S T A I N A B I L I T Y 31 O N E V I S I O N 33 43 C O N S U M E R - C E N T R I C P O R T F O L I O H E A L T H Y H A B I T S L E T T E R T O O U R S T A K E H O L D E R S C F O I N T E R V I E W C A O I N T E R V I E W O U R F O O T P R I N T 05 09 14 18 21 23 25 F I N A N C I A L / S U S T A I N A B I L I T Y H I G H L I G H T S 47 O N E P L A T F O R M P R O D U C T P O R T F O L I O V A L U E C H A I N 49 55 59 78 C O M M E R C I A L 4 G R O W T H S U P P LY 4 G R O W T H P E O P L E 4 G R O W T H F I N A N C E 4 G R O W T H 80 O N E F U T U R E 118 A P P E N D I X 82 87 91 98 C L E A N E N E R G Y I N O U R O P E R A T I O N S W A T E R S U S T A I N A B I L I T Y W A S T E & R E C Y C L I N G S A F E T Y C O M M I T M E N T 107 S U S T A I N A B L E M O B I L I T Y 109 S H A R E D O P P O R T U N I T Y W I T H O U R C O M M U N I T I E S 119 120 125 127 132 136 F I N A N C I A L S U M M A R Y M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S C A P I T A L S & C O M P A N Y E N G A G E M E N T C O M P R E H E N S I V E R I S K M A N A G E M E N T C O R P O R A T E G O V E R N A N C E S H A R E H O L D E R A N D A N A LY S T I N F O R M A T I O N 137 A B O U T O U R I N T E G R A T E D R E P O R T D E A R F E L L O W stakeholders Underscoring a year of transformation and capa- bility building, we continued capitalizing on our in- dustry’s potential to produce positive results while navigating dynamic environments. Thanks to our ongoing transformation, we are de- veloping the capabilities to win in a world marked by rapid changes. Thus, we embarked on our Fuel for Growth strategy to create an even leaner, more ag- ile organization focused on our customers and con- sumers. This multi-year journey aims to strength- en our organization through new ways of working, strive for efficiency with best-in-class capabilities enabled by digital technology, eliminate redundan- cy, and ensure our sustainable business growth. As part of our strategy, we are unifying our organiza- tion under one vision to become an undisputed total beverage leader with sustainable, profitable growth; one platform to ensure our teams work as a cohe- sive unit to create sustainable value for our stake- holders; and one future to maintain our flexibility to evolve together with our consumers and customers. José Antonio Fernández Carbajal John Santa Maria Otazua +194 billion pesos in total revenue COCA-COLA FEMSAINTEGRATED REPORT 20195We collected more than 50% of the bottles that we put in Mexico and Brazil. O N E C O N S U M E R - C E N T R I C P L A T F O R M : S T R A T E G I C I N I T I A T I V E S Guided by our obsessive consumer focus, we are con- solidating a winning total beverage portfolio to satisfy evolving tastes and lifestyles. We are fostering sparkling beverage growth by leveraging portfolio innovation and affordability, while driving our low or no-sugar beverage portfolio ahead of consumer trends. Additionally, we are improving our competitive position in still beverages, and amplifying our water portfolio to establish consis- tent leadership across this growing category. As part of our Fuel for Growth journey, we functionalized our finance, supply chain, and human resources operat- ing models to create a leaner service organization that leverages our company’s scale to drive our operations’ sustainable, profitable business growth. Underpinned by KOF DNA, we are building a collaborative customer and consumer-centric culture founded on op- erational excellence, agile decision-making, an owners’ mentality, and always placing our people first. Moreover, we are accelerating our digitally driven busi- ness transformation. After rolling out our KOFmmercial digital platform (KDP) across our traditional trade chan- nel, we deployed KDP throughout Brazil and Mexico’s modern trade channel. In Brazil, we further expanded our first mover advantage across food aggregators and dig- ital channels, while successfully piloting our omnichan- nel entry capability. Finally, we continue to make important progress on our sustainability goals. Notably, we collected more than 50% of the bottles that we put into the market, well po- sitioned to achieve our 2030 commitment of collecting 100%. We used 23.7% of recycled materials in our PET packaging, on track to achieve our 2020 goal of 25%. We improved our water use ratio to 1.52 liters of water per liter of beverage produced, on track to achieve our 2020 goal of 1.5 liters. Impressively, 71% of our manufacturing operations’ power comes from clean energy sources, up over seven times the past five years. COCA-COLA FEMSAINTEGRATED REPORT 20196O N E C O N S U M E R - C E N T R I C P L A T F O R M : O P E R A T I N G H I G H L I G H T S Guided by our holistic strategic framework, we navigat- ed a challenging macroeconomic environment to deliver positive results for the year. Our total sales volume in- creased 1.4% to 3.37 billion unit cases, with transactions growing 2.5% to 20.2 billion. Total revenues grew 6.7% to Ps. 194.5 billion. Operating income grew 3.0% to Ps. 25.4 billion. Operating cash flow grew 4.8% to Ps. 37.1 billion. Importantly, controlling net income reached Ps. 12.1 bil- lion for earnings per share of Ps. 0.72 and per unit of Ps. 5.76 (Ps. 57.60 per ADS). Our resilient Mexico operation achieved strong top-line growth, despite uncertain macroeconomic conditions. Our portfolio innovation, affordability, and commercial initiatives enabled us to generate price-mix improve- ments and deliver 8.1% revenue growth, while our ability to drive cost and expense efficiencies resulted in margin expansion. In Central America, we delivered solid top-line growth, driven mainly by the strong performance of our Guate- mala and Costa Rica operations. Our ability to capture synergies from new territories, expanded distribution platform, and improved point-of-sale execution enabled us to achieve outstanding volume growth in Guatemala. Despite slow macroeconomic growth, our Brazilian op- eration continued its impressive turnaround, generating strong volumes that built on two years of continuous growth. Importantly, this growth is leading to market share gains across our key beverage categories, driven by our relentless consumer focus, robust portfolio, and point-of-sale execution. After a complicated start to the year, we’re encouraged by our Colombian operation’s turnaround over the sec- ond half of 2019, driven by our efficiency, coverage, and portfolio initiatives. In Argentina, we adapted our portfo- lio to remain close to our consumers, driven by our af- fordability strategy. Our total revenues grew 6.7%. COCA-COLA FEMSAINTEGRATED REPORT 20197Our operating income grew 3.0% to Ps. 25.4 billion. We seamlessly consolidated our Uruguay operation. Be- yond exceeding our estimated synergies, we improved our volumes and margins, driven by increased produc- tion efficiency and market share gains in the sparkling and still beverage categories. Finally, consistent with our disciplined approach to capi- tal allocation and commitment to generating shareholder value, our Board of Directors agreed to propose an ordi- nary dividend of Ps. 4.86 per unit to the Annual Share- holders Meeting. This proposal represents an increase of 37% versus the previous year, reflecting the strength of our free cash flow generation and our confidence in Coca-Cola FEMSA’s solid financial position. Moving forward, our overarching strategic priority is to become the best option for our customers and consum- ers in all of our markets—creating and fulfilling their de- mand anytime, everywhere. On behalf of our employees, we thank you for your con- tinued confidence in our ability to deliver economic value and to generate social and environmental wellbeing for you all. J O S É A N T O N I O F E R N Á N D E Z C A R B A J A L J O H N S A N T A M A R I A O T A Z U A Chairman of the Board Chief Executive Officer COCA-COLA FEMSAINTEGRATED REPORT 20198question & answer Constantino, 2019 marks your first year as Coca Cola FEMSA’s CFO. How would you reflect on the company’s performance for the year? What are your priorities? A) 2019 was a very positive year. We successfully navigated a challenging overall macroeconomic environment, and most importantly, we continued taking significant strate- gic steps towards our long-term goals. Additionally, we laid important foundations and achieved important milestones in our finance function. When I assumed the CFO position at the beginning of year, I set five key priorities: 1) Maintain our solid financial foundation to improve our return on invested capital (ROIC) – To this end, we took important steps to prioritize ROIC as a key per- formance indicator (KPI) across our organization and renewed our commitment to a disciplined approach to leverage, capital allocation, working capital optimiza- tion, and profitability insights. Constantino Spas reflects on his first year as our company’s Chief Financial Officer. He discusses his five key priorities, our company’s positive performance, Fuel for Growth strategy, operating highlights, disciplined capital allocation, and financial flexibility. CHIEF FINANCIAL OFFICERCOCA-COLA FEMSAINTEGRATED REPORT 201992) Continue evolving our finance function to drive top- and bottom-line results and maximize sharehold- er value – Our finance function is increasingly evolv- ing into a partner to our broader business in order to drive results. In this way, we support our operations by delivering valuable insights for better and faster deci- sion-making to maximize shareholder value, while en- suring compliance and transactional efficiency. 3) Guarantee that we will continue attracting and devel- oping our talent base for our finance function – To- gether with Human Resources and aligned with our DNA, we continue to attract and develop the right talent across diverse finance functions across our operations. 4) Continue our approach of transparency, fair disclo- sure, and continuous communication with our stake- holders – Building on this commitment, this year we took important steps to gain a deeper understanding of our shareholders’ perception of the company; for us, it is key to gather feedback from the market and maintain this important two-way communication. Our shareholders’ insights are fundamental as we continue to plan and execute our strategies. 5) Finally, in my role as CFO, I continue to take important steps to support John and our senior leadership team on their journey of cultural transformation, reinforc- ing our DNA by taking an active role in the design and implementation of our Fuel for Growth strategy that en- ables us to leverage new ways of working. Could you walk through the factors that drove the company’s positive performance for the year? A) During 2019, we capitalized on our operational excellence, portfolio initiatives, digital transformation, and Fuel for Growth strategy. First, we enhanced our operational excel- lence led by our efforts across our operations to continue improving our point-of-sale execution and expanding our cooler coverage. Second, we carried on revamping our portfolio across categories, while rolling out affordability initiatives to not only accelerate growth, but also improve our competitiveness to gain market share across key mar- kets and beverage categories. Third, we continued to take steps on our digital transformation, incorporating big data analytics and artificial intelligence and advancing our om- nichannel commercial capabilities. Moreover, our digital distribution and supply chain initiatives enabled us to be- come more efficient while improving our service levels. Finally, we started the rollout of our Fuel for Growth strat- egy—a set of ambitious productivity and efficiency initia- tives designed to create an even leaner, more agile orga- nization fully focused on our consumers. These initiatives focus on strengthening our organization through new ways of working, eliminating redundancies, and leveraging digital enablers to streamline our cost base, while generat- ing funds to support our strategic initiatives and reinvest in our business. COCA-COLA FEMSAINTEGRATED REPORT 201910 Could you briefly review the highlights of the company’s oper- ations in Mexico, Central America, and South America for the year? A) Mexico, our largest operation, achieved positive results in the face of a resilient, but challenging consumer envi- ronment. Despite market uncertainty, we delivered top- line growth, increasing our 2.5-liter and 3-liter returnable presentations’ coverage, while launching our affordable 235-ml returnable glass bottle at 5 pesos to incentivize our single-serve mix. Importantly, a more stable raw ma- terial environment, coupled with our Mexico team’s ability to generate significant savings, enabled us to stabilize and improve our profitability during the year. Our Central America operations’ positive performance was driven mainly by our Guatemala operation’s high single-dig- it volume growth. In Guatemala, we expanded our portfo- lio. In Costa Rica, we took successful measures to reduce our cost to serve, while we worked to strengthen our retail relationships in Panama. Finally, in Nicaragua, we adapted to a challenging market environment by connecting with our consumers through our cola, affordability, and return- able strategies. Moving onto South America, Brazil, our second largest op- eration, achieved high single-digit volume growth, while gaining share across beverage categories. Our Brazilian operation’s volume growth was driven by our affordabili- ty initiatives, revamped portfolio, and strong point-of-sale execution. In the face of a challenging year, our Colombia operation delivered better-than-expected volumes. During 2019, we restructured our portfolio and our business to successfully turnaround our Colombia operation. In Argen- tina, we adapted our portfolio to navigate an exception- ally challenging environment, and thanks to our amazing teamwork, we achieved cost and expense controls in or- der to protect our profitability. Finally, we seamlessly and successfully integrated our promising Uruguay operation, capturing important synergies. Could you update us on the company’s integration of its acqui- sitions in Guatemala and in Uruguay? Synergies? A) Our acquisitions in Uruguay and Guatemala are success stories. We smoothly and successfully integrated these territories, and we achieved better-than-expected syner- gies of more than US$25 million for the year—from best practices to cost and expense efficiencies on both the supply chain and manufacturing fronts. Importantly, we successfully deployed our DNA, working seamlessly to in- tegrate our culture while establishing management teams that combine talent from our new and existing operations. In Uruguay, we are significantly improving our competitive position across key categories, marked by market share gains in flavored sparkling beverages. Moreover, in Guate- mala, we are standardizing our portfolio while improving our competitive position. COCA-COLA FEMSAINTEGRATED REPORT 201911Could you briefly walk us through how the company is trans- forming its Finance Operating Model through Finance 4 Growth? To follow up, could you briefly discuss the steps that the com- pany’s taking to maximize shareholder value through disci- plined capital allocation, working capital optimization, and im- proved profitability? A) Through Finance 4 Growth, we are implementing a vision to support our front-line operations. Overall, our ambition is to serve as a business partner to our operations by deliver- ing valuable insights for better and faster decision-making to maximize shareholder value, while ensuring compliance and transactional efficiency. In order to enable our finance teams to partner with our broader organization to drive sustainable, profitable busi- ness growth, we are implementing a vision that will allow us to: • Act as business advisor and integrator of our total busi- ness view • Provide valuable insights, proactively and robustly manage challenges, and support our commercial deci- sion-making • Take ownership for and actively manage our compa- ny’s financial value drivers. With this in mind, our KOF Financial Services (KFS) team is in charge of applying new digital technologies and skills to continually improve our Finance Operating Model. A) This year, we completed an important financial milestone. We concluded an eight-for-one stock split, the issuance of new Series B shares with full voting rights, and the listing of Series B and Series L shares in the form of units. Each new unit is comprised of 3 Series B shares and 5 Series L shares. This action enables our company to increase its capacity to issue new equity, which may be used as con- sideration in future share-based acquisitions, as well as for general corporate purposes. Moving forward, we feel confident that the listing of Series L shares and Series B shares in the form of units will help unlock value for our shareholders and position our company for new growth opportunities. Importantly, and underscoring our solid financial position, which allows us to return excess cash to our shareholders without compromising our flexibility to pursue future ac- quisition opportunities, our Board of Directors is proposing to our Annual Shareholders Meeting an ordinary dividend of Ps. 4.86 per unit, an increase of 37% versus the previous year dividend. COCA-COLA FEMSAINTEGRATED REPORT 201912 Could you further update us on the steps the company is tak- ing to strengthen its capital structure and financial flexibility? A) Consistent with our mandate to deleverage our company’s balance sheet, we continued to repay debt to strengthen our company’s financial position. Importantly, we set the foundations to take advantage of favorable market con- ditions in the U.S. dollar and Mexican peso debt markets. As a result, in January 2020, we successful priced a his- toric public offering of US$1.25 billion principal amount of senior notes due 2030. The notes priced at US Treasury + 100 basis points and a coupon of 2.750%—the lowest spread, yield, and coupon in history for a Latin American corporate debt offering. In addition, on February 6, 2020, we successfully placed two tranches of Mexican peso-denominated bonds in the Mexican market for a total aggregate amount of Ps. 4,727 million. The first tranche is for an aggregate amount of Ps. 3,000 for 8 years bearing an annual fixed interest rate of 7.35%, and the second tranche is for an aggregate amount of Ps. 1,727 million for 5.5 years bearing a variable interest rate of TIIE + 0.08%. This transaction received broad par- ticipation from investment-grade investors, confirming our company’s financial discipline and strong credit profile. We used the net proceeds from our sale of the 2030 notes to fully redeem our company’s 3.875% senior notes due 2023, and the remainder is intended to be used for general corporate purposes. This will enable us to increase the av- erage life of our debt from 6.8 years to 8.3 years. Finally, could you briefly discuss the factors that will drive the company’s performance during 2020? A) We are encouraged by the opportunities ahead. More than ever, we are one unified company, with our foundation for future success guided by one vision, one platform, and one future. To strengthen our P&L and maximize our ROIC, we look to take advantage of key levers to improve our busi- ness performance and profitability, including opportuni- ties for sales growth and margin expansion, affordability initiatives, and strategic capital investments. Furthermore, we will continue executing our Fuel for Growth strategy to achieve efficiencies in our cost base, reinvent our supply chain, maximize our return on investment, and develop fit- for-purpose route-to-market models to improve our compa- ny’s profitability. COCA-COLA FEMSAINTEGRATED REPORT 201913 question & answer What would you say were Coca-Cola FEMSA’s main sustain- ability achievements during 2019? A) During 2019, we made good progress on our sustainability strategy aligned with Coca-Cola FEMSA´s strategic frame- work. As you may know, our 2020 goal is to supply 85% of Mexico’s manufacturing operations energy requirements with clean energy. For the year, we achieved significant progress towards this goal, using clean energy to cover 69% of those manufacturing plants’ energy needs, and we are confident that we will achieve our goal by the end of 2020. Moreover, we increased the use of clean energy for our bottling plants in Panama, Colombia, Brazil, Argenti- na, Guatemala, and Costa Rica, accomplishing 70.7% cov- erage of our company’s total manufacturing operations’ power needs through clean sources of energy. José Ramón Martínez, Corporate Affairs Officer, discusses our integrated sustainability strategy. Among other topics, he talks about our main sustainability achievements, environmental stewardship, and strengthening our local communities. CORPORATE AFFAIRS OFFICERCOCA-COLA FEMSAINTEGRATED REPORT 201914 Continuing our long-term commitment to collectively ad- dress the challenge of waste management and aligned with The Coca-Cola Company’s commitment to a “World Without Waste,” we can proudly say that, in the main mar- kets in which we operate, collection and recycling mecha- nisms account for more than 50% of the PET bottles that we sell, putting us well on track to our 2030 goal of col- lecting 100% of the PET bottles we place in the market. While this is a challenging task, we are confident that, with the support and co-responsibility of all of the actors in the value chain, we will fulfill our commitment through a mar- ket-based approach to the circular economy. Of course, we undertake this concerted effort in conjunction with our ongoing initiatives to lighten the weight of our packages, optimize the use of PET, and incorporate recycled content into our bottles. In 2019, we used an average of 23.7% re- cycled content in our plastic bottles, putting us on the right path to accomplish our 2020 goal of 25%; a goal that we aim to expand to include 50% of recycled materials in our PET packaging by 2030. To address the threat of climate change, we strongly support the adoption of a science-based approach that is aligned with the goal of the Paris Agreement to limit a global temperature rise to well below 2ºC. Consequently, during 2019, we embarked on the Science Based Targets initiative (SBTi), a collaboration between CDP (formerly the Carbon Disclosure Project), World Resources Institute (WRI), the UN Global Compact, and the World Wide Fund for Nature (WWF). This company-wide effort is designed to measure and account for the carbon footprint of Co- ca-Cola FEMSA’s value chain, with the eventual goal of adopting a science-based target for emissions reduction that reflects our commitment to a low carbon economy. How would you describe the increasing integration of sustain- ability and its strategy into Coca-Cola FEMSA’s business prior- ities? A) At Coca-Cola FEMSA, we integrate sustainability into our day-to-day operations as a key driver of business deci- sions. This enables us to guarantee our company’s long- term development and continuity, foster the wellbeing of communities, and take care of the environment, fulfilling our mission to simultaneously generate economic and so- cial value in collaboration with our stakeholders. We view sustainability as an enabler of our company’s business growth; thus, virtually all organizational decisions and actions, regardless of their origin, consider sustainability implications—from the selection of a particular supplier to the investment in eco-efficient infrastructure improve- ments, the expansion of our product portfolio to satisfy every consumer lifestyle, and our community investment. Ultimately, we understand that we share one vision, one platform, one future, and work for one Coca-Cola FEMSA. COCA-COLA FEMSAINTEGRATED REPORT 201915 In the global context of new labeling regulations surfacing across the board, could you please elaborate on Coca-Cola FEMSA’s commitment to empower consumers to make in- formed decisions through responsible marketing? A) We obsessively focus on satisfying our customers and consumers. Accordingly, transparency, fact-based infor- mation, and a high sense of responsibility form the guid- ing principles for our marketing practices. Given our com- pany’s position in Latin America, our nutritional labeling recognizes that each population is different, with its own needs and habits; therefore, we fully endorse and comply with each country’s existing legal framework. When regu- latory changes arise, we are always willing to take a pro- active role in such changes, providing our expertise and quality information in order to ensure that our consumers receive high-quality information. Additionally, our produc- tion processes fulfill the highest quality standards, and our ingredients comply with each of our operations’ local regulations and high internal