Coca Cola Femsa S.A.B. de C.V.
Annual Report 2021

Plain-text annual report

EVOLUTION COCA-COLA FEMSA Integrated Report 2021 More than an evolution, we're igniting a business re-evolution. Our strategic growth and industry leadership is driven by our purpose to refresh the world anytime, anywhere— always finding the most efficient and sustainable way to put our consumer's choice in their hands whenever and wherever they want it. Guided by our purpose, we're working seamlessly, collaboratively, and agilely across six strategic corridors: Build out an Open Omnichannel Platform; Develop a Winning Consumer-Centric Portfolio; Foster an Agile, Digital Savvy, and People-Centric Culture; Place Sustainability at the Heart of our Organization; Digitize the Core; and Actively pursue Value-Enhancing Acquisitions. Letter to Our Stakeholders CFO Interview CAO Letter 1 Overview 5 8 12 14 Our Experienced Management Team 16 Our Footprint 18 Financial & Sustainability Highlights 21 Our Value Chain 2 Our Framework Strategy Sustainability Sustainable Financing 23 24 27 3 Our Strategic Corridors 30 Develop a Winning Consumer- Centric Portfolio 40 Build out an Open Omnichannel 46 70 Platform Place Sustainability at the Heart of our Organization Foster an Agile, Digital Savvy, and People-Centric Culture CONTENTS 4 Appendices 82 Financial Summary 84 Management’s Discussion 88 89 92 94 95 96 97 99 and Analysis Capital & Company Engagement Comprehensive Risk Management Corporate Governance Integral Ethical System Turnover Recognitions Independent Verification Shareholder and Analyst Information 100 About Our Integrated Report Overview Our Framework Our Strategic Corridors Appendices 4 OVERVIEW Overview Our Framework Our Strategic Corridors Appendices 5 CHAIRMAN’S AND CEO’S LETTER TO STAKEHOLDERS DEAR FELLOW STAKEHOLDERS This year highlighted our business’s resilience, adaptability, and agility. In these unprecedented times, our resilience was evident in our company’s ability to protect the safety and wellbeing of our people, while delivering accelerated results across all of our strategic fronts—from portfolio management and digital transformation to milestones in sustainable development—highlighted by our issuance of the first ever sustainability-linked bonds in the Mexican market. José Antonio Fernández Carbajal Chairman of the Board John Santa Maria Otazua Chief Executive Officer Overview Our Framework Our Strategic Corridors Appendices 6 Consistent with our strategy, we are further adapting and reshap- ing our company to thrive in the new global business environ- ment. Together with The Coca-Cola Company and the Coca-Cola System in Brazil, we redesigned our distribution partnership with Heineken. This agreement enables us to continue our relationship with Heineken as a key partner, allowing us to serve the Brazilian market with a customer-centric portfolio of premium, mainstream, and economy brands and affording us the flexibility to further complement our portfolio. To this end, we acquired Brazilian craft beer brand Therezópolis, and we agreed to distribute Estrella Galicia’s beer portfolio in Brazil. Savvy, People-Centric Culture; Place Sustainability at the Heart of our Organization; Digitize Our Core; and Actively pursue Value-En- hancing Acquisitions. To this end, we’re developing a winning consumer-centric portfolio that is allowing us to consolidate our industry leadership within the non-al- coholic ready-to-drink (NARTD) space. Underscored by the success of the new formula and visual identity of Coca-Cola Zero Sugar, our spar- kling beverage category posted solid volume and share growth, while our still beverage and personal water categories achieved double-digit growth and share gains across most of our territories. Importantly, we worked with The Coca-Cola Company to bolster our successful, longstanding relationship. Our enhanced coopera- tion framework ensures the long-term alignment of our partner- ship, growth plans, and strategies—enabling us to not only continue building a winning consumer-centric portfolio, but also explore new multi-category opportunities across our markets while we develop new strategic digital initiatives. On the omnichannel front, we accelerated the expansion of our B2B customer-centric omnichannel commercial platform. To give you a sense, we now have approximately 300 thousand active monthly purchasers, up over twofold from a year ago. Notably, digital pur- chases now represent over 6% of our total orders, generating close to US$360 million in sales. This marks triple-digit growth in our digi- tal orders and revenues compared with 2020. Consistent with this framework, we’ve already rolled out pilot pro- grams to test the distribution of complementary categories such as spirits, other alcoholic beverages, and consumer brands in cer- tain markets—working together to improve distribution economics and open new revenue streams by providing other leading brands access to our company’s deep customer relationships, distribution network, and rapidly evolving omnichannel commercial platform. Re-Evolving Business, Vision & Strategy Aligned with our purpose and our vision, we are working across six strategic corridors: Build out an Open Omnichannel Platform; De- velop a Winning Consumer-Centric Portfolio; Foster an Agile, Digital We worked with The Coca-Cola Company to bolster our successful, longstanding relationship. Additionally, in the direct to home channel, we substantially in- creased the number of home delivery routes—from almost 800 routes to over 1,200 routes, allowing us to reach close to 600 thou- sand Mexican households. We’ve further deepened our company’s commitment to sustainable development, placing sustainability at the heart of our organiza- tion. As a result of our Climate Action Strategy, 85% of our bottling operations’ power came from clean energy sources, up more than fourfold from 2015. We increased the use of recycled materials in our PET packaging to 31%, while increasing the collection of bottles that we put into our markets, thus accelerating the transition to a circu- lar economy. Through our water stewardship, we improved our wa- ter use ratio to an average of 1.47 liters of water per liter of beverage produced, an industry benchmark. Furthermore, we issued the first sustainability-linked bonds in the Mexican market, enabling us to align our financial strategy with the achievement of ambitious wa- ter efficiency targets that are now public commitments. Indeed, for the second consecutive year, our sustainability (ESG) performance We substantially increased the number of home delivery routes—from almost 800 routes to over 1,200 routes, allowing us to reach close to 600 thousand Mexican households. Overview Our Framework Our Strategic Corridors Appendices 7 enabled us to be the only Mexican company in our sector included in the S&P Global Sustainability Yearbook 2022. Aligned with our commitment to ESG, we acknowledge the importance of evolving towards a more balanced governance model to enrich our corporate governance profile. We are working to ensure our board’s composition includes the skills, experiences, diversity, and capabilities required to provide effective oversight into the future. To win in the market and our industry, we are re-evolving the way we work, creating an agile, digital savvy, culture while we continue to fos- ter a diverse, inclusive, and people-centric culture. To improve gender diversity, we’re systematically working to recruit, develop, and retain female talent at all levels of the organization. Indeed, this is the fourth consecutive year that Coca-Cola FEMSA is part of the Bloomberg Gen- der-Equality Index. Looking ahead, we plan to actively pursue value-enhancing acquisi- tions. We’re not only exploring traditional opportunities to shape our company’s future NARTD footprint, but also prioritizing adjacent cat- egories for portfolio expansion. To this end, we acquired Brazilian craft beer brand Therezópolis, our first ever acquisition in the beer segment. We also acquired Brazilian Coca-Cola bottler CVI Refrigerantes Ltda., bolstering our NARTD leadership position in the region. Performance As we navigated a dynamic environment, our focus on affordabili- ty and execution enabled us to deliver 5.3% year-over-year volume growth—2.6% ahead of our 2019-baseline year. For the year, total rev- enues increased 6.1% to Ps. 194.8 billion. Operating income improved 8.6% to Ps. 27.4 billion. Operating cash flow increased 4.0% to Ps. 38.8 billion. Controlling net income rose 52.4% to Ps. 15.7 billion to achieve earnings per share of Ps. 0.93 and per unit of Ps. 7.48 (Ps. 74.77 per ADS). Notably, our return on invested capital improved for the fifth consec- utive year, closing out the year in the double digits. Moreover, our net- debt-to-EBITDA ratio ended the year at 0.9 times—while our cash posi- tion was more than Ps. 47 billion—reflecting our strong balance sheet, while putting us in a great position to grow. As we move forward, one of our key strengths is our business relation- ship with The Coca-Cola Company. Working together, we’re able to successfully navigate ever changing macroeconomic and industry dy- namics, driving a consumer-centric approach and fundamental trans- formation in the way we operate and collectively go to market. Building on this longstanding relationship, our overarching strategic priorities are to accelerate the build out of our open omnichannel com- mercial platform; and ensure the necessary investment behind our ca- pabilities to escalate our business growth. When we reflect on our vision for Coca-Cola FEMSA and the actions we’re taking, we are confident that we are building the right set of ca- pabilities to expedite our company’s growth and value creation for many years to come. On behalf of our employees, we thank you for your continued confi- dence in our ability to deliver economic value and to generate social and environmental wellbeing for you all. José Antonio Fernández Carbajal Chairman of the Board John Santa Maria Otazua Chief Executive Officer Our focus on affordability and execution enabled us to deliver 5.3% year-over-year volume growth—2.6% ahead of our 2019-baseline year. Overview Our Framework Our Strategic Corridors Appendices 8 INTERVIEW WITH OUR CFO Constantino Spas, our company’s Chief Financial Officer, reflects on our company’s ability to navigate a dynamic market environment and deliver accelerated results across all of our strategic fronts. He discusses the strategic importance of our enhanced cooperation framework with The Coca-Cola Company, redesigned distribution partnership with Heineken, approach to value-enhancing acquisitions, first ever sustainability- linked bonds in the Mexican market, and disciplined capital allocation. Constantino Spas Chief Financial Officer Overview Our Framework Our Strategic Corridors Appendices 9 This year, we successfully navigated a dynamic market environment to deliver accelerated results across all of our strategic fronts. Q) Constantino, how would you reflect on the company’s perfor- Q) Given its strategic importance, could you elaborate further on the company’s mance for the year? enhanced cooperation framework with The Coca-Cola Company? A) This year, we successfully navigated a dynamic market environment to deliver accelerated results across all of our strategic fronts. We strengthened key longstanding partnerships, accelerated the build out of our customer-centric B2B and D2C omnichannel commercial platforms, achieved key milestones in our sustainable development, capitalized on value-enhancing acquisition opportunities, and emerged even stronger from the pandemic—closing the year with escalating momentum by delivering solid top- and bottom-line growth, coupled with share gains across our territories. Thanks to our consistent strategic execution, we achieved con- solidated volume growth of 5.3% year over year, improving 2.6% compared to our 2019 baseline. Consolidated revenues rose 6.1%, surpassing our 2019 baseline, and operating income grew 8.6%, in- creasing 7.8% compared with 2019. This enabled us to finish the year with a very solid financial foundation while continuing to improve our return on invested capital (ROIC). We further increased our an- nual dividend, delivering on our commitment to our shareholders. Perhaps most importantly, based on our enhanced coopera- tion framework with The Coca-Cola Company, we’re reshaping our company to thrive in the new global business environment. Aligned with our purpose to refresh the world anytime, anywhere, we are working seamlessly and collaboratively across six strate- gic corridors: Build out an Open Omnichannel Platform; Develop a Consumer-Centric Winning Portfolio; Foster an Agile, Digital Savvy, and People-Centric Culture; Place Sustainability at the Heart of our Organization; Digitize the Core; and Actively pursue Value-Enhanc- ing Acquisitions. A) Our enhanced cooperation framework is great news for both of our companies. It further strengthens our relationship, ensuring long-term alignment and certainty, positioning us to accelerate further towards our shared purpose of refreshing the world. Specifically, this enhancement will ensure long-term alignment in the fol- lowing key areas: 1) Growth plans. We have agreed to build and align long-term strategies and business plans to ensure coordinated execution. These growth plans aim to in- crease our operating income via top-line growth, volume expansion, cost and ex- pense efficiencies, and the implementation of marketing and commercial strate- gies and productivity programs. 2) Relationship economics. We have agreed to ensure that the economics of our business and management incentives are fully aligned towards long-term system value creation, always considering investment and profitability levels that are ben- eficial to both The Coca-Cola Company and Coca-Cola FEMSA. 3) Potential new businesses and ventures. As the system continues to evolve, we agree to explore potential new businesses and ventures, such as the distribution of beer, spirits, and other consumer goods. Indeed, we’ve already rolled out pilot programs to test the distribution of complementary categories in certain mar- kets—thereby working together to improve distribution economics and open new revenue streams by providing other CPG brands access to our deep customer re- lationships and robust distribution network. 4) Lastly, through a joint general framework for digital initiatives, we acknowledge the great opportunity to develop a joint digital strategy across strategic corridors. Crucially, through our enhanced cooperation framework, we have not only renewed and reinforced our successful longstanding relationship with The Coca-Cola Company—which remains one of our key strengths—but also empowered our business’s re-evolution. Overview Our Framework Our Strategic Corridors Appendices 10 Q) Could you brief us on the company’s redesigned distribution partnership with Heineken, as well as the company’s steps to further complement its beer portfolio in Brazil? Q) Could you also expand on the company’s strategic approach to value-enhancing acquisitions, particularly in light of its two re- cent acquisitions in Brazil? A) As part of our key strategic priorities, together with the Coca-Cola A) Aligned with our strategy, we are not only exploring global We furthered capitalized on an excellent opportunity to complement our portfolio by acquiring Brazilian craft beer brand Therezópolis. opportunities to shape our company’s non-alcoholic ready-to- drink (NARTD) footprint of the future, but also prioritizing adjacent categories and capabilities that enhance our value proposition and foster our multi-category portfolio expansion, reaching customers and consumers across multiple channels with a wide array of products and services. As exemplified by our two recent acquisitions, any future invest- ment must be completely aligned with our vision and strategy, be value accretive for our shareholders, and be consistent with our ex- tremely disciplined approach to capital allocation. With these criteria in mind, we recently closed our acquisition of CVI, a Coca-Cola franchise bottler with operations in southern Bra- zil. This bolt-on acquisition bolsters our leadership position in the region—to reach 52% of the Coca-Cola System’s volume in Brazil— adding to our operation one bottling facility and three distribution centers that serve more than 13 thousand points of sale and more than 2.8 million consumers in a territory that is full of synergies and market opportunities. We also acquired Brazilian craft beer brand Therezópolis, together with Coca-Cola Andina. Marking our first ever acquisition of a beer brand, this acquisition advances our long-term strategy to complement our beer portfolio in the region. System, we successfully redesigned our distribution partnership with Heineken. This represents a win-win for the Coca-Cola System, Heineken, and most importantly, our customers and consumers in Brazil, who will benefit from a wider array of options. In particular, this agreement allows our company to: i) Strengthen our beer portfolio with solid premium, mainstream, and economy brands from Heineken’s portfolio. ii) Align our interests and provide flexibility: The Coca-Cola Sys- tem will be able to produce and distribute other beers and alco- holic beverages, subject to certain mutually agreed upon terms. iii) Capture distribution synergies within the system, allowing for stronger economics. As part of this new agreement—which became effective mid- 2021—we completed the transition of the Heineken and Amstel brands to Heineken Brazil’s distribution network. We also lever- aged our continuing relationship with Heineken as a key partner to complement our existing beer portfolio, including the Kaiser, Bavaria, and Sol brands, with Eisenbahn, a premium brand, and Ti- ger, a pure malt mainstream brand, from Heineken’s portfolio. We furthered capitalized on an excellent opportunity to complement our portfolio by acquiring Brazilian craft beer brand Therezópolis, together with Coca-Cola Andina, and by entering into a distribu- tion agreement with leading Spanish brewer Estrella Galicia, to- gether with the Coca-Cola System in Brazil. Moving forward, the redesign of this successful distribution part- nership with Heineken and, more importantly, the realignment of incentives, combined with our capabilities to develop the market, make us confident that we will continue growing and developing the beer category as we have successfully done in the past—build- ing a solid portfolio of premium, mainstream, and value brands. Overview Our Framework Our Strategic Corridors Appendices 11 Q) Could you briefly discuss the proactive initiatives taken to strengthen the company’s balance sheet and financial position in what was still a very dynamic environment? A) Consistent with our financial discipline, we continued to take ad- vantage of favorable capital market conditions with our issuance of the first ever sustainability-linked bonds in the Mexican market. Building on last year’s issuance of what was the largest ever green bond for a Latin American corporation, we are very proud to con- tinue making history in terms of our sustainable financing, and we are confident that these efforts will not only have a positive environ- mental impact, but also bolster the commitment to sustainability across our industry. Through this milestone transaction, we further extended the aver- age life of our debt from 7 to approximately 9 years, while reducing our average interest expense. We also continued to adhere to our policy of zero net debt exposure to U.S. dollars. Today, we enjoy a comfortable and conservative debt profile, with more than 85% of our debt maturing beyond 2025. Q) Finally, could you briefly review Coca-Cola FEMSA’s disciplined approach to capital allocation? A) At this point, we are well positioned financially and operationally to take advantage of any compelling inorganic growth opportunities that may arise. As of December 31, 2021, our net debt-to-EBITDA ratio closed below 1.0 time, compared to 1.13 times at the end of 2020, and we finished the year with a cash position of more than Ps. 47 billion. Q) In light of its strategic significance, could you elaborate further on the company’s issuance of the first ever sustainability-linked bonds in the Mexican market? A) Certainly, consistent with our financial discipline, strong credit pro- file, and commitment to sustainability, we issued the first ever sus- tainability-linked bonds in the Mexican market for Ps. $9.4 billion. These bonds were priced in two tranches: (i) Ps. 6.9 billion at a fixed rate of 7.36% due in 7 years, and (ii) Ps. 2.4 billion at a variable rate of TIIE + 5 basis points due in five years. This transaction received broad participation from investment-grade dedicated investors, confirming Coca-Cola FEMSA’s financial strength and position as a sustainable financing leader. As part of this transaction—and aligned with our commitment to place sustainability at the heart of our organization—we are public- ly committed to achieve a water use ratio of 1.36 liters of water used per liter of beverage produced by 2024, and a water use ratio of 1.26 by 2026. Today, our water use ratio is 1.47 liters, a benchmark of wa- ter efficiency for the Coca-Cola System. With that in mind, we will leverage our disciplined approach to cap- ital allocation as we evaluate inorganic growth opportunities from both a strategic and value standpoint. Aligned with a clear frame- work for value-enhancing acquisitions—as exemplified by our re- cent Brazilian transactions—we look to pay a correct valuation, including clearly identifiable synergies; to create value for our share- holders; to diversify our operations across