Coca-Cola standards. What is Coca-Cola FEMSA’s strategic approach to water re- source management? A) Water is a key resource for our communities and our oper- ations; therefore, we are committed to the efficient use of this natural resource in our bottling operations—returning to the environment and communities the same amount of water used in our beverages, while safeguarding it not only for us to use, but also for our communities to enjoy now and into the future. From 2010 through 2019, we signifi- cantly improved our water use ratio by an impressive 22% to reach 1.52 liters of water per liter of beverage produced, representing savings of more than 10.5 billion liters of this vital resource compared to our 2010 baseline. Important- ly, we currently give back to the environment more than 100% of the water we use in the production of our bev- erages in Brazil, Colombia, Mexico, Central America, and Argentina. Consistent with our commitment to water conservation, in collaboration with FEMSA Foundation, we carry out proj- ects designed to improve communities’ quality of life by helping to provide them with safe water, improved sanita- tion, and hygiene education. We further work to strength- en water funds and conserve water basins through sus- tainable initiatives involving partnerships with several stakeholders. Through the Latin American Water Funds Alliance—comprised of the Nature Conservancy, FEMSA Foundation, the Inter-American Development Bank (IDB), and the Global Environment Facility—we jointly seek to of- fer hydrological safety in the region, ensuring sustainable access to a sufficient quantity and quality of water to sus- tain human life and socioeconomic development. COCA-COLA FEMSAINTEGRATED REPORT 201916Since strong communities make for strong businesses, what is Coca-Cola FEMSA’s take on community engagement and development? How would you say Coca-Cola FEMSA addressed a challeng- ing, complex social and economic environment this year? A) To create a community relations vision that we can put it into practice in a standardized and systematic manner, we developed a management model that includes five sequential steps, which are the foundation of our Model for Addressing Risks and Relations with the Communi- ty (MARRCO). Based on MARRCO, our work centers are designing a community engagement plan to immediately implement a series of measures, including mitigation ac- tivities to reduce our operational footprint and community programs aligned with local needs and risks. In turn, this will help us to not only ensure our positive coexistence and our business’ permanence at those locations, but also reaffirm our social license to operate. A) 2019 continued a trend of complex social and economic challenges in Latin America, triggered by political complexi- ty and hyperinflation in Argentina. At Coca-Cola FEMSA, we have full confidence in the region in which we have grown for more than 25 years. Underscoring our commitment to the region, we are firmly committed to serve our mar- kets with excellence and to grow our operations. Guided by a clear sustainability vision, we are prepared better than ever to face these challenging environments, powered by our drive to innovate, a winning product portfolio, superi- or point-of-sale execution, an unparalleled distribution net- work, unmatched cold drink equipment placement, and dig- ital commercial capabilities. COCA-COLA FEMSAINTEGRATED REPORT 201917O U R footprint We have the privilege to serve more than 261 mil- lion people through 1.9 million points of sale in 9 markets of Latin America with a wide portfolio of leading brands in 10 beverage categories. Mexico Central America Colombia Brazil Uruguay Argentina ¹ Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage. 783 214 5,726 139 42 847 T R A N S A C T I O N S million 20,221 T O T A L V O L U M E million unit cases¹ 3,369 9,585 1,945 1,968 1,838 237 266 2,641 volume 16,610 transactions 514 volume 1,688 transactions 214 volume 1,923 transactions SPARKLING BEVERAGESWATER & BULK WATERSTILL BEVERAGESCOCA-COLA FEMSAINTEGRATED REPORT 201918261.1 1,909,112 49 268 P O P U L AT I O N S E R V E D P O I N T S O F S A L E P L A N T S million 75.1 869,918 31.9 173,919 22 7 D I S T R I B U T I O N C E N T E R S 142 54 89.5 405,209 10 41 13.1 41,712 2 3 Mexico Central America Colombia Brazil Uruguay Argentina Venezuela¹ ¹ As of December 31, 2017, as a non-consolidated operation, Venezuela is reported as an investment in shares. 48.0394,4713.523,88372315COCA-COLA FEMSAINTEGRATED REPORT 201919Product mix by size Single serve Multi-serve 34 51 25 21 19 21 y r o g e t a c y b x i m t c u d o r P Product mix by package Returnable Non-returnable 38 41 31 19 24 28 1. Excludes still bottled water in presentations of 5.0 Lt. or larger. Includes flavored water. 2. Bulk water - still water in presentations of 5.0 Lt. or larger. Includes flavored water.   * As of December 31, 2017, Venezuela is reported as an investment in shares, as a non-consolidated operation. S PA R K L I N G B U L K W AT E R ² W AT E R ¹ S T I L L 73.2% 15.3% 5.1% 6.4% 86.0% 0.3% 5.1% 8.6% 77.8% 7.2% 9.5% 5.5% 86.8% 1.0% 6.1% 6.1% 91.1% 0.0% 8.0% 0.9% 80.0% 2.8% 10.2% 7.0% 6462MX6469CO7676UR5659CA8281BR72AR66MX75CO81UR49CA79BR79ARMXCACOBRURARCOCA-COLA FEMSAINTEGRATED REPORT 201920 F I N A N C I A L H I G H L I G H T S The strides we took during 2019 to put together the right sets of capabilities and talent positions our organization to generate increased value for all our stakeholders for many years to come. S A L E S V O L U M E million unit cases¹ 2019 2018 2017 2016 T O T A L R E V E N U E S billion Mexican Ps. 2019 2018 2017 2016 2 0 1 9 U S D ¹ 2 0 1 9 M X N 2 0 1 8 % C H A N G E M X N Millions of Mexican pesos and U.S. dollars as of December 31, 2019 (except volume and per share data). Results under International Financial Reporting Standards. I N C O M E F R O M O P E R A T I O N S billion Mexican Ps. S A L E S V O L U M E (million unit cases) 3,368.9 3,368.9 3,321.8 T O T A L R E V E N U E S 10,311 194,471 182,342 I N C O M E F R O M O P E R A T I O N S 1,348 25,423 24,673 1.4% 6.7% 3.0% 1. U.S. dollar figures are converted from Mexican pesos using the exchange rate for Mexican pesos published by the U.S. Federal Reserve Board on De- cember 31, 2019, which exchange rate was Ps. 18.86 to U.S.$1.00. 2. As of December 31, 2017, the Company changed the method for reporting Coca‑Cola FEMSA Venezuela to Fair Value. Due to this change, a recorded foreign currency translation charge in equity has been reclassified as a non‑ cash one‑time item to the other non‑operative expenses line of the Income Statement in accordance with IFRS. C O N T R O L L I N G I N T E R E S T N E T I N C O M E ² 642 12,101 13,910 ‑13.0% 3. Based on 16,806.7 million outstanding ordinary shares as of December 31, 2019 and 2018. T O T A L A S S E T S 13,671 257,839 263,787 ‑2.3% L O N G - T E R M B A N K L O A N S A N D N O T E S P A Y A B L E 3,101 58,492 70,201 ‑16.7% C O N T R O L L I N G I N T E R E S T 6,518 122,934 124,943 C A P I T A L E X P E N D I T U R E S 608 11,465 11,069 B O O K V A L U E P E R S H A R E 3 0.39 7.31 7.43 ‑1.6% 3.6% ‑1.6% 2019 2018 2017 2016 D I V I D E N D P E R S H A R E Mexican Ps. 2019 2018 2017 2016 2019 Past years 3,369 3,322 3,318 3,334 194.5 182.3 183.3 177.7 25.4 24.7 25.0 23.9 3.54 3.35 3.35 3.35 1. Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage.2. 2017 is re-presented without the Philippines.3. As of December 31, 2017, as a non-consolidated operation, Venezuela is reported as an investment in shares.COCA-COLA FEMSAINTEGRATED REPORT 201921E C O N O M I C V A L U E D I S T R I B U T E D At Coca-Cola FEMSA we are convinced that strong communities are good business. As such, we are in a privileged position to generate economic val- ue to our stakeholders through our good business practices, which ultimately transforms into social value for the countries in which we operate. 2019 U S D M X N E C O N O M I C V A L U E G E N E R A T E D $ 10,311 $ 194,471 P A Y M E N T S T O S U P P L I E R S $ 5,061 $ 95,456 W A G E S & B E N E F I T S F O R E M P L O Y E E S $ 1,620 $ 30,561 A C Q U I S I T I O N O F L O N G - T E R M A S S E T S $ 547 $ 10,324 D I V I D E N D S P A I D T O S H A R E H O L D E R S $ 394 $ 7,440 I N C O M E T A X E S P A I D T O G O V E R N M E N T S $ 255 $ 4,806 D O N A T I O N S & C O M M U N I T Y I N V E S T M E N T $ 21 $ 390 T O T A L E C O N O M I C V A L U E D I S T R I B U T E D $ 7,899 $ 148,977 COCA-COLA FEMSAINTEGRATED REPORT 201922P R O D U C T portfolio S P A R K L I N G W A T E R F L A V O R E D W A T E R I S O T O N I C 2.0% Volume growth in our sparkling category 9.6% Volume growth in our personal and bulk water category in Brazil 38.6% Volume growth in our flavored water category in Mexico 8.5% Volume growth in our isotonic category in Central America J U I C E S , N E C T A R S & F R U I T B A S E D 4.9%Volume growth in our Juices, Nectars & Fruit Based category in Central America COCA-COLA FEMSAINTEGRATED REPORT 201923F U N C T I O N A L B E V E R A G E S E N E R G Y D R I N K S T E A S D A I R Y P R O D U C T S P L A N T- B A S E D 48K Unit cases sold of our recently launched line of Isolite 37.2% Volume growth in our energy drinks category 7.1% Volume growth in our teas category in Mexico 24.5% Volume growth in our dairy products category in Mexico 7.1% Volume growth in our plant based category in Colombia COCA-COLA FEMSAINTEGRATED REPORT 2019241 7 8 9 2 O U R V A L U E chain I N G R E D I E N T S We work with our suppliers to have the best raw materials. 3 M A N U F A C T U R I N G Enabled by our Digital Manufacturing Platform 2.0, we pro- duce high-quality beverages in our facilities, with an efficient use of water and energy. P R I M A R Y D I S T R I B U T I O N From our manufacturing facilities, we ship beverages to our 268 distribution centers. 1 2 3 4 6 5 4 5 6 D I S T R I B U T I O N C E N T E R In our automated warehouses, we integrate pre-sale with secondary distribution processes. P R E - S A L E Powered by the KOF Digital Platform, we serve our clients in the traditional and modern channels, offering a winning portfolio of leading brands in 10 beverage categories. S E C O N D A R Y D I S T R I B U T I O N Once a pre-sale order is placed, we use our Digital Distribution Platform to define an optimal Route-To-Market operation. 7 8 9 P O I N T S O F S A L E We reach more than 1.9 million points of sale with targe- ted commercial initiatives, and we use Market Analytics to maximize the value proposition for each client. C O N S U M P T I O N We serve more than 261 million people, offering a total por- tfolio including 10 beverage categories with choices for every life style. R E C Y C L I N G We encourage and help consumers to properly dispose and recycle all packages from our beverages. COCA-COLA FEMSAINTEGRATED REPORT 201925O U R framework S T R A T E G Y One Vision We must be obsessive about our consumers. We must maximize value for our customers. One Platform We must evolve the way we work. We must strive for more efficiency and productivity. We must continue to develop and deploy best-in-class capabilities. One Future We must deploy digital tools and enablers to transform the organization. We must ensure we have a license to operate. Our DNA Our DNA is the foundation of everything we do. It includes fundamental beliefs and behaviors that govern our daily actions. We are ONE Coca-Cola FEMSA. 04030201COCA-COLA FEMSAINTEGRATED REPORT 201926S U S T A I N A B I L I T Y Materiality Assessment Materiality Study In 2012, we carried out a materiality analysis, iden- tifying best practices globally, interviewing key executives, and engaging in dialogues with rep- resentatives of external stakeholders executives, sustainability experts and employees. Through this exercise, we identified the material issues that impact our business. The material issues for our business include the following: • They are those in which Coca-Cola FEMSA may generate greater value. • They are issues in which we have a sufficient degree of maturity that allow us to be agents of change. • Previous investments have been made in these areas. • They have elements that may be converted into a competitive advantage and that allow us to stand out in the market. • They are important to our stakeholders, and we have identified that for some of them we may join efforts to create positive changes. 2 3 4 1 5 8 6 7 9 10 11 12 13 14 15 16 l s r e d o h e k a t S r u o r o f e c n a v e l e R O U R P L A N E T 1. Local environmental impact 4. Waste management 7. Water 9. Packaging and recycling 10. Energy 12. Transportation impacts O U R C O M M U N I T Y 2. Safety in our communities 3. Wellbeing in our communities 5. Responsible marketing 6. Nutrition and physical activation 8. Sustainable products 13. Supplier development O U R P E O P L E Relevance for our Business 11. Training and development 14. Compensation 15. Health and safety 16. Culture and values COCA-COLA FEMSAINTEGRATED REPORT 201927 Sustainability Framework 2020 Goals U R P L ANET O Our Sustainability Strategy provides us with the guidelines to achieve our mission to positively transform the communities where we operate, supported by Ethics and Values. Our Sustainability Goals guide us to measure our progress on each of the topics that have an impact on the long-term sustainability of our business. C O M MUNI T Y R U O Healthy Lifestyles Water Benefit 5 million people with our nutrition and physical activation programs and initiatives. Increase our efficiency in water usage to 1.5 liters of water per liter of beverage produced. Community Development Have Social License programs in 100% of our priority plants and distribution centers. U R P E OPL E O Comprehensive Development Generate 1 million hours of volunteer work. Return to our communities and their environ- ment the same amount of water used in our beverages. Waste and Recycling Integrate 25% of recycled or renewable materi- als in our PET packaging. Recycle at least 90% of our waste in every one of our bottling plants. Achieve a Lost Time Incident Rate (LTIR) of 0.5 per 100 associates. Energy Reduce by 20% the general illness absentee rate vs. 2010. Zero fatalities from work-related diseases. Supply 85% of the energy used in manufacturing in Mexico with clean energy sources. Reduce by 20% the carbon footprint of our value chain vs. 2010.  COCA-COLA FEMSAINTEGRATED REPORT 201928We are committed to contribute to the United Nations Sustainable Development Goals. Many of our initiatives contribute to the 17 objectives with specific actions; however, we are convinced that, through our strategic framework and initiatives, we can have a larger impact on the following nine goals. Several of our projects are focused on healthy habits for our communities, such as proper nutrition initiatives and social programs for early childhood development from FEMSA Foundation. Our 2020 goal is to supply 85% of the energy we use in manufacturing in Mexico with clean sources, and we continue to introduce clean energy in all of the countries where we operate, reaching a 71% share of clean energy for our manufacturing needs. We are committed to promoting healthy habits. This way, we have already benefited 7.2 million people, accomplishing our 2020 goal with our nutrition and physical activation programs. In addition, we offer a portfolio of total beverages, and we carry out responsible marketing strategies for our products. We look for economic growth through the efficient use of resources by promoting a work environment that offers comprehensive development, by creating jobs in emerging markets, and by applying our sustainable sourcing principles. Our production processes ensure the efficient use of water, as well as correct wastewater treatment. We are committed to return to nature and to the communities all of the water used to produce our beverages. We also developed WASH programs in alliance with the FEMSA Foundation. COCA-COLA FEMSAINTEGRATED REPORT 201929We work on innovative processes in the industry, aiming to develop local suppliers and to improve our environmental performance, which is why our 2020 goal is to reduce our carbon footprint by 20% across our value chain. We collaborate with other companies, governments, and NGOs to clean water bodies and to reduce water pollution through volunteer cleanup activities. We communicate our sustainability results annually through our Integrated Report, and have established goals to ensure a responsible consumption of raw materials, to achieve greater efficiencies, and to encourage recycling. We recognize that complex challenges in an ever-changing context require coming up with innovative solutions that can only be achieved and put into action together. We embrace this reality and partner with other companies, government, NGOs and other institutions to maximize our impact. COCA-COLA FEMSAINTEGRATED REPORT 201930O N E O N E C O C A - C O L A F E M S A 01 01Driven by our obsessive focus on our consumers and customers, we are consolidating a leading total beverage portfolio with options for every consumer taste and lifestyle, while promoting healthy habits locally— encouraging people across communities to combine proper nutrition with physical education throughout all stages of their lives. COCA-COLA FEMSAINTEGRATED REPORT 20193237.2% of our brands are low- and no-sugar beverages By deeply understanding our shoppers and consumers’ changing tastes and buying habits, we act faster than our competitors to adapt our portfolio to satisfy their ever- changing needs. Consistent with our consumers’ evolving needs, we are strengthening our winning total beverage portfolio, offer- ing a growing array of low- and no-sugar sparkling bev- erages; refreshing juices, nectars, and fruit-based bev- erages; hydrating purified, sparkling, and flavored water; teas, sports, and energy drinks; and wholesome dairy and plant-based protein products. Our consumers and customers are at the center of ev- erything we do. By deeply understanding our shoppers and consumers’ changing tastes and buying habits, we act faster than our competitors to adapt our portfolio to satisfy their ever-changing needs through exemplary product innovation and commercial execution. portfolioCONSUMER-CENTRIC33M E X I C O A N D C O L O M B I A C O L O M B I A Enhancing Consumer Engagement Delivering Consumer-Centric Innovation To enhance consumer engagement with brand Co- ca-Cola across lifestyles and consumption occasions, we launched Coca-Cola Café in our convenient 235-ml mini can in both Mexico and Colombia. Featuring two of our consumers’ favorite tastes blended together with no sugar and more caffeine for people on the go, this enhanced Coke is already a big hit, generating sales of approximately 500 thousand unit cases on top of al- most 12 million transactions for the year. We continued to satisfy our Colombian customers and consumers’ growing demand for refreshing juice-based beverages through our new sizes of Del Valle Frutal and Del Valle Fresh brand juice drinks. With the launch of our consumer-centric returnable 1-liter PET, 1-liter Tetra Pak, and 0.5-liter PET presentations, we address more consumption occasions and enhance our competitive position in the country’s large juice category. B R A Z I L Creating a Premium Shopper Experience To capture the magic of our sparkling beverage brands, we are offering an enhanced shopper experience at our points of sale across the modern trade channel. Through our premium in-store displays and on-premise promo- tions—featuring our Schweppes and Coca-Cola brand beverages—we’re reflecting changing consumer buying habits, offering an improved shopper experience, and broadening our brands’ appeal while improving our posi- tion. Moreover, our recently launched Triple Win Strate- gy aims to further enrich our sparkling beverage catego- ry’s appeal throughout the modern trade and on-premise channels as we roll it out over the next three years. G U A T E M A L A Award-Winning Excellence This year, our operation in Guatemala earned “The Co- ca-Cola Excellence Cup,” winning the award ahead of other leading Coca-Cola bottlers within The Coca-Cola Compa- ny’s Latin Center region. The operation won this recogni- tion for its exemplary quality and execution, as well as for achieving the highest revenue growth in all of Coca-Cola’s beverage categories and the greatest share of value growth for the most representative beverage brands. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201934Our sparkling category grew 2.0% Year over year F O S T E R S P A R K L I N G B E V E R A G E C A T E G O R Y T H R O U G H A F F O R D A B I L I T Y Throughout the year, we revitalized our sparkling bever- age growth through our focus on affordability. To this end, we continued to satisfy our cost-conscious consumers through our strong platform of affordable packaging al- ternatives at the right price points—from our convenient single-serve packages to our family-sized multi-serve re- turnable presentations. COCA-COLA FEMSAINTEGRATED REPORT 201935A R G E N T I N A Adapting Value Proposition To Consumer Environment Underscoring our ability to offer value to consumers, we successfully launched an affordable 1.25-liter multi- serve returnable glass bottle of Coca-Cola for cost-con- scious consumers in Argentina. Through this popular returnable presentation, we engaged our consumers, while regaining share of sales. Additionally, our 220-ml mini-can has rapidly become an important, affordable single-serve option for Argentine consumers, reaching 30% of our single-serve transactions in the country for the year. B R A Z I L Capturing Market Share Gains Through our three-part affordability strategy, we cap- tured market share gains and consolidated our com- petitive advantage across the sparkling beverage cat- egory—attaining a record high share of sales for our Brazilian operation. First, we expanded coverage and household penetration of our family-size multi-serve returnable presentations of Coca-Cola, achieving dou- ble-digit volume growth for the year. Second, we took advantage of our convenient affordable single-serve 200-ml PET presentations and 220-ml mini-cans of Co- ca-Cola, Sprite, and Fanta to capture almost 21% vol- ume growth year over year. Third, we expanded our ca- pabilities in the north and south of our brazilian territory to capitalize on our successful offering of dual packs of Coke and our core flavored sparkling beverage brands in our popular family-size returnable presentations. Har- nessing the power of brand Coca-Cola to increase our competitive position in flavors, our dual packs signifi- cantly enlarged our share of sales at our points of sale across the modern and traditional trade channels. M E X I C O Expanding Affordable Alternatives In Mexico, we expanded the affordability and immediate consumption of brand Coca-Cola through the launch of our breakthrough 235-ml returnable glass bottle at the magic price point of Ps. 5—offering a convenient sin- gle-serve alternative to our cost-conscious consumers. We also launched our new affordable 400-ml one-way single-serve presentation of Fanta, Mundet, Sprite, and Fresca at the magic price point of Ps. 7 and our new affordable 2-liter one-way multi-serve presentation of Mundet multi-flavors at the magic price point of Ps. 17. We further expanded the coverage of our successful 3-li- ter multi-serve returnable PET presentation of Coca-Co- la for our consumers’ enjoyment. Additionally, we rolled out our 1.25-liter multi-serve returnable glass bottle, along with our 1.5-liter and 2-liter multi-serve returnable PET presentations of Coca-Cola, to more territories in Mexico. Consequently, we increased the volume of our popular multi-serve returnable packages of Coca-Cola by more than 7% year over year. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201936Our still beverage category grew 17.1% Year over year in Brazil S T R O N G C O M P E T I T I V E P O S I T I O N I N S T I L L B E V E R A G E C A T E G O R Y As the fastest growing category in our industry, we focus on strengthening our competitive position and capturing the most value from still beverage segments by closely aligning our portfolio with consumers’ tastes and preferences. COCA-COLA FEMSAINTEGRATED REPORT 201937M E X I C O B R A Z I L & U R U G U A Y A R G E N T I N A A N D C E N T R A L A M E R I C A Accelerating Wholesome Dairy Growth Achieving Monster Growth Expanding Plant-Based Beverage Category Throughout the year, we continued to accelerate growth across the value-added dairy category. Under our joint venture with The Coca-Cola Company, we continued to meet growing consumer demand for our portfolio of wholesome Santa Clara brand UHT whole milk, spe- cialized milk, and flavored milk products. Among our innovative promotional initiatives, we transferred value directly to our consumers through a compelling com- bo-package deal of either our 1.25-liter returnable glass bottle or 1.7-liter one-way PET presentation of Cola-Co- la with our 1-liter presentation of Santa Clara UHT whole milk from September to October of 2019. Thanks to the growing power of our Santa Clara brand, our granular distribution network, and point-of-sale execution, we ac- celerated our overall volume growth by 25% year over year across the traditional trade channel, while position- ing Santa Clara as the second largest player in the UHT whole milk market with over 5% share of sales growth for 2019. Monster remained one of the fastest growing, most at- tractive energy drinks for our Brazilian consumers. Bol- stered by our innovative new Mango Loco, Ultra Violet, and Absolutely Blue flavors, Monster alone surpassed the sales volume of the country’s market leader—an im- portant benchmark. It also enabled us to achieve over 47.8% volume growth, while significantly increasing our share of sales in the energy drink category for the year. Similarly, in Uruguay, Monster rapidly became the coun- try’s energy drink market leader, considerably increas- ing our share of sales. We consolidated and expanded our AdeS brand plant- based beverage business in Argentina. Among our ini- tiatives, we improved AdeS packaging—featuring its notable nutritional benefits—enhanced its point-of-sale execution, and expanded its availability across the mod- ern trade channel. Thanks to our efforts, we not only in- creased our sales, but also grew our share of the coun- try’s plant-based beverage category. We further began the integration of AdeS in Costa Rica and Panama, in- cluding our launch of multiple new flavors for our con- sumers’ enjoyment. B R A Z I L Leveraging Juice-Based Beverage Portfolio We capitalized on our restructured Del Valle Fresh brand portfolio to fulfill Brazilian consumers’ growing demand for refreshing juice-based beverages. Utilizing our cold- fill platform, we expanded our share in the affordable juice-based beverage segment. Additionally, we launched Del Valle Frutas+Vegetais, a premium juice offering that blends both fruit and vegetables—with no added sugar— in a convenient premium glass presentation. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201938Our personal water category grew 8.4% in Central America G R O W I N G O U R W A T E R P O R T F O L I O We continue to grow our innovative water portfolio to refresh and rehydrate our consumers through- out their day. COCA-COLA FEMSAINTEGRATED REPORT 201939M E X I C O Introducing Naturally Sourced Mineral Water In Mexico, we recently launched Topo Chico brand sparkling mineral water, an excellent complement to our premium water portfolio. Already popular in the U.S., this naturally sourced mineral water comes from a limestone spring hidden under the Cerro del Topo Chi- co Mountain, which rises nearly 4,000 feet above the outskirts of Monterrey, Mexico. Sourced and bottled in Monterrey since 1895, we began offering this naturally carbonated premium mineral water to our consumers in our 355-ml one-way glass bottles, along with our 600-ml and 1.5-liter one-way PET presentations, in the on prem- ise, self service, and convenience store sales channels. A R G E N T I N A Executing a Multi-Tier Strategy In Argentina, our multi-tier strategy enabled us to grow our share of sales in the personal water category, de- spite an exceptionally challenging consumer environ- ment. In the value segment, we took advantage of our re-launched KIN brand personal water to offer a com- petitive, affordable option to our customers and con- sumers. We continued to leverage our Bonaqua brand purified water in the mainstream segment. Moreover, in the premium segment, we capitalized on our late 2018 launch of Smartwater, featuring a unique blend of elec- trolytes to create a distinctly fresh, crisp, and pure taste for our consumers. B R A Z I L Building on Three-Tier Water Strategy We built on our three-tier water strategy to achieve re- cord high share of sales across our Brazilian franchise territories. In the mainstream water segment, we con- tinued to grow our Crystal purified water brand across the traditional and modern trade channels. In the main- stream plus water segment, we capitalized on our suc- cessful launch of naturally flavored Crystal sparkling water, growing this brand at a rate of 1 million unit cas- es per year. After our successful launch of Smartwater late last year, we expanded our point-of-sale coverage to accelerate our growth in the premium water segment. As a result of this strategy, we achieved record share of sales, selling over 200 thousand unit cases in Brazil. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201940The volume of Coca-Cola Sin Azúcar grew 18.9% Year over year D R I V E L O W - A N D N O - S U G A R F O O T P R I N T A H E A D O F C O N S U M E R S ’ D I V E R S E T R E N D S We continue to drive the development of our low- and no-sugar portfolio of beverages to satisfy and stimulate demand for our products while adapting to our consum- ers’ diverse needs. COCA-COLA FEMSAINTEGRATED REPORT 201941M E X I C O U R U G U A Y Great Taste, Less Sugar With a New Formula Launching Refreshing, Sugar-Free Schweppes In Mexico, we completed a major rollout of our original Coca-Cola recipe with reduced sugar content in our sin- gle and family-size one-way presentations throughout our territories over the course of the year. We further fin- ished a major rollout of our original Fanta, Fresca, Sidral Mundet, and Sprite brand recipes with less sugar con- tent across our single- and multi-serve presentations. launched sugar-free In Uruguay, we successfully Schweppes naturally flavored grapefruit sparkling soda in our convenient 250-ml single-serve mini can and our 3-liter family-size PET presentation. Thanks to the pop- ularity of this refreshing sugar-free alternative, we sig- nificantly increased our share of sales in both the coun- try’s grapefruit flavored sparkling beverage segment and no-sugar beverage category. B R A Z I L Building on the Popularity Of Coca-Cola Sem Açúcar We continued to build on the increasing popularity of Coca-Cola Sem Açúcar across our Brazilian franchise territories. Driven by our more than 50% growth in household penetration, this attractive consumer choice generated 28% volume growth year over year. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201942+1 million people benefited from our healthy habits initiatives in 2019 H E A L T H Y Surpassing our 2020 goal by 2 million people As leaders in the beverage industry, we continue to meet the changing lifestyles of our consumers and the com- munities we serve. Among our actions, we carry on driving the development of our low- or no-sugar port- folio across our markets ahead of consumer demand. We also strive to promote healthy habits in our commu- nities through multi-sector coalitions and local initiatives focused on fostering healthy habits, proper nutrition, and physical activity. COCA-COLA FEMSAINTEGRATED REPORT 201943F O S T E R I N G H E A L T H Y H A B I T S I N O U R C O M M U N I T I E S We seek to encourage healthy habits in our com- munities through local programs focused on nutri- tion and physical activity. At the end of 2018, we exceeded our goal of ben- efitting 5 million people through our healthy habits and nutrition programs from 2015 to 2020. Thus far, approximately 7.2 million people have benefit- ed from our programs over the past five years. To achieve this goal and complement our healthy habits programs, over the past 10 years, we have also worked with the FEMSA Foundation to make strategic social investments in projects—with a strong early childhood education component—fo- cused on solving food-related issues and creating healthy environments for children. 0.5 1.5 3.1 6.15 7.2 Accumulated BeneficiariesHealthy Habits Initiatives20162015201720182019COCA-COLA FEMSAINTEGRATED REPORT 201944M E X I C O Along with the Coca-Cola System and other partners, we collaborate in the Ponte al 100 program—designed to generate healthy habits in primary and secondary school students, while providing metabolic index mea- surement of different health indicators for a large por- tion of the population. C E N T R A L A M E R I C A We support the Campaign of Colors, a network that promotes nutrition and healthy habits at 65 elementa- ry schools in Costa Rica, Guatemala, Nicaragua, and Panama, by educating children about nutrition, hygiene, and positive physical activity habits. This project is car- ried out in collaboration with the American Nicaraguan Foundation (ANF) and Glasswing International. B R A Z I L A N D M E X I C O C E N T R A L A M E R I C A N I C A R A G U A We improve our communities’ quality of life through Praça da Cidadania in Brazil or Plaza de la Ciudadanía in Mexico. This initiative provides access to public ser- vices, while building a network of upgraded community health, nutrition, and physical activity programs. We contribute to the physical activity of children, teen- agers, and adults through their participation in the Hora de Moverse initiative, which promotes teacher training and donates sports equipment. Partnering with The Coca-Cola Company, we offer the Un Plato, Una Sonrisa program to contribute to aca- demic performance, promote balanced eating habits, and maintain nutritional wellbeing by supplying daily meals throughout the school year. LOCAL INITIATIVESCOCA-COLA FEMSAINTEGRATED REPORT 201945R E S P O N S I B L E M A R K E T I N G At Coca-Cola FEMSA, our consumers are at the center of our decisions and actions. Therefore, transparency, fact-based information, and a high sense of responsibility are the guiding principles for our marketing practices. Informed nutritional decisions Responsible marketing Highest quality To enable our consumers to make healthy informed choices across every one of our operations, our up-front product labels include clear, easy-to-find nutritional con- tent information, including the nutrients, fats, sugar, and sodium in each of our products. Our nutritional labeling strategy is based on providing consumers with clear and complete information in full compliance with applicable regulations in each of the 9 countries we serve. When regulatory changes arise, we are always willing to take part in such changes, providing our expertise as a sys- tem in order to ensure that our consumers are provided with high-quality information. As part of our commitment to the wellbeing of our con- sumers, our advertising adheres to The Coca-Cola Com- pany’s Responsible Marketing Policy and Global School Beverage Guidelines. For instance, as part of the Co- ca-Cola system, we diligently follow and enforce The Co- ca-Cola Company’s Responsible Marketing Policy, and we do not market products in channels with an audience predominantly of children under 12. In this and other ways, we underscore our devotion to the healthy habits of our consumers. Our production processes fulfill the highest quality stan- dards; our ingredients comply with each of our opera- tions’ local regulations and international standards of other regulatory agencies, including CODEX, FDA, JEFCA, and EFSA. Our processes are performed in state-of-the- art bottling facilities within the global beverage industry, thus guaranteeing only the best quality products for our consumers. 010203COCA-COLA FEMSAINTEGRATED REPORT 201946O N E 02 O N E C O C A - C O L A F E M S A 02Aligned with our holistic strategic framework, this year we functionalized the finance, supply chain, and human resources operating models to create a leaner, more agile, and collaborative service organization that leverages our company’s scale and shared value opportunities to drive our front- line operations’ sustainable, profitable business growth. As a result, we are creating a stronger, more flexible organization, with the speed, agility, and capability to drive our competitiveness, proactively address evolving industry challenges, and capitalize on arising market opportunities. COCA-COLA FEMSAINTEGRATED REPORT 201948commercial 4 G R O W T H Our commercial strategy aims to create and satisfy con- sumer demand for our products whenever, wherever, and however they want them. To this end, our Commercial Center of Excellence endeavors to enhance and guard our company’s commercial processes, while strengthen- ing our commercial capabilities focused on: • Market segmentation. To provide the best value proposition to our customers, shoppers, and consumers. • Revenue growth management. Including portfolio, pricing, and promotions. • Demand planning. To guarantee fulfillment of our products in the markets we serve. • Commercial execution. To ensure our product portfolio is presented in the best way possible to the shoppers. • Route to market. To better serve our customers in the most efficient and profitable way. • Customer service and engagement. To build strong, long-lasting relationships with our customers. • Commercial analytics and data management. To generate powerful insights and transform them into winning strategies. • Digital technologies and enablers. To develop the most innovative, cutting-edge solutions to support our operations. 49We are taking advantage of digital technology to transform the way we work and serve our 1.9 million customers and 261 million consumers. O U R O M N I C H A N N E L S O L U T I O N Our Omnichannel solution connects diverse contact points in real time to improve customer service and en- gagement, increase sales, and drive productivity. The following pages describe an example of how our cus- tomers will benefit from it. This year, we continued to push forward our Advanced Analytics Platform to improve our market segmentation, revenue growth management, and demand planning ca- pabilities. To fully capitalize on these capabilities, our Dy- namic Initiative Management process (DIM) aligns our marketing and commercial teams to prioritize and exe- cute granular initiatives, through the sales force, across both the traditional and modern trade channels. We are also taking advantage of technology to transform the way we work and serve our 1.9 million customers and 261 million consumers. This is why we are focused on developing an Omni- channel solution for our customers, connecting diverse contact points in real time—from presale and contact centers to digital technologies such as direct messag- ing, web portals, mobile apps, and electronic data inter- change (EDI)—to improve customer service and engage- ment, increase sales, and drive productivity. cocacolafemsa_mx Metepec Pueblo Mágico Liked by cocacolafemsa_uy and others COCA-COLA FEMSAINTEGRATED REPORT 201950Monday Juan has been our client for some years. Today, as every Monday, Juan is visited by Mario, his usual pre-seller. While Juan is busy taking care of his business, he asks Mario to place his weekly order. 8:55 Thursday, 3 July MI COCA-COLA now You have placed and additional order. Hours later, Juan realizes that he forgot to order a specific product, but it is too late. Mario will visit him again in a few days. Juan then uses KOF’s WhatsApp chatbot to place an additional order, including the specific product he had forgotten. Mario instantly receives a notification in his hand held: “Juan has placed an additional order”. Mario decides to call Juan to confirm his new request. 01020304COCA-COLA FEMSAINTEGRATED REPORT 201951Tuesday Overnight, Juan’s cooler malfunctioned. Using his cellphone, Juan accesses KOF’s mobile app and creates a service order to evaluate and repair his cooler. Juan receives a call from the Contact Center: “A technician will visit you in the next few hours”. 11:00 Today In the afternoon Recieved We are working on your order On the way Delivered Next, he confirms that his most recent orders will be delivered in the afternoon, using the order tracking functionality. As the delivery truck approaches Juan’s business, he receives a WhatsApp notification: “Your order is about to be delivered. You will be the next customer in our route to be served”. The delivery truck arrives, and Juan receives both of his orders. He uses the built in e-payment system in KOF’s mobile app to create a QR Code. Juan validates his payment was successful and verifies his total balance. Juan is a satisfied customer. 05060708COCA-COLA FEMSAINTEGRATED REPORT 201952A R G E N T I N A A N D B R A Z I L M E X I C O C O L O M B I A B R A Z I L B2B Digital Solutions Advanced Analytics Platform During 2019, we rolled out our B2B web portal in Brazil and Argentina, serving up to 50,000 customers in the first stage of its deployment. In Brazil, we also rolled out another B2B solution based on a chatbot by WhatsApp, enabling our customers to reach us for a product any- time while allowing us to capture lost orders and reduce our out of stocks in the market. We are further undertak- ing pilots in Mexico, Brazil, and Argentina to fine-tune our B2B relationship model and develop tailored Route- to-Market models that address increased complexity, while reengineering our IT infrastructure for real-time connectivity. We are strengthening our marketing and sales Advanced Analytics Platform in Mexico and Colombia, while roll- ing it out across our Brazilian operation. Among this platform’s benefits, we have optimized our combined promotional return on investment by over 30% in Mex- ico and Colombia’s traditional trade channel. In Mexi- co, we have also increased our average price ahead of inflation while maintaining our market share. We have further constructed a growing library of commercial ini- tiatives—ranked by effectiveness—for each of our op- erations to choose from according to their commercial strategy. M E X I C O C O L O M B I A B R A Z I L B R A Z I L C O C A - C O L A F E M S A Artificial Intelligence Digital Trade Dynamic Initiative Management Through Victoria, our machine learning prescriptive an- alytical engine, we improved our sales forecast accura- cy across selected operations in Mexico. We are also expanding Victoria’s footprint and running pilot tests in Colombia and Brazil to improve our sales forecast accu- racy and generate inventory and transportation savings in these operations. We’re expanding our first mover advantage across Bra- zil’s digital trade channels, including both digital e-com- merce and food aggregators such as iFood and Rappi. Consequently, we enjoy a 78% share of the retail e-com- merce home market channel and 16.9% incidence rate among the country’s online food aggregators, resulting in sales of 6.7 million unit cases and volume growth of over 120% for the year. We operate our Dynamic Initiative Management pro- cess in Mexico, Brazil, Colombia, Argentina, Costa Rica, Nicaragua, Panama, and Uruguay. During 2019, we communicated over 5 million targeted initiatives every month across these operations. Moreover, our Mexico operation has shown 8% improvement in its targeted initiatives execution scores. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201953D E V E L O P C U S T O M E R - C E N T R I C R O U T E - T O - M A R K E T M O D E L S G U A T E M A L A B R A Z I L Transformed Operating Model KOF Edge Strategy We are capitalizing on our growing knowledge and evolving our tailored direct and indirect Route-to-Market (RTM) mod- els to maximize our customer value creation and optimize our cost to serve. Through the right combination of direct and indi- rect RTM models, we will flexibly and effectively achieve great- er productivity. In our Los Altos territory, which includes Guatemala’s second-largest city, we transformed the operating mod- el to upgrade market execution, significantly improve customer service, and considerably expand our portfo- lio’s availability. As a result, sales volume across this territory rose 32.3% year over year. In Brazil, our KOF EDGE strategy aims to literally and fig- uratively connect all of the dots—from Omnichannel or- der taking to increased customer engagement, real-time routing and delivery traceability to alternative payment solutions—to build a sustainable competitive advantage by becoming our customers’ preferred sales and delivery partner. C O S T A R I C A Distributors Model M E X I C O “Saturation” RTM Model In 2019, we successfully rolled out our sustainable Dis- tributors Model in Costa Rica, optimizing the produc- tivity of our secondary distribution fleet through an ap- proved network of distributors. Aligned with our market execution standards, this model is enabling us to not only increase our Costa Rica operation’s ICE score by 10%, but also reduce our Costa Rica operation’s cost to serve while improving our client service, volume growth, and return on invested capital. In Mexico, we piloted our saturation RTM model to better serve the needs of our smaller and specialized clients in urban areas. Complementing our existing pre-sale model, we’re selectively working with wholesalers and distributors to expand our market reach and to improve the level of service for small clients, including specific routes for new categories. Consequently, we’re enlarg- ing our client and consumer base, while expanding port- folio availability to foster volume growth. Overall, we are leveraging our Advanced Analytics Platform, DIM, Omnichannel solution, and flexible Route-to-Market models to create a more agile and flexible organization, enabled with the right commercial capabilities to drive our competitiveness, proactively address evolving industry challenges, and capitalize on business opportunities. COCA-COLA FEMSAINTEGRATED REPORT 201954supply 4 G R O W T H This year, we functionalized our key supply chain area to advance, optimize, and standardize our supply chain operating models, platforms, systems, and processes. To this end, we centralized the organization’s reporting structure, with each of the heads of our countries’ supply chain operations now reporting directly to our compa- ny’s Supply Chain Director. Recognizing those operations with the best practices, we also decentralized our distri- bution and manufacturing centers of excellence to our Brazil and Mexico operations, respectively. Consequent- ly, Brazil and Mexico are now responsible for evolving our distribution and manufacturing models and ensuring the rest of our operations adoption of those models. Fur- thermore, we defined a clear vision for our supply chain, focused on six main pillars: • Define and maintain high standards of quality, safety, and environment. • Actively embrace and advance our demand-driven customer-centric supply chain model. • Continuously improve our end-to-end operational excellence. • Maximize our return on invested capital through robust capital and operational expense allocation and management. • Support our operations’ growth as a reliable business partner, consistently meeting our business’ key performance indicators and enabling our marketing and commercial strategies. • Ensure we enjoy the best talent, culture, and behavior, aligned with KOF DNA. COCA-COLA FEMSAINTEGRATED REPORT 201955Our Brazil and Mexico operations are the most advanced in distribution and manufacturing, respectively. For this reason, we decentralized our distribution and manufacturing centers of excellence to each of those operations for them to lead our best practices across our organization. operations. After deployment of our Digital Distribution 1.0 platform, including a web-based app, mobile deliv- ery devices, and vehicle telemetry equipment, across our Mexican and Brazilian operations, we implemented our Digital Distribution 2.0 platform throughout our Brazil- ian operation’s secondary distribution fleet during 2019. Moving forward, we will begin our evolving digital dis- tribution journey throughout the rest of our operations, while deploying Digital Distribution 2.0 across our Mexi- co operation next year. Consistent with our vision, we launched our Supply Chain Reinvention initiative to collaboratively and systemically share, adopt, and devise our best practices and process- es, bolster our talent pool, and capture productivity op- portunities across our company’s supply chain through- out our 9 operations. As part of this four-year reinvention, we are undertaking end-to-end portfolio analysis and net- work optimization; maximizing our asset utilization and direct material allocation; optimizing our primary trans- portation and load sharing; and designing our manufac- turing, warehouse, and distribution operations of tomor- row—catering to our business’ future needs. Aligned with our strategic priorities, we accelerated our development and deployment of our demand-driven, customer-centric supply chain model. This year, we final- ized the implementation of our KOF Logistics Services’ (KLS) Supply Chain Planning platform across all of our cocacolafemsa_br Liked by cocacolafemsa_mx and others COCA-COLA FEMSAINTEGRATED REPORT 201956C O C A - C O L A F E M S A M E X I C O & B R A Z I L B R A Z I L KOF Logistics Services (KLS) Supply Chain Planning Platform During 2019, we completed the implementa- tion of our KOF Logistics Services (KLS) Sup- ply Chain Planning platform across 100% of our operations. We also began deployment of this platform throughout our new Uruguay and Guatemala operations. Using advanced analytics, we are now able to track, adjust, and optimize our routes’ performance and our overall customer service. Consequent- ly, the level of service that we provide to our commercial markets rose to 99.7 for 2019, from 99.4 last year. We have also generated production, warehousing, and transportation cost savings of US$ 39.2 million over the past three years. Digital Distribution 2.0 We deployed our Digital Distribution 2.0 platform, utilizing our Monitoring Tower 2.0, throughout our Brazilian operation during 2019. Addressing the entire strategic and tactical planning cycle of our secondary distribution process—from analytics to de- livery route planning and execution—this en- hanced platform features route traceability, a new web-based app for supervisors, end- to-end supply chain network analysis, and digital real-time control of our distribution operation. C O C A - C O L A F E M S A Customer-Driven Distribution Planning To support our KLS Supply Chain Planning platform, we implemented our new custom- er-driven distribution planning process in Brazil and Mexico during 2019. This more agile demand-driven process enables us to proactively adapt our distribution system to fulfill our customer requirements, while opti- mizing our cost to serve. As a result of this process, we opened multiple cross-docks and distribution centers to draw our supply closer to demand over the course of the year. Supply Chain Control Tower This year, we developed and deployed our centralized Supply Chain Control Tower housing all of our capabilities while provid- ing visibility across all of our supply chain activities. The tower utilizes a data lake to store our growing quantity of business intel- ligence data. SUCCESS STORIESCOCA-COLA FEMSAINTEGRATED REPORT 201957We are ensuring that we boast the right talent pipeline at the operational level, including a growing pool of plant, distribution, and logistics managers. On the manufacturing front, we made specific advanc- es while undergoing a thorough assessment of our best practices across our operations. Among our initiatives, we continued development of our end-to-end Digital Manu- facturing 2.0 platform. Within this platform, we are evolv- ing our Centralized Plant Maintenance Planning mod- el into our integrated Asset Management System. This system will encompass our whole supply chain, from our manufacturing assets to our buildings, distribution fleet, and coolers. Through this comprehensive Asset Manage- ment System, we expect to improve our company’s re- turn on invested capital through more robust capital and operational expense allocation and management. Furthermore, we are ensuring that we boast the right tal- ent pipeline at the operational level, including a growing pool of plant, distribution, and logistics managers. With this in mind, we worked closely with our human resources function to develop KLS University, a standardized learn- ing platform designed to assure we possess the right competencies and capabilities across our operations. For example, our Leaders 1 and 2 programs focus on the advancement of our middle managers’ capabilities. To complement KLS University, we are also creating our own Distribution University and Manufacturing University to build not only our technical, but also our managerial ca- pabilities throughout our organization for years to come. COCA-COLA FEMSAINTEGRATED REPORT 201958people 4 G R O W T H As a part of our multi-year cultural transformation jour- ney, during 2019, we fully functionalized our Human Re- sources organizational model. Through this process, we centralized, streamlined, and de-layered our organiza- tional structure, with each of our operations’ human re- sources managers now reporting directly to our compa- ny’s Human Resources Director. Importantly, we defined the vision for our new Human Resources (HR) organiza- tional model to enable our front-line operations’ success: • Think and work as one HR team regardless of where • • we work. Improve the quality and value of HR services to our employees, prioritizing our employee experience. Identify and develop the capabilities required for our current and future global business needs. • Consolidate and standardize HR processes, capabili- ties, and resources across our operations, eliminating redundancies while focusing on high value-added ef- forts and sharing best practices. • Enable technology to define our digital path. COCA-COLA FEMSAINTEGRATED REPORT 201959Organization & Culture Adapt our company’s organizational capabilities to meet evolving business needs. Talent Management & Development Ensure our talent becomes our competitive advantage to reach our company’s strategic goals. Path to Digital Promote HR process standardization and automation, prioritizing our employee experience. Overall, our medium-term goal is to improve HR service value proposition to contribute to our broader business strategy and address each of our employee’s needs, based on our employees’ hire to retire journey. To this end, we look to support our business growth by leading cultural change, developing the best talent, and deploy- ing agile automated processes at an optimum cost. 010302COCA-COLA FEMSAINTEGRATED REPORT 201960People F i r st O b s e s s i v e Focus on C o n s nt u m er & Clie O p e r ational E x c e ellenc s A g i l e Decisio n M aker O w ners Me n t ality C U L T U R A L & O R G A N I Z A T I O N A L T R A N S F O R M A T I O N Our cultural transformation journey began with the launch of KOF DNA to ensure our customers and con- sumers are at the center of everything we do. Comprised of five key foundational elements, KOF DNA is the set of core beliefs and behaviors that we aspire to live and breathe each and every day. In 2019, we evolved our Organizational Climate Survey to a third-party managed, 100% digital, and faster survey with the goal of maximizing sense of belonging and increasing employee experience with excellent results: We had a 90% rate of participation and a 91% of employee engagement. cocacolafemsa_ar Liked by cocacolafemsa_mx and others COCA-COLA FEMSAINTEGRATED REPORT 201961Fuel for Growth will help us become a leaner, more agile, and digital Coca-Cola FEMSA. Over the course of the year, we brought KOF DNA to life through multiple initiatives across our 9 countries of operation: Moments of Truth (MoT) workshops – We conducted 10 MoT workshops with the participation of more than 400 employees to identify cultural pain points and to de- velop action plans to help us bridge any identified gaps between our current culture and the culture we look to achieve across our company. Culture Dynamics Forums – We organized six forums that enabled our leaders to reflect on different cultural dynamics that we aim to establish and to subsequently implement these behaviors throughout our organization, reinforcing our desired culture. We further undertook initiatives, including visits across our traditional and modern trade channels, to expand our knowledge of our operational processes, while develop- ing the operational sensibility to design more assertive strategies. To support our launch of KOF DNA, our company em- barked on a major organizational model change under our Fuel for Growth program in order to achieve our goal of becoming more: All-Hands Meetings – We held three companywide meetings to provide all of our employees with visibility about our business strategy and results, as well as to promote opportunities for interaction with our compa- ny’s leaders and to recognize our business heroes. LEAN to get closer to our markets, clients, and consum- ers AGILE and less bureaucratic to respond to our custom- ers and consumers’ needs DIGITAL to optimize our platforms and processes cocacolafemsa_gt Liked by cocacolafemsa_mx and others COCA-COLA FEMSAINTEGRATED REPORT 201962cocacolafemsa_uy To create one collaborative culture throughout our com- pany, we complemented our deployment of KOF DNA across all of our operations and organizational levels with our focus on necessary leadership behaviors and capa- bilities. Our senior leadership team is committed to serve as role models for these capabilities and behaviors, and they are expected of everyone around our organization: cocacolafemsa_panama Collaboration Mentality We Before Me Work together effectively and solve problems as a team Constantly put our organization and team’s results above your own to benefit our company as a whole Liked by cocacolafemsa_mx and others Accountability Trust Always let your actions reflect a sense of responsibility not only for what you must deliver, but also for what our organization must deliver Continually put our trust in our colleagues Furthermore, we are in the process of changing our way of working. As part of the change management process, we have already conducted 10 town hall meetings, 62 cross-functional workshops, five change management workshops, 21 leadership workshops, and 20 enabling workshops. Liked by cocacolafemsa_mx and others COCA-COLA FEMSAINTEGRATED REPORT 201963US$ 22.1 million invested in our people. People First Our people and the way they work together are our company’s most valuable assets. Ac- cordingly, we invested US$ 22.1 million in our people over the course of the year, including social development and volunteer activities, training initiatives, and occupational health programs. T A L E N T M A N A G E M E N T A N D D E V E L O P M E N T “People First” is a key element of our company’s DNA. Accordingly, we comprehensively manage, attract, de- velop, and motivate our people effectively, preparing the next generation of leaders today. COCA-COLA FEMSAINTEGRATED REPORT 20196466% of our company’s talent requirements were filled by internal candidates. P E R F O R M A N C E , S U C C E S S I O N & M O B I L I T Y During the year, we improved our performance manage- ment methodology by including a DNA evaluation, equiv- alent to 30% of our employees’ annual results. Thus, we underscore the importance of our employees’ living and acting upon our company’s desired behaviors. We further deployed our annual 9-Box Talent Assess- ment and Management Methodology, enhancing our tal- ent quality, succession, mobility, and execution metrics while focusing on our high potential talent. During 2019, 95.8% of our employees from executive, senior, and mid- dle management, as well as individual contributors, were evaluated throughout our operations in order to identify and take actions to develop our talent pipeline within our company. To ensure our development of high potential talent, we expanded our Global Accelerated Development Pro- grams to provide our organization’s directors, manag- ers, and team leaders with the necessary capabilities to guarantee our successful business strategy. Based on tailor-made 360º gaps in leadership competencies and global business needs, these nine-month programs em- ploy a mixed methodology of face-to-face and virtual COCA-COLA FEMSAINTEGRATED REPORT 20196530 45 67 39 90 137 sessions throughout the year. For 2019, we are proud to report that our second class of directors and managers and our first class of junior managers and team leaders graduated from these four programs, comprising 68 high potential executives from different levels of our organi- zation. Importantly, 54% of our first graduating class of directors and managers achieved appointments to new roles during the year. Moreover, we launched our Global Talent Visibility program for our high potential talent across all of our operations. l e a M l l A l e a m e F 49 53 90 Our Path to Digital During 2019, we began deployment of SAP SuccessFactors® Platform throughout all of our operations. Ultimately impacting 70,000 employees, this platform will integrate, im- prove, and simplify our leaders and employ- ees’ experience with our Human Resources processes: • Implementing Succession & Develop- ment, Performance & 360º Assessment, Employee Profile, and Compensation modules. • Migrating FEMSA University to a new platform, integrating all of our Human Resources processes while generating self-learning and development. • Currently standardizing and migrating our Human Resources Administration backbone to a cloud-based solution in order to meet market trends and set the foundation for our path to digital. Training hoursAverage hours per contribution levelStrategic LeadersTactical LeadersPeople LeadersIndividual ContributorsOperations ContributorsInternsAverage hours per genderCOCA-COLA FEMSAINTEGRATED REPORT 201966I N C L U S I O N & D I V E R S I T Y Train and install inclusive leadership skills in all of our leaders Create an open and flexible work environment Develop a diverse talent pipeline At Coca-Cola FEMSA, we aim to create an environ- ment in which every individual can feel included and valued for his or her own knowledge, behavior, competencies, and results, with opportunities for development and recognition based on his or her own talent. To this end, our strategic goals are to: • Train to identify unconscious biases that exist in the way our company functions. • Install best practices that allow us to consciously manage such biases. • Have a companywide Inclusion & Diversity Board to advise our CEO and Operation Heads. • Update flexible work program policies. • Promote flexible work programs through a communications campaign focused on providing education on their use and benefits. • Undertake Inclusion & Diversity Week. • Increase representation of women in leadership roles. • Provide visibility, sponsorship, and mentoring to female talent. • Review laws regarding equality and non- discrimination and their requirements. • Continuously sensitize our company to new ways of working. • Increase representation of people with different abilities. • Migrate towards open and collaborative workplaces across all of our operations. • Develop guidelines and key performance indicators to evaluate diversity and inclusion. 010203COCA-COLA FEMSAINTEGRATED REPORT 201967Inclusion & Diversity Week To reinforce that our company’s diversity makes us stronger, we created a space to enable our employees to reflect on the im- portance of inclusion and diversity for our organization, encourage our company’s de- velopment of inclusive leadership, and lever- age the experience and commitment of our senior leadership team to strengthen our culture of inclusion and diversity. Through- out the week, we undertook talks and activi- ties designed to encourage diverse thinking by questioning how: • We speak about minorities within our or- ganization. • We raise our collective consciousness to use our team’s talent to solve obstacles • We speak inside and outside of our com- pany, ensuring our message is properly understood. • We realize what an enriching experience it is to take advantage of our differences. • We prevent sexual and labor harassment. • We approach diversity in a different way given the impact that change has on the human body. Inclusion & Diversity Mindset To accelerate our development of a truly inclusive and diverse organizational culture, we are raising awareness and enabling Leadership teams to embed an Inclusion & Diversity Mindset by opening a space in our Annual KOF Leaders’ Summit to discuss and reflect on unintentional bias and intolerance, how “hard-wired” patterns and so- cial rejection impact performance negatively, and how to create an open and mindful culture that can leverage the power of human differences. We will continue to boost our transformation by empowering our leaders to: • Create and mature our company’s inclusion • and diversity capability development. Improve our employee experience and sense of belonging by fostering a collaborative and flexible work environment. • Ensure our employees reflect the communities and consumers we serve. COCA-COLA FEMSAINTEGRATED REPORT 20196834% 59% 7% 13% 46% 40% 1% 33% 45% 21% 1% 59% 29% 12% 57% 27% 15% 1% 85% 15% 79% 21% 79% 21% 80% 20% 96% 4% 99% 1% 45% 55% EmployeesBy gender in each contribution levelTactical LeadersStrategic LeadersPeople LeadersIndividual ContributorsOperationsInternsMaleFemaleEmployeesPer age group in each contribution levelTactical LeadersStrategic LeadersPeople LeadersIndividual ContributorsOperationsInterns35-4445-5960+18-34COCA-COLA FEMSAINTEGRATED REPORT 201969919 total 1,092 total 1,512 total 1,615 total 2,251 total 3,766 total 4,878 total 641 278 1,090 2 1,278 234 1,615 0 2,208 43 3,766 0 3,083 1,795 19,474 42,892 2,143 21,617 total 1,685 44,577 total 11% 82,227 89% By contract & regionNIUYCRARGTCOBRMXPAEmployeesExternalIndefiniteInternalTemporaryEmployeesInternal & ExternalCOCA-COLA FEMSAINTEGRATED REPORT 2019702% 19% 4% 4% 14% 11% 8% 25% 2% 7% l e a M l e a m e F 7% 18% 3.3% 14.3% 4% 4% 9% 1% 1% 12.7% 3% 8% 36.4% 4% 11% 32% 32% 10% 19.7% 9% 19% Per genderTurnoverNatural turnoverInduced turnoverBy age groupBy Country18-3435-44BrazilArgentina45-59ColombiaGuatemalaMexicoNicaraguaPanamaUruguay60+Costa RicaNatural turnoverNatural turnoverInduced turnoverInduced turnoverCOCA-COLA FEMSAINTEGRATED REPORT 20197198% 96% 92% 80% Flexible Benefits We encourage a good work/life balance for our employ- ees. To this end, we standardized our different flexible benefit schemes across our operations, including: • Flexible schedules • Home Office • Parental leaves • Paid personal day In some of our operations, we also offer benefits such as Happy Friday, Half Day Birthday, and permitted absences for family losses. Return Rate per Gender¹Retention Rate per Gender²MaleFemaleMaleFemaleParental leave¹ Employees that returned to work after Parental Leave.² Employees that continue working 12 months after Parental Leave.Male Parental Leave varies in each country from 2 to 14 days.COCA-COLA FEMSAINTEGRATED REPORT 201972C O M P E N S A T I O N A N D B E N E F I T S Our people’s compensation recognizes their effort, and it’s equal for both men and women. ees are receiving an integrated salary that is greater than or equal to the market average. We comply with all labor rights and obligations stipu- lated by law, surpassing the conditions and benefits es- tablished in the laws of each of the countries where we operate. Our collective bargaining agreements cover ap- proximately 66% of our workers. These labor contracts are reviewed and agreed on with all of our union repre- sentatives, respecting the established validity times, as well as complying with all notification periods. Our people’s compensation and benefits scheme recog- nizes their effort and commitment to their jobs, along with their contribution to creating value for our company. At all levels of our organization, we ensure that our em- ployees’ remuneration is competitive and that their con- ditions are equal for both men and women. To ensure the competitiveness of our benefit packages in all of our operations, consistent with our talent acquisition and re- tention strategy, performance-based bonus practices for middle management were reviewed against the market. Moreover, to ensure our management team’s competi- tive compensation and to prevent a loss of talent in re- covering economies, an analysis was developed togeth- er with Mercer, a world leader in the health and benefits marketplace. Additionally, based on studies performed by internation- al consulting firms that enable us to make comparisons between countries, we can determine that our employ- COCA-COLA FEMSAINTEGRATED REPORT 201973S O C I A L D E V E L O P M E N T We promote the development and quality of life of our employees through a model of integral wellbeing that positively influences their environment. Social Development Strategy To this end, our Social Development Strategy concen- trates on five dimensions: • Health: We promote healthy physical and biopsycho- social lifestyles for our employees. • Social Relationships: We encourage satisfactory relationships in harmony with the environment and community through employee volunteering activities. • Economy: We work to build and protect our employ- ees’ family assets and promote a culture of savings. • Educational: We look to improve our employees’ school levels, increase their knowledge and skills, and foster their cultural, creative, and technological devel- opment. • Labor: We are committed to our employees’ excel- lence on the job and within their organizational envi- ronment while developing a sense of belonging. Promoting Social Development In 2019, we invested US$3.8 million in pro- grams promoting the proper balance be- tween work and family, improving our em- ployees’ wellbeing and quality of life. COCA-COLA FEMSAINTEGRATED REPORT 201974KOF Volunteers Program We encourage the development of our employees and their families as responsible citizens, committed to their community, society, and environment. Through the KOF Volunteers program, we promote initiatives that enable us to beneficially impact the quality of life and wellbe- ing of the communities where we operate, strengthening our relationships with them, while positively affecting our corporate position and reputation. Our 2020 Goal: To generate 1 million hours of volunteer work Our overall volunteer activity is committed to six differ- ent causes: Community Development Environment Natural Disasters Health Education Human Rights In 2019, 83,076 participants, including our employees and their families, devoted 421,021 hours to 858 volun- teer initiatives, supported by an investment of more than US$243,000. From 2015 through 2019, we accumulated 1,443,246 hours of volunteer work. COCA-COLA FEMSAINTEGRATED REPORT 201975O C C U P A T I O N A L H E A L T H At Coca-Cola FEMSA, we look to promote an improved quality of work life for all of our employees across our organization. Occupational Health Management System Our Occupational Health Management System estab- lishes the vision, strategy, objectives, elements, and ac- tivities through which we improve the quality of work life for our employees across our company’s work centers and strategic business units. Complying with our legal, ethical, scientific, and organizational framework, this sys- tem encompasses our health processes and programs that we apply according to applicable risk matrices, local legislation, and operational needs. 2.4% improvement in our lost days due to General Illness Index vs. 2018. COCA-COLA FEMSAINTEGRATED REPORT 201976Health & Wellbeing Policies At Coca-Cola FEMSA, our Corporate Occupational Health area is responsible for proposing relevant revisions and updates to our three Health and Wellbeing Policies: • Occupational Health • Personnel With Healthy Habits • Healthy Culture As well as this annual corporate review, which is sent for approval to our Director of Social and Labor Development and Global Director of Human Resources, our company’s internal audit area will later review these policies for dis- semination and implementation across our operations. Employee Support Program In 2019, we continued with our Employee Support Pro- gram in Mexico. This emotional containment service is designed to assist our employees and their families to resolve situations that may generate emotional distur- bances such as stress, anxiety, and depression, among others, which may affect their development in either their daily life or their work environment. This program is part of our Comprehensive Wellbeing Strategy to reduce psychosocial risk factors inside and outside of work through the attention and advice of psy- chologists and other health professionals according to the different situations that affect our employees. 556.7 543.4 HealthLost Days due to General Illness Index(Less is better)20182019COCA-COLA FEMSAINTEGRATED REPORT 201977finance 4 G R O W T H During 2019, we functionalized and consolidated our key finance area into a leaner, more agile, more collab- orative, and digitally driven operating model that takes advantage of our company’s size, scale, and value op- portunities to enable the success of our front-line opera- tions. With this in mind, the ambition of our new Finance Operating Model is to serve as a business partner to our operations by delivering valuable insights for better and faster decision-making to maximize shareholder value, while ensuring compliance and transactional efficiency. To achieve this ambition, our priorities are to: • Maximize our return on invested capital (ROIC) and shareholder value creation through disciplined capi- tal allocation, working capital optimization, and prof- itability insights. • Co-design business strategies and support our op- erations by delivering valuable insights for better and faster decision-making to maximize shareholder val- ue, while ensuring compliance and transactional effi- ciency. • Proactively manage risks by designing our internal control system and actively address financial, legal, and cyber-security risks. • Prioritize efficiency for all of our transactional activ- ities by boosting penetration and adoption of shared services and digital solutions. • Ensure accuracy of our financial information and compliance with statutory obligations. COCA-COLA FEMSAINTEGRATED REPORT 201978Chief Financial Officer Functional Directors Treasury, Controllership, Legal, Business Strategy, Tax, Procurement, Information Security, KFS Territory Finance Directors Mexico, Brazil, LATAM Through our functionalization process, we centralized, streamlined, and de-layered our Financial Structure, with each of our operations’ finance directors and managers now reporting directly to our company’s Chief Financial Officer. Consequently, we enjoy a leaner, more agile, effi- cient, and collaborative Finance Operating Model, better positioned to capitalize on our company’s scale, capture greater value, share best practices and processes, and, ultimately, enable our front-line operations to transform current and future challenges into opportunities—fueling our profitable business growth. Moreover, over the second half of the year, we centralized and standardized our governance, policies, procedures, and metrics to ensure compliance and efficiency. We further deployed our shared financial services strategy, centralizing and consolidating our operations’ transac- tional activities, such as data processing and reporting, within our KOF Global Business Services platform— thereby enabling our operations to focus on our cus- tomer and consumer-centric capabilities and initiatives. Moving forward, we aim to further develop our digitally driven Finance Operating Model in order to strengthen and streamline our organization, maximize our return on capital, optimize our capital allocation, and importantly, free up resources to support our operations’ sustainable business growth and overall stakeholder value creation. KOF Global Business Services: Fueling Front-Line Business Growth KOF Global Business Services model is de- signed to better support and enable our business’ global and local strategic growth. Consistent with our business strategy, ob- jectives, guidelines, and requisite financial results, three specialized Finance entities— our Corporate Experts team, KOF Financial Services (KFS), and Region/Country Finance team—work collaboratively to provide on- field support focused on providing the rules of engagement and financial services to serve our internal and external clients and ensure our strategic objectives. Through our Transformation Framework, we enable an efficient, digitally driven, and harmonious Administrative & Financial (A&F) Shared Ser- vice Model. COCA-COLA FEMSAINTEGRATED REPORT 201979O N E O N E C O C A - C O L A F E M S A 03 03As an enabler of our company’s strategic growth, we ensure sustainability is fully integrated throughout our day-to-day decision-making processes and business operations. With the long-term sustainability of our business in mind, we strategically, proactively, and responsibly address our operations’ sustainability challenges across our value chain—from clean energy to climate change, efficient water use and conservation, responsible waste management, community development, and safety. COCA-COLA FEMSA81INTEGRATED REPORT 2019C L E A N E N E R G Y I N our operations We strive for energy efficiency across our value chain. We further integrate clean and renewable sources of en- ergy and technologies to reduce our carbon emissions— thus contributing to climate change mitigation. Our operations’ energy consumption focuses on a com- prehensive strategy that encompasses our value chain. Aligned with this strategy, we have defined the following 2020 goals: to reduce the carbon footprint of our value chain by 20% against our 2010 baseline; and to supply 85% of the energy we use for our manufacturing in Mex- ico from clean sources. COCA-COLA FEMSA82INTEGRATED REPORT 2019Our 2020 Goals: Reduce the carbon footprint of our value chain by 20% against our 2010 baseline. Supply 85% of the energy we use for our manufacturing in Mexico from clean sources. 19% 29% 38% 50% 70.7% 91.6 255.3 thousand tCO2e 163.7 Science Based Targets Initiative: Acting Against Climate Change During 2019, Coca-Cola FEMSA embarked on the Science Based Targets initiative (SBTi) to improve our accounting of green- house gas (GHG) emissions across our val- ue chain, so we can adopt a science-based target for GHG emissions reduction that is aligned with the goal of the Paris Agreement to limit global warming to well below 2ºC. Based on a thorough business analysis, we precisely identified the sources of our oper- ations CO2 emissions—from ingredients to packaging, manufacturing, distribution, and cold drink equipment. With this hard data, we are defining the actions that we must take to drive down our CO2 emissions through a clearly defined science-based pathway to a low carbon economy. The SBT initiative is a collaboration between CDP (formerly the Carbon Disclosure Proj- ect), the United Nations Global Compact, World Resources Institute, the World Wide Fund for Nature, and one of the We Mean Business Coalition commitments. Clean EnergyTotal KOF CO2 emissions thousand tons of CO2 (eq)Scope 2Scope 120152016201720182019COCA-COLA FEMSA83INTEGRATED REPORT 20194.027 M tonCO2e 25% 28% 7% 14% 27% Ingredients Sweeteners CO2 Packaging PET RefPET Glass Aluminum Others * We report the carbon footprint of our value chain a year behind, since the inventory is made after the operating year is completed. Manufacturing Bottling electricity Fossil fuels Distribution Cold-Drink Equipment Distribution center electricity Primary and secondary distribution fleet Electricity Refrigerant gasses 2018 Value Chain Emissions*219.1 gCO2e/L. beverageCOCA-COLA FEMSA84INTEGRATED REPORT 2019M A N U F A C T U R I N G E N E R G Y E F F I C I E N C Y , C L E A N E N E R G Y & E M I S S I O N S R E D U C T I O N We managed to increase our energy efficiency by 46% from 2010 to 2019. 3.7 5.4 Our aim is to improve the energy efficiency of our man- ufacturing operations, while simultaneously reducing our greenhouse gas emissions. To this end, we managed to increase our energy efficiency by 46% from 2010 to 2019. To improve our plants’ energy efficiency, we have imple- mented multiple strategic initiatives: • Energy Training – We provide annual energy training to all of our energy managers in every division, as well as all of the operators of each of our plants. • Steam Standard – We focus on the utilization of steam produced in our plants to reduce consump- tion, ensure safe use, recover steam condensate, and increase the life of our assets. • Top 20 Energy Efficiency Strategies – We implement key energy efficiency strategies to minimize each of our plants’ energy consumption. • Energy Assessments – We conduct annual energy assessments to support our operations in Argentina, Brazil, Central America, Colombia, and Mexico. From 2015 through 2019, we achieved a 12.6% decrease in our manufacturing operations CO2 emissions, reaching 13.7 grams of CO2 per liter of beverage produced in 2019. From 2015 through 2019, we achieved a 12.6% decrease in our manufacturing operations CO2 emissions, reaching 13.7 grams of CO2 per liter of beverage produced in 2019. 20102019COCA-COLA FEMSA85INTEGRATED REPORT 201929.3% 70.7% Electricity 1.78 M Gj 3.39 M Gj Energy Use Thermal 1.61 M Gj Grid electricity Clean electricity Steam Wood Fueloil Disesel LP Gas Natural Gas 40% 1% 11% 12% 17% 18% By 2020, we look to satisfy 85% of our Mexican manu- facturing operations’ electricity requirements with clean energy. By the end of 2019, we achieved 69% coverage of our Mexican bottling operations’ power needs. Beyond this goal, we supplied 70.7% of our global bot- tling operations’ electricity requirements with clean ener- gy sources by the end of 2019, up more than seven times from 9% in 2014. We use clean sources of energy for our manufacturing operations in Argentina, Brazil, Colombia, Costa Rica, Guatemala, Mexico, and Panama. For the year, we reduced our energy consumption by 12%, resulting in the following total savings: US$8.15 million – total energy savings • US$4.15 million – energy efficiency • US$4 million – clean energy We use clean sources of energy for our manufacturing operations in Argentina, Brazil, Colombia, Costa Rica, Guatemala, Mexico, and Panama. COCA-COLA FEMSA86INTEGRATED REPORT 2019W A T E R sustainability Water is an essential ingredient in the production of our beverages. Consequently, we are committed to ensur- ing the efficient use and conservation of this natural re- source for the benefit of our company, our communities, and our planet. COCA-COLA FEMSA87INTEGRATED REPORT 2019Our 2020 Goals: Increase our efficiency in water usage to 1.5 liters of water per liter of beverage produced. Return to our communities and their environment the same amount of water used in our beverages. Consistent with this commitment, we have established a comprehensive water strategy, founded on three pillars: 1. Efficiency in water use at our plants 2. Facilitating access to water and sanitation in our communities 3. Replenishment and water funds From 2010 through 2019, we decreased our absolute water consumption by 27.8% Protect, Produce and Return Water scarcity is a global challenge of rap- idly growing proportions. Therefore, we must act to ensure water security to enable the sustainable growth of our company, our communities, and our planet. To this end, our operations follow a three-part paradigm to protect, efficiently produce, and return this vital resource to the environment. Among our efforts, we continually update our water risk assessment tool, conduct plant self-assessments, and secure water concessions for our production facilities to protect the water supply of our company, our communities, and our countries. More- over, we constantly aim to improve our water use ratio in the production of our beverag- es through increased operating efficiency and investment in our top 10 most water in- tensive plants. Furthermore, our operations keep working to replenish and return to the environment and our communities the same amount of water used to produce our bev- erages by capturing the full potential of our water recovery systems. COCA-COLA FEMSA88INTEGRATED REPORT 2019W A T E R E F F I C I E N C Y As a beverage bottler, efficient water management is es- sential to our business, our communities, and our planet. By 2020, our goal is to improve our water use ratio to 1.5 liters of water per liter of beverage produced. For 2019, we remained on track to reach our 2020 goal, achieving 1.52 liters of water per liter of beverage produced—a 22.5% improvement in our water use ratio from our 2010 base year. Moreover, our water efficiency initiatives and projects generated savings of US$ 1.63 million in 2019. Through our Top 20 Water Saving Initiatives program, we foster efficient water consumption across all of our plants. To this end, we registered significant progress across our operations, focusing on 20 key measures— from our detection and elimination of leaks to optimal water use in our plants to our water recovery systems. 1.72 1.65 1.58 1.52 W A S T E W A T E R T R E A T M E N T 100% of the water we discharge from our manufactur- ing operations is sent to wastewater treatment plants, which ensure sufficient quality to foster aquatic life. Access to Safe Water and Sanitation in Our Communities In collaboration with FEMSA Foundation, we carry out projects designed to improve com- munities’ quality of life by helping to provide them with safe water, improved sanitation, and hygiene education. While the Founda- tion intervenes significantly at the outset of each project, all of these initiatives utilize the necessary elements to enable communities to adopt them in a sustainable way—endur- ing over the long term. For more information about FEMSA Founda- tion, visit https://www.femsa.com/en/femsa- foundation/ Water Efficiency2016201720182019COCA-COLA FEMSA89INTEGRATED REPORT 2019cocacolafemsa_col We currently give back 100% of the water we use in the production of our beverages. W A T E R R E P L E N I S H M E N T & C O N S E R V A T I O N Aligned with the United Nations’ Sustainable Develop- ment Goals, we recognize that water is an important and essential natural resource. Accordingly, we join efforts to provide access to potable and affordable water, as well as to protect and recover water-related ecosystems. By 2020, our goal is to reduce our water consumption and to return to the environment and our communities the same amount of water used to produce our bever- ages. Aligned with our goal, we currently give back to the environment more than 100% of the water we use in the production of our beverages in Argentina, Brazil, Central America, Colombia, and Mexico. In light of the substantial scope, importance, and com- plexity of water conservation and replenishment, we work to strengthen water funds and conserve water basins through sustainable initiatives involving partner- ships with several stakeholders. Through the Latin Amer- ican Water Funds Partnership—comprised of the Nature Conservancy, FEMSA Foundation, the Inter-American Development Bank (IDB), and the Global Environment Facility—we jointly seek to offer hydrological safety in the region, ensuring sustainable access to a sufficient quantity and quality of water to sustain human life and socioeconomic development. To date, the Partnership has developed 26 water funds. Of these funds, five are in countries where we operate— Brazil, Colombia, Costa Rica, Guatemala, and Mexico. As a result, through 2019, the Partnership has worked to directly benefit approximately 110,500 people in areas near the water basins through job creation and capabili- ties training since the projects began. COCA-COLA FEMSA90INTEGRATED REPORT 2019W A S T E & recycling At Coca-Cola FEMSA, we strive to mitigate the environ- mental impact of our operations’ processes. Over the past several years, we have led the way in the promotion of a culture of waste management throughout all of our operations and value chain. COCA-COLA FEMSA91INTEGRATED REPORT 2019C I R C U L A R E C O N O M Y O F P O S T - C O N S U M P T I O N P A C K A G I N G 1 2 11 3 10 9 B 4 1 2 3 4 5 6 Waste Transport Collection Transport Sorting Centers Bales 7 8 9 10 11 Recyclers (Grading/sorting, washing, grinding, shaping) PET Bottles With Recycled Content Producers Distributors Consumers 8 A 5 7 6 A B Other Products (Open loop) Virgin PET Producers In Coca-Cola FEMSA we are confindent that with the support & co-responsibility of all actors in the value chain, a market-based approach to the circular econo- my is achievable. 92COCA-COLA FEMSAINTEGRATED REPORT 2019KOF Waste Management Strategy Comprehensive and responsible post-industrial waste management Post-consumption collection and recycling Efficient design and integration of recycled materials in our packaging Our 2020 Goals: To recycle at least 90% of the waste we generate in every one of our bottling plants. To include 25% of recycled materials in our PET packaging. COCA-COLA FEMSAINTEGRATED REPORT 201993World Without Waste Plastic waste is a global problem that con- cerns all of us. It is unacceptable that pack- ages of beverages end up in the wrong place. Therefore, we continue to embrace our re- sponsibility to help ensure that our compa- ny’s impact is positive, and our actions in- spire others. Consistent with our long-term commitment to waste management, we are fully aligned with the three pillars of The Coca-Cola Com- pany’s “World Without Waste” global initia- tive’s 2030 vision to: DESIGN • Make all consumer packaging 100% recy- clable by 2025 • Create packaging that includes at least 50% recycled material by 2030 COLLECT • Collect the equivalent of 100% of our pri- mary packaging by 2030 PARTNER • Grow participation in marine litter preven- tion programs and beach cleanups Working together, we remain committed to help solve this pressing problem throughout the entire packaging lifecycle—from how our bottles are designed to the way they’re col- lected, recycled, and reused. COCA-COLA FEMSA94INTEGRATED REPORT 2019I N N O V A T I V E P A C K A G I N G D E V E L O P M E N T Within the beverage industry, our product packaging is mainly comprised of PET, glass, and aluminum. We are committed to efficiently using our packaging materials; redesigning our packaging’s components to achieve 100% recyclability while including a significant share of recycled content. By 2020, our goal is to incorporate 25% recycled materi- als into all of our PET packages. In 2019, we successfully included an average of 23.7% of recycled resin into the production of all of our PET presentations. Consistent with our efficient resource management and optimization of our packaging materials, we continued to deploy a wide-ranging light-weighting strategy for our operations’ PET presentations and caps. Through our ef- ficient resource management and packaging optimiza- tion, we generated savings of approximately US$ 11.2 million in 2019. % Recycled Content19.8%201620172018201921.2%20.8%23.7%COCA-COLA FEMSA95INTEGRATED REPORT 2019By joining efforts, we multiply the effects of our actions. Accordingly, we partner with communities, authorities, and NGOs on different initiatives to raise awareness of post-consumer waste management, carry out collection and recycling programs within our communities, and in- form consumers about the proper disposal and handling of the waste generated from our products, including ma- rine litter prevention, debris collection, and beach cleanups. Importantly we launched Movimiento Re in Colombia, an industry alliance to increase PET collection rates in the cities of Cartagena, Santa Marta, and Barranquilla. Since 2002, we have collaborated with other food and bev- erage companies through ECOCE, a Mexican civil associ- ation that promotes the collection of waste, the creation of a national market for recycling, and the development of recycling programs. Through this collaboration, in 2019, ECOCE collected 56% of the total PET waste in Mexico. Importantly, we are leaders in PET bottle-to-bottle recy- cling in Latin America. In 2005, we joined efforts in Mex- ico to operate the first food grade PET recycling plant in Latin America, called IMER (Industria Mexicana de Reciclaje or Mexican Recycling Industry). In 2019, this plant recycled 11,909 tons of PET. Moreover, we agreed to co-invest with our supplier in the construction of a new food grade PET recycling plant with a capacity of 35,000 tons in southeast Mexico. Overall, we have a total of 14 recycled food-grade resin suppliers across our op- erations network. Overall, in 2019, we utilized a total of 63,631 tons of re- cycled materials in our plants in Argentina, Brazil, Central America, Colombia, and Mexico. As a result of these ef- forts, we have used more than 336,000 tons of recycled PET since 2010. Strengthening Our Collection and Recycling Capabilities In August 2019, we started operations in Bra- zil of SustentaPET, a PET collection center that will allow us to strengthen our capabil- ities in the Greater Sao Paulo metropolitan area. Leveraging our shared knowledge and best practices, we are undertaking customized ap- proaches for each country through which we engage with suppliers of recycled food-grade PET resin, develop our own collection and recycling capabilities, and partner with other stakeholders to achieve our common goals. COCA-COLA FEMSA96INTEGRATED REPORT 2019P O S T - I N D U S T R I A L O P E R A T I N G W A S T E M A N A G E M E N T 5 119K tons 114 In 2019, 22 of our bottling plants earned Zero Waste to landfill certification. Designed for our Mexico operations, this initiative establishes specific measures to improve waste management, disposal, and repurposing—result- ing in improved waste efficiency per liter of beverage produced. By 2020, we aim to recycle at least 90% of our waste in each of our bottling plants. At the end of 2019, 90% of our plants successfully achieved this goal. Importantly, in Mexico, our plants recycled 100% of the waste gen- erated in our production processes. Overall, we recycled 95.7% or approximately 114,000 tons of manufacturing waste generated. Currently, 18 of our plants in Mexico have obtained Clean Industry certification from the Federal Environmental Protection Agency (PROFEPA). Moreover, in 2019, 36 of our distribution centers in Mexico received air quality certifications from PROFEPA, the state of Mexico’s Envi- ronmental Agency, and Mexico City’s Ministry Secretary of the Environment (SEDEMA). These and other recogni- tions confirm our commitment to the environment and overall sustainability. To this end, we diligently work to ensure our processes comply with the highest national and international stan- dards and with all applicable laws, avoiding sanctions and fines pertaining to environmental issues, while reaf- firming our commitment to efficient operational process- es, environmental performance, and competitiveness. 8.3 7.5 6.9 6.4 Waste EfficiencyTotal Waste Generatedgrams of waste per liter of beverage produced(Less is better)2016201720182019Recycled WasteWaste DisposedCOCA-COLA FEMSA97INTEGRATED REPORT 2019S A F E T Y commitment At Coca-Cola FEMSA, we firmly believe that it is funda- mentally necessary to protect our people’s safety, so they can fully enjoy every moment of their lives, while creating sustainable value for our consumers, our cus- tomers, and our business. That is why we continually reaffirm our commitment to do everything necessary to safeguard the lives of all of the people with whom we interact across our operations to achieve our vision of zero incidents. Consistent with this commitment, we regard safety as a core value and behavioral principle for all of our em- ployees and our organization, based on a culture of pre- vention, collaboration, respect, and recognition—aligned with KOF DNA and our world-class management model. COCA-COLA FEMSA98INTEGRATED REPORT 2019Quality • Safety • Environment Raw Materials Manufacturing T1 Distribution Warehousing T2 Distribution Sales Risk Management Talent & Capability Development Management, Improvement & Innovation Managing environmental risks, quality, food safety, and road safety Developing capabilities through the professionalization of the QSE function & experts World-class system and processes to ensure continuous QSE management, improvement and innovation QSE Transformation Transforming QSE to support our vision in a sustainable way along the value chain Technology & Digitalization Supporting our strategy through technology and digitalization to boost people’s capabilities and accelerate, optimize, and standardize processes 010203COCA-COLA FEMSA99INTEGRATED REPORT 2019Our 2020 Goal: To reach a Lost Time Incident Rate (LTIR)¹ of 0.5 and a Total Incident Rate (TIR)² of 1.5. 1 2 (# Accidents x 200,000)/Hours Worked. (# Total Reportable Incidents x 200,000)/Hours Worked. The factor of 200,000 is obtained from the estimated hours worked by 100 employees over 50 weeks at 40 hours per week. This factor allows for a comparison of the indicators as a proportionate rate. cocacolafemsa_mx Liked by cocacolafemsa_br and others Through our Executive Team, Coca-Cola FEMSA ratified our Safety Strategy and Vision 2020 – 2022 for all of our operations—encompassing all of our employees, third parties, and strategic partners to whom we have made the promise and commitment to become a global safety benchmark. Until we achieve our vision of zero incidents, we have pledged to achieve a 15% annual reduction in our incident rates, consistent with our commitment to achieve world-class indicators and attain a Lost Time Incident Rate (LTIR) of 0.5 through our supply chain by 2022. To this end, we established KOF Quality, Safety & Envi- ronment (QSE) Committee, representing the countries in which we operate. This Committee aims to define our QSE Strategy and transformational initiatives for all of Coca-Cola FEMSA. COCA-COLA FEMSA100INTEGRATED REPORT 2019As a result of our strategic safety initiatives, we report- ed a Lost Time Incident Rate (LTIR) of 1.10 in 2019, a 7% reduction from 2018 and a 57% reduction from 2015. Virtually all of our operations reported a downward trend compared to the prior year; notably, our Brazilian opera- tion surpassed our 2022 goal with an LTIR of 0.36. We also achieved a 14% reduction in our Lost Time Incident Severity Rate (LTISR), from 22.68 in 2018 to 19.50 in 2019. We further reached a Total Incident Rate (TIR) of 1.88, a 6% reduction from 2018. Lost Time Incident Rate-LTIRTotal Incident Rate-TIR(Less is better)(Less is better)2016201620152017201720182018201920191.803.062.561.342.331.182.001.101.88COCA-COLA FEMSA101INTEGRATED REPORT 2019ial Conte xt c o S n t e em g a n a M E QS L e adership wit h p u r F F u u n n d d a a m m e e n n t t a a l l s s o s e p S t r u c t u re 13. Management model 14. Tools and routines 15. Relevant knowledge 10. Transformation teams 11. Talent management 12. Basic conditions T R A N S F O R M O U R S A F E T Y C U L T U R E During 2019, we evolved our Safety Cultural Transforma- tion Model into our QSE Cultural Transformation Model, aligned with KOF DNA, our Supply Chain Strategy, and the Coca-Cola system’s QSE Culture Model. This model defines five key QSE cultural elements and 15 transfor- mation sub-elements that will enable us to achieve our company’s desired picture of success, which forms the foundation for both our Supply Chain and QSE Strategy. ters. Our supply chain and sales area leaders took part in our QSE leadership workshops, defining the challenges, vision, purpose, beliefs, behaviors, routines, and transfor- mation plans that our company plans to implement over the next three years. Moreover, we formed more than 150 Safety Cultural Committees, replicated more than 100 safety initiatives, and carried out more than 200 safety activities. Pursuant to this model, we conducted more than 350 QSE leadership workshops in all of our operations, con- necting more than 10,000 employees and 100 work cen- InternalExternalQSE Cultural Transformation Model1. QSE vision and purpose2. Beliefs and Behaviors3. Knowledge, perception and risk tolerance4. QSE in business5. Operational discipline6. Organizational communication7. Interactions of trust8. Collaboration between business functions9. Consequences and recognitionCOCA-COLA FEMSA102INTEGRATED REPORT 2019 Over 1,500 action plans created to manage safety risks throughout the company. M A N A G E K E Y R I S K S & F O C U S O N C R I T I C A L A C T I V I T I E S During 2019, we developed our QSE Risk Management Strategy, and we identified and validated our main stra- tegic risks at a company level. Moreover, we completed the third stage of our Corporate Safety Standards devel- opment, where programs and controls for key risks at a company level are defined. We have designed more than 1,500 action plans to manage safety risks at a company level. Throughout 2020, we will continue their implemen- tation according to each operation’s risk map, as well as the critical risks of our Top Five Initiative process at each of our operation’s level. COCA-COLA FEMSA103INTEGRATED REPORT 2019Our vision is to achieve zero incidents. S A F E T Y F U N C T I O N T R A N S F O R M A T I O N Our development of safety capabilities is one of our core transformational initiatives. In order to face current and future organizational challenges, we must develop skills that enable us to make better decisions, including those related to safety. Accordingly, we conducted more than 500 training activities, including the following series of consolidated educational and diagnostic models and safety skills programs: • Safety Skills Diagnostic B R A Z I L • Cultural Transformation Workshop for Middle Man- agement and Multipliers P H A S E 2 • Truck Safety School induction C O L O M B I A • Safety School C O C A - C O L A F E M S A • Drivers School B R A Z I L A N D M E X I C O • Cultural Transformation Workshops for Middle Management and Multipliers C O S TA R I C A , N I C A R A G U A , A N D PA N A M A • Risk Management Workshops for Middle Management C O S TA R I C A , N I C A R A G U A , A N D PA N A M A During 2019, we invested over 1.25 million training hours in Occupational Health and Safety. COCA-COLA FEMSA104INTEGRATED REPORT 2019S A F E T Y T E C H N O L O G Y & D I G I T A L I Z A T I O N Our safety technology and digitalization pipeline con- tinues to enable our Road Safety Strategy and results. During 2019, we mapped our main risks and key strate- gies, while defining a series of pilot tests and technolo- gies to implement over the next three years. Additionally, we developed and pilot-tested the following main initia- tives over the course of the year: • Information Management Platform and Safety Indi- cators – enabler to manage our Brazilian operation’s Road Safety Program, comprising a telemetry + ac- tion management platform for road incident preven- tion and mitigation • Phase 2 Road Simulators for our Brazilian opera- tion’s primary and secondary distribution fleet • Evolution of Road Capabilities Training Program – focused on defensive driving, road accident reduction, vehicle wear, and fuel consumption in our Brazilian operation’s primary and secondary distribution fleet • Mobileye Initiative for our Mexico operation’s prima- ry distribution fleet – enabler to identify operator pro- files and assess performance/driving habits in order to implement controls to decrease accident rates and to focus proficiencies according to a specific profile • Phase 1 Road Simulators for our Mexico operation’s secondary distribution fleet. Moreover, we continued to consolidate our Road Safety Strategy. Based on three key elements—People, Orga- nization, and Vehicles—this strategy has enabled us to significantly improve road safety by reducing the num- ber of accidents within the organization. To support this strategy, our business units have continued to implement initiatives and innovations that have accelerated the pos- itive performance in this critical area, focusing on the de- velopment of our drivers’ capabilities, the development of organizational processes, and the implementation of technology for road risk monitoring and management. Thanks to these transformational initiatives, we achieved a 22% crash rate reduction compared with 2018. COCA-COLA FEMSA105INTEGRATED REPORT 201928 29 12 18 C O M M I T M E N T T O Z E R O I N C I D E N T S At Coca-Cola FEMSA, we firmly believe that all incidents are preventable. Accordingly, we continually research, analyze, and identify the measures required to reduce the number of injuries resulting from our operations. For 2019, we reduced our total fatalities by 10%. Begin- ning 2018, this data includes all of our manufacturing, distribution, and commercial operations conducted by our employees, contractors, and third parties. Important- ly, 96% of our operations did not report fatalities; how- ever, the remaining 4% is still an unacceptable number. We are deeply sorry and regret to report a total of 25 fa- talities, 96% from road accidents and 4% from incidents within our operations. We will not be satisfied until we fulfill our promise and commitment to zero incidents. We offer our condolences to the families and people affect- ed by our operations, and we pledge to implement best practices to prevent any future losses. Total FatalitiesOwn employees + third parties2016282017920181620197Third partiesOwn employeesCOCA-COLA FEMSA106INTEGRATED REPORT 2019S U S T A I N A B L E mobility Through our Sustainable Mobility strategy, we aim to re- duce the impact of our fleet—including our primary and secondary distribution trucks—and to position ourselves as the industry leader in Latin America in terms of vehi- cle efficiency, environmental stewardship, and safety. COCA-COLA FEMSA107INTEGRATED REPORT 2019We are executing route optimization strategies to maxi- mize our overall vehicle efficiency. With the complete roll- out of our KOF Digital Distribution 1.0 platform in Mexi- co and Brazil, we have installed telemetry equipment on 100% our secondary distribution fleet. Thanks to our trucks’ telemetry data—combined with the functionality of our mobile delivery devices—we enjoy the capability to identify and correct deviations in our distribution route execution versus our route plan. This equipment also enables us to analyze our route execution patterns in order to identify an optimal combination of variables to improve our route planning process. As a result, we op- timize our fleet’s usage, minimizing our vehicles’ down- time while maximizing our vehicles’ uptime. Thanks to our telemetry equipment, we also significantly reduced our fuel consumption by more than 650 thousand liters in 2019, while decreasing our CO2 emissions by 1,740 tons for the year. Moreover, with our deployment of dynamic routing across our secondary distribution fleet in Brazil, Colombia, and Ar- gentina, we enjoy the flexibility to plan our vehicles’ routes every day, thereby optimizing our available fleet resources and our distances traveled to serve our customers. reinforced our commitment to eco-efficiency with local environmental authorities. In 2019, we continued to evaluate the commercial via- bility of new lower emission vehicles and emission re- duction devices. In Mexico, we are working with FEMSA on an initiative to convert certain small trucks to electric vehicles. We are also running tests on an engine idling limiter for our secondary delivery trucks in order to de- crease our CO2 emissions by 8,200 tons per fleet annual- ly. Currently, 91% of our company’s forklifts run on either electricity or liquefied petroleum gas. Additionally, we leveraged our secondary fleet substitu- tion program in Mexico and Brazil, where we maintain our largest volume of delivery trucks. Over the past four years, we have substituted more than 1,350 trucks with vehicles that meet higher standards to reduce emis- sions. Thanks to this program, we reduced our fuel con- sumption, emissions, and maintenance costs, and we In the Valley of Mexico, we continued to work closely with local governmental authorities to earn certification for 1,127 of our trucks under the self-regulation program. Pursuant to this voluntary program, we commit to mini- mize the local delivery fleet’s emissions through key ini- tiatives, including an efficient maintenance process and ongoing fleet substitution program. Among other bene- fits, local authorities allow us to continually operate our complete secondary distribution fleet every day—foster- ing our social license to operate. In recognition of our efforts to reduce our primary and secondary fleet’s emissions, we earned the Clean Trans- portation Award from Mexico’s ministries of Environ- ment and Natural Resources (SEMARNAT) and Commu- nications and Transportation (SCT) for the eighth year. COCA-COLA FEMSA108INTEGRATED REPORT 2019S H A R E D O P P O R T U N I T I E S W I T H our communities We work to strengthen and consolidate positive rela- tionships with the communities with which we interact. We identify and develop shared opportunities for our company and communities’ sustainable development, enhancing our ability to serve the marketplace while maintaining our social license to operate. COCA-COLA FEMSA109INTEGRATED REPORT 2019S U S T A I N A B L E S O U R C I N G 83% of our procurement expenditure goes to local suppliers. At Coca-Cola FEMSA, we work with our suppliers to re- duce the environmental and social impacts generated by our commercial interactions and thus improve the conditions of our supply chain. In this way, we not only minimize negative impacts, but also raise standards in key business areas, increase labor efficiency, preserve environmental capital, and reduce risks and costs for all of those involved throughout the value chain. As part of our company’s sustainable sourcing mandate, in conjunction with our defined strategic initiatives, each supplier cooperates to minimize their social and environ- mental risks over which we have no direct control and which cause the greatest number of impacts throughout our supply chain on a daily basis. The general guidelines that we use to make this happen are: 1. The Coca-Cola Company’s (TCCC) Supplier Guiding Principles focus on strategic input categories and in- clude areas such as Human Rights Policies, Environ- mental Protection, and Labor Rights. Through audits that ensure compliance with these standards, TCCC authorizes its bottlers to work with approved suppliers. 2. Sustainable Agriculture Guiding Principles. Estab- lished by TCCC, they include the same areas as the previous principles, but are adapted to suppliers of agricultural raw materials. 3. FEMSA’s Supplier Guiding Principles. We apply these principles to mitigate social risks of suppliers for categories that are different from those of the strategic inputs and are relevant to the value chain. F E M S A Supplier Guiding Principles Labor Rights Environment Community Ethics & Values Child labor Forced labor & freedom to move Impact & environmental compliance Community development Freedom of association & collective bargaining Discrimination & harassment Work schedule & compensation Occupational health & safety Reporting mechanisms Legal Compliance Fiscal integrity Anti-corruption Money laundering Fair competition Conflicts of interest Privacy & intellectual property Human Rights COCA-COLA FEMSA110INTEGRATED REPORT 2019These principles reflect the standards that guide our dai- ly activities to ensure we provide responsible workplaces that protect human rights and comply with environmen- tal laws. Founded on these principles, we follow a com- prehensive five-step Sustainable Sourcing Strategy: Prioritization of categories At Coca-Cola FEMSA, we use a proprietary tool to iden- tify which suppliers are candidates for a development process. Suppliers are prioritized considering factors such as expenditure, environmental, social, and ethical impacts for each product category, dependability, brand association, and operational criticality. Sustainable purchases Through this step, we include FEMSA’s Supplier Guiding Principles in our supplier contracts and requests for in- formation, provide general guidelines for assessment procedures, and conduct training for sourcing and pur- chasing employees. COCA-COLA FEMSA111INTEGRATED REPORT 2019Assessment At Coca-Cola FEMSA, we assess our suppliers continu- ously through our Sustainable Sourcing System, ensur- ing that they are aligned with our company’s operating principles and values. Carried out online, this assessment focuses on four main areas: Social/Labor Rights; Envi- ronment; Ethics and Values; and Community. To ensure the process’ transparency, a third party reviews and ver- ifies the information, and we then provide feedback and create action plans to encourage supplier development, ethics, and sustainability. All suppliers with low scores are subject to improvement plans at their facilities and are evaluated periodically to encourage their continuous improvement. This year, we conducted 426 supplier eval- uations based on FEMSA’s Supplier Guiding Principles. Since 2015, we have carried out 1,897 evaluations under these principles. Consistent with this strategy, The Coca-Cola Company (TCCC) assesses and ensures compliance with its guid- ing principles and sustainability standards for specific categories of strategic suppliers; at Coca-Cola FEMSA, we only work with suppliers approved by TCCC in those categories. In 2019, TCCC carried out 105 evaluations of suppliers aligned with their Supplier Guiding Principles and Sustainable Agricultural Guiding Principles. Suppliers assessed under The Coca-Cola Company guiding principles C O U N T R Y C O U N T R Y 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 Mexico Costa Rica Guatemala Nicaragua Panama Argentina Brazil Colombia Total 33 52 40 59 37 2 3 0 1 5 54 8 3 5 1 0 11 47 7 107 126 7 8 0 3 19 102 18 197 0 7 0 3 10 51 11 1 8 1 2 10 42 4 141 105 Suppliers assessed under FEMSA guiding principles C O U N T R Y C O U N T R Y 2 0 1 5 2 0 1 5 2 0 1 6 2 0 1 6 2 0 1 7 2 0 1 7 2 0 1 8 2 0 1 8 2 0 1 9 2 0 1 9 In addition to these assessments, Coca-Cola FEMSA is one of the few companies that promoted the application of these assessments to Tier 2 suppliers or the suppliers of our suppliers. Currently, our strategic suppliers are ap- plying the same risk assessment and mitigation mech- anisms within their own value chain. This ensures that the knowledge and the drive for greater sustainability not only remains within our direct circle of influence, but also extends to all of those who participate in supplying raw materials, inputs, and services. Mexico Costa Rica Guatemala Nicaragua Brazil Panama Argentina Total 100 30 – – – – – 198 120 – 84 – – – 245 106 49 94 45 – – 172 165 34 34 27 66 36 31 41 36 21 63 24 31 130 402 539 400 426 COCA-COLA FEMSA112INTEGRATED REPORT 2019Capabilities development To strengthen our suppliers’ business capabilities, we provide them with access to training and growth initia- tives on topics such as finance, marketing, and human resources, among others. We also support their growth and build their business skills, improve their companies, and develop high quality products aligned with our prin- ciples and values. In collaboration with the Mexican Center for Competi- tiveness (Centro Mexicano de Competitividad), we car- ry out a Comprehensive Supplier Development Program for strategically selected small- and medium-sized en- terprises (SMEs) to improve their business capabilities. Through this program, we collaborate with suppliers to not only improve their sustainable competitiveness, but also forge stronger relationships with our company and other large companies. In 2019, 35 suppliers participat- ed in the program, training a total of 266 suppliers from Mexico and Costa Rica over the past four years. Recognition The good performance of our suppliers on sustainabil- ity issues is very important. Accordingly, we recognize all of those suppliers that incorporate sustainability into their own business’s DNA not only as a requirement for doing business with Coca-Cola FEMSA, but also as a competitive advantage and a means to become socially responsible. In Mexico, we conducted a suppliers’ forum, with the participation of over 55 companies, where we recognized Ecolab, Lub y Rec, and Spirax Sarco for their remarkable practices in water access and education. 35 suppliers participated in the SME Development program, training a total of 266 suppliers from Mexico and Costa Rica over the past four years. COCA-COLA FEMSA113INTEGRATED REPORT 2019C O M M U N I T Y D E V E L O P M E N T To develop stronger relationships with our immediate communities, we encourage continuous dialogue and interaction. By systematically analyzing their particular needs, we design and deploy activities that benefit both our communities and our company. In this way, we seek to build trust and ensure the commitment of all parties involved—maintaining our social license to operate. This not only enables us to consolidate positive relation- ships with our communities, but also contributes to our ability to serve the market while identifying key opportu- nities to collaborate with our neighbors. Our 2020 Goal: To put in place a community relations plan throughout 100% of our key work centers. COCA-COLA FEMSA114INTEGRATED REPORT 2019In Coca-Cola FEMSA we are convinced that strong communities are good for business. C O M M U N I T Y R E L A T I O N S ’ M A N A G E M E N T M O D E L To create a community relations vision that we can put it into practice in a standardized and systematic manner, we developed a management model that includes five sequential steps—which are the foundation of our Model for Addressing Risks and Relations with the Community (MARRCO). During 2019, we expanded the reach of MARRCO. From 2016 to 2019, we have implemented MARRCO in 40 pri- oritized facilities representing 81.6% of our target. Based on MARRCO methodology, our work centers are designing a community engagement plan to immediate- ly implement a series of measures, including mitigation activities to reduce our operational footprint and com- munity programs aligned with local needs and risks. In turn, this will help us to ensure our positive coexistence and our business’ permanence at those locations, while reaffirming our social license to operate. COCA-COLA FEMSA115INTEGRATED REPORT 201901 Identify & Understand Objectives, capabilities, priorities, needs, resources, and commitments of the business towards the community. 02 Analyze & Plan The risks and opportunities for designing community engagement activities and programs. 03 Agree & Act Listen to and build with the community to set commitments and execute mutually beneficial activities and programs. 04 Assess & Measure Impact levels of the community engagement activities and programs, and of the plan’s progress. 05 Learn & Improve Strengthen the capabilities and develop abilities by identifying areas for improvement, best practices, and knowledge exchange. D I A L O G U E // C O M M I T M E N T C O L L A B O R A T I O N // T R U S T E N G A G E M E N T Achieve positive engagement with the communities to ensure the continuity of the operation and improve life quality. B U S I N E S S Identifying the impact and influence of a community in achieving business goals, considering community risks. C O M M U N I T Y Identify the impact of the business strategy on the community. O P P O R T U N I T I E S Finding opportunities to collaborate with the community to improve their living conditions. COCA-COLA FEMSA116INTEGRATED REPORT 2019B R A Z I L C O L O M B I A Minha Galera Faz Eco Vive Bailando This is an inter-school socio-environmental program that seeks to foster interest in sus- tainable practices among children. This social intervention model focuses on teenagers and uses dance classes as both a transformation and healthy lifestyles tool that sustainably and positively impacts their behavior, leadership, family unit, and ability to change their surroundings, which have been affected by violence. M E X I C O Vive tu Parque These parks feature an outdoor gym, sports facilities, drinking fountains, children’s games, and lights. A R G E N T I N A C O S T A R I C A Canteros Alcorta Female Empowerment Project We rehabilitated the boulevard in front of our Alcorta plant by installing sports poles. With the participation of women entrepre- neurs and neighbors from Calle Blancos, we carry out financial practices workshops to benefit their small enterprises. Social programs and initiatives At Coca-Cola FEMSA, we build positive rela- tionships with our communities by carrying out different social programs and initiatives in order to improve local living conditions from the moment we begin our operations. Recognizing the diversity of our countries and communities, we develop enriching ac- tivities aligned with their local needs. In 2019, we carried out over 100 community development programs and social initiatives with over 6 thousand different interventions to benefit our communities across the coun- tries where we operate. Among our many different activities, our ex- emplary social programs and initiatives in these countries include: COCA-COLA FEMSA117INTEGRATED REPORT 2019appendix 118summary Amounts expressed in millions of U.S. dollars and Mexican pesos, except data per share and headcount. I N C O M E S T A T E M E N T Total revenues Cost of goods solds Gross profit Operative expenses Other expenses, net Comprehensive financing result Income before income taxes and share of the profit or of associates and joint ventures accounted for using the equity method Income taxes Share in the (loss) profit of equity accounted investees, net of taxes Net income (loss) after tax from discontinued operations Consolidated net income Equity holders of the parent for continuing operations Equity holders of the parent for discontinued operations Non-controlling interest net income for continuing operations Non-controlling interest net income for discontinued operations U.S. (*) 2019 2018 (4) (5) (6) 2017 (2) (3) (4) 2016 (1) 2015 10,311 194,471 182,342 183,256 177,718 152,360 5,671 4,640 3,211 132 321 106,964 87,507 60,537 2,490 6,071 98,404 83,938 57,924 1,881 6,943 99,748 83,508 58,044 31,357 5,362 98,056 79,662 55,462 3,812 6,080 80,330 72,030 48,284 1,748 7,273 976 18,409 17,190 (11,255) 14,308 14,725 299 (7) - 670 642 — 28 — (131) (226) 60 147 155 - 3,366 3,725 — — 12,630 12,101 15,070 10,936 (11,654) (16,058) 10,527 10,070 10,329 10,235 — 2,975 3,256 — 529 768 679 457 — 391 469 — — 94 — Information considers full-year of KOF’s territories and one month of Vonpar Refrescos, S.A. (“Vonpar”). Income statement information considers full-year of KOF’s territories and full-year of Coca Cola FEMSA Venezuela. 1. 2. 3. Balance sheet information does not include Coca Cola FEMSA Venezuela’s balances due to deconsolidation as of December 31, 2017. Venezuela balance is included as investment in shares as of December 31, 2017. Income statement information includes 8 months of the financial results for Abasa and Los Volcanes in Guatemala. Income statement information includes six months in the financial results for Uruguay. Includes investments in property, plant and equipment, refrigeration equipment and returnable bottles and cases, net of disposals of property, plant and equipment. 4. KOF Philippines has been classified as a discontinued operation in our profit and loss statement for the years ended December 31, 2017 and 2018. 5. 6. 7. 8. Based on 16,806.7 million ordinary shares as of December 31, 2019, 2018 and 2017, and 16,583.4 million shares as of December 31, 2016 and 2015. 9. Computed based on the weighted average number of shares outstanding during the periods presented:16,806.7 million for 2019 and 2018, 16,730.8 million in 2017 and 16,730.8 million in 2016 and 2015. 10. Dividends paid during the year based on the prior year’s net income, using 16,806.7 millions outstanding ordinary shares for 2019 and 2018 and 16,583.4 million outstanding ordinary shares for paid on 2017, 2016 and 2015. Includes third-party and for 2017 excludes 16,566 employees for our discontinued operation in Philippines. 11. * Exchange rate as of December 31, 2019 Ps. 18.86 per U.S. dollar solely for the convenience of the reader according to the federal USA reserve. U.S. (*) 2019 2018 (4) (5) (6) 2017 (2) (3) (4) 2016 (1) 2015 R A T I O S T O R E V E N U E S ( % ) Gross margin Net income margin C A S H F L O W Operative cash flow Capital expenditures (7) Total cash, cash equivalents B A L A N C E S H E E T Current assets Investment in shares Property, plant and equipment, net Intangible assets, net Deferred charges and other assets, net 45.0 6.5 1,660 608 1,086 3,011 517 3,244 5,941 958 45.0 6.5 31,289 11,465 20,491 56,796 9,751 61,187 46.0 8.3 29,687 11,069 23,727 57,490 10,518 61,942 45.6 (6.4) 33,236 12,917 18,767 55,657 12,540 75,827 44.8 5.9 47.3 6.8 32,446 12,391 10,476 45,453 22,357 65,288 23,202 11,484 15,989 42,232 17,873 50,532 90,754 8,858 112,050 116,804 124,243 123,964 18,055 17,033 17,410 22,194 L I A B I L I T I E S Short-term bank loans and notes payable Interest payable Other current liabilities Long-term bank loans and notes payable Other long-term liabilities Total Liabilities Equity Non-controlling interest in consolidated subsidiaries 609 23 2,073 3,101 989 6,795 6,876 358 11,485 11,604 12,171 439 39,086 58,492 18,652 128,154 129,685 6,751 497 33,423 70,201 16,312 132,037 131,750 6,806 487 42,936 71,189 18,184 144,967 140,710 18,141 3,052 520 36,296 85,857 24,298 150,023 129,233 7,096 3,470 411 26,599 63,260 7,774 101,514 108,735 3,986 Equity attributable to equity holders of the parent 6,518 122,934 124,944 122,569 122,137 104,749 F I N A N C I A L R A T I O S ( % ) Current Leverage Capitalization Coverage D A T A P E R S H A R E Book Value (8) Loss (income) tributable to the holders of the parent (9) Dividends paid (10) Headcount (11) 1.11 0.99 0.37 5.51 0.388 0.038 0.023 1.11 0.99 0.37 5.51 7.315 0.723 0.443 1.26 1.00 0.41 4.52 7.434 0.831 0.419 82,186 82,186 83,364 1.00 1.03 0.39 4.16 7.293 (0.765) 0.422 79,636 1.14 1.16 0.41 4.80 7.365 0.607 0.419 1.39 0.93 0.39 3.92 6.317 0.617 0.386 85,140 83,712 5,648 5,260 4,184 3,928 4,551 Total Assets 13,671 257,839 263,787 285,677 279,256 210,249 FINANCIALCOCA-COLA FEMSA119INTEGRATED REPORT 2019Results for the Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018 analysis C O N S O L I D A T E D R E S U L T S The comparability of our financial and operating performance in 2019 as compared to 2018 was affected by the following factors: (1) the ongoing integration of mergers, acquisitions, and divestitures completed in recent years, specifically the acquisitions in Guatemala and Uruguay in April and June 2018, respectively; (2) translation effects from fluctuations in exchange rates; and (3) our results in Argentina, which effective as of January 1, 2018 has been considered a hyperinflationary economy. To translate the full-year results of Argentina, we used the 2019 end-of-period exchange rate of 59.89 Argentine pesos per U.S. dollar and the 2018 end-of-peri- od exchange rate of 37.70 Argentine pesos per U.S. dollar, for the periods ended December 31, 2019 and 2018, respectively. The depreciation of the end-of-period Argentine peso at December 31, 2019, as compared to the end-of-period exchange rate for 2018, was 58.9%. In addition, the average depreciation of currencies used in our main operations relative to the U.S. dollar in 2019, as compared to 2018, were: 14.8% for the Uruguayan peso, 11.0% for the Colombian peso, 7.9% for the Brazilian real, and 0.1% for the Mexican peso. Total Revenues. Our consolidated total revenues increased by 6.7% to Ps. 194,471 million in 2019, mainly as a result of price increases aligned with or above inflation, volume growth in key territories and the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala and Monresa in Uruguay. These effects were partially offset by the depreciation of the Argentine peso, the Brazilian real and the Colombian peso, in each case as compared to the Mexican peso. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. On a comparable basis, total revenues would have increased by 10.8%, mainly as a result of an increase in the average price per unit case across our operations and volume growth in Brazil and Central America. Total sales volume increased by 1.4% to 3,368.9 million unit cases in 2019 as compared to 2018. On a comparable basis, total sales volume would have increased by 1.4% in 2019 as compared to 2018. • Sales volume of our sparkling beverage portfolio increased by 2.0% as compared to 2018; sales volume of our colas portfolio increased by 1.9%, while sales volume of our flavored sparkling beverage portfolio increased by 2.5%. On a comparable basis, sales volume of our sparkling beverage portfolio would have increased by 1.8% as compared to 2018, driven by growth in Brazil, Central America and flat performance in Mexico. Sales volume of our colas portfolio would have increased by 1.6%, mainly due to growth in Brazil, Central America and flat performance in Mexico, and sales volume of our flavored sparkling beverages portfolio would have increased by 2.8%. • Sales volume of our still beverage portfolio remained flat as compared to 2018. On a compa- rable basis, sales volume of our still beverage portfolio would have increased by 0.9%, driven by volume growth in Brazil. • Sales volume of our bottled water category, excluding bulk water, decreased by 2.5% as com- pared to 2018. On a comparable basis, sales volume of our water portfolio would have de- creased by 2.2%, driven by volume growth in Brazil and Central America offset by a volume contraction in the rest of our territories. MANAGEMENT DISCUSSION &COCA-COLA FEMSA120INTEGRATED REPORT 2019• Sales volume of our bulk water category remained flat as compared to 2018. On a compara- ble basis, sales volume of our bulk water portfolio would have increased by 0.5%, mainly as a result of volume growth in Brazil and Mexico partially offset by a contraction in Colombia and Central America. Consolidated average price per unit case increased by 3.7% to Ps. 52.46 in 2019, as compared to Ps. 50.57 in 2018, mainly as a result of price increases aligned with or above inflation partially offset by the negative translation effect resulting from the depreciation of most of our operat- ing currencies relative to the Mexican peso. On a comparable basis, average price per unit case would have increased by 7.8% in 2019, driven by average price per unit case increases aligned with or above inflation in key territories. Gross Profit. Our gross profit increased by 4.3% to Ps. 87,507 million in 2019; with a gross margin decline of 100 basis points to reach 45.0% in 2019 as compared to 2018. On a comparable basis, our gross profit would have increased by 8.0% in 2019, as compared to 2018. Our pricing initia- tives, together with lower PET resin costs and stable sweetener prices in most of our operations, were offset by higher concentrate costs in Mexico, higher concentrate costs in Brazil due to the re- duction of tax credits on concentrate purchased from the Manaus Free Trade Zone coupled with our temporary decision to suspend such tax creditsand the depreciation in the average exchange rate of most of our operating currencies as applied to U.S. dollar-denominated raw material costs. The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to our production facilities, wages and other labor costs associated with labor force employed at our production facilities and certain overhead costs. Concentrate prices are determined as a percentage of the retail price of our products in local currency, net of applicable taxes. Packaging materials, mainly PET resin and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars. Administrative and Selling Expenses. Our administrative and selling expenses increased by 4.5% to Ps. 60,537 million in 2019 as compared to 2018. Our administrative and selling expenses as a percentage of total revenues decreased by 70 basis points to 31.1% in 2019 as compared to 2018, mainly as a result of operating expense efficiencies which were partially offset by an increase in labor, freight and maintenance expenses. In 2019, we continued investing across our territories to support marketplace execution, increase our cooler coverage, and bolster our return- able presentation base. Other Expenses Net. We recorded other expenses net of Ps. 2,490 million in 2019 as compared to Ps. 1,881 million in 2018, which increased mainly as a result of severance payments related to the implementation of our efficiency program to create a leaner and more agile organization partially offset by the tax actualization effect of tax reclaim proceeds received in Brazil. Our non-operating expenses net in 2019 were mainly comprised of an impairment of Ps. 948 million of our investment in Compañía Panameña de Bebidas, S.A.P.I. de C.V. (Estrella Azul) along with provisions related to contingencies in Brazil. Comprehensive Financing Result. The term “comprehensive financing result” refers to the com- bined financial effects of net interest expenses, net financial foreign exchange gains or losses, and net gains or losses on the monetary position of hyperinflationary countries where we oper- ate. Net financial foreign exchange gains or losses represent the impact of changes in foreign exchange rates on financial assets or liabilities denominated in currencies other than local cur- rencies, and gains or losses resulting from derivative financial instruments. A financial foreign exchange loss arises if a liability is denominated in a foreign currency that appreciates relative to the local currency between the date the liability is incurred or the beginning of the period, which- ever occurs first, and the date it is repaid or the end of the period, whichever occurs first, as the appreciation of the foreign currency results in an increase in the amount of local currency, which must be exchanged to repay the specified amount of the foreign currency liability. Comprehensive financing result in 2019 recorded an expense of Ps. 6,071 million as compared to an expense of Ps. 6,943 million in 2018. This 12.6% decrease was mainly driven by a reduction in our interest expense, due to debt reductions during the year, a foreign exchange loss as our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso, and a reduction in other financial expenses. Income Taxes. In 2019, our effective income tax rate was 30.7%, reaching Ps. 5,648 million in 2019, as compared to Ps. 5,260 million in 2018. As a result, our effective income tax rate re- COCA-COLA FEMSA121INTEGRATED REPORT 2019  mained stable as compared with 2018, as the non-deductible charge related to the impairment of our investment in Estrella Azul offset by the increase in the relative weight of Mexico oper- ations profits in our consolidated results which have a lower tax rate, coupled with certain tax efficiencies across our operations. Share of the Profit of Associates and Joint Ventures Accounted for Using the Equity Method, Net of Taxes. In 2019, we recorded a loss of Ps. 131 million in the share of the profits of asso- ciates and joint ventures accounted for using the equity method, net of taxes, mainly due to a loss in Estrella Azul that was partially offset by gains in our Jugos Del Valle joint venture and our water joint ventures in Brazil. Net Income (Equity holders of the parent). We reported a net controlling interest income of Ps. 12,101 million in 2019, as compared to Ps. 13,911 million in 2018. This was mainly driven by a demanding comparable driven by the results of discontinued operations related to the sale of the operation in the Philippines and an impairment of Ps. 948 million in our Estrella Azul dairy joint venture in Panama. R E S U L T S B Y C O N S O L I D A T E D R E P O R T I N G S E G M E N T Mexico and Central America Total Revenues. Total revenues in our Mexico and Central America consolidated reporting seg- ment increased by 9.1% to Ps. 109,249 million in 2019 as compared to 2018, mainly as a result of an increase in the average price per unit case in Mexico, the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala and volume growth in Central America. Total sales volume in our Mexico and Central America consolidated reporting segment increased by 0.5% to 2,075.3 million unit cases in 2019 as compared to 2018, as a result of the consolida- tion of our acquisitions of ABASA and Los Volcanes in Guatemala, coupled with volume growth in Central America. • Sales volume of our sparkling beverage portfolio increased by 1.2%, mainly driven by a 1.4% increase in our colas portfolio and a stable performance in our flavored sparkling beverage portfolio. On a comparable basis, sales volume of our sparkling beverage portfolio would have remained flat as compared to 2018, driven by a stable performance in both our colas and flavored sparkling beverage portfolios. • Sales volume of our still beverage portfolio decreased by 1.6%, mainly due to a decline in both Mexico and Central America. On a comparable basis, sales volume of our still beverage port- folio would have decreased by 1.9% as compared to 2018, driven by a decline in both Mexico and Central America. • Sales volume of bottled water, excluding bulk water, decreased by 6.3%, due to a decline in Mexico that was partially offset by growth in Central America. On a comparable basis, sales volume of our bottled water portfolio would have decreased by 6.7% as compared to 2018, driven by a decline in Mexico that was partially offset by growth in Central America. • Sales volume of our bulk water portfolio increased by 0.5%. Sales volume in Mexico slightly decreased by 0.6% to 1,838.3 million unit cases in 2019, as com- pared to 1,850.2 million unit cases in 2018. • Sales volume of our sparkling beverage portfolio remained flat, driven by stable performance in our colas portfolio, which was partially offset by a decline in flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio decreased by 1.7%. • Sales volume of bottled water, excluding bulk water, decreased by 7.9%. • Sales volume of our bulk water portfolio increased by 0.5%. Sales volume in Central America increased by 10.3% to 236.9 million unit cases in 2019, as com- pared to 214.8 million unit cases in 2018, mainly as a result of the consolidation of our acquisi- tions of ABASA and Los Volcanes in Guatemala, coupled with organic volume growth. • Sales volume of our sparkling beverage portfolio increased by 11.8%, driven by a 13.4% in- crease in sales volume of our colas portfolio and a 5.4% increase in sales volume of our flavored sparkling beverage portfolio. On a comparable basis, sales volume of our sparkling beverage portfolio would have increased by 1.8% as compared to 2018; sales volume of our colas portfolio would have increased by 1.8%, while sales volume of our flavored sparkling beverage portfolio would have increased by 1.7%. COCA-COLA FEMSA122INTEGRATED REPORT 2019  • Sales volume of our still beverage portfolio decreased 0.9%. On a comparable basis, sales volume of our still beverage portfolio would have decreased by 3.0% as compared to 2018. • Sales volume of bottled water, excluding bulk water, increased by 8.4%. On a comparable ba- sis, sales volume of our bottled water portfolio would have increased by 4.0% as compared to 2018. Total sales volume in our South America consolidated reporting segment increased by 2.9% to 1,293.6 million unit cases in 2019 as compared to 2018, mainly as a result of volume growth in Brazil and the consolidation of Uruguay, effects that were partially offset by declines in Argentina and Colombia. On a comparable basis, total sales volume would have increased by 4.9% in 2019 as compared to 2018, as a result of volume growth in Brazil. • Sales volume of our bulk water portfolio declined by 4.1%. Gross Profit. Our gross profit in this consolidated reporting segment increased by 8.8% to Ps. 52,384 million in 2019 as compared to 2018; however, gross profit margin decreased by 20 basis points to 47.9% in 2019. Gross profit margin decreased mainly as a result of increases in concentrate prices in Mexico and the depreciation of the average exchange rates of most of our operating currencies of the division, in each case as applied to our U.S. dollar denominated raw material costs, which factors were partially offset by our pricing initiatives coupled with more stable sweetener prices and a decline in our PET resin prices. Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment decreased by 80 basis points to 32.9% in 2019 as compared with the same period in 2018. Administrative and selling expenses, in abso- lute terms, increased by 6.5% as compared to 2018 driven mainly by Increases in maintenance and labor costs in Mexico. South America Total Revenues. Total revenues in our South America consolidated reporting segment increased by 3.7% to Ps. 85,222 million in 2019 as compared to 2018, mainly as a result of volume growth in Brazil together with average price per unit case growth across our territories and the consoli- dation of the new acquisition in Uruguay. These effects were partially offset by volume declines in the rest of our operations and negative translation effects due to the depreciation of the Argen- tine peso, the Brazilian real and the Colombian peso in each case as compared to the Mexican peso. Total revenues for beer amounted to Ps. 15,619 million in 2019. This figure includes ex- traordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. On a comparable basis, total revenues would have increased by 14.8%, driven by volume growth in Brazil and average price per unit case increases in local currencies across our territories. • Sales volume of our sparkling beverage portfolio increased by 3.2% as compared to 2018. On a comparable basis, sales volume of our sparkling beverage portfolio would have increased by 4.9%, mainly due to a 2.5% growth in our colas portfolio and 5.5% in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 2.6% as compared to 2018. On a comparable basis, sales volume of our still beverage portfolio would have increased by 7.1%, mainly driven by growth in Brazil and Uruguay that was partially offset by a decline in Colom- bia. • Sales volume of our bottled water category, excluding bulk water, increased by 2.2% as com- pared to 2018. On a comparable basis, sales volume of our bottled water category, excluding bulk water, would have increased by 4.7% as compared to 2018, mainly driven by growth in Brazil and Colombia. • Sales volume of our bulk water portfolio decreased by 2.3% as compared to 2018. On a com- parable basis, sales volume of our bulk water portfolio would have remained flat, mainly driv- en by a decline in Colombia that was offset by growth in Brazil. Sales volume in Brazil increased by 7.5% to 846.5 million unit cases in 2019, as compared to 787.4 million unit cases in 2018. • Sales volume of our sparkling beverage portfolio increased by 6.7% as compared to 2018, as a result of a 5.9% increase in our colas portfolio and a 9.3% increase in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 17.1% as compared to 2018. • Sales volume of our bottled water, excluding bulk water, increased by 10.1% as compared to 2018. • Sales volume of our bulk water portfolio increased by 6.5%. COCA-COLA FEMSA123INTEGRATED REPORT 2019  Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment decreased by 60 basis points to 28.9% in 2019 as compared to 2018 , driven mainly by operating expense efficiencies in Brazil. Adminis- trative and selling expenses, in absolute terms, increased by 1.8% as compared to 2018. Sales volume in Colombia decreased by 2.2% to 265.5 million unit cases in 2019, as compared to 271.4 million unit cases in 2018. to 271.4 million unit cases in 2018. • Sales volume of our sparkling beverage portfolio remained flat as compared to 2018, mainly driven by a 1.8% decline in our flavored sparkling beverage portfolio, offset by flat perfor- mance in our colas portfolio. • Sales volume of our still beverage portfolio decreased by 17.4% during 2019, as compared to 2018. Sales volume of bottled water, excluding bulk water, decreased by 5.3% as compared to 2018. • • Sales volume of our bulk water portfolio decreased by 2.4%. Sales volume in Argentina decreased by 20.6% to 139.3 million unit cases in 2019, as compared to 175.3 million unit cases in 2018. • Sales volume of our sparkling beverage portfolio decreased by 21.0% as compared to 2018, mainly driven by a decline in both our colas and flavored sparkling beverage portfolios. • Sales volume of our still beverage portfolio decreased by 21.4% as compared to 2018. • Sales volume of bottled water, excluding bulk water, decreased by 18.0%. • Sales volume of our bulk water portfolio decreased by 16.3%, as compared to 2018. Sales volume in Uruguay amounted to 42.4 million unit cases in 2019. Our sparkling beverage category represented 91.1% of our total sales volume. Our still beverage category represented 0.9% of our total sales volume. Our water portfolio represented 8.0% of our total sales volume. Gross Profit. Gross profit in this consolidated reporting segment amounted to Ps. 35,123 mil- lion, a decrease of 1.8% in 2019 as compared to 2018, with a 230 basis point margin contraction to 41.2%. This decrease in gross profit was mainly driven by higher concentrate costs in Brazil related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, coupled with our temporary decision to suspend such tax credits and the depreciation of the average exchange rate of all our local currencies in the division as applied to our U.S. dollar denominated raw material costs. These factors were partially offset by our revenue manage- ment initiatives, a favorable currency hedging position, combined with lower PET prices in the division and lower sweetener prices mainly in Brazil. COCA-COLA FEMSA124INTEGRATED REPORT 2019C A P I T A L S & C O M P A N Y engagement H U M A N N A T U R A L S O C I A L Our people and the way they work together are our com- pany’s most valuable assets. Accordingly, we encourage their comprehensive professional and personal deve- lopment, while creating an inclusive, diverse, and safe work environment. Through our continuous talent ma- nagement and development, we promote trust, trans- parency, and teamwork, prepare our next generation of leaders, advance meritocracy, recognize and celebrate our teams’ success, while providing them with honest, regular feedback. In this way, we look to attract, retain, and develop the best multicultural talent to ensure our sustainable success. Our business is committed to the responsible use of our natural re- sources. As the main ingredient in our beverages, our comprehensive water strategy focuses on ensuring efficient water management in our operations, facilitating access to safe water and sanitation in our communities, and implementing water conservation and replenish- ment projects to protect the environment. We also work to increase energy efficiency across our value chain, while integrating clean and renewable energy to reduce our carbon emissions. Aligned with The Coca-Cola Company’s “World Without Waste” global initiative, we continue to focus on comprehensive and responsible waste man- agement, increase our use of recycled materials in our packaging, and participate in schemes and models that support post-consump- tion collection and recycling. Our communities and other stakeholders are key en- ablers of our business success. Accordingly, we are committed to creating economic, environmental, and social value by encouraging dialogue and continuous in- teraction with our neighbors and stakeholders in order to develop and implement programs and initiatives that ad- dress their particular needs and guarantee the continuity of our social license to operate. COCA-COLA FEMSA125INTEGRATED REPORT 2019F I N A N C I A L I N T E L L E C T U A L M A N U F A C T U R E D Our financial and operating discipline, strong capital structure and financial flexibility, transformational digital initiatives, and adaptability to changing market dynam- ics enable us to capture organic and inorganic growth opportunities in our industry, while creating sustainable value for our investors. We are accelerating our digitally driven business transformation throughout our value chain. We are further capturing the insights from our powerful analytical platform to develop tailored business models. By building our critical capabilities, we are creating a stron- ger, more agile, and flexible organization to drive our competitiveness, proactively address industry challenges, capitalize on market oppor- tunities, and foster intellectual development across our organization. Our highly experienced team of specialists operate 49 bottling plants and 268 distribution centers across 9 countries, deliver over 3.3 billion unit cases of beverag- es through a primary and secondary fleet of more than 11,000 trucks to more than 1.9 million points of sale and serve a population of 261 million people. COCA-COLA FEMSA126INTEGRATED REPORT 2019C O M P R E H E N S I V E R I S K management Our company is present in different countries and regions. Consequently, we are continually exposed to an environment that presents challenges and risks. Our ability to manage the risks that may arise in the global environment where we oper- ate is vital for our business’ value creation. Accordingly, our strategy includes a Comprehensive Risk Management Pro- cess through which we are able to identify, measure, register, assess, prevent, and/or mitigate risks. Strategic shareholder relationships Consumer preferences M A I N R I S K S M A I N R I S K S Our business depends on our relationship with The Coca-Cola Company and FEMSA, and changes in this relationship may adversely affect us. Changes in consumer preferences, purchase drivers, and consumption habits might generate variability in the demand for some of our products. P O T E N T I A L I M P A C T S P O T E N T I A L I M P A C T S • Termination of the bottler agreements. • Actions contrary to the interests of our shareholders other than The Coca-Cola Company and FEMSA. K E Y M I T I G A T I O N A C T I O N S • Comply with our bottler agreements. • Work together and promote effective interaction between our strategic shareholders in order to maximize value creation. Variability in the demand for our products. K E Y M I T I G A T I O N A C T I O N S • Transform into a total beverage company aligned with consumers’ changing tastes and lifestyles. • Build a winning total portfolio of products and presentations . • Drive our low- and no-sugar portfolio ahead of consumer trends. • Promote healthy habits . • Offer sustainable packaging options for our beverages. COCA-COLA FEMSA127INTEGRATED REPORT 2019Coca-Cola trademarks Competition Cyber attacks M A I N R I S K S M A I N R I S K S M A I N R I S K S Coca-Cola’s brand reputation or brand violations could adversely affect our business. Our competition could adversely affect our business, financial performance, and results of operations. P O T E N T I A L I M P A C T S Damage to Coca-Cola’s trademark reputation. K E Y M I T I G A T I O N A C T I O N S P O T E N T I A L I M P A C T S • Changes in consumer preferences. • Lower pricing by our competitors. • Maintain the reputation and intellectual property K E Y M I T I G A T I O N A C T I O N S rights of Coca-Cola trademarks. • Effective brand protection. • Strictly comply with Responsible Marketing Policy. • Offer affordable prices, returnable packaging, effective promotions, access to retail outlets and sufficient shelf space, enhanced customer service, and innovative products. Identify, stimulate, and satisfy consumer preferences. • Service interruption, misappropriation of data or breaches of security could adversely affect our business. P O T E N T I A L I M P A C T S • Financial loss. • • Unauthorized disclosure of material confidential Interruption of operations. information. K E Y M I T I G A T I O N A C T I O N S Identify and address cyber threats. • • Strengthening strategic and technical capabilities for • mitigation and recovery. Increase awareness and provide training for incident resolution. COCA-COLA FEMSA128INTEGRATED REPORT 2019Economic, political, and social conditions Regulations Legal proceedings M A I N R I S K S M A I N R I S K S M A I N R I S K S Adverse economic conditions, political and social events in the countries where we operate and elsewhere, and changes in governmental policies may adversely affect our business, financial condition, results of operations, and prospects. P O T E N T I A L I M P A C T S • Affect and reduce consumer per capita income, which could result in decreased consumer purchasing power. • Lower demand for our products, lower real pricing of our products or a shift to lower margin products. • Negatively affect our company and materially affect our financial condition, results of operations, and prospects. K E Y M I T I G A T I O N A C T I O N S • Through a risk management strategy, hedge our exposure to interest rates, exchange rates, and raw material costs. • Annually or more frequently evaluate, when the circumstances require, the possible financial effects of these conditions and, to the extent possible, anticipate mitigation measures. Taxes and changes in regulations in the regions where we operate could adversely affect our business. Unfavorable results of legal proceedings could adversely impact our business. P O T E N T I A L I M P A C T S P O T E N T I A L I M P A C T S Increase in operating and compliance costs • • Restrictions imposed on our operations. Investigations and proceedings on tax, consumer protection, environmental, and labor matters. K E Y M I T I G A T I O N A C T I O N S K E Y M I T I G A T I O N A C T I O N S • Map regulatory risks and proposals of changes to regulations that directly affect our operation or financial condition. • Advocacy work to provide advice on legislators’ proposed regulatory changes. Comply with applicable laws and regulations and comply with workplace rights policy. COCA-COLA FEMSA129INTEGRATED REPORT 2019Acquisitions Foreign exchange Climate change M A I N R I S K S M A I N R I S K S M A I N R I S K S Inability to successfully integrate acquisitions or achieve expected synergies could adversely affect our operations. Depreciation of the local currencies of the countries where we operate relative to the U.S. dollar could adversely affect our financial condition and results. P O T E N T I A L I M P A C T S P O T E N T I A L I M P A C T S Difficulties and unforeseen liabilities or additional costs in restructuring and integrating bottling operations. K E Y M I T I G A T I O N A C T I O N S Integrate acquired or merged businesses’ operations in a timely and effective way, retaining key qualified and experienced professionals. • Financial loss. • • Adversely affect our results, financial condition, and Increase cost of some raw materials. cash flows in future periods. K E Y M I T I G A T I O N A C T I O N S • Closely monitor developments that may affect exchanges rates. • Hedge our exposure to the U.S. dollar with respect to certain local currencies, our U.S. dollar-denominated debt obligations, and the purchase of certain U.S. dollar-denominated raw materials. Adverse weather conditions could adversely affect our business and results of operations. P O T E N T I A L I M P A C T S • Negatively affect consumer patterns and reduce sales. • Affect plants’ installed capacity, road infrastructure, raw material supply and points of sale. K E Y M I T I G A T I O N A C T I O N S Identify sources of our operations’ CO2 emissions • • Support and comply with climate change measures • for adaptation and mitigation. Identify and reduce our environmental footprint through efficient use of water, energy, and materials. COCA-COLA FEMSA130INTEGRATED REPORT 2019Social media Water Raw materials M A I N R I S K S M A I N R I S K S M A I N R I S K S Negative or inaccurate information on social media could adversely affect our reputation. Water shortages or failure to maintain our current water concessions could adversely affect our business. P O T E N T I A L I M P A C T S P O T E N T I A L I M P A C T S Damage to our brands or corporate reputation without affording us an opportunity for correction. • Water supply may be insufficient to meet our future production needs. • Water supply may be adversely affected due to shortages or changes • • Increases in the price of raw materials we use to manufacture our products could adversely affect our production costs. Insufficient availability of raw materials could limit the production of our beverages. K E Y M I T I G A T I O N A C T I O N S • Effective brand protection. • Proactive external communication. in governmental regulations or environmental changes. P O T E N T I A L I M P A C T S • Water concessions or contracts may be terminated or not renewed. K E Y M I T I G A T I O N A C T I O N S • Efficient water usage. • Execute water conservation and replenishment projects. • Maintain 100% legal compliance. • Develop Water Risk Index, including four issues that need to be assessed: Community and Public Perception Risks, Scarcity of Water and other Inputs, Regulatory Risks, and Legal Risks for each of our bottling plants. • Update water risk assessment tool and work plans that contemplate aspects such as climate change, resilience to hydrological stress, media and social vulnerabilities, as well as regulations and production volumes for each of our bottling plants. • Secure water concessions for our production facilities. Increase in our cost of goods sold. • • Shortage or insufficient availability of raw materials may adversely affect our capacity to ensure production continuity. • Adjustments to our product portfolio according to availability. K E Y M I T I G A T I O N A C T I O N S • Implement measures to mitigate the negative effect of product pricing on our margins, such as hedging via derivative instruments. • Proactively address risk of supply on our value chain • Strictly comply with our Supplier Guiding Principles. • Strategically adjust our product portfolio to enable us to minimize the impact of certain operating disruptions. COCA-COLA FEMSA131INTEGRATED REPORT 2019officers John Santa Maria Otazua C H I E F E X E C U T I V E O F F I C E R Constantino Spas Motesinos C H I E F F I N A N C I A L O F F I C E R Rafael Ramos Casas S U P P LY C H A I N A N D E N G I N E E R I N G O F F I C E R Xiemar Zarazua López C O M M E R C I A L D E V E L O P M E N T O F F I C E R Karina Paola Awad Pérez H U M A N R E S O U R C E S O F F I C E R José Ramón Martínez C O R P O R A T E A F F A I R S O F F I C E R Rafael Alberto Suárez Olaguibel I N F O R M A T I O N T E C H N O L O G Y A N D T R A N S F O R M A T I O N O F F I C E R Fabricio Ponce García C H I E F O P E R A T I N G O F F I C E R – M E X I C O Ian Marcel Craig Garcia C H I E F O P E R A T I N G O F F I C E R - B R A Z I L Eduardo Guillermo Hernández Peña C H I E F O P E R A T I N G O F F I C E R - L A T A M EXECUTIVECOCA-COLA FEMSA132INTEGRATED REPORT 2019directors D I R E C T O R S A P P O I N T E D B Y S E R I E S A S H A R E H O L D E R S José Antonio Fernández Carbajal Executive Chairman of the Board of Directors of FEMSA 27 years as a Board Member Eduardo Padilla Silva Chief Executive Officer of FEMSA 4 years as a Board Member Federico Reyes García Independent Consultant 27 years as a Board Member Alternate: Javier Astaburuaga Sanjines John Santa Maria Otazua Chief Executive Officer of Coca-Cola FEMSA 6 years as a Board Member Ricardo Guajardo Touché Chairman of the Board of Directors, SOLFI, S.A. de C.V. 27 years as a Board Member Alfonso González Migoya¹ Chairman of the Board of Directors of Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (Volaris), and Managing Partner of Acumen Empresarial, S.A. de C.V. 14 years as a Board Member Enrique F. Senior Hernández¹ Managing Director of Allen & Company, LLC. 16 years as a Board Member Luis Rubio Friedberg¹ President of the Organization México Evalúa 6 years as a Board Member Alternate: Jaime El Koury Daniel Servitje Montull¹ Chief Executive Officer and Chairman of the Board of Directors of Bimbo 22 years as a Board Member José Luis Cutrale Chairman of the Board of Directors of Sucocítrico Cutrale, LTDA. 16 years as a Board Member Alternate: José Henrique Cutrale Luis Alfonso Nicolau Gutiérrez¹ Partner at Ritch, Mueller, Heather y Nicolau, S.C., Law Firm; Member of the Firm´s Executive Committee 2 years as a Board Member D I R E C T O R S A P P O I N T E D B Y S E R I E S D S H A R E H O L D E R S José Octavio Reyes Lagunes Retired 4 years as a Board Member Charles H. McTier¹ Retired 22 years as a Board Member John Murphy Executive Vice President and Chief Financial Officer of The Coca-Cola Company 2 years as a Board Member Alternate: Sunil Krishna Ghatnekar Brian Smith President and Chief Operating Officer of The Coca-Cola Company 3 years as a Board Member Alternate: Marie D. Quintero-Johnson D I R E C T O R S A P P O I N T E D B Y S E R I E S L S H A R E H O L D E R S Herman Fleishman Cahn¹ President of Grupo Tampico, S.A.P.I de C.V. 8 years as a Board Member Alternate: Robert Alan Fleishman Cahn Victor Tiburcio Celorio¹ Independent Consultant 2 years as a Board Member Francisco Zambrano Rodríguez¹ Managing Partner of Forte Estate Planning S.C. 17 years as a Board Member S E C R E T A R Y O F B O A R D Carlos Eduardo Aldrete Ancira General Counsel of FEMSA 27 years as a Secretary Alternate: Carlos Luis Díaz Sáenz ¹ Independent BOARD OFCOCA-COLA FEMSA133INTEGRATED REPORT 2019practices F I N A N C E A N D P L A N N I N G C O M M I T T E E The Planning and Finance Committee works with management to set our annual and long-term stra- tegic and financial plans and monitors adherence to these plans. It is responsible for setting our opti- mal capital structure and recommends the appro- priate level of borrowing as well as the issuance of securities. Financial risk management is another responsibility of the Planning and Finance Com- mittee. Ricardo Guajardo Touché is the chairman of the Planning and Finance Committee. The oth- er members include: Federico Reyes García, John Murphy, Enrique F. Senior Hernández and Miguel Eduardo Padilla Silva. The secretary non-member of the Planning and Finance Committee is Constan- tino Spas Montesinos, our Chief Financial Officer. A U D I T C O M M I T T E E The Audit Committee is responsible for reviewing the accuracy and integrity of quarterly and annual financial statements in accordance with account- ing, internal control and auditing requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and over- sight of the independent auditor, who reports di- rectly to the Audit Committee, such appointment and compensation being subject to the approv- al of our Board of Directors; the internal auditing function also reports to the Audit Committee. The Audit Committee has implemented procedures for receiving, retaining and addressing complaints re- garding accounting, internal control and auditing matters, including the submission of confidential, anonymous complaints from employees regarding questionable accounting or auditing matters. To carry out its duties, the Audit Committee may hire independent counsel and other advisors. As neces- sary, we compensate the independent auditor and any outside advisor hired by the Audit Committee and provide funding for ordinary administrative expenses incurred by the Audit Committee in the course of its duties. Victor Alberto Tiburcio Celo- rio is the chairman of the Audit Committee and the audit committee financial expert. Pursuant to the Mexican Securities Market Law, the chairman of the Audit Committee is elected at our share- holders meeting. The other members are: Alfonso González Migoya, Charles H. McTier and Francisco Zambrano Rodríguez. Each member of the Audit Committee is an independent director, as required by the Mexican Securities Market Law and appli- cable New York Stock Exchange listing standards. The secretary nonmember of the Audit Committee is José González Ornelas, vice-president of FEM- SA’s internal corporate control department. C O R P O R A T E P R A C T I C E S C O M M I T T E E The Corporate Practices Committee, which con- sists exclusively of independent directors, is re- sponsible for preventing or reducing the risk of performing operations that could damage the value of our company or that benefit a particular group of shareholders. The committee may call a shareholders meeting and include matters on the agenda for that meeting that it deems appropriate, approve policies on related party transactions, ap- prove the compensation plan of the chief execu- tive officer and relevant officers, and support our board of directors in the elaboration of related re- ports. The chairman of the Corporate Practices Committee is Daniel Servitje Montull. Pursuant to the Mexican Securities Market Law, the chairman of the Corporate Practices Committee is elected at our shareholders meeting. The other members in- clude: Jaime A. El Koury, Luis Rubio Freidberg, Luis A. Nicolau Gutiérrez and two permanent non-mem- ber guests, Miguel Eduardo Padilla Silva and José Octavio Reyes Lagunes. The secretary non-mem- ber of the Corporate Practices Committee is Karina Awad Pérez. A D V I S O R Y B O A R D The Advisory’s Board main role is to advise and pro- pose initiatives to our board of directors through the Chief Executive Officer. This committee is mainly comprised of former shareholders of the various bottling businesses that merged with us, whose experience constitute an important contribution to our operations. BOARDCOCA-COLA FEMSA134INTEGRATED REPORT 2019ethical system 34% Unsubstantiated Complaints by status Through our ethical culture, we manage under schemes that must be adopted as a way of life that inspires the acts and actions of all those who are part of the organi- zation through the establishment of an Ethical System. principles. Our Code, recently updated, includes import- ant topics such as Human Rights, Inclusion and Diversi- ty, Discrimination, Violence and Harassment, Conflicts of interests, Misuse of information and Anti-corruption. 24% Substantiated Our ethical management is based on: • Prevent illicit behaviors that may affect our human capital and our heritage. • Detect improper acts through open communication channels. • Respond and provide feedback to our organization to build trust. • Therefore, our system is comprised of three funda- mental elements: the Code of Ethics, an Ethics Com- mittee and the whistleblowing system known as KOF Ethics Line. Our Code of Ethics It is the basis of our organizational culture, communi- cates our values, contemplates our main behaviors, pro- motes good behavior inside and outside our organization and guides our correct decision-making based on ethical Our Ethics Committee It is the oversight and control body, which guarantees compliance with the Code of Ethics and attends to the most relevant ethical situations of the company. In each of our territories, there is an Ethics Committee and each Committee reports to the Corporate Ethics Committee. Our KOF Ethics Line whistleblowing system Complaints about noncompliance with the Code of Eth- ics are received through the KOF Ethics Line, which is managed by a third-party. Employees, customers, suppli- ers, third parties or anyone who has a relationship with Coca-Cola FEMSA can use the system anonymously. A group of investigators analyzes the complaints impar- tially and confidentially and, if a violation of the Code is found, corrective measures are applied. In 2019, we received 1,190 complaints; of these, none were related to child labor, forced labor or freedom of association. To strengthen our culture, our workers sign a Letter of Compliance to our Code of Ethics. Its purpose is to en- sure that our employees are aware of the Code of Eth- ics, understand the main acts or omissions that may be incurred and can put at risk to our organization and that they must report any violation of the Code that they know. 42% In review 1% Financial Information Complaints by topic 20% Operational 79% Human Resources INTEGRALCOCA-COLA FEMSA135INTEGRATED REPORT 2019information I N V E S T O R R E L A T I O N S Jorge Collazo Bryan Carlson Maite Vilchis Lorena Martin kofmxinves@kof.com.mx S U S T A I N A B I I T Y & C O R P O R A T E C O M M U N I C A T I O N Juan Carlos Cortés Carlos Valle Pedro Incháustegui sostenibilidad@kof.com.mx Coca-Cola FEMSA, S.A.B. de C.V. Mario Pani N° 100 Col. Santa Fe Cuajimalpa 05348, Ciudad de Mexico, México (5255) 1519 5000 www.coca-colafemsa.com L E G A L C O U N S E L O F T H E C O M P A N Y Carlos L. Díaz Sáenz Marío Pani N° 100 Col. Santa Fe Cuajimalpa 05348, Ciudad de Mexico, México Phone: (5255) 1519 5000 I N D E P E N D E N T A C C O U N T A N T S Mancera, S.C. A member firm of Ernst & Young Global Antara Polanco Av. Ejército Nacional Torre Paseo 843-B Piso 4 Colonia Granada 11520 Ciudad de Mexico, México Phone:(5255) 5283 1400 S T O C K E X C H A N G E I N F O R M A T I O N Coca-Cola FEMSA’s common stock is traded on the Bolsa Mexicana de Valores, (the Mexican Stock Exchange) under the symbol KOFUBL and on the New York Stock Exchange, Inc. (NYSE) under the symbol KOF. T R A N S F E R A G E N T A N D R E G I S T R A R Bank of New York 101 Barclay Street 22W New York, New York 10286, U.S.A n o i t a m r o f n I k c o t S y l r e t r a u Q n o i t a m r o f n I k c o t S y l r e t r a u Q E G N A H C X E K C O T S K R O Y W E N E G N A H C X E K C O T S N A C I X E M KOF U.S. Dollars per ADS 2019 Quarter Ended $ High $ Low $ Close dec-31 sep-30 jun-28 mar-29 61.98 63.12 68.51 66.75 54.98 57.27 62.03 58.29 60.62 60.62 62.14 66.00 U.S. Dollars per ADS 2018 Quarter Ended $ High $ Low $ Close dec-31 sep-28 jun-29 mar-30 64.59 56.99 60.84 63.54 54.98 61.24 69.25 54.72 56.43 78.97 64.79 66.43 KOFUBL Mexican Pesos 2019 Quarter Ended $ High $ Low $ Close dec-31 sep-30 jun-28 mar-29 121.01 105.71 114.88 122.57 112.93 120.09 130.07 119.05 119.11 128.31 114.28 128.31 Mexican Pesos 2018 Quarter Ended $ High $ Low $ Close dec-31 sep-28 jun-29 mar-30 128.25 114.60 119.15 118.62 109.94 114.26 125.21 111.49 112.46 146.21 118.92 120.23 SHAREHOLDERS & ANALYSTCOCA-COLA FEMSA136INTEGRATED REPORT 2019 A B O U T O U R integrated report From our headquarters in Mexico City, we present our zil, Guatemala, Colombia, and Argentina, and, nation- Integrated Report 2019 edition. Developed following the guidelines of the International Integrated Reporting wide, in Costa Rica, Nicaragua, Panama and Uruguay. Council (IIRC) and in accordance with the GRI (Global For comparability purposes, the non-financial quanti- Reporting Initiative) Standards. Similarly reporting the tative data for 2019 and 2018 is represented without indicators of the Sector Supplement for Food Process- Venezuela, since as of December 31, 2017 Venezuela ing Companies of the same guide in its G4 version. is a deconsolidated operation reported as an invest- Furthermore, this Report elaborates our Communica- ment in shares; while the 2017 information is repre- tion on Progress (COP) to the United Nations Global sented without the Philippines. Compact included by FEMSA in its 2019 report. The information contained corresponds to the period from January 1st to December 31st, 2019. It includes data from all the countries where Coca-Cola FEMSA, S.A.B. of C.V. has operations or a majority share. Its op- erations encompass franchise territories Mexico, Bra- C H I E F F I N A N C I A L A N D A D M I N I S T R A T I V E O F F I C E R Constantino Spas Montesinos C O R P O R A T E A F F A I R S O F F I C E R José Ramón Martínez Alonso Stock listing information: Mexican Stock Exchange, Ticker: KOFUBL | NYSE (ADS), Ticker: KOF | Ratio of KOFUBL to KOF = 10:1 Coca-Cola FEMSA files reports, including annual reports and other information with the U.S. Securities and Exchange Commission, or the “SEC,” and the Mexican Stock Exchange (Bolsa Mexicana de Valores, or the “BMV”) pursuant to the rules and regulations of the SEC (that apply to foreign private issu- ers) and of the BMV. Filings we make electronically with the SEC and the BMV are available to the public on the Internet at the SEC’s website at www.sec. gov, the BMV’s website at www.bmv.com.mx, and our website at www.coca-colafemsa.com. Coca-Cola FEMSA, S.A.B. de C.V. is the largest Coca-Cola franchise bottler in the world by sales volume. The Company produces and distributes trademark beverages of The Coca-Cola Company, offering a wide portfolio of 129 brands to a population of more than 261 million. With over 80 thousand employees, the Company markets and sells approximately 3.4 billion unit cases through close to 2 million points of sale a year. Operating 49 manufacturing plants and 268 distribution centers, Coca-Cola FEMSA is committed to generating economic, social, and environmental value for all of its stakeholders across the value chain. The Company is a member of the Dow Jones Sustainability Emerging Markets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Sustainability Indices, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela through its investment in KOF Venezuela. For further informa- tion, please visit www.coca-colafemsa.com COCA-COLA FEMSAINTEGRATED REPORT 2019

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