geographies, categories, and currencies; and to expand our multi-category portfolio, prioritiz- ing promising adjacent categories and capabilities for expansion. With regards to CAPEX, we will continue to take a very disciplined approach to capital allocation, using our cash control tower meth- odology to ensure that we maintain solid cash flow generation. Guided by a CAPEX-to-revenue ratio of from 7% to 8%, we expect that these investments will primarily focus on strengthening our infrastructure—especially our affordability capacity—and investing behind assets that increase our market presence in order to ensure our long-term growth and re-evolution. We are very proud to continue making history in sustainable financing as exemplified by our issuance of the first ever sustainability-linked bonds in the Mexican market. Overview Our Framework Our Strategic Corridors Appendices 12 CAO’S LETTER TO STAKEHOLDERS In Coca-Cola FEMSA, we are placing sustainability at the heart of our organization. Throughout our operating structures and geographies, it represents the strategic pillar that guides our business decisions. Working together, we are tackling sustainability challenges in a holistic way with focus on the our people, our community and our planet pillars. María del Carmen Alanis Figueroa Corporate Affairs Officer Overview Our Framework Our Strategic Corridors Appendices 13 Notably, on September 21st, 2021, we placed the first sustainability-linked bonds in the Mexican market for Ps. 9.4 billion (US$470 million). We recognize the great responsibility that our company has as part of a global ecosystem, and we reinforce our commitment to positively contribute to the development of the communities where we operate. We view sustain- ability as an interrelated system in which every action that our company undertakes directly impacts our society and our environment. We’re committed to create social, environmental, and eco- nomic value by encouraging dialogue and continuous in- teraction with our interest groups in order to develop and deploy programs and initiatives that address their particu- lar needs and ensuring the construction of responsible en- vironments throughout our value chain. Now, we’ve set our sights on new ambitions and a new re- cap, recognizing that we can only address the challenges we face both internally and externally through cooperative, equitable, and solid alliances, mainly focused on interest groups with an inclusion and diversity scope. Consistent with our commitment to our social footprint, in collaboration with The Coca-Cola Company, The Coca-Cola Foundation, and FEMSA Foundation, together we carry out projects designed to improve communities’ standard of living by helping them with digital training and economic empowerment, and community wellbeing, while working to provide them with safe water, improved sanitation, and hygiene education. Additionally, we work to strengthen water funds and conserve water basins through sustainable initiatives involving partnerships with several key stakeholders. Notably, on September 2021, we placed the first sustain- ability-linked bonds in the Mexican market for Ps. 9.4 bil- lion (US$470 million). For this first issuance, we’re focusing on the sustainable and efficient use of water, committing to the achievement of a water use ratio of 1.26 liters of wa- ter per liter of beverage produced by 2026. This milestone transaction was made possible by the collaboration of our tremendous multidisciplinary team of executives, who rep- resented all engaged areas of our company. This reinforces our commitment to a comprehensive water management strategy, guaranteeing efficient use, promoting conserva- tion and replenishment, and facilitating access to safe wa- ter in the communities where we operate. Looking ahead, our communication strategy will become an important component of our business strategy. Our goal is to reposition our corporate brand and identity to en- hance our company’s reputation among different external audiences, providing powerful messages. Coca-Cola FEMSA is in the process of updating and strength- ening its ESG (environmental, social, and governance) strat- egy. This way, we will boost our business's ability to manage operational risks and reinforce our company’s ability to rec- ognize and take advantage of potential opportunities. Overview Our Framework Our Strategic Corridors Appendices 14 OUR EXPERIENCED MANAGEMENT TEAM Aligned with our purpose to refresh the world anytime, anywhere, our experienced management team is inspiring a business re-evolution. Underpinned by KOF DNA, they’re leveraging our strengths to guide our accelerated business growth and re-evolution, and to achieve our long-term strategic priorities. Empowered by their example, we aim to not only consolidate our leadership position in the global beverage in- dustry, but also adapt and reshape our company to thrive in the new global business environment. John Anthony Santa Maria Otazua Chief Executive Officer Constantino Spas Montesinos Chief Financial Officer Karina Paola Awad Pérez Human Resources Officer Bruno Juanes Gárate Commercial Development Officer María del Carmen Alanis Figueroa Corporate Affairs Officer Mr. Santa Maria joined Coca-Cola FEMSA in 1995 and was appointed to his current po- sition in 2014. With 39 years of experience in the beverage industry, he previously served in several senior management positions in our organization, including Chief Operating Officer of the South America Division, the Mexico Division, and other C-suite roles such as Strategic Planning, Commercial Development, and Mergers & Acquisitions. He is a member of the Boards of Compartamos Banco, Coca-Cola FEMSA, and FEMSA Foundation. Mr. Santa Maria earned a Bachelor’s degree and an MBA with a major in Finance from Southern Methodist University. Mr. Spas joined Coca-Cola FEMSA in 2018 as Strategic Planning Officer and was appointed to his current position in 2019. He has over 26 years of experience in the food and beverage sector in Latin Amer- ica with a demonstrated track record in companies such as Bacardi, Kraft Foods, SAB Miller, Grupo Mavesa, and Empre- sas Polar. Mr. Spas earned a Bachelor’s degree in Business Administration from Universidad Metropolitana in Caracas, Venezuela, and an MBA from Emory Uni- versity Goizueta Business School in Atlan- ta, Georgia. Ms. Awad joined Coca-Cola FEMSA in 2018 and was appointed to her current position in the same year. With almost 30 years of experience in the human re- sources field, she previously served as Se- nior Vice President of Human Resources for Walmart Mexico and Central America, and Vice President of Human Resources for Walmart Chile. Ms. Awad is a member of the International Women’s Forum in Mexico, and she has received numerous recognitions for her female leadership role and human resources influence in Latin America. Ms. Awad earned a Bache- lor’s degree in Psychology from Pontifical Catholic University of Chile and an MBA from the Adolfo Ibáñez School of Man- agement in Miami. She is also a Newfield Network Certified Executive Coach. Mr. Juanes joined Coca-Cola FEMSA in 2021 and was appointed to his current position in the same year. With over 30 years of ex- perience in digital transformation, innova- tion, business model design, and manage- ment consulting, he previously served as LATAM Region CEO of the Management Consulting Division within NTTData, Chief Digital Innovation Officer, Core Business Operations Portfolio Leader, and mem- ber of the executive committee at Deloitte Consulting Mexico, and Chief Digital and Innovation Officer for Grupo Xignux. Mr. Juanes earned a Bachelor’s degree in Or- ganic Chemistry from Universidad Autóno- ma de Madrid, a degree in Molecular Biol- ogy from University of California, Berkeley, and completed a General Management Program at IESE in Madrid. Ms. Alanis joined Coca-Cola FEMSA in 2021 and was appointed to her current posi- tion in the same year. With more than 30 years of experience in the public sector, she previously served as Executive Director of Electoral Training and Civic Education, Executive Secretary of the Federal Elector- al Institute, and President of the Federal Electoral Court of Mexico (TEPJF). She also served as Mexico’s representative before the Venice Commission of the Council of Europe, Mexico’s representative before the Follow-up Mechanism of the Belém do Pará Convention, and Consultant for Latin America at the Kofi Annan Foundation. Ms. Alanis earned a Master’s degree in Compar- ative Government from the London School of Economics and a PhD in Law from the National Autonomous University of Mexico. Overview Our Framework Our Strategic Corridors Appendices 15 Rafael Ramos Casas Supply Chain and Engineering Officer Ignacio Echevarría Mendiguren Digital and Technology Officer Washington Fabricio Ponce García Chief Operating Officer—Mexico Ian Marcel Craig García Chief Operating Officer—Brazil Eduardo Guillermo Hernández Peña Chief Operating Officer—Latin America Mr. Ramos joined Coca-Cola FEMSA in 1999 and was appointed to his current position in 2018. With over 31 years of experience in the beverage industry, he previously served in several senior management positions, in- cluding Manufacturing Director for South- east Mexico, Manufacturing and Logistics Director, Supply Chain Director for Mexico and Central America, and Supply Chain Director of FEMSA Comercio. Mr. Ramos earned a Bachelor’s degree in Biochemical Engineering and an MBA in Agribusiness from the EGADE Business School of ITESM. Mr. Echevarría joined Coca-Cola FEMSA in 2018 and was appointed to his current position in 2021. With over 25 years of ex- perience in the IT industry, he previously held IT management positions within the Coca-Cola System, where he led various IT strategy and digital transformation projects developing and implementing solutions in Spain (Cobega), Africa (Equa- torial Bottler Company) and Europe (Coca-Cola Europacific Partners). He also served as a member of Telynet Group’s board of directors, a multi-platform and multi-category omnichannel business solutions development company with operations in the Americas, Europe, and Africa. Mr. Echevarría earned a degree in Industrial Engineering with a minor in Industrial Organization and an MBA from Instituto de Empresa in Madrid. Mr. Ponce joined Coca-Cola FEMSA in 1998 and was appointed to his current position in 2019. With over 23 years of experience in the beverage industry, he previously served in several senior management positions, including Chief Operating Officer of the Philippines, Managing Director of Central America, Argentina, and Colombia, and Director of Planning for Latin America Region. Before joining Coca-Cola FEMSA, he served as Managing Director for Heineken in Brazil and Senior Consultant in Bain & Company. An agricultural engineer, Mr. Ponce earned a Master’s degree in Economics from INCAE Business School in Costa Rica. Mr. Craig joined Coca-Cola FEMSA in 2003 and was appointed to his current position in 2016. With over 27 years of experience in the beverage industry, he previously served in several senior management positions, including Chief Operating Officer of Argen- tina, CFO and Strategic Planning Director of South America Division, CFO, Planning and Corporate Affairs Director of Mercosur Region, and Corporate Finance and Trea- sury Director of Coca-Cola FEMSA. Mr. Craig earned a Bachelor’s degree in Industrial Engineering from ITESM, an MBA from the University of Chicago Booth School of Busi- ness, and a Master’s degree in International Commercial Law from ITESM. Mr. Hernández joined Coca-Cola FEMSA in 2015 and was appointed to his current position in 2018. With over 32 years of experience in the beverage industry, he previously served in several senior management positions, including Strategic Planning Director and New Business Director of Coca-Cola FEMSA. Before joining Coca-Cola FEMSA, he served as CEO of Gloria Alimentos and Beer Business Director of Empresas Polar in Venezuela. Mr. Hernandez earned a Bachelor’s degree in Business Administration from Universidad Metropilitana in Caracas, Venezuela, and an MBA from the Kellogg School of Management at Northwestern University. Overview Our Framework Our Strategic Corridors Appendices 16 MEXICO 74.3 million people served 833K points of sale 22 plants 132 distribution centers CENTRAL AMERICA (Guatemala, Nicaragua, Costa Rica and Panama) 32.7 million people served 228K points of sale 7 plants 55 distribution centers OUR FOOTPRINT We have the privilege to serve more than 266 million people through 2 million points of sale in 9 markets of Latin America with a wide portfolio of leading brands. COLOMBIA 51 million people served 454K points of sale 7 plants 22 distribution centers 1) As of December 31, 2017, Venezuela is reported as an investment in shares, as a non-consolidated operation. 2) Figures do not include CVI. In January 2022, our Brazilian subsidiary acquired CVI, a Brazilian bottler of Coca-Cola trademark products with operations in the state of Rio Grande do Sul in Brazil. CVI serves more than 13 thousand points of sale and more than 2.8 million consumers. VENEZUELA1 BRAZIL2 90.7 million people served 443K points of sale 10 plants 43 distribution centers 266 million people served 2 million points of sale 49 plants 260 distribution centers URUGUAY 3.5 million people served 26K points of sale 1 plants 5 distribution centers ARGENTINA 13.4 million people served 63K points of sale 2 plants 3 distribution centers Overview Our Framework Our Strategic Corridors Appendices 17 SPARKLING BEVERAGES 2,721 Volume 15,956 Transactions WATER AND BULK WATER 495 Volume 1,485 Transactions STILL BEVERAGES 242 Volume 2,050 Transactions Argentina 765.8 Uruguay 202.1 Brazil 5,866.6 Mexico 8,569.5 TRANSACTIONS million 19,490.9 Colombia 2,046.2 CAM South 1,005.3 Guatemala 1,035.2 PRODUCT MIX BY PACKAGE PRODUCT MIX BY SIZE % 5 5 % 5 6 % 4 8 % 0 8 % 1 8 % 0 8 % 1 7 % 8 5 % 0 7 % 7 6 % 2 8 % 4 8 % 5 4 o c i x e M % 5 3 a c i r e m A l a r t n e C % 0 2 % 6 1 l i z a r B i a b m o o C l % 9 1 a n i t n e g r A % 0 2 y a u g u r U % 2 4 a c i r e m A l a r t n e C % 9 2 o c i x e M % 3 3 % 0 3 l i z a r B i a b m o o C l % 8 1 a n i t n e g r A % 6 1 y a u g u r U ■ Returnable ■ Non-returnable ■ Single serve ■ Multi-serve Argentina 155.4 Uruguay 43.4 PRODUCT MIX BY CATEGORY Brazil 903.3 Mexico 1,790.0 TOTAL VOLUME million unit cases1 3,457.9 Colombia 297.9 CAM South 136.6 Guatemala 131.3 % of volume of total beverages Sparkling Water1 Bulk Water2 Mexico Central America Colombia Brazil Argentina Uruguay 72.8% 87.3% 78.7% 87.0% 80.5% 86.9% 4.6% 3.8% 9.0% 5.4% 7.6% 11.2% 15.7% 0.2% 5.1% 0.9% 3.5% — Still 6.8% 8.7% 7.2% 6.7% 8.5% 1.9% 1) Volume is measured in million unit cases 1) Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage. 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. Overview Our Framework Our Strategic Corridors Appendices 18 FINANCIAL HIGHLIGHTS In a year of operational and strategic milestones, Coca-Cola FEMSA was able to deliver solid performance and volume recovery ahead of pre-pandemic levels. Despite supply chain disruptions and higher raw material costs, Coca-Cola FEMSA delivered another year of operating income growth. Sales Volume (million unit cases) Total Revenues Operating Income 2021 USD1 2021 MXN 2020 MXN % Change 3,457.9 3,457.9 3,284.4 9,496 194,804 183,615 1,336 27,402 25,243 5.3% 6.1% 8.6% Controlling Interest Net Income 766 15,708 10,307 52.4% Total Assets 13,238 271,567 263,066 Long-Term Bank Loans and Notes Payable 4,062 83,329 82,461 Controlling Interest Capital Expenditures Book value per share2 5,925 121,550 116,874 676 0.35 13,865 10,354 7.23 6.95 3.2% 1.1% 4.0% 33.9% 4.0% Millions of Mexican pesos and U.S. dollars as of December 31, 2021 (except volume and per share data). Results under International Financial Reporting Standards. 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 December 31, 2021, which exchange rate was Ps. 20.51 to U.S.$1.00. 2. Based on 16,806.7 million outstanding ordinary shares as of December 31, 2021 and 2020. Sales Volume million unit cases¹ 2 2 3 3 , 9 6 3 3 , 4 8 2 3 , 8 5 4 3 , Total Revenues billion Mexican Ps. . 5 4 9 1 . 6 3 8 1 . 8 4 9 1 . 3 2 8 1 Operating Income billion Mexican Ps. . 7 4 2 . 4 5 2 . 2 5 2 . 4 7 2 Dividend Per Share Mexican Ps. 4 0 5 . 6 8 4 . 4 5 3 . 5 3 3 . 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 1. Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage. Overview Our Framework Our Strategic Corridors Appendices 19 SUSTAINABILITY HIGHLIGHTS 2021 At Coca-Cola FEMSA, we are tackling sustainability challenges in a holistic way— including our people, communities, and transforming operations—on issues such as climate change, water stewardship, circular economy, safety, and community development. 4 ~100K benefited in neighboring communities with the funds we operate in collaboration with Fundación FEMSA. +2K activities of volunteering, impacting more than 300 thousand people. 1.3 million beneficiaries of activities focused on our sustainability pillars: Our Planet, Our Community, and Our People. US$114.6 million invested in projects in the Our Planet pillar, prioritizing activities in the areas of circular economy, water stewardship, and climate action. 2 5 1 3 6 +2 million liters of beverage donated to vulnerable populations, health professionals, and front-line workers amidst the COVID-19 pandemic. 70K tons of waste were collected in a holistic and transversal way through some of our countries’ most important initiatives. Overview Our Framework Our Strategic Corridors Appendices 20 1.47 liters of water per liter of beverage produced. 85% of our electricity requirements across our manufacturing operations come from clean sources. 7 11 15 31% recycled PET used on average across our plastic bottle presentations. 8 12 98% of post- industrial waste recycled or properly disposed. 1st Mexican Company to secure approval of the Science Based Targets Initiative (SBTi) for our GHG emissions reduction targets. 28% reduction of our absolute GHG emissions from our operations (scope 1 and 2) from 2015 to 2021. 16 4th Consecutive year of inclusion in the Bloomberg Gender-Equality Index. First Sustainability- Linked Bonds issued in the Mexican market for Ps. 9.4 billion (US$470 million) with a commitment to achieve a water use ratio of 1.36 by 2024 and 1.26 by 2026. Top 15% of companies leading the sustainability agenda, according to the S&P Global Sustainability Yearbook 2022. 9 13 17 46% of our manufacturing facilities have Zero Waste certification. US$705 million 1st Green Bond issuance within the Coca-Cola System. 10 14 18 Recognized for a 3rd year as one of the Best LGBTQ+ Places to Work by the Human Rights Campaign Foundation and HRC Equidad MX: Global Program for Labor Equity. Overview Our Framework Our Strategic Corridors Appendices 21 OUR VALUE CHAIN 1 Ingredients We work with our suppliers to have the best raw materials. 3 Primary Distribution From our manufacturing facilities, we ship beverages to our 260 distribution centers. 5 Pre-Sale Powered by KOF digital platforms, we serve our clients in the traditional and modern channels, offering a winning portfolio of leading brands. 7 Points of Sale We reach more than 2.0 million points of sale with targeted commercial initiatives, and we use Market Analytics to maximize the value proposition for each client. 9 Recycling We encourage and help consumers to properly dispose and recycle all packages from our beverages. 2 Manufacturing Enabled by our Digital Manufacturing Platform 2.0, we produce high-quality beverages in our facilities, with an efficient use of water and energy. 4 Distribution Center In our automated warehouses, we integrate pre-sale with secondary distribution processes. 6 Secondary Distribution Once a pre-sale order is placed, we use our Digital Distribution Platform to define an optimal Route-To- Market operation. 8 Consumption We serve more than 266 million people, offering a portfolio with choices for every lifestyle. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 22 22 OUR FRAMEWORK Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 23 23 Strategy More than an evolution, we’re inspiring a business re-evolution, working seamlessly, collaboratively, and agilely across six strategic corridors: • Build out an Open Omnichannel Platform • Develop a Winning Consumer-Centric Portfolio • Foster an Agile, Digital Savvy, and People-Centric Culture • Place Sustainability at the Heart of our Organization • Digitize the Core • Actively pursue Value-Enhancing Acquisitions Our strategic growth and industry leadership is driven by our purpose to refresh the world anytime, anywhere—always finding the most efficient and sustainable way to put our consumers’ choice in their hands whenever and wherever they want it. E L B A N I A T S U S Winning Portfolio Value- enhancing acquisitions Omnichannel Platform E C O S Y S T E M Digitize our core operation Agile, digital savvy, people centric culture Sustainability S U S T A I N A B L E Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 24 24 Sustainability Materiality Matrix With our company’s achievement of key 2020 sustainability targets, we conducted a com- prehensive materiality study to ensure that our sustainability priorities were aligned with stakeholder expectations and what our busi- ness needs to thrive over the coming years. Through this analysis, we developed an updat- ed set of priorities that: • Clarify our company’s position as part of our overall value chain • Position our company’s value chain within the context of society’s expectations • Allow us to understand the role that we and our society play with respect to envi- ronmental care and respect for planetary boundaries As a result of this study, we identified 45 materi- al topics and 17 priorities that will drive strategic lines of action across our value chain to ensure the sustainability of our business, our business partners, and the communities in which we operate. Using the results of our study, we gen- erated an updated materiality matrix, mapping the 17 identified priorities across the three pilars of our sustainability strategy. e c n a v e l e R r e d l o h e k a t S 3 17 15 13 16 18 21 27 23 29 26 28 31 34 36 25 10 4 9 14 7 12 19 22 20 24 1 8 2 11 6 5 37 38 45 43 41 44 42 35 39 40 30 33 32 B u s i n e s s S u c c e s s  Our Planet 1 Packaging Circular Economy 4 GHG Emissions Reduction 5 Sustainable Mobility 6 Climate Change Adaptation 9 Energy Management: Renewables & Efficiency 10 WASH (Water Access, Sanitation, and Hygiene) 11 Context-Based Hydrological Safety 17 Water Efficiency 26 Industrial Waste Circular Economy 43 Environmentally Responsible Dairy Farming  Our Community 13 Human and Labor Rights 15 Diversity and Inclusion 16 Safety, Health, and Wellness 20 Culture, Ethics, and Values 21 Labor Relations 23 Standards for Contractors 32 Talent Attraction 33 Compensation and Benefits 44 Training and Development  Our People 2 Nutritional Attributes of Product Portfolio 7 Product Portfolio Diversification 14 Supporting Small Businesses 18 Advertising & Commercial Practices 19 Women’s Empowerment 22 Local Community Relationships 25 Information Security & Cybersecurity 28 GMOs / Traceability of Ingredients 29 Digitalization in Customers 31 Promotion of Healthy Habits 34 Customer Engagement for Circular Economy 36 Support of Local Supply Chains 37 Road Safety 38 Information & Quality of Products 39 Customer Satisfaction Measurement 40 Quality of Service for Customers 41 Supplier Relationship T&Cs Management 42 Mechanism for Consumers to Raise Concerns 45 Opportunities for Youth  Corporate Governance 3 Global Integrity & Compliance 24 Best-in-Class Board Practices 27 Partnerships for Sustainability 30 Comprehensive Risk 8 Relationship with Government 12 Consumer Engagement for Management 35 Code of Conduct Circular Economy Our materiality matrix maps 17 identified priorities across the three pillars of our sustainability strategy. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 25 25 Consistent with our sustainability frame- work, we maintained the three pillars—Our People, Our Planet, and Our Community— that have guided us since the inception of our strategy, while reinvigorating these pil- lars with a differentiated approach to sus- tainability focusing on 10 strategic priorities throughout our value chain. Circular Economy Suppliers KOF Operations Customers Consumers/ Communities Packaging Circular Economy Industrial Waste Circular Economy Customer Engagement for Circular Economy Consumer Engagement for Circular Economy GHG Emissions Reduction Climate Action Sustainable Mobility Climate Change Adaptation Energy Management: Renewables & Efficiency Water Stewardship Product Portfolio Gmo's/ Traceability of Ingredients Context-Based Hydrological Safety Water Efficiency Nutritional Attributes of Product Portfolio Product Portfolio Diversification Relationship with Governments Wash (Water Access, Sanitation, And Hygiene) Information & Quality of Products Aligned with societal expectations, stake- holder engagement, and respect for en- vironmental boundaries, our refreshed approach to sustainability aims to simulta- neously create economic and social value across our value chain in collaboration with all of our stakeholders. Relationship with Government Marketing & Advertising Supporting Small Businesses Fundamental Working Conditions Enhanced Cultural Elements Corporate Governance Advertising & Commercial Practices Development of Capabilities Human & Labor Rights Safety, Health & Wellness Diversity & Inclusion Global Integrity & Compliance  Our Planet  Our Community  Our People  Corporate Governance Sustainability Framework Our sustainability framework is based on three over- arching pillars: Our People, Our Community, and Our Planet. This strategic framework provides us with the direction to accomplish our mission to positively transform the communities where we operate, sup- ported by our ethics, values, and collaboration.  Our People Our people and the way they work together are our company’s most valuable assets. We promote their integral development and quality of life through our comprehensive wellbeing model. Through this mod- el, we positively influence their workplace environ- ment, enabling them to work toward shared goals, achieve our expected business results, enhance and improve our leading position, and live our core be- liefs and behaviors every day.  Our Community Our communities are key enablers of business suc- cess. We reinforce positive relationships with the communities with which we continuously interact, fostering our ability to serve the market and main- tain our social license to operate. Above all, these efforts enable us to create a stronger, more flexible organization, with the agility to adapt to ever-chang- ing environments while generating sustainable growth.  Our Planet We ensure that we fully understand the role that we play with respect to environmental care and planetary boundaries by embedding environmen- tal consciousness throughout our day-to-day de- cision-making processes and business operations. Thus, we strategically, efficiently, and responsibly address environmental challenges across our value chain—from climate action to water stewardship and a circular economy. Our differentiated approach to sustainability focuses on 10 strategic priorities throughout our company’s value chain. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 26 26 United Nations Sustainable Development Goals We are committed to contributing to the achievement of the United Nations Sustainable Development Goals (SDGs). While many of our actions contribute to the 17 SDGs, we are convinced that we can have a larger impact on the following fourteen goals through our strategic framework and initiatives. We are working with FEMSA Foundation on initiatives and social programs in our communities, focused on early childhood and healthy lifestyles. Aligned with our comprehensive management framework, we continued to prioritize the safety and wellbeing of our employees, customers, consumers, and communities throughout the COVID-19 pandemic. By prioritizing their health and safety, we reinforce our company’s commitment to delivering economic value, while generating social and environmental wellbeing. In addition, we offer a total beverage portfolio, and we carry out responsible marketing strategies for our products. Aligned with our commitment to improve gender diversity at all levels of the organization, our operations are developing and deploying initiatives to increase women’s representation within their operations. In addition, we carry out projects to foster women’s empowerment in the traditional trade. We are committed to ensuring the efficient use of this natural resource in our bottling operations and returning to the environment more water than we take to produce our beverages, while safeguarding this resource not only for the benefit of our company, but also for the enjoyment of our communities and planet now and into the future. In alliance with FEMSA Foundation, we also develop water access, sanitation, and hygience (WASH) programs. We strive for energy efficiency across our value chain. We further integrate clean and renewable sources of energy and technologies to reduce our GHG emissions—thus contributing to climate change mitigation. Our operations’ energy consumption focuses on a comprehensive strategy that encompasses our value chain. We aim to achieve sustainable economic growth through efficient resource utilization, promote a work environment that offers comprehensive professional development, create jobs in emerging markets, and apply sustainable procurement principles. In addition, we developed initiatives in our communities focused on empowerment training to generate resilience and reactivation of local economies. We continually work to improve our environmental performance and foster industry innovation, mainly in water stewardship, circular economy and energy efficiency, while reducing our carbon footprint across our value chain. We complement these programs with digital and innovation training to develop local suppliers. We carry out projects designed to improve communities’ quality of life and wellbeing by helping them with digital training and economic empowerment, while working to provide them with safe water, improved sanitation, and hygiene education. We currently replenish to more than 100% of the water we use in the production of our beverages in Argentina, Brazil, Costa Rica, Guatemala, Panama, Colombia, and Mexico through conservation projects like “Agua para el Futuro” and protection of biodiversity. Our corporate governance and the way we conduct our business is in full compliance with applicable regulations in all of our countries of operation, with our Code of Ethics as our compass. With our suppliers, we further apply guiding principles that focus on strategic input categories, including areas such as human rights, environmental protection, and labor rights. We recognize that complex, ever- changing challenges require innovative solutions that can only be achieved and put into action together. We embrace this reality, and we partner with other companies, governments, NGOs, and institutions to maximize our impact. We look to provide tools that allow for the sustainable growth and development of the communities within our social and operational footprint. At the same time, we strive to protect and promote the prosperity of all of the people in these communities and to continue to build socially responsible environments throughout our whole value chain. We communicate our sustainability results annually through our Integrated Report. We are confident that, with the support and co- responsibility of all of the actors across the value chain, we will fulfill our 2030 goal of collecting 100% of the PET bottles we place in the market through a concerted market-based approach to the circular economy. We recognize that climate change is a real, imminent threat to the way that we are accustomed to live, and we are convinced that a science-based, multi- stakeholder effort is required to address this urgent matter that concerns us all. Aligned with the goal of the Paris Agreement to limit global warming to well below 2°C above pre-industrial levels, our Climate Action Strategy is designed to drive an absolute reduction of our carbon footprint throughout the entire value chain—from suppliers to our operations, customers, and consumers. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 27 27 Sustainable Financing Our approach to sustainable financing enables us to maximize our positive impact by publicly aligning our finance strategy with the achievement of our environ- mental targets, while contributing to the United Na- tions Sustainable Development Goals. Green Bond Progress Report Aligned with this approach and our sustainability strategy, we issued our first-ever green bond in September 2020, valued at US$705 million, at the time the largest for a Latin American corporation and a first for the Coca-Cola System. Subsequently, in June 2021, we released our first Green Bond Report, providing an update on the allocation of the net proceeds from this bond to finance or refinance eligible green projects in three main categories—climate action, water stewardship, and circular economy—according to our Green Bond Framework. As published in that report, we allocated US$235.48 million in net proceeds from the issuance of our first green bond to eligible green projects from 2018 through 2020, representing 33.4% of the net proceeds. As of December 31, 2021, we had allocated US$350.12 million of green bond net proceeds to eligible green projects—including a further US$114.64 million during 2021—leaving US$354.88 million of net proceeds unal- located at the end of 2021. The total investment so far represents 49.7% of the net proceeds and includes in- vestments in all of the three main categories of climate action, water stewardship, and circular economy. Green Bond Allocation As of December 31, 2021, Coca-Cola FEMSA had allocated US$350.12 million of green bond net proceeds to projects supporting climate action, water stewardship, and a circular economy. US$705Million Green Bond Issued September 2020 US$350.12 million allocated Between 2018-2021 Spend by Year US$ million Spend by Category 2018-2021 . 4 6 4 1 1 . 7 2 3 8 . 7 2 8 7 5 9 3 7 . 2018 2019 2020 2021 Circular Economy 90.9% US$318.29 million Water Stewardship 3.9% US$13.6 million Climate Action 5.2% US$18.23 million Goal Performance The net proceeds of our green bond help to deliv- er on our company’s sus- tainability goals, includ- ing our commitments to increase recycled content in our PET packaging, improve water efficiency, and reduce CO2 emis- sions. From 2018 through 2021, we made progress against these goals, as il- lustrated in these charts. % Recycled content % 1 3 % 9 2 % 3 2 % 1 2 % 0 2 % 6 1 2016 2017 2018 2019 2020 2021 Water efficiency Liters of water per liter of beverage produced (less is better) 2 7 . 1 5 6 . 1 8 5 . 1 2 5 . 1 9 4 . 1 7 4 . 1 2016 2017 2018 2019 2020 2021 Clean Energy in Manufacturing % 5 8 % 0 8 % 7 0 7 . % 6 . 1 5 % 8 3 % 9 2 2016 2017 2018 2019 2020 2021 Use at least 50% recycled resin (rPET) in our PET bottles by 2030 Achieve a water use ratio of 1.26 liters of water per liter of beverage produced by 2026 As part of our commitment to the Science Based Targets initiative (SBTi), we commit to achieve 100% renewable energy from our operations by 2030. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 28 28 Sustainability-Linked Bonds Building on our sustainability strategy, in September 2021, we issued the first-ever sustainability-linked bonds (SLB) in the Mexican market for a total of Ps. 9,400 million in accordance with our Sustainability-Linked Bonds Framework. Rec- ognizing that water is not only an invaluable resource for our company and industry, but also an indispensable element of climate change resilience, we are focusing this first issuance on the sustainable and efficient use of water, aligned with our commitment to water stewardship. Unlike the use of green bond proceeds, our sustainability-linked bonds are committed to the achievement of a water use ratio of 1.36 by 2024 and 1.26 by 2026. Today, our water use ratio is 1.47 liters, a benchmark of water efficiency for the Coca-Cola System. Data Reported and Forecast KPI water use ratio (lt) 8 5 . 1 2 5 . 1 9 4 . 1 7 4 . 1 6 3 . 1 6 2 . 1 2018 2019 2020 2021 2024 SPT 2024 2026 SPT 2026 Sustainability-Linked Bonds Features On September 21, 2021, Coca-Cola FEMSA issued the first sustainability-linked bonds in the Mexican market. Issuer Format Issue Date Currency • Coca-Cola FEMSA SAB de CV • Senior Fixed & Variable Rate Sustainability-Linked Bonds • September 21, 2021 • Mexican Pesos Total Issued Amount • Ps. 9,400 million Ratings • HR AAA (HR Ratings de México) / Aaa.mx (Moody’s Sustainability Performance Targets de México) • As part of these bonds, we commit to achieve a water use ratio of 1.36 by 2024 and 1.26 by 2026, which will be verified by an independent third party, and in the event these targets are not met, the interest rate will increase by 25 bps to remain at 7.61% and TIIE + 0.30%, respectively. Bonds/Yields/Maturities • Ps. 6,965 million at fixed rate of 7.36% (MBONO + 34 bps) due in 7 years • Ps. 2,435 million at variable rate of TIIE + 5 bps due in 5 years Subject to the issuance of applicable funding instruments, we will continue to annually report on the allocation of proceeds and the associated impact in the year(s) following issuance of any future funding instruments under our current Green Bond and Sustainability-Linked Bonds Frameworks. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 29 29 OUR STRATEGIC CORRIDORS Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 30 30 Driven by our obsessive focus on our consumers and customers, we are developing a winning, multi-category portfolio with compelling options for every consumer taste and lifestyle, while promoting healthy habits—prioritizing the safety and wellbeing of our employees, customers, consumers, and communities throughout the course of the COVID-19 pandemic. DEVELOP A WINNING CONSUMER- CENTRIC PORTFOLIO WINNING CONSUMER-CENTRIC PORTFOLIO Our strategy aims to build a winning consumer-centric, multi- category portfolio for every occasion by leveraging affordability to drive sustainable beverage growth; capturing new consumption occasions and preferences through portfolio innovation; and consolidating our market leadership in emerging beverage categories, while exploring multi-category opportunities across our markets. Our customers and consumers are at the center of everything we do. By deeply understanding their changing tastes and buying habits, we proactively adapt our portfolio strategies and digital initiatives to satisfy their evolving preferences; develop complementary distribution models to increase their service levels; accelerate our first-mover advantage across digital sales channels to indulge their online purchasing patterns; and fulfill their growing needs through exemplary market execution. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 31 31 SUCCESS STORIES MEXICO MEXICO: DEVELOPING COMPLEMENTARY INDIRECT DISTRIBUTION MODELS We are developing and customizing comple- mentary indirect distribution models to in- crease customer service levels to our small mom-and-pop clients. This is reflected in dou- ble-digit growth in emerging indirect channels such as wholesalers and distributors. Through a clear segmentation and category manage- ment strategy, the wholesalers channel gained double-digit volume growth year over year. We also moved forward with our distributors’ transformation process, covering nearly 30% of this channel’s total volume during 2021. MEXICO: CAPITALIZING ON CONVENIENT HOME DELIVERY As at-home consumption occasions and preferences change, we contin- ued to expand our home delivery routes, while broadening our portfolio strategies and digital initiatives, to serve the evolving needs of nearly 600 thousand households across Mexico. During the year, we not only added over 400 new routes for a total of more than 1,200 routes, but also started the digital transformation of those routes to our Coca-Cola en tu Hogar (Coca-Cola at Home) omnichannel solution, connecting directly with our consumers via chatbot and website order-taking platforms. Thanks to increased routes, digital enablers, and portfolio initiatives, our home de- livery routes are rapidly improving their productivity, average ticket, and sales. For the year, we increased the average ticket by driving the mix of non-jug-water products to close to half. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 32 32 SUCCESS STORIES BRAZIL ACCELERATING FIRST-MOVER ADVANTAGE ACROSS DIGITAL SALES CHANNEL As consumers reshape their online purchasing pat- terns and preferences, we’re accelerating our growth and first-mover advantage across the digital sales channel, from pure players to grocery and food ag- gregators to e-retailers. In Brazil, we have scaled our digital consumer experience to achieve an incidence rate of 17% in food aggregators—a benchmark for the Coca-Cola system globally—and a more than 70% share of the country’s e-retailers. Consequently, our sales volume across the increasingly important digi- tal sales channel grew by almost 50% year over year. GUATEMALA AWARD-WINNING EXCELLENCE By focusing on our fundamentals—delivering op- erational excellence, developing a winning con- sumer-centric portfolio, driving affordability to better serve consumers’ demands, and facilitating route-to-market transformation—Guatemala has increased its score on The Coca-Cola Company’s execution index, expanded our share of sales, and generated a compound annual volume growth rate of more than 11% over the last four years. Conse- quently, Guatemala now represents our fourth larg- est market in terms of revenues. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 33 33 SUCCESS STORIES MEXICO EXPANDING AFFORDABILITY STRATEGY In Mexico, our affordability strategy focuses not only on our expanding portfolio of refillable multi-serve presentations, but also on boosting our portfolio of affordable one-way presentations through our magic price points. In the traditional trade channel, we bolstered our magic price points with the launch of our new affordable 1.35-liter one-way PET presentation of Coca-Cola Original and our core flavored sparkling brands, along with the launch of our new affordable 2.75-liter one-way PET presentation of Coca-Cola Original. Thanks to this strategy, we gained market share in the multi-serve cola segment, and we supplemented our affordability with refillables in convenience stores. Leverage Affordability To Drive Sustainable Beverage Growth Affordability remained an important driver of our sustainable beverage growth. Accordingly, we leveraged our unmatched execution and ability to provide affordability to consumers to drive our markets’ recovery through- out the year. To this end, we continued investing behind this core capabili- ty, including more than US$500 million in production lines and returnable bottles and cases over the past two years. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 34 34 SUCCESS STORIES MEXICO & COLOMBIA INCREASING UNIVERSAL BOTTLE COVERAGE The launch of our Universal Bottle or Botella Unica—which enables us to use the same refillable bottle for Coca-Cola, flavored sparkling beverages, and juices—is delivering better than expected results. Now covering 75% of our territories across Mexico, we increased our Universal Bottle production capacity, while expanding our labeling production capacity by more than 40% during 2021. To scale the Universal Bottle’s impact, we continued the rollout of our 2.5-liter returnable PET Universal Bottle beyond the traditional trade channel, while beginning the rollout of our 500-ml returnable glass Universal Bottle in certain cities. Indeed, our focus on increasing the coverage of our Universal Bottle continues to provide share gains. Notably, our 2.5-liter refillable PET Universal Bottle contributed to a share of sales gain in the cities where it was launched. Similarly, our Universal Bottle is proving successful in Colombia, with volumes and share of sales increases in the cities where it was launched. By expanding our returnable reach beyond Coca-Cola, this transformational bottling technology enables us to launch affordable returnable PET presentations of our flavored sparkling and still beverage brands to compete more effectively in the market. BRAZIL LEVERAGING THE POPULARTIY OF MULTIPACKS This year, we continued to leverage the popularity and household penetration of our convenient, afford- able multipacks of Coke and our core flavored spar- kling beverage brands in our single- and multi-serve non-returnable presentations. By harnessing the pow- er of brand Coca-Cola to introduce consumers to our flavored sparkling beverage brands, our multipack strategy largely enabled us to grow our volume of Fanta Guaraná by more than 9% year over year, while capturing increased share of sales in the sparkling beverage category. ARGENTINA IMPROVING HOUSEHOLD PENETRATION Under our affordability strategy, we continued to regain share and expand our consumer base in the face of Argentina’s dynamic competitive and economic environment. Thanks to our mar- ket segmentation strategy, we were able to offer the right product at the right price across di- verse socioeconomic segments of our franchise territory, enabling us to improve our household penetration while preserving our profitability. We further increased our volume versus our baseline year of 2019. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 35 35 SUCCESS STORIES Capture New Consumption Occasions Through Portfolio Innovation Through ongoing portfolio innovation, we continue to focus on improving our competitive position and capturing the most value from our beverage brands by closely aligning our portfolio with consumers’ tastes and preferences. Among our initiatives, we continue to drive the growth of our no- and low-sugar portfolio of sparkling beverages to satisfy and stimulate demand for our products, while adapting our portfolio to evolving consumer behavior. MEXICO SUCCESSFULLY LAUNCHING NEW FORMULA OF COCA-COLA SIN AZÚCAR (ZERO SUGAR) This year, we successfully launched the new formula and visual identity of Coca-Cola Sin Azúcar (Zero Sugar) with a great reception from our consumers. Notably, our focus on increasing consumer contact and transactions enabled us to achieve double-digit volume growth year over year, mainly focused on the single-serve format. GROWING PREMIUM TOPO CHICO SPARKLING MINERAL WATER The power of portfolio innovation and expansion is exemplified by the successful launch and popularity of our Topo Chico brand of sparkling mineral water. With volume growth of over 60%, this naturally sourced mineral water complements our portfolio, offering consumers a superb premium offering. After its launch last year, we expanded Topo Chico’s mineral water coverage across the country’s modern and traditional trade channels, achieving consistent share growth in the sparkling water category. Also, our dual Topo Chico and Ciel mineral water strategy drove us to reach a leading share of the mineral water category in the modern trade channel. Furthermore, we continued to innovate in the flavored sparkling water segment with new flavors of both Topo Chico and Ciel mineral water. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 36 36 SUCCESS STORIES INCREASING COVERAGE, VOLUME, AND SHARE OF COCA-COLA SEM AÇÚCAR (ZERO SUGAR) This year, we continued to increase the cov- erage of Coca-Cola Sem Açúcar (Zero Sugar) across our franchise territories, gaining sig- nificant share of sales growth while gener- ating double-digit volume growth year over year. Consequently, we managed to build on the popularity of Coca-Cola Sem Açúcar (Zero Sugar) to not only drive volume growth of over 14% and 10% versus 2020 and 2019, re- spectively, but also contribute to our record share of sales across the sparkling beverage category. BRAZIL INNOVATIVE MULTIPACKS SPUR SINGLE- SERVE RECOVERY This year, our single-serve multipacks, in- cluding our convenient 24-pack of 200-ml bottles and six-pack of 350-ml cans, contrib- uted to a more than 13 pp recovery in our sin- gle-serve sparkling beverage mix. Moreover, the volume of these popular mixed multi- packs of our Coke and core Fanta brands grew more than 30% year over year. ARGENTINA & URUGUAY EXPANDING ZERO-SUGAR CATEGORY GROWTH Harnessing the successful new formula of Coca-Cola Sin Azúcar (Zero Sugar), we success- fully expanded the no-sugar beverage category across our Argentina and Uruguay franchise terri- tories. Thanks to the popularity of this refreshing sugar-free alternative, coupled with our superi- or market execution, we achieved double-dig- it growth in per capita consumption across our no-sugar sparkling beverage category in Argenti- na, while we expanded our market leadership in Uruguay’s no-sugar beverage category—spurred by Coca-Cola Sin Azúcar (Zero Sugar) reaching more than 32% volume growth year over year. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 37 37 SUCCESS STORIES MEXICO MEXICO & BRAZIL DELIVERING DOUBLE-DIGIT DAIRY AND DAIRY- ALTERNATIVE GROWTH Under our joint venture with The Coca-Cola Company, we satisfied growing consumer demand for our portfolio of wholesome Santa Clara brand UHT whole milk, specialized milk, and flavored milk products. Thanks to our unmatched market execution, we expanded our share of sales and achieved more than 20% volume growth year over year across the traditional trade channel. Simultaneously, we captured consumers’ taste for dairy-alternative beverages through our AdeS brand, significantly increasing our volume in the plant-based beverage category. Capitalize On Emerging Categories & New Multi- Category Opportunities This year, we continued to capture market share across emerging still beverage categories—from hydration to nutrition, energy, tea, and sport drinks—while identifying, defining, and exploring multi- category opportunities across our markets. COLOMBIA LAUNCHING REFRESHING BRISA SPARKLING FLAVORED WATER In Colombia, we took portfolio innovation to a new level with the launch of refreshing Brisa sparkling water in enticing Colombian Apple and Lemon-Lime flavors. By year-end, we essentially doubled our volume and achieved higher share of sales in the country’s competitive flavored sparkling water segment. ACCELERATING ENERGY GROWTH In Mexico, thanks to our point-of-sale execution, we achieved high double-digit volume growth year over year in the energy category, which drives us to be the leader within the premium energy brands segment. Also, we’re continually innovating with new product launches such as Monster Pacific Punch, Lo Carb, and Hamilton. Additionally, we continued to build on our successful launch of Predator, a more affordable value brand from the Monster family. Predator complements our energy portfolio across the modern and traditional sales channels, while enabling us to gain market share in this attractive, growing beverage segment. By leveraging the traditional trade and wholesalers’ channels, we’ve achieved amazing volume growth of more than 50% year over year. In Brazil, we launched new flavors of our Monster and Reign brand energy drink, including Monster Pacific Punch and Dragon Tea Pessego, significantly expanding our share of sales, while increasing our sales volume by more than 80% year over year in this segment. Notably, Monster not only achieved record share of sales, but also share of sales leadership in Brazil’s fast-growing energy drink segment. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 38 38 SUCCESS STORIES BRAZIL BRAZIL & COSTA RICA BUILDING A WINNING CONSUMER-CENTRIC BEER PORTFOLIO This year, together with Heineken, The Coca-Cola Company, and the rest of the Coca-Cola System in Brazil, we successfully redesigned our beer distribution partnership in the country. As a result, during the year, we completed the transition of the Heineken and Amstel brands to Heineken’s distribution net- work, and we proactively evaluated and rolled out promising new brands to complement our beer portfolio. Leveraging our continued rela- tionship with Heineken, we incorporated and launched two brands from Heineken’s port- folio: Eisenbahn, a premium brand, and Tiger, a pure malt mainstream brand. We furthered capitalized on market opportunities to acquire Brazilian craft beer brand Therezópolis, togeth- er with Coca-Cola Andina, and announced a new agreement to distribute leading Span- ish brewer Estrella Galicia’s portfolio, together with the Coca-Cola System in Brazil. TANTALIZING TEA AND SPORT DRINKS GROWTH We continued to capitalize on our reformulated portfolio to cater to our Brazilian con- sumers’ growing demand for refreshing teas. Strategically, the combination of our new cold-fill formula together with the rollout of our Leão brand teas enabled us to increase our sales volume by almost 20% for the year, while expanding our sales to a record share of this fast-growing beverage category. We further achieved significant share of sales and almost 50% volume growth in the profitable sport drinks category year over year. More- over, in Costa Rica, we successfully launched a fusion of Hi-C and Fuze Tea in the main- stream tea segment, expanding our share of sales year over year. MEXICO & BRAZIL EMERGING OPPORTUNITIES IN FLAVORED ALCOHOLIC READY-TO-DRINK BEVERAGES Consistent with our journey to complement our portfolio with options for all consumption occasions, we are identifying and defining a broader multi-category portfolio beyond our traditional non-alcoholic ready-to-drink beverages. Our experience with Topo Chico Hard Seltzer shows consumers are excited to see recognizable beverage brands that they already enjoy enter the flavored alcoholic ready-to-drink alcohol space. With the combination of a familiar, beloved brand and a strong distribution and market position, we are confident that consumers will enjoy our emerging portfolio of flavored alcoholic ready-to-drink beverages, including Topo Chico Hard Seltzer. Additionally, we further continue to rollout pilot programs to test the distribution of complementary categories such as leading spirit brands, other alcoholic beverages, and leading consumer products in certain markets. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 39 39 RESPONSIBLE MARKETING At Coca-Cola FEMSA, our consumers are at the center of everything we do. Therefore, transparency, fact-based information, an analytical culture, and a high sense of responsibility are the guiding principles for our marketing practices. 1 Informed nutritional decisions To enable our consumers to make healthy informed choices across every one of our operations, our upfront product labels include clear, easy-to-find nutritional content 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 countries we serve. Our aim is to ensure that our consumers are provided with high-quality information. 2 Responsible marketing 3 Highest quality As part of our commitment to the wellbeing of our consumers and customers, our advertising adheres to The Coca-Cola Company’s Responsible Marketing Policy and Global School Beverage Guidelines. For instance, as part of the Coca-Cola system, we diligently follow and enforce The Coca-Cola Company’s Responsible Marketing Policy, and we do not market products in channels with an audience predominantly of children under 13. In this and other ways, we underscore our devotion to the healthy habits of our consumers. Our production processes fulfill the highest quality standards; our ingredients comply with each of our operations’ 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—all FSSC 22000 certified—thus guaranteeing only the best quality products for our consumers. DELIVERING HIGH-QUALITY PRODUCTS AND SERVICES As a customer-focused company, we are in constant communication with our custom- ers, giving them an open channel where they can voice their concerns and complaints. With that in mind, one of the ways we measure customer satisfaction is by reducing the num- ber of complaints through our ongoing pro- cess optimization and food safety and quality assurance systems. This year, we are pleased to report that we en- joyed our best quality control performance in the past eight years across key performance indicators. Notably, we managed to reduce complaints by 35%, while lowering minor product non-conformities by 63%. We also managed to reduce internal incidents by 25%, surpassing our 15% reduction goal. We further achieved a 7% reduction in non-quality event costs, a significant result taking into consid- eration that we invest more than US$1 million per year to address those types of occurrenc- es. Overall, in terms of our key performance indicators for quality control, we had our best performance in the past 8 years. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 40 40 BUILD OUT AN OPEN OMNICHANNEL PLATFORM To enable the digital re-evolution of our business, we’re expanding an omnichannel multi-category commercial platform that will seamlessly interact with other interconnected platforms and encompass our business-to-business (B2B), direct-to-consumer (D2C), indirect, and digital trade channels. During the year, we markedly accelerated the evolution of our customer-centric B2B omnichannel multi-category commercial platform. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 41 41 B2B TRADITIONAL OMNICHANNEL COMMERCIAL PLATFORM 10:00 AM Our goal is to build a profitable, customer-centric omnichannel B2B platform across our multi-category product offerings, with a differentiated end-to-end customer experience. During the year, we markedly accelerated the evolution of our customer-centric B2B omnichannel multi-category commercial platform. Through our multicategory om- nichannel platform, we’re connecting every point of contact in real time for our large base of traditional trade clients—strength- ening our successful pre-sale model and contact centers with digital touch points to amplify our customer service, including di- rect messaging, web portals, mobile apps, and electronic data interchange (EDI)—so they can interact with us whenever, wherev- er, and whichever way they want. 2 Hours later, Juan real- izes that he forgot to order a specific prod- uct, but it is too late. Mario will visit him again in a few days. Juan then uses KOF’s chatbot to place an additional order, in- cluding the specific product he had for- gotten. 4 Mario decides to call Juan to confirm his new request. 03:35 PM 08:00 PM 6 Next, he confirms that his most recent orders will be deliv- ered in the afternoon, using the order track- ing functionality. 12:55 PM NEXT DAY 8 The delivery truck ar- rives, and Juan receives both of his orders. He uses the built-in e-pay- ment system in KOF’s mobile app to create a QR Code. Juan validates his pay- ment was successful and verifies his total balance. Juan is a satis- fied customer. 3 Mario instantly re- ceives a notification in his handheld: “Juan has placed an addi- tional order.” 03:30 PM 04:02 PM 1 Juan has been our cli- ent for some years. To- day, as every Monday, Juan is visited by Ma- rio, his usual pre-seller. While Juan is busy taking care of his busi- ness, he asks Mario to place his weekly order. 7 As the delivery truck approaches Juan’s business, he receives a notification: “Your or- der is about to be de- livered. You will be the next customer in our route to be served.” 01:50 PM NEXT DAY 10:30 AM NEXT DAY 5 Overnight, Juan’s cooler malfunctioned. Using his cellphone, Juan accesses KOF’s mobile app and cre- ates a service order to evaluate and repair his cooler. Juan receives a call from the Contact Cen- ter: “A technician will visit you in the next few hours.” Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 42 42 Our platform puts the customer front and center. With that in mind, we’re building out our omnichan- nel platform around them, offering a growing array of customer-centric options and features to serve them better across multiple points of con- tact. For example, to build upon the personal customer experience our clients enjoy, we’re offering them pre-seller visits, plus a mobile app— which we’re scaling up company- wide. The app’s latest version pro- vides clients with a wider selection of features, including digital order tracking, promotions, and a devel- oping loyalty program. Our large base of traditional trade customers is rapidly embracing the digital options available on our B2B omnichannel platform. Notably, we are serving over 500 thousand registered clients, including almost 300 thousand active purcharsers monthly, on our B2B platform— which enables seamless order tak- ing with an enhanced customer ex- perience and lower cost to serve—in Argentina, Brazil, Central America, Colombia, and Mexico. Indeed, cus- tomers’ preference for our robust omnichannel platform is clearly re- flected in their growing acceptance and rising orders, while amplifying the performance of new categories across our product portfolio. Overall, we processed more than 5.5 million orders on digital channels, generating close to US$360 million in sales, representing roughly 6% of our company's total orders and a triple digit increase in orders and revenues as compared to 2020. We processed more than 5.5 million orders on digital channels in 2021. We are serving over 500 thousand registered clients, including almost 300 thousand active purchasers monthly, on our B2B platform. Digital channels represent approximately 6% of our company's total orders. 1 2 3 BRAZIL: ALMOST 270,000 ACTIVE CUSTOMERS EMBRACE OUR B2B OMNICHANNEL PLATFORM tures—from digital order tracking to product pro- During 2021, our Brazilian operation reached ap- motions, and a customer loyalty program. proximately 270,000 active users —including over 130,000 monthly buyers— on our B2B omnichan- nel multi-category commercial platform. Appeal- ing to customer demand for a one-stop solution, our platform enables our large base of traditional trade clients to not only place an order for their favorite brands/categories whenever, wherever, and whichever way they choose, but also take advantage of a constantly evolving array of fea- For the year, our Brazilian traditional trade cus- tomers generated over US$280 million on our B2B omnichannel platform. Notably, digital pur- chases represented over 30% of our Brazilian clients’ total orders or approximately 9% of total revenues by year-end 2021. Pre Seller Chatbot App Website All clients Medium and small-sized clients Medium and small-sized clients Large and medium-sized clients This year, we reached an inflection point—with digital purchases accounting for over 6% of our total orders or almost US$360 million.Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 43 43 DIRECT TO CONSUMER Our goal is to develop a profitable and scalable D2C business model to market our company’s products and services directly to our consumers’ homes, acting as a benchmark in the market. Aligned with this goal, our mission is to become households’ favorite D2C platform throughout our operations, offering top-class service. Vision Develop a profitable and scalable standardized model to sell products directly to the consumer at home, being a reference in the market Mission Be the favorite B2C platform for consumers in KOF’s operations offering top class service • Personalized attention • Direct support to consumer • Living the experience • Penetration Immediacy • • Practicality • Shopping experience • Loyalty plans • Different payments means • Multi-functionality Web SFA device Sales and delivery route Consumer Chatbot CCETH ERP Building on the year’s historical expansion of our D2C home delivery routes—from almost 800 routes to more than 1,200 routes serving almost 600 thousand households in Mexico— we recently began the deployment of our consumer-centric D2C omnichannel platform in those routes, including the home order-entry platform and Coca-Cola en tu Hogar web- site, supported by our digital (ERP) order fulfillment system. At the end of 2021, our D2C omnichannel platform was in- tegrated and tested to serve home delivery routes in major Mexican cities. As a fundamental component of our omnichannel multi-cat- egory platform, we look to expand and consolidate our in- tegrated D2C omnichannel platform in Mexico during 2022. Also, we will carry on the development of new functionalities to increase our household penetration while continuing to evolve with a focus on the consumer. HISTORICAL D2C HOME DELIVERY EXPANSION This year, we achieved the historical expansion of our D2C home delivery routes—from almost 800 routes to over 1,200 routes serving more than 600 thousand households in Mexico. We also started the implemen- tation of our D2C omnichannel platform, including the order-entry platform and Coca-Cola en tu Hogar web- site, supported by our digital (ERP) order fulfillment system. For the year, we generated double-digit reve- nue growth in the home delivery channel; moreover, in those routes in which we deployed our D2C omnichan- nel platform, we increased the average ticket by en- larging the mix of our non-jug water portfolio. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 44 44 DIGITAL & ANALYTICS HUB: DRIVE AGILE, DIGITAL RE-EVOLUTION Our digital and analytics hub is enabling us to re-evolve the way we work across the company. To win in both the market and our industry, we’re driving an agile methodology, mindset, and culture that will accelerate the deployment of our omnichannel commercial platforms and solutions holistically via an end-to- end process that connects strategic plan- ning with quick delivery of the best value proposition for our customers, consum- ers, and business through agile cells— ranging from distribution and planning optimization to our B2B, D2C, and indi- rect omnichannel platforms. Through our digital and analytics hub, we’re re-evolving our advanced analyt- ics and data management capabilities to produce valuable insights, tools, and solutions for any area of the company through agile cells of data scientists, data engineers, and initiative leads. Among our aggressive pipeline of analytic solu- tions, an agile team of data engineers, scientists, and business translators is working to design and install the sug- gested order process for our B2B plat- form, based on a machine-learned al- gorithm that enables us to predict the number of products our clients’ need to prevent out of stocks. In this way, we’re improving the customer experience by tackling two key pain points for our tra- ditional trade clients: increase the sales and reduce the risk of out of stocks of their preferred products. Moreover, our price and promotion op- timization cell is addressing one of the most important gain points for custom- ers—product promotion—while enabling us to improve our promotional return on investment in our Argentina, Central America, Colombia, and Uruguay opera- tions. With this and other solutions, we’re capturing the voice of our customers, working closely with them to quickly de- velop and deploy their favorite features and to enhance their overall customer experience. CONTINUOUSLY EVOLVING MARKETING CAPABILITIES: ENABLE HOLISTIC, OMNICHANNEL CUSTOMER EXPERIENCE We’re re-evolving and leveraging our marketing capa- bilities—from revenue growth management (RGM) to dynamic initiative management (DIM) and digital mar- keting—to develop not only a winning multi-category portfolio, but also a holistic omnichannel experience for our customers and consumers. To fully capitalize on our advanced analytics capabilities, our DIM process aligns the marketing and commercial strategy across our day-to-day operations to select, pri- oritize, and schedule granular initiatives that the sales force team executes for specific customers within the traditional and modern trade channels. During 2021, we implemented over a million targeted initiatives through our DIM process every month across our operations, im- proving our point-of-sale execution scores and customer engagement. Additionally, we’re improving our RGM capability with our advanced commercial analytics platform, enabling our Brazil, Colombia, and Mexico operations to create greater customer value by maximizing our price, port- folio, and promotion optimization. We’re also centraliz- ing our price and promotion optimization capability and tools within our operations. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 45 45 KEY FINANCIAL ENABLER: DESIGN AND DEPLOY DIGITAL PAYMENT SYSTEM ACROSS ALL CHANNELS As part of our digital re-evolution, an agile cell is work- ing to design and deploy a safe, frictionless, end-to-end digital payment solution to customers and consumers across all channels. Thus far, we’ve rolled out the digital credit card payment feature to almost 600 thousand households throughout our over 1,200 D2C home deliv- ery routes in Mexico. We’ve also enabled 1,200 custom- ers to make digital QR code payments, along with over 6,600 customers who pay digitally through our B2B web portal in our Argentine franchise territories. SUPPLY CHAIN ENABLERS: FACILITATE COMMERCIAL RE-EVOLUTION Our omnichannel multi-catego- ry strategy leverages our lead- ing-edge supply chain enablers to enhance our customers’ expe- rience when they interact with us, while re-evolving our capabilities to win in the market and the industry. Digital Distribution Through our evolving Commercial Control Tower, we mon- itor and manage our entire commercial and distribution operation, enabling both real-time and dynamic routing. With the deployment of dynamic routing across our sec- ondary distribution fleet in Brazil, Mexico, Colombia, Gua- temala, Panama, Costa Rica, Argentina, and Uruguay, we’re able to offer 24/7 order entry. Thanks to this enabler, we enjoy the flexibility to plan vehicles’ routes on a daily, week- ly, and monthly basis, thereby optimizing available delivery resources and distances traveled to serve our customers. Moreover, with the continuing evolution of our Digital Dis- tribution 2.0 platform, we completed the rollout of real-time routing across 100% of our Brazilian operation’s second- ary distribution routes, serving 35,000 clients per day. With real-time routing, we adapt our delivery process—from pre-sellers’ visits to digital apps—to unplanned daily events, constantly integrating and analyzing traffic, road, climate, and other conditions to define the most efficient delivery sequence and route, thereby fulfilling our sales promise while improving customer service and engagement. Aligned with our omnichannel multi-category strategy, we further deployed our order-tracking platform to enable customers to track their orders—created on any commer- cial channel—from the moment of shipment to delivery. Already deployed in Argentina, Brazil, and Mexico, we plan to develop this digital tool for our other operations while accelerating our digital distribution journey. Warehouse Optimization & Digitalization During the year, we optimized our warehouses to manage our growing multi-category product portfolio, while con- tinuing the systematic deployment of advanced picking solutions, including both real and optimal picking. Utilizing voice and digital images, these advanced picking solutions improve our warehouses’ level of service through the assertive assembly of mixed pallets according to each client’s specific needs, maximizing load and route opti- mization while increasing productivity. Building on the integration of real picking across 100% of our Brazilian op- erating units last year, we rolled out this solution to 42 op- erating units across 6 different operations, while we final- ized the implementation of 28 additional operating units with optimal picking, completing the rollout plan in all our Brazilian operating units. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 46 46 Consistent with our strategic corridors, we are placing sustainability at the heart of our organization. PLACE SUSTAINABILITY AT THE HEART OF OUR ORGANIZATION Starting from within by setting an example and involving our whole organization—across all of the different areas—we integrate sustainability as a strategic pillar that guides our business decisions to continuously create economic, social, and environmental value for our stakeholders. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 47 47 Working together, we are tackling sustainability chal- lenges in a holistic way—including our people, com- munities, and transforming operations—on issues such as climate change, water stewardship, circular economy, safety, and community development. Today, Coca-Cola FEMSA is the largest bottler in terms of sales volume in the entire Coca-Cola System. With- out a doubt, this is reflected in the great operational, economic, social, and environmental footprint that we have created from operating throughout nine countries across Latin America. At Coca-Cola FEMSA, we recognize the great respon- sibility that comes from the role we play within this ecosystem. That is why we view sustainability as an interrelated system in which every action directly im- pacts the environment and our society. We recognize that we can only deal with the internal and external challenges we face through cooperative, equitable, and solid local and international alliances, like UN Women, Inter-American Development Bank and The Global Compact, among others. In this way, our extensive footprint gives us the power to improve socioeconomic and environmental conditions for cur- rent and future generations. Aligned with our company’s strategy, our senior lead- ership team recently defined six strategic corridors. One of these strategic corridors is to place sustainabil- ity at the heart of our organization. Across this strate- gic corridor, our renewed focus on sustainability seeks to tackle issues that the company depends on in a holistic way, starting from within by setting an exam- ple and involving our entire value chain. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 48 48 CLIMATE ACTION At Coca-Cola FEMSA, we recognize that climate change is a real, and imminent threat, and we are convinced that a science-based, multi-stakeholder effort is required to address this urgent matter that concerns us all. Consequently, in 2020, we became the first Mexican company and the third in Latin America to achieve the official approval of our emissions reduction targets by the Science Based Target initiative (SBTi), aligned with the goal of the 2015 Paris Agreement to limit global warming to well below 2°C above pre- industrial levels. Accordingly, our new 2030 commitments (compared with the 2015 baseline) are: CO₂ CH₄ N₂O HFCs PFCs SF₆ Scope 2 Scope 1 Scope 3 Reduce 20% absolute GHG emissions from the value chain (covering purchased goods and services provided by suppliers and upstream transportation) by 2030 compared with a 2015 baseline year. Achieve 100% renewable electricity for our operations. Reduce 50% absolute GHG emissions from our operations (scope 1 and 2) by 2030 compared with a 2015 baseline year. Upstream Scope 3 • Subcontracted fleet. • Ingredients: sugar, HFCS, CO₂. • Packaging: PET, aluminum, glass, labels, screw caps, crown caps. Direct operations Scope 1 • Plant boilers. • Own fleet. • Refrigerant gases. Scope 2 • Power consumption in plants, distribution centers, and offices. SCIENCE BASED TARGETS INITIATIVE (SBTi) In June 2020, Coca-Cola FEMSA be- came the first Mexican company and the third in Latin America to obtain approval from the Science Based Targets initiative (SBTi) for its emissions reduction goals. Performance on SBTi1 • Reduce 50% absolute GHG emissions from our operations (scope 1 and 2) by 2030 compared with a 2015 baseline year. 2030 28% 50% • Achieve 100% renewable electricity for our operations. 53% 2030 100% • Reduce 20% absolute GHG emissions from the value chain by 2030 com- pared with a 2015 baseline year. 14% 2030 20% Our absolute emissions targets de- couple business growth from GHG emissions. We thereby ensure that, no matter the overall size of our business in 2030, we will make our operations, along with the entire value chain, less carbon intensive than our 2015 baseline. 1. Performance reflects all of our operations and is calculated based on SBTi. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 49 49 Manufacturing CO₂e emissions Scope 2: 41,853 ton CO₂e 127,901 ton CO₂e Scope 1: 86,048 ton CO₂e Value chain CO₂e emissions Cold drink Equipment 31.1% Ingredients 29.9% 3,841,932 ton CO₂e Distribution 13.6% Packaging 22.2% Manufacturing 3.3% Consistent with our Climate Action Strategy, we have defined sever- al initiatives to meet our emissions reduction goals. Among the most important initiatives, we worked along with our primary goods and packaging suppliers to reduce their emissions. We will also continue to lighten the weight of our packages and utilize a greater percentage of recycled resin (rPET); increase the energy efficiency of our plants and distribution centers; move our operations to renewable energy sources; focus on sustainable mobility, replacing our secondary trucks and utility vehicles with electric vehicles; and improve the management of refrig- erant gases in our sales equipment. Energy Efficiency, Clean Energy & Emissions Reduction We strive for energy efficiency across our value chain. We further in- tegrate clean sources of energy and technologies to reduce our GHG emissions—thus contributing to climate change mitigation. Our oper- ations’ energy consumption focuses on a comprehensive strategy that encompasses our value chain. Clean Energy in Manufacturing % 5 8 % 0 8 % 1 7 % 2 5 % 8 3 % 9 2 2016 2017 2018 2019 2020 2021 At the end of 2021, we supplied 85% of the electricity used in our bot- tling plants with energy from clean sources. We used clean sources of energy for our manufacturing operations in Argentina, Brazil, Colombia, Costa Rica, Guatemala, Mexico, and Panama. We further aim to improve the energy efficiency of our manufacturing operations, while simultaneously reducing our GHG emissions. To im- prove our plants’ energy efficiency, we have implemented multiple stra- tegic initiatives: • Energy Training – We provide annual training to all of our energy managers in every division, as well as all of the operators of each of our work centers. • Energy Assessments – We conduct annual energy assessments to support our operations in Argentina, Brazil, Central America, Colom- bia, and Mexico. • Steam Standard – We focus on the utilization of steam produced in our plants to reduce consumption, ensure safe use, recover steam condensate, and increase the life of our assets. • Top 20 Energy Efficiency Strategies – We implement key energy effi- ciency strategies to minimize each of our plants’ energy consumption. From 2015 to 2021, we increased our energy efficiency by 1.35 times. We also reduced our energy consumption by 44 million MJ year over year, and we have invested US$16.8 million in energy efficiency. Liters of beverage produced per MJ 6 6 5 . 7 1 . 4 2015 2021 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 50 50 SUSTAINABLE MOBILITY Through our Sustain- able Mobility Strategy, we aim to reduce the impact of our fleet on the CO2 emissions of our supply chain (including primary and sec- ondary distribution trucks), and to position ourselves as an industry leader in Latin Ameri- ca in terms of vehicle efficiency, environmental stewardship, and safety. Aligned with this strategy, our 2030 projects are to: • Integrate 45% commercial electric vehicles in our fleet • Achieve a 25% increase in efficiency in fuel consumption (MJ)/kilometers of distance covered (Km) During the year, we continued to execute route optimization strategies to maximize overall vehicle efficiency. With the deploy- ment of KOF Digital Distribution 1.0 platform in Argentina, Brazil, Colombia, Central Ameri- ca, Mexico, and Uruguay, we installed vehicle telemetry systems on 80% of our primary and secondary distribution fleet. Thanks to each truck’s telemetry data—together with the functionality of our mobile delivery devices— we enjoy the ability to identify and correct de- viations in distribution route execution versus our route plan. This equipment also enables us to analyze route execution patterns in order to identify an optimal combination of variables to improve our route planning process. As a re- sult, we optimize our fleet’s usage and improve key road safety indicators, while reducing fuel consumption and CO2 emissions. Indeed, we’ve developed a standardized KPI for fuel use efficiency that will enable us to perform internal benchmarks to improve this indicator moving forward. Moreover, with the deployment of dynamic routing across our secondary distribution fleet in Brazil, Colombia, and Mexico, we enjoy the flexibility to plan vehicles’ routes on a daily, weekly, and monthly basis, thereby optimizing available fleet resources and distances traveled to serve our customers. EXPANDING ELECTRIC VEHICLE FLEET This year, we expanded our fleet of electric vehicles by over 30% to 421 vehicles. We also sig- nificantly expanded our supplier base for electric vehicles in the Latin America region to eight leading global suppliers, working with them to develop electric units that meet the bottling industry’s specifications. Through our sustainable mobility community, we’re working to align the electric vehicle strategy followed across our operations. Within this community, we developed and de- ployed a total cost of ownership (TCO) and scenarios analysis tool. Moreover, to further align our operations, we developed a standardized protocol to test new electric vehicle technol- ogies—with a standard fuel efficiency KPI to measure fuel consumption by country—to re- inforce and improve our migration to electric vehicles. Thanks to these and other initiatives, we’re confident that we will transition our fleet to 45% of electric vehicles by 2030. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 51 51 Additionally, we leveraged our secondary fleet substitution program in Mexico, Brazil, and Colombia, where we maintain the largest volume of de- livery trucks. This year, we invested in 100 new electric vehicles to reach a total of 421 vehicles. Additionally, through our sustainable mobility commu- nity, we have been working to align the strategy followed across the differ- ent countries. Within this community, we developed an economic-opera- tional feasibility analysis, as well as an analysis of the market conditions and availability of electric vehicles in Latin America. Over the past five years, we’ve substituted our fleet with new vehicles that meet higher emissions reduction standards. Currently, we’ve 2,934 trucks throughout these operations’ secondary and primary fleet with EPA and Euro V Certification. Thanks to this program, we reduced our fuel con- sumption, emissions, and maintenance costs, and we reinforced our com- mitment to eco-efficiency with local environmental authorities. Through our self-regulation program in the Valley of Mexico, we commit to minimize the local delivery fleet’s emissions through key initiatives, includ- ing an efficient maintenance process and ongoing fleet substitution pro- gram, fostering our social license to operate. 80%of our Brazilian operation’s utility vehicles use cleaner, lower emission ethanol biofuel.Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 52 52 WATER STEWARDSHIP Water is an essential ingredient in the production of our beverages. Therefore, we are committed to ensuring the efficient use of this natural resource in our bottling operations and returning to the environment more water than we take to produce our beverages, while safeguarding this resource not only for the benefit of our company, but also for the access and the enjoyment of our communities and planet now and into the future. COCA-COLA FEMSA PLACES FIRST SUSTAINABILITY-LINKED BONDS IN MEXICO In September, 2021, we placed the first sustainability-linked bonds in the Mexi- can market for a total of Ps. 9,400 million (US$470 million). Recognizing that wa- ter is not only an invaluable resource for our company and industry, but also an indispensable element of resilience to climate change, we are focusing this first issuance on the sustainable and efficient use of water. Specifically, as part of these bonds, we are committed to the achieve- ment of a water use ratio of 1.36 by 2024 and 1.26 by 2026. 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. Aligned with this strategy, our goals and key performance indicators are to: • Achieve a water use ratio of 1.26 liters of water per liter of beverage produced by 2026 (total Coca-Cola FEMSA) • Replenish more than 100% of the water utilized to pro- duce beverages across our bottling operations, focusing on those determined to have high hydrological stress • Conduct a yearly water risk analysis in each plant, in- cluding identifying the social risks associated with water • Create mitigation and adaption plans in each operation, community or watershed in which we identify some risk Efficiency • Reduce, reuse, and track the water used in the operation (lt water/lt beverage). 1.47 2026 1.26 Hydrological safety • Replenish all of the water used in our beverages in the watershed with a focus on high stress areas. Water risk assestment • Annual water risk assestment. 2025 100% +100% Annual 100% 100% Water Efficiency At the end of 2021, we averaged 1.47 liters of water per liter of beverage produced and used 28 million liters of water. To this end, we have invested US$4.5 million in 2021. Aligned with our goal to achieve a water use ra- tio of 1.26 liters by 2026, we are making all of our operations more efficient. Through our continu- ously improving 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, focus- ing on 20 key measures—from our detection and elimination of leaks to optimal water use in our plants to our water recovery systems. Water efficiency Liters of water per liter of beverage produced (less is better) 2 7 . 1 5 6 . 1 8 5 . 1 2 5 . 1 9 4 . 1 7 4 . 1 2016 2017 2018 2019 2020 2021 15% improvement in water use ratio over the last five years Liters of municipal water Liters of rainwater Liters of well water Liters of river water Total water consumption (L) Total General 8,434,437,506.30 5,424,000.00 18,071,077,948.96 1,487,958,647.00 27,998,898,102.26 Liters of water discharged to sewers Liters of water discharged into rivers Total water discharged (L) Total General 2,761,699,828.84 3,051,539,229.71 5,813,239,058.55 100% of the water we discharge from our manufacturing operations is sent to water treatment plants, which ensure sufficient water quality to foster aquatic life. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 53 53 WATER RISK & ADAPTATION This year, we analyzed water risks and estab- lished mitigation plans across 100% of our operations. All of our strategies are aligned with the Unit- ed Nations' Sustainable Development Goals. Through different alliances, we join efforts to foster adaptability and resiliency in the com- munities we serve, prioritizing those most vul- nerable to climate change and water short- age. In this way, we support the communities where we operate with water treatment and water access projects. Our aspiration is to return to the environment and our communities more water than we use to produce our beverages where it matters the most. Aligned with this 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 Ameri- ca, Colombia, and Mexico through the conser- vation and protection of biodiversity. We also replenished 100% of the water that we use in Colombia, Costa Rica, Guatemala, and Panama through our “Agua para el Futuro” (Water for the Future) conservation projects. FACILITATING COMMUNITIES ACCESS TO SAFE AND SECURE WATER By 2030, our Water Access Program aims to support 1 million people across our communities in Mexico, so they can secure access to safe and sustainable wa- ter through the promotion of collective action and inclusion. Moreover, “Ven por Agua” (Come for Water) is a mobile vehicle through which we provide access to safe, secure water for those communities that need it the most or those declared disaster zones in Colombia and Mexico. In addition, we launched a pilot in Chi- apas, where we’re distributing drums to collect water that impacted 5,000 fami- lies in small rural communities. Furthermore, in collaboration with FEMSA Foundation, we carry out projects de- signed to improve communities’ quality of life by helping to provide them with safe water, improved sanitation, and hygiene education. While the Foundation 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—enduring over the long term. For more information about FEMSA Foundation, visit https://www.femsa.com/ en/femsa-foundation/ Given the substantial scope, importance, and complexity of water conservation and replenishment, we further work to strengthen water funds and conserve water basins through sustainable initiatives involving partnerships with multiple stakeholders. Through the Latin American Water Funds Partnership— comprised of The Nature Conservancy (TNC), FEMSA Foundation, the Inter- American Development Bank (IDB), and the Global Environment Facility (GEF)—we jointly seek to achieve and sustain water security 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, eight are in countries where we operate— Brazil, Colombia, Costa Rica, Guatemala, and Mexico. As a result, through 2021, the Partnership has worked to directly benefit approximately 100 thousand people in neighboring communities around the water basins, creating jobs and capabilities training since the projects began. We replenished 109% of the water we used and had an average water use ratio of 1.41 liters for our 17 Brazilian, Mexican, and Guatemalan plants located in high water stress areas. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 54 54 CIRCULAR ECONOMY At Coca-Cola FEMSA, we are con- fident that, with the support and co-responsibility of all the actors involved in the value chain, we will fulfill our 2030 goal of collecting 100% of the PET bottles we place in the market through a concerted market-based approach to the circular economy. To accelerate the tran- sition to a circular economy for PET plastic bot- tles, our focus is on ensuring both a steady and secure supply of recycled resin through the joint development of bottle-to-bottle recycling facilities and closed-loop systems through the development of our own infrastructure or through partnerships with other stakeholders. Distributors 10 (cid:30) Producers 1 Waste 2 11 Consumers Transport 3 Circular economy of post / consumption packaging Collection 4 8 PET Bottles with Recycled Content (cid:29) (cid:27) 5 Recyclers Bales Sorting Centers Transport (cid:28) (cid:31) Virgin PET Producers (Grading/sorting, washing, grinding, shaping) (cid:31) Other Products (Open loop) Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 55 55 Consistent with our long-term commitment to waste management and aligned with The Coca-Cola Company’s commitment to a “World Without Waste,” our goals are to: • Make all consumer packaging 100% recyclable by 2025 • Certify 100% of our bottling plants as zero waste to landfill by 2025 • Collect the equivalent of 100% of the PET bottles we place in the market by 2030 • Use at least 50% recycled resin (rPET) in our PET bottles by 2030 • Reach 25% reusable packaging by 2030 Industrial waste • Zero Waste Certification in all of our operations. Packaging • Increase the use of recycled resin in our PET bottles. 46% • % of solid waste recycled. 2025 100% 2025 98% 100% 31% 2030 50% • Recyclable materials in our packaging. 2025 • Reusable packaging. 97% 100% 2030 34% 25% To achieve these goals, we strive to mitigate the environmental impact of our operations’ processes, leading the way in the promotion of a culture of waste management throughout all of our operations and value chain. KOF Waste Management Strategy Post-consumption collection and recycling Efficient design and integration of recycled materials in our packaging Comprehensive and responsible post- industrial waste management Packaging Within the beverage industry, our product packaging is mainly com- prised of polyethylene terephthalate (PET) plastic, glass, and aluminum. PET, our highest-volume packaging material, is versatile, lightweight, and the most widely recycled of all plastic types2 —which can also be made into new and refillable bottles. We are committed to efficiently using our packaging materials; redesigning our packaging’s compo- nents to achieve recyclability; and integrating a growing share of recy- cled content. In 2021, we used an average of 31% recycled PET resin (rPET) in our plas- tic bottles, an increase of more than five times in rPET volume over the past eight years. Recycled PET is part of a closed loop recycling solution for plastic bottles, offering a 60% greenhouse gas reduction and a 75% lower total energy demand over virgin PET.3 2. The Coca-Cola Company, 2020 World Without Waste Report (June 2021), p. 5. 3. According to an updated Cradle-To-Resin Life Cycle Analysis of Polyethylene Resin by the National Association for PET Container Resources (NAPCOR), a 60% reduction in greenhouse gas emissions and a 75% lower total energy demand may be achieved by replacing a unit of virgin PET with recycled PET. Mix 69% Recycled content 31% rPET Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 56 56 Moving forward, our goal is to use at least 50% rPET in our plastic bottles by 2030. Notably, we now offer beverages packaged in 100% rPET across our markets, including all one-way pre- sentations of Crystal brand water in Brazil, Bri- sa brand water in Colombia, Ciel brand water in Mexico, KIN brand water in Argentina, Vi- tale brand water in Uruguay, and Alpina and Dasani brand water in Central America. We are also transitioning Sprite’s packaging from green to clear in order to make it easier to re- cycle; in the meantime, all of our Sprite bottles in Mexico are made of 100% rPET. We further built on the successful launch of our Univer- sal returnable bottle in Argentina, Colombia, Mexico, and Uruguay, significantly expanding coverage and increasing production capacity throughout key franchise territories. % Recycled content % 1 3 % 9 2 % 4 2 % 1 2 % 1 2 % 6 1 Consistent with our efficient resource man- agement and optimization of packaging ma- terials, we continued to deploy a wide-ranging light-weighting strategy for our operations’ PET presentations and caps. Thanks to our ef- ficient resource management and packaging optimization, we generated savings of approxi- mately US$6.4 million in 2021. UPSTREAM INNOVATION: RETURNABLE/REFILLABLE PACKAGING MODEL Through upstream innovation, we not only avoid the production of billions of new PET plas- tic bottles every year through our expanding portfolio of refillable PET presentations, but also make our packaging more sustainable while minimizing our use of virgin PET plastic, as exemplified by the growth of our reusable Universal bottle that can be used across mul- tiple beverage categories and brands. Universal Bottle – Circular System In this circular system, consumers pay an indirect deposit when purchasing our beverag- es in a refillable Universal bottle by receiving a discount on their next purchase when they return the empty bottle to the store—a reward feature that ensures a return rate of above 90%. Our retail customers store them and then give them back upon delivery of a new or- der. We take the multi-branded mix of Universal bottles back to our bottling facility where we wash off the paper labels and clean, refill, and rebrand the bottles with a fresh label be- fore redistributing them. Universal Bottle - Environmental Benefits Carbon Emissions Reduction: Greenhouse gas emissions can be reduced by up to 47% compared to single-use PET bottles, taking into account bottle production, increased trans- port, and water use during washing.4 2016 2017 2018 2019 2020 2021 Water Use Reduction: Even factoring in washing, the reuse model reduces water use by 45% compared to single-use PET bottles.3 3. According to an updated Cradle-To-Resin Life Cycle Analysis of Polyethylene Resin by the National Association for PET Container Resources (NAPCOR), a 60% reduction in greenhouse gas emissions and a 75% lower total energy demand may be achieved by replacing a unit of virgin PET with recycled PET. 4. Ellen MacArthur Foundation, Upstream Innovation, A guide to packaging solutions (November 2020), p. 106. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 57 57 Collection & Recycling We strive to make our beverage packaging part of the circular economy. To this end, we are creating circular solutions for collection throughout our markets, working with key partners across different collection and recy- cling infrastructures. Through locally appropri- ate collection and recycling solutions, we can effectively turn old packages into new ones, reduce our carbon footprint, and keep plastic out of the environment. WORKING WITH KEY PARTNERS TO MULTIPLY OUR SUSTAINABLE COLLECTION CAPABILITIES By joining efforts, we multiply the effects of our actions. Accordingly, we partner with com- munities, authorities, industry allies, and NGOs on different initiatives to raise awareness of post-consumer waste management, carry out collection and recycling programs within our communities, and inform consumers about the proper disposal and handling of the waste gen- erated from our products. Across Latin America, we continued to strengthen our sustainable collection capabili- ties, including the following collaborative initia- tives in our countries of operation: Argentina – We are focused on reinforc- ing our recycling capabilities in municipalities through programs such as Ruta Verde, Latitud R, Iguazú, and Red de Innovación Local (RIL). Brazil – Through SustentaPET, a joint venture created in partnership with The Coca-Cola Company, we have opened four PET collection centers in Belo Horizonte, Cosmópolis, Porto Alegre, and São Paulo, Brazil. Colombia – We expanded our Movimien- toRE program, an industry/business alliance to increase the collection of PET in the cities of Barranquilla, Cartagena, Santa Marta, and Cali (through “Cali Circular”), as well as Reciclave Bo- gotá with the empowerment of recyclers. Costa Rica – We use green trucks along our home delivery routes to collect PET from the households to whom we deliver our products. Also, through our Geocycle, Misión Planeta, and industry alliances. Guatemala – Through our alliances with other developers, we can start the separation and collection process from homes. We also formed an alliance with INGRUP, a local recy- cled resin provider. Mexico – We opened five new collec- tion centers, so we can increase recycling in the southeast region of the country. We also aligned with small customers, as well as with larger chains, to collect waste at their stores through “mi tienda sin residuos” (“my zero waste stop”) program. Nicaragua – Starting in 2021, we estab- lished a strategic alliance with Gravita, which operates through a network of base recyclers in several municipalities, guaranteeing the re- covery and treatment of PET, so that it can be reused as a raw material again. Panama – We formed an alliance with Reci- cladora Nacional to increase the collection and treatment of PET plastic bottles and create a circular economy for the use of these materials. Uruguay – We have an industry agreement with Crystal PET to close the PET recycling loop through the use of rPET. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 58 58 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 With- out Waste,” in the main markets where we operate or have strong alliances with packaging collection and recycling mechanisms, we have collected more than 122 thousand tons of PET, putting us well on track to our 2030 goal of col- lecting 100% of the PET bottles we place in the market. Since 2002, we have collaborated with other food and bever- age companies through ECOCE, a Mexican civil association that promotes collection of waste, creation of a national mar- ket for recycling, and development of recycling programs. With an impressive national collection rate of 59% in Mexico under the ECOCE model, we are at the top of collection and recycling practices in Latin America through this collabora- tion, with levels equivalent to the European Union. To close the PET plastic recycling loop, we are leaders in PET bottle-to-bottle recycling in Latin America. In 2005, we joined forces to operate the first food-grade PET recycling plant in Latin America, called IMER (Industria Mexicana de Reciclaje or Mexican Recycling Industry), which recycled 19,252 tons of PET during 2021. Overall, we now have a total of nine recycled food-grade resin suppliers across our operations network. In 2021, we utilized a total of 83,085 tons of recycled mate- rials in our operations in Argentina, Brazil, Central America, Colombia, Mexico, and Uruguay. As a result of these efforts, we avoided the use of more than 460 thousand tons of virgin PET resin since 2010. BREAKING GROUND ON A NEW FOOD-GRADE PET RECYCLING FACILITY IN MEXICO Through a joint venture with ALPLA, we recently broke ground on a new food-grade PET recycling facility in Cunduacán, Tabasco, México known as PLANETA (Planta Nueva Ecologia de Tabasco), which is projected to begin operation during the third quarter of 2023. This facility will have the capacity to process approximately 50,000 tons of post-consumer PET bottles annually—resulting in 35,000 tons of rPET pellets—which we plan to supply from 18 col- lection centers in the southeast region. This new plant, together with the accompanying collect centers, will help us to achieve our goal of using at least 50% rPET in our plastic bottles by 2030, gain greater control of the PET collection and rPET production cycle, expand collection and recycling to states with low activity, and generate approximately 20 thousand direct and indirect jobs. Colombia earned gold certification for 100% of our seven bottling plants as zero waste facilities this year. 2.8 K tons landfilled Industrial Waste Management In 2021, 22 of our bottling plants earned Zero Waste to landfill certifica- tion. Originally designed for our Mexico operations, this initiative estab- lishes specific measures to improve waste management, disposal, and repurposing—resulting in improved waste efficiency per liter of bever- age produced. We also extended this program to our distribution cen- ters, with 78% of our Brazilian distribution centers became zero waste to landfill during the year. At the end of 2021, our bottling plants recy - cled 98% or approximately 116.8 thousand tons of manufacturing waste generated. To this end, we diligently work to ensure our processes comply with the highest national and international standards and with all applicable laws, avoiding sanctions and fines pertaining to environmental issues, while reaffirming our commitment to efficient operational processes, environmental performance, and competitiveness. . 3 8 Total waste generated 119.6 K tons 116.8 K tons recycled Waste efficiency grams of waste per liter of beverage produced (less is better) . 5 97 6 . 4 6 . . 2 6 . 3 6 2016 2017 2018 2019 2020 2021 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 59 59 SAFETY Safety is a key priority, a basic principle of action, and a fundamental val- ue for our company. It is of utmost importance to fulfill our purpose as an organiza- tion. That is why we are committed to continuously improve our opera- tions by doing everything necessary to prevent workplace injuries and illnesses to safeguard the safety of our employees, strategic partners, and communities. OUR 2020-2025 SAFETY GOALS Aligned with our safety strategy, our 2020-2025 goals are to reach: • Zero fatalities (avoidable or within the company’s control) • Lost Time Incident Rate (LTIR) of 0.4 • Total Incident Rate (TIR) of 0.8 • Crash Rate of 6.5 • Major Crash Rate of 0.5 Safety Performance This year, we achieved an accelerated reduction of both industrial and road incidents. Like the past five years, we again registered our safest year at the company level. During 2021, we reported a Lost Time Incident Rate (LTIR) of 0.58, a 20% year-over-year reduc- tion that puts us closer to our 2025 goal of 0.4. Notably, our manufacturing operations achieved an LTIR of 0.32, below the 2025 goal that we set as an organization. We also reduced our Total Incident Rate (TIR) by 22% year over year to 1.04, remaining on track to achieve our 2025 goal of 0.8. We also formally integrated KPIs for our own employees and third parties: • Lost Time Incident Rate (LTIR) of 0.66 for employees and third parties • Total Incident Rate (TIR) of 1.06 for employees and third parties We further achieved 12% and 55% year-over-year reductions in Crash Rate and Major Crash Rate to 9.76 and 0.83, respectively. During 2021, we integrated a new metric tracking the frequency of serious incidents and fatalities (SIF Exposure Rate), effective 2022. Lost time incident rate-LTIR (less is better) 8 . 1 . 3 3 81 1 . 1 0 1 . 1 3 7 0 . 8 5 0 . Total incident rate-TIR (less is better) 6 0 3 . 9 6 2 . 9 9 . 1 9 8 . 1 3 3 . 1 4 0 . 1 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Indicator KOF Results1 2016 2017 2018 2019 2020 2021 0.58 LTIR 1.04 TIR 1 For comparability purposes, this data excludes Venezuela, since Venezuela is a deconsolidated operation. 1.18 1.99 1.33 2.69 0.73 1.33 1.10 1.89 1.8 3.06 The numbers in this table reflect rates only for KOF employees and not third parties, which is a number we started integrating this year. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 60 60 Safety Vision & Strategy This year, we began implementing our 2021 - 2025 safety strategy, a multi-year effort to up- date our focus and vision for the whole com- pany. Consequently, we updated our vision, objectives, and strategic initiatives to corre- spond to our “zero is possible” aspiration. Additionally, we started implementing five key safety initiatives focused on our main risks and organizational culture. With the success of these programs, we are confident that we will reach our goals and accelerate our safety results, with active employee participation and leadership key to the success of our safety strategy. Safety is a key priority, a basic principle of action, and a fundamental value for our company. It is of utmost importance to fulfilling our purpose of always finding the most efficient and sustainable way to put the drink of choice in our consumers’ hands anytime, anywhere. SAFETY VISION Goals Strategic Corridors Key Safety Initiatives • Zero Fatalities & Serious Incidents • Best In Class KPIs • ZERO External Audit Findings Key Risks and Systems Management Talent and Capability Development Serious Incidents and Fatalities Prevention Model (SIF) Life Saving Rules and Critical Safety Standards Infrastructure, Technology, Digitalization of Processes and Basics Performance Management, Improvement, and Innovation Road Safety Program Safety Model for Third Parties QSE Culture Safety Culture & Accountability Program Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 61 61 Key Risks & Systems Management We aim to provide solid manage- ment based on world-class stan- dards, systems integration, oper- ating models, and programs that ensure the control, mitigation, and containment of major risks and their impacts on our people, com- munities, and company. Among our achievements for the year, we put in place diagnostics and plans for our 14 Life Saving Rules throughout 100% of our manufacturing plants and 60% of our distribution centers. As part of our Road Safety Program, we updated the road safety strat- egy and standards, and executed a series of road safety diagnostics and evaluations across all of our operations—which will serve as the base for their strategic, tactical, and operational plans. We carried out strategies and communications plans designed to create awareness among different road actors of the risks present on public roads while educating them on their different roles and responsibilities when driv- ing on a public road. We standard- ized precursors, risks, and distri- bution activity controls to manage risks and implement key controls, establishing high-impact activities such as reverse maneuvers, vehicle parking, and offloading on public roads. We also carried out a series of incentive/recognition programs for drivers to reinforce expected be- havior, compliance, and road risk management. Moreover, we began to implement our Safety Incidents Prevention Model, so we can replicate this model throughout our operations during 2022. We updated nine global standards that respond to critical safety risks at the organi- zational level—from working at height to road safety—with each country executing these standards in accordance with their own risk analysis. We also employed a safe- ty management model where we defined 30 safety processes and requirements that are managed within the organization, with each country complementing this model with applicable local government requirements. With our strategic partner Solisti- ca, we implemented a safety and environmental management mod- el aligned with our five strategic safety corridors. Begun in 2020, this model led to a 52% reduction in minor crashes, a 72% reduction in major crashes, and zero serious in- cidents and fatalities (SIF). Talent & Capability Development Our aim is to enable a capable and trained team and talent, com- mitted to safety at all levels of the organization. Among our achieve- ments for the year, we worked with our strategic partner Solistica to design a shifting skill development model, with latest generation road simulators, in Brazil and Mexico. Thanks to these simulators and new training methods, we are developing a highly professional team of safe drivers. Moreover, in Brazil, we carried out a training program specifically designed to achieve our company’s defined education- al objectives, along with the technical and behavioral capabilities to achieve safe and efficient driving standards. QSE ACADEMY & COMMUNITIES COLLABORATIVELY ADVANCE KEY SAFETY INITIATIVES As part of our company’s skills development, we designed phase one of our QSE Academy. The Academy offers more than 70 subjects—29 of them safety related—to be implement- ed throughout our operations in the coming years. Additional- ly, during 2021, we developed safety technical skills, focusing on key risks, involving an annual investment of over 350 thousand hours of virtual and in-person training. We further strengthened and managed our safety knowledge communities, including those focused on RTM Safety, Third Party Safety, and Serious Injuries and Fatalities (SIF) Manage- ment Model. Through these communities, we systematically connect best practices, experiences, and a network of experts from across our operations to collaboratively advance these key safety initiatives. During 2021, we conducted a companywide study to evaluate our or- ganizational structure, considering operations management and the impact of COVID-19. We also achieved 95% implementation of our new safety organizational structure, which was re-designed in 2020. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 62 62 Infrastructure, Technology & Digitalization of Processes We are leveraging technological development, process digitalization, and predictive analy- sis to enable our safety culture and strategy, transforming behavior while fulfilling machin- ery and vehicular safety standards. To this end, we chronicled the following achievements for the year: Costa Rica, Guatemala, and Panama – We in- stalled telemetry equipment across 100% of the secondary delivery fleet. We also implemented a behavioral management platform that en- ables driving traceability through a telemetry system, while identifying and grading opera- tor’s driving habits on a scale from 0 to 100%. Costa Rica, Guatemala, Nicaragua, and Pan- ama – We implemented an integral system for forklift management that utilizes telem- etry equipment for behavior management, team performance optimization, and excellent service. This system increases visibility and re- al-time alerts, reduces risky behavior, improves impact detection, and lowers corrective main- tenance cost, among other benefits. Mexico – We installed advanced driver assis- tance and monitoring systems (ADAS) across 100% of our primary distribution fleet. We also deployed an onboard management technol- ogy model through the ADAS Mobileye + Eye- sight technology that was installed through- out our primary distribution fleet. The ADAS technology consists of auxiliary electronic de- vices to support drivers in specific driving sit- uations—from fatigue and collision alerts to speed limits—generate a plan, and follow up with each operator to foster safe driving habits. Added to the behavior management model, these technologies have enabled us to dras- tically reduce the number of road incidents, while following up on key findings. Brazil – We managed to eliminate 100% of mo- torcycle crashes as an integral part of our safe- ty risk strategy. Through the development of a motorcycle management model, we were also able to reduce crashes by over 35% in Colom- bia and Guatemala. Performance Management, Improvement & Innovation We aim to provide the required pro- cesses and tools for safety perfor- mance management, while promot- ing improvement and innovation that leverages our safety strategy. Among our achievements for the year, our manufacturing plants re- ceived ISO 45001 occupational health and safety certification. We devel- oped a digital preventive observa- tions registry to control and identify behavior across our Central American operations. We digitized the motorcy- cle documentation process in Colom- bia, including traffic violation controls, skill and dexterity texts, and personal protective equipment verifications. We conducted the first self-diagnos- tic evaluation of our company’s safety maturity model. Moreover, we devel- oped phase two of our Control Tower, where all of the safety indicators were standardized and automated, gen- erating reports and business intelli- gence data analyses. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 63 63 QSE Culture We aim to position our QSE culture as a fun- damental business strategy, ensuring the ownership, commitment, credibility, consis- tency, and leadership to support our QSE cul- tural evolution. Our “Zero Is Possible” Aspiration Since 2016, we have consolidated and im- proved our culture and performance on safety issues, while we have not been able to elimi- nate fatal and serious incidents involving em- ployees and third parties. Among our achievements for the year, we car- ried out communication plans and conducted training of our leadership teams based on psy- chological safety principles, elements, and be- haviors. We conducted a diagnosis of cultural interferences that limit our QSE cultural trans- formation progress, defining nine key priorities aligned with The Coca-Cola Company’s global human and organizational methodology. We carried out a diagnosis and QSE culture work- shops in Colombia, Costa Rica, Guatemala, and Mexico. We further conducted communication plans and recognition programs that leverage expected beliefs and behaviors by acknowl- edging people and operational units with ex- traordinary results. With this in mind, we are now implementing throughout the organization a deeper and more consistent focus on the interaction be- tween people, culture, leadership, teams, work systems, and processes because most of our fatal and serious incidents result from the in- teraction of these elements. We are also evolv- ing our approach to focus on risks and pre- cursors management, so we can help people make better decisions and prevent damages when things do not go as planned. Furthermore, we will continue the deploy- ment of our security plan throughout the company, creating an organizational culture where we are convinced that “zero is possible.” This implies a significant change in mentality throughout our global leadership and in our commitment to security, while we reinforce and ensure our fundamental security practices and principles. In this way, we strive to make ZERO a reality, so if there is an incident, our people come out unscathed ceptable, so we will not be satisfied until we ful- fill our promise of ZERO incidents. We extend our condolences to all of the families and ev- eryone affected by our operations, and we are committed to implement best practices to pre- vent any losses in the future. This report documents the total number of fatalities (with or without legal responsibili- ty where we were somehow involved during 2021). Importantly, we include any fatalities involving our own personnel, third parties, and communities, integrating all of our opera- tions—manufacturing, distribution, and com- mercial locations operated by our own person- nel, contractors, and third parties. Roughly 95% of these fatal events were relat- ed to road accidents (16 events), and 5% were connected to violence on public roads. Of the 17 fatalities, five (29%) were third-party employ- ees/contractors, and 12 (71%) were community members connected to our operations. Five events (29%) were related to logistics/primary fleet; eight (47%) were connected to secondary distribution; and in 5 events (29%), the authori- ties determined that we were legally responsi- ble, while in the rest of the incidents the com- munity was deemed to be responsible. Fatalities Unfortunately, over the past year, 17 people died either through their work for Coca-Cola FEMSA or community members involved in an incident with one of our vehicles. Any fatality is unac- Notably, we have reduced the total fatalities involving our own vehicles or personnel by 93% from 2016, and over the same period, we have managed to reduce the total fatalities involv- ing our contractors and third parties by 43%. Total fatalities Own employees + third parties + communities  Own employees  Third parties  Communities 39 9 6 2016 29 23 19 22 12 5 3 2017 4 3 2018 4 4 2020 5 2021 2 2019 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 64 64 SHARED OPPORTUNITY WITH OUR COMMUNITIES We work to strengthen and consolidate positive relationships with the communities with which we interact. We identify and develop shared opportunities for our company and communities’ sustain- able development, enhancing our ability to serve the marketplace while maintaining our social li- cense to operate. Sustainable Procurement At Coca-Cola FEMSA, we work with our suppliers to reduce 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 im- pacts, but also raise standards in key business areas, increase labor efficiency, preserve envi- ronmental capital, and reduce risks and costs for all of those involved throughout the value chain. As part of our company’s sustainable procure- ment mandate, in conjunction with our defined strategic initiatives, each supplier cooperates to minimize their social and environmental risks over which we have no direct control and which cause the greatest number of impacts through- out 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 include areas such as Human Rights Policies, Environmental Protection, and Labor Rights. Through audits that en- sure compliance with these standards, TCCC authorizes its bottlers to work with approved suppliers. 2. Sustainable Agriculture Guiding Princi- ples. Established by TCCC, they include the same areas as the previous principles, but are adapted to suppliers of agricultural raw ma- terials. 3. Coca-Cola FEMSA’s Supplier Guiding Prin- ciples. 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. COCA-COLA FEMSA SUPPLIER GUIDING PRINCIPLES Human Rights 1. Respect for human dignity 2. No to discrimination Fundamental Principles and Rights at Work 3. No to forced or child labor 4. Freedom of association and trade-union freedom 5. Labor relations 6. Safety and health at work 7. Human capital development and well-being 8. Whistleblowing systems Environment 9. Environmental impact and compliance Commitment to the Community 10. Community development Information Management and Security 11. Privileged and confidential information 12. Intellectual property 13. Personal data 14. Information security Third-Party Relationship 15. Competition 16. Government and authorities Culture of Lawfulness 17. Regulatory Compliance 18. Tax Compliance 19. Anticorruption 20. Anti-money laundering 21. Conflict of interest 22. Gifts, hospitalities, and/or Entertainment 23. Information update 24. Corrective measures For further information you may access one of the following links: Spanish English Portuguese Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 65 65 These principles reflect the standards that guide our daily activities to ensure we provide responsible workplaces that protect human rights and comply with environmental laws. Founded on these principles, we follow a comprehensive five-step Sustainable Procurement Strategy: Prioritization of categories At Coca-Cola FEMSA, we use a proprietary tool to identify which suppli- ers are candidates for a development process. Suppliers are prioritized considering factors such as expenditure, environmental, social, and eth- ical impacts for each product category, dependability, brand associa- tion, and operational criticality. The Coca-Cola Company Country Mexico Costa Rica Guatemala Nicaragua Panama Argentina Brazil Colombia Total 2016 52 3 5 1 0 11 47 7 126 2017 40 7 8 0 3 19 102 18 197 2018 59 0 7 0 3 10 51 11 141 2019 37 1 8 1 2 10 42 4 105 Sustainable purchases Through this step, we include Coca-Cola FEMSA’s Supplier Guiding Prin- ciples in our supplier contracts and requests for information, provide general guidelines for assessment procedures, and conduct training for sourcing and purchasing employees. Assessment At Coca-Cola FEMSA, we assess our suppliers continuously through our Sustainable Procurement System, ensuring 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’s transparency, a third party reviews and verifies 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 699 supplier evaluations based on Coca-Cola FEMSA’s Sup- plier Guiding Principles. Since 2015, we have carried out 3,215 evalua- tions under these principles. Consistent with this strategy, The Coca-Cola Company (TCCC) assesses and ensures compliance with its guiding principles and sustainability stan- dards for specific categories of strategic suppliers; at Coca-Cola FEMSA, we only work with suppliers approved by TCCC in those categories. In 2021, TCCC carried out 253 evaluations of suppliers aligned with their Supplier Guiding Principles and Sustainable Agricultural Guiding Principles. Coca-Cola FEMSA Country Mexico Costa Rica Guatemala Nicaragua Brazil Panama Argentina Colombia Uruguay Total 2015 100 30 2016 198 120 84 2017 245 106 49 94 45 2018 172 34 34 27 66 36 31 130 402 539 400 2019 165 41 36 21 63 24 31 30 15 426 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 applying the same risk assessment and mitigation mechanisms 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 sup- plying raw materials, inputs, and services. In 2021, we evaluated 61 indirect Tier 2 suppliers based on Coca-Cola FEMSA’s Supplier Guiding Principles. Since 2018, we have conducted 143 evaluations un- der these principles. Year 2018 2019 2020 2021 Tier 2 Suppliers Evaluated 26 36 20 61 2020 27 7 7 1 1 10 57 10 120 2020 164 35 35 15 245 30 17 51 27 619 2021 130 0 7 0 1 25 65 25 253 2021 143 47 57 24 266 36 42 56 28 699 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 66 66 Capabilities development To strengthen our suppliers’ business capabilities, we provide them with access to training and growth initiatives 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 de- velop high quality products aligned with our principles and values. In collaboration with GDS Resources, we carry out a Comprehensive Supplier Development Program for strategically selected small- and medium-sized enterprises (SMEs) to improve their business capabili- ties. Through this program, we collaborate with suppliers to not only improve their sustainable competitiveness, but also forge stronger re- lationships with our company and other large companies. In 2021, eight suppliers participated in the program, training a total of 263 suppliers from Mexico. Recognition The good performance of our suppliers on sustainability issues is very important. Accordingly, we recognize all those suppliers that incorpo- rate sustainability into their own business’s DNA not only as a require- ment for doing business with Coca-Cola FEMSA, but also as a compet- itive advantage and a means to become socially responsible. During 2021, we conducted virtual recognition forums for suppliers to our Brazil, Costa Rica, Guatemala, Mexico, and Panama operations, where we rec- ognized 64 suppliers from over 374 participating companies for their remarkable practices. SUSTAINABLE COMMUNITY DEVELOPMENT 1.3 million benefited in neighboring communities that contributed to the achievement of the UN Sustainable Development Goals. At Coca-Cola FEMSA, we look to provide tools that allow for the sus- tainable growth and development of the communities within our so- cial and operational footprint. At the same time, we work to develop standardized activities through all of our countries with high social impact to protect and promote the prosperity of all of the people in these communities and to continue to build socially responsible envi- ronments throughout our value chain. Throughout the year, we developed strategies with our communi- ties, prioritizing activities focused on our sustainability pillars—Our Planet, Our Community, and Our People—that benefitted approx- imately 1.3 million people during 2021. Thanks to our alliances with The Coca-Cola Company, The Coca-Cola Foundation, and FEMSA Foundation, we implemented more than 120 initiatives that contrib- uted to the achievement of the UN Sustainable Development Goals. Through actions focused on Our Community and Our People pil- lars, we benefitted more than 400 thousand people throughout our operations, and we worked on more than 2 thousand volunteering activities that impacted over 300 thousand people. Specifically, we prioritized our community integral wellbeing, early childhood devel- opment, economic growth, sustainable procurement, and inclusion and diversity initiatives. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 67 67 to artistically express emotions, thereby achieving a healthier physical and mental state. Moreover, through the Fiesta Navidad Calle Blancos and Natal Sem Fome initiatives in Costa Rica and Brazil, respectively, we de- ployed luminous caravans to distribute and donate more than 4,000 baskets of basic goods. Furthermore, in Venezuela, we continued the Red de Entrenadores program, which has trained 800 coaches, positively im- pacting more than 60 thousand young people in vul- nerable communities across the country since its cre- ation in 2016. Economic development and empowerment At Coca-Cola FEMSA, we strive to positively impact so- ciety by investing and supporting small business own- ers because they can transform their communities. Consistent with our commitment to support commu- nities and achieve a more sustainable environment fo- cused on inclusion and diversity, we developed activities to create resilience and reactivate local economies. To this end, we deployed economic development projects to support the rentability and sustainability of more than 17 thousand people’s businesses, mainly in the tradition- al channel, through entrepreneurship and economic empowerment training with innovation and digitaliza- tion components. Together with FEMSA Foundation, we carried out ac- tions and achieved long-term benefits focused on early childhood development. Among the highlights, in Brazil, we undertook the Vamos a Brincar and Guia Pela Primeira Infância programs to promote active and healthy lifestyles for children between the ages of three and five with the support of their families and teachers. In Colombia, we helped to reduce gaps in early child- hood education for children from vulnerable families through La Mojana. In Nicaragua, in alliance with Glass- wing, we delivered family and emotional welfare kits, as well as baskets of food and hygiene products, under the Desarrollo Infantil Temprano program. Additionally, in Costa Rica, our Lazos de Amor initiative trained par- ents and caregivers to stimulate the development of skills for 100 children from birth through age 5. To promote healthy lifestyles and a positive family en- vironment, we continued activities that promote exer- cise—like Vive Bailando - Somos Sabor and Me Gozo la Vida in Colombia—where we use dance and movement Consistent with our commitment to support communities and achieve a more sustainable environment focused on inclusion and diversity, we developed activities to create resilience and reactivate local economies. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 68 68 Furthermore, we are promoting women’s resilience to emerge from the pandemic and reinvent their business to adapt to the new normal. In Mexico, we joined forces with The Coca-Cola Company, FUNDES, and Pro Mujer to implement the Programa Mujeres en el Canal Tradicional, through which we carried out individual training in areas such as client development and sales, business management, digital abilities, and financial health. This pro- gram’s goal is to bolster the development of women and small businesses, so they can recover from the recent economic crisis and adapt to the new digital business reality. With the State of Chiapas’ Secretary of Gender Equality, we also developed the Juntas Crecemos tu Negocio initiative, which looks to empow- er vulnerable women with the strengths and skills to get their businesses to take off. Similarly, in South America, we worked on programs focused on gender equality, inclusion, and diversity. In Brazil, together with The Coca-Cola Company, we developed the Coca-Cola dá um gás no seu negócio initiative, in which we trained Afro-descendent women entrepreneurs in small stores and economic kitchens through the Camellia Institute. In Colombia, we strengthened small businesses long term, while promoting responsible finan- cial models under the Finsotienda y Ruta Tenderos program. Moreover, in Venezuela, we provided training for the develop- ment of women’s collective leadership, with a psychosocial com- ponent, through the Red de Empoderamiento program. Furthermore, we are promoting women’s resilience to emerge from the pandemic and reinvent their business to adapt to the new normal. With an investment of over US$9 million, projects focused on the Our Planet pillar prioritized activities in the areas of circular economy, water stewardship, climate action, and environmen- tal education. In collaboration with The Coca-Cola Company, we have also been working with non-governmental organizations (NGOs), local governments, and consumers to define a road- map that will reduce our environmental impact. This year, we collected over 70 thousand tons of waste in a ho- listic, transversal way. Some of our most important initiatives include: Movimiento Re and Reciclar Tiene Valor in Colombia, a collaboration of several environmentally committed com- panies to strengthen recycling organizations and thereby in- crease their collection capabilities; Limpieza de Playas in Gua- temala, a volunteer initiative to create a reduce, reuse, recycle culture; Mi Tienda sin Residuos in Mexico, a program to place PET plastic recycling bins in Oaxaca; and Misión Planeta in Cos- ta Rica, a 25-year recycling program focused on PET plastic and Tetra Pak recycling. We have further established important alliances with West Coast Waste, Geocycle, GRAVITA, ECOCE, Recicladora Nacional, FEMSA Foundation, and The Coca-Cola Company Mexico’s Reciclatón. Finally, in conjunction with the water funds we operate in col- laboration with FEMSA Foundation, through 2021, we benefit- ted approximately 100 thousand people in neighboring com- munities around the water basins through job creation and capabilities training since the projects began. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 69 69 COVID-19 ACTIONS Aligned with our compre- hensive management frame- work, we continued to priori- tize the safety and wellbeing of our employees, customers, consumers, and communi- ties throughout the COVID-19 pandemic. By prioritizing their health and safety, we reinforce our company’s commitment to delivering economic value, while generating social and en- vironmental wellbeing. As a leading beverage com- pany, we have made our re- sources available to build on the actions of the communities where we operate. In solidarity with our communities in 2021, we have offered our company’s support through our donation of more than 2 million liters of beverages to medical personnel and vulnerable families across our markets. We have further collaborated with government authorities to leverage our mar- keting spaces and delivery trucks in the communication of prevention measures, including fliers to spread messages of prevention and care. We have also played an important role in vaccine rollouts across some of the countries in which we operate. MOVING FORWARD TO A NEW ESG STRATEGY We are committed to place sustainability at the heart of the organization, fostering an ESG-centered culture. In pursuit of this goal, we will update our ESG strategy, looking to rise to leadership status in our industry, as reflected in our performance in evaluations, indexes, and rankings. In addition, this strategy will be aligned with both The Coca-Cola Company’s and FEMSA’s efforts. The following objectives for sustainability/ESG were defined: Strategy and priorities: define the company’s sustainability strategies and priorities. i) ii) Public pledges: optimize the revision and approval of public commitments and policy related to sustainability topics. iii) Management and assignment of resources: develop a mechanism to revise and approve bud- gets, resources, and investments to carry out our sustainability strategies and fulfill public com- mitments. iv) Monitoring and supervision: ensure that our public commitments are fulfilled, financed, executed, and communicated appropriately in the manner that was approved by senior leadership. v) Risk mitigation: analyze external social and environmental dynamics, trends and emerging risks, and possible strategic alternatives. Oversee sustainability efforts to mitigate risks that may have a significant impact on the business. vi) Redefine and prioritize Social/Community programs at country and operation level. vii) Inclusion and Diversity. To ensure we are able to reach these objectives in an efficient manner, during 2021 we agreed to es- tablish an ESG Committee, starting on 2022, which will be composed of members of our senior leader- ship team—to ensure that all of the relevant areas of our business and all of the countries in which we operate are fully involved in the creation of ESG initiatives and decisions. Aligned with our strategy, our aim is to continually reinforce our commitment to create value in the areas of social, environmental, and corporate governance, while generating economic value across all of the communities we serve. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 70 70 Consistent with our commitment to foster an agile, digital savvy, and people-centric culture, we defined our Human Resources (HR) function’s long-term strategy. To facilitate this strategy, HR acts as agents of change—leading our cultural transformation journey, reshaping our company through talent, enabling key organizational capabilities, and improving HR data and processes to deliver faster and better services to our organization. FOSTER AN AGILE, DIGITAL SAVVY, AND PEOPLE- CENTRIC CULTURE HR Strategy 2020-2025 Enable key organizational capabilities Adapt cultural, structural and leadership capabilities to meet evolving business needs Transform KOF through talent Ensure that our Talent becomes the competitive advantage to reach KOFʼs strategic goals Improve HR data, processes & service Promote standard, data-driven, automated and digital HR processes to deliver faster and better services Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 71 71 CULTURAL & ORGANIZATIONAL TRANSFORMATION Our cultural transformation journey, coupled with the complex business outlook brought on by the COVID-19 pandemic, required the continuity of relevant cultural changes throughout the organization. Our HR function became an active strategic business partner, efficiently facing the company’s business needs and adding val- ue to the overall strategy. Deployment of DNA KOF In 2018, we began our cultural transformation with the launch of KOF DNA. One of the elements of our DNA is to be agile decision-makers, which is why we promote action oriented decisions. COVID-19 “The 2020/21 global pandemic has elevated the role of the CHRO and the HR function.” —Gartner The pandemic brought a series of HR challenges, enabling it to become a strategic partner for the business. This required HR to reconfigure its model and ways of working to support all of the company’s needs. Functionalization In 2019, we began a functionalization process to achieve greater alignment of our corporate areas and countries where we operate, ensuring more agile and better services. +5,500 leaders trained through our Agile & Digital Academy. To support our transformation, we made or- ganizational changes based on our refreshed corporate strategy, including the creation of commercial platforms to ensure our business transformation, the reorganization of the HR and Finance functions to offer greater strate- gic contributions to our business from these central areas, and the integration of the RTM Center of Excellence to unify our processes and practices to better serve our customers. To this end, we designed robust HR, Finance, IT, Compliance, and Corporate Affairs models from our corporate areas to our countries of operation. These upgraded operating models focus on supporting our refreshed corporate strategy: on the one hand, they exploit our current capabilities through their focus on the transactional aspects of our business; on the other hand, they explore future opportunities through their focus on the strategic elements of our business. In 2018, we launched our DNA to ensure that our customers and consumers were priori- tized to our activities. This year, we reinforced our DNA—establishing that our people are at the center of everything we do. To this end, we continued to create mechanisms and practic- es to live and refresh our DNA throughout our organization. For example, we developed and implemented a recognition program known as “Estrella KOF” or “KOF Star” in all of our op- erations, where our employes nominate and recognize their colleagues for showing extraor- dinary commitment to our DNA. We further focused on our digital and agile transformation, enabling our organizational capabilities, transforming KOF through talent, and improving our data processes and ser- vices. Among our strategic initiatives, we de- veloped our Agile & Digital Academy, which of- fered digital capabilities training to more than 5,500 leaders throughout the organization. We also adopted agile ways of working like digital communities and cells. Moreover, we are an- alyzing the world’s trends and defining new ways of working in the post-pandemic envi- ronment, taking into account radical flexibility and making hybrid work a reality. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 72 72 Upgraded HR Operating Model Upgraded HR Operating Model HR Talent Leaders HR Talent Leaders HR Transformation HR Transformation • Lead HR at country level • Lead HR at country level • Make local decisions and execution • Make local decisions and execution • Respond in an agile manner • Respond in an agile manner • Build internal client relationships • Build internal client relationships • Build labor relationships • Build labor relationships • Reduce focus on operational • Reduce focus management on operational management • Harmonize new business and • Harmonize new categories business and categories • Focus on the future (innovation, • Focus on the benchmarks, best future (innovation, practices) benchmarks, best practices) • Drive cultural transformation • Drive cultural transformation • Lead inclusion and diversity agenda • Lead inclusion and diversity agenda • Manage internal communications • Manage internal communications • Guard change management • Guard change management • Govern lean and agile methodologies • Govern lean and agile methodologies Centers of HR Talent Leaders Excellence (CoEs) • Subject matter experts in each of HR’s • Subject matter main functions: experts in each of HR’s main functions: - Talent Management - Talent Management - Training and Development - Training and Development - Total Rewards - Total Rewards - Labor Development - Labor Development - Health and Social Development - Health and Social Development - Security - Security HR Operations HR Operations • Execute transactional operations • Execute transactional operations • Identify and develop shared services • Identify and develop opportunities shared services opportunities • Drive automation and digitalization • Drive automation and digitalization • Generate insights based on HR • Generate insights information and based on HR analytics information and analytics • Deliver employee experience • Deliver employee experience People partners People of the future People products People services People partners People of the future People products People services We conducted our biannual employee en- gagement survey throughout our operations. This year’s survey showed significantly im- proved employee engagement and commu- nication with leaders through various cultural and communication efforts such as KOFFEE Talks, which are spaces where leaders enjoy the opportunity to interact with our people to discuss topics of interest. We further implemented our labor risk meth- odology assessment remotely across nine of our countries of operation to identify gaps in our operational basics, people needs, and feel- ings. This assessment enables us to gather rel- evant information regarding our operations, prevent possible labor impacts, and develop plans to address identified needs. Finally, we are integrating the core capabilities of our business, developing different function- al academies focusing on areas such as logis- tics, commercial, warehouses, and manufac- turing, among others. Functional Academies This year, we completed eight functional acad- emies to further develop the core capabilities of our business. Comprised of 80% virtual and 20% face-to-face instruction, these academies cur- rently cover over 49,000 employees. Distribution 1.0 Courses: 34 Warehouses Courses: 15 Logistics Courses: 45 Asset Management Courses: 36 Commercial Basics Courses: 55 Manufacturing Courses: 63 Property Protection Courses: 14 Leadership & Culture Courses: 22 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 73 73 TALENT MANAGEMENT AND DEVELOPMENT Our people and the way they work together are our company’s most valuable assets. Accordingly, we comprehensively manage, attract, de- velop, and motivate our people effectively, preparing the next genera- tion of leaders today. This year, we designed and implemented programs to ensure we have the right talent for the right position. Recognizing that we have many talented people across the company, we constantly reinvent ourselves and mobilize the entire organization to get the best out of our talent, unleash its full potential, and inject new capabilities. This year we won the LinkedIn Talent Award, recognizing us as a company that excelled at engaging with talent, creating inclusive workplaces, building strong employer brands, encouraging learning and development, and focusing on employee retention. Among our initiatives, we created our employer brand to attract the best talent, and we developed programs like intern- ships with top U.S. universities and other key organizations to increase talent injection. We also continued implementing the lab leadership program for the Supply Chain function, giving us greater talent visibility, and enabling us to enjoy a better succession pipeline for key positions. Lab Leadership Program Our Lab Leadership program aims to facilitate accelerated devel- opment of talent at the Supply Chain & Engineering talent to de- velop, expose, and generate international mobility Program Features • Duration of the program: 4 semesters - 2 for local experiences and 2 for international experiences. • A biannual mentoring meeting with Rafael Ramos. • A monthly follow-up meeting with the Talent area. • Check point scheme with the Local Supply Chain Director. During the year, we continued to build our Performance Management System, giving depth to leader-collaborator conversations while focus- ing on accountability and contribution to the business. To this end, we evolved our technological enabler Success Factors Talent Platform to accompany these dialogues and to close the virtuous circle between user experience and execution. We further kept on improving our talent management processes, proactively ensuring that we offer the best user experience. Moreover, we deployed our annual 9-Box Talent Assessment and 360º evaluations for leaders, enhancing our talent quality, succession, mobility, and execution metrics, while focusing on our high potential talent. Training hours Average hours per contribution level Average hours per gender 52.75% 27.20% Strategic Leaders Male 67.37% 28.34% Tactical Leaders All 36.05% Female 72.81% People Leaders 37.76% Individual Contributors 22.37% Operations Contributors 31.23% Interns Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 74 74 INCLUSION & DIVERSITY At Coca-Cola FEMSA, we are on our way to creating an environment in which each person feels included and valued for their own knowledge, be- havior, skills, and results, with opportunities for development and recogni- tion based on their talent. To this end, our strategic pillars are: Inclusion & Diversity Board To accelerate the development of a truly inclusive and di- verse organizational culture, our companywide Inclusion and Diversity Board is focused on five main purposes: Inclusive Leadership Flexible Environment Diverse Talent 1. Engage and hold leaders accountable throughout the or- Recognition as a company with inclusive leaders and work teams Foster a flexible and agile environment that adapts to the needs of our surroundings Ensure a diverse, inclusive, and respectful workplace for all our employees Inclusive Leadership Training Certifications and Recognitions • Unconscious bias training • • and awareness Ignite leader’s role as inclusion and diversity advocates Inclusion on various in- dexes and obtain recogni- tions such as: Bloomberg Gender-Equality Index, Human Rights Campaign, UN Women, Women Mat- ter – McKinsey, Linkedin Talent Awards Female Talent Pipeline • Representation of women in leadership roles • Efforts to foster female employability Discussion Forums • Provide safe places for our employees to dialogue Engaging and Connecting • Raise awareness and create a call to action on social issues that impact our communities New Normal • Efforts deployed alongside new normal practices and new ways of working “Our Label Is Talent” Campaign ganization 2. Define both long- and short-term objectives and strate- gies aligned with our company’s inclusion and diversity vision 3. Ensure functionality of work teams at a country and re- gional level 4. Ensure deployment of an internal and external communi- cation plan 5. Measure, monitor, and evaluate initiatives. Leveraging our Inclusion and Diversity Board, as well as com- pany leaders, we have prioritized and accelerated the diver- sity of talent that makes up our company, placing great em- phasis on increasing the mix of female talent at all levels of the organization with a primary focus on leadership and op- erative positions. With that in mind, we became a signatory to the UN Women’s Empowerment Principles, as we contin- ue creating an inclusive and diverse organization. Aligned with the pillars of our Inclusion & Diversity Strategy, we carried out several initiatives throughout the year to reinforce our company’s commit- ment to inclusion and diversity. From our “We-talks” discussion forums to our Inclusion and Diversity Forum, we raised awareness of important soci- etal issues that will enable our employees to play a role in creating a more equal, diverse, and inclusive organization. Our operations are developing and deploying initiatives to increase women’s representation. Improving gender diversity Aligned with our commitment to improve gender diversity at all levels of the organiza- tion, our operations are developing and de- ploying initiatives to increase women’s rep- resentation. Among their initiatives, Mexico implemented a systematic plan to recruit, develop, and retain female talent, incorpo- rating 108 new women in their operation. Brazil developed a program to train women to operate forklifts. Moreover, Guatemala not only developed a program focused on wom- en, but also a program to attract native peo- ple through a strategic alliance with the La- bor Ministry and Native People Associations. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 75 75 % 1 3 9 7 . % 4 1 . 5 7 % 0 5 . 1 6 % 3 0 7 7 . % 9 1 . 4 9 % 0 6 7 3 . 1 8 6 : y a u g u r U 9 8 1 1 , : i a c R a t s o C 7 4 2 1 , : a m a n a P 2 1 7 : a u g a r a c N i 6 4 3 2 , : a n i t n e g r A 2 5 9 2 , : l a a m e t a u G 9 5 1 3 , : i a b m o o C l % 9 1 . 1 % 0 8 . 1 4 % 7 1 . 5 4 % 7 1 . 5 % 7 1 . 5 5 % 7 0 7 3 . % 4 3 0 . % 1 3 0 2 . % 7 5 0 4 . % 8 7 8 3 . s r e d a e L c g e t a r t S i % 9 5 2 . % 3 8 . 1 1 s r e d a e L l a c i t c a T s r e d a e L e p o e P l % 7 3 0 . % 5 2 4 1 . % 7 3 . 1 3 % 1 0 4 5 . s r o t u b i r t n o C l i a u d v d n i I % 4 2 . 1 % 6 7 8 9 . % 9 6 0 . % 7 2 6 1 . % 4 3 7 2 . % 0 7 5 5 . s r o t u b i r t n o C s n o i t a r e p O s n r e t n I % 0 4 2 6 . s r o t u b i r t n o C s n o i t a r e p O % 1 8 5 . s n r e t n I % 0 5 8 3 . s r e d a e L e p o e P l % 6 8 4 2 . s r e d a e L l a c i t c a T % 9 6 0 2 . s r e d a e L c g e t a r t S i % 7 9 2 2 . s r o t u b i r t n o C l i a u d v d n i I ■ 18-34 ■ 35-44 ■ 45-59 ■ 60+ 1% 54% 29% 16% ■ Female ■ Male EMPLOYEES Per age group in each contribution level EMPLOYEES Per gender in each contribution level 5 2 2 1 2 1 , 2 1 1 5 9 2 , 9 5 1 0 0 0 3 , 3 3 6 5 1 , 1 6 1 1 3 2 , 1 0 1 2 0 7 1 8 6 ■ Indefinite ■ Temporal EMPLOYEES By contract & region 1 9 2 2 4 , : o c i x e M 8 4 8 4 , 3 4 4 7 3 , 8 7 2 9 1 , : l i z a r B 5 8 5 3 9 6 8 1 , Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 76 76 84,568 Employees Female 14% Male 86% Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 77 77 COMPENSATION AND BENEFITS Our people’s compensation and benefits scheme not only recognizes their effort and commitment to their jobs, but also their contribution to our company’s value creation. Therefore, despite the continuing impact of the COVID-19 pandemic, we were able to keep salaries aligned with local levels of inflation or market references during 2021. Thanks to the optimization of our organization’s job valuation process, through a model based on job families, we not only generate efficiencies in our current workforce management, but also strengthen our talent processes such as devel- opment, succession, and talent planning. Also, it allowed us to improve our compensation plan to accompany the contributor’s salary throughout their development. Moreover, we analyzed the current variable com- pensation schemes throughout our operations to reduce the overall number of schemes and to implement a tool to manage and automate them. We also continued the implementation of a flex- ible benefits program to offer our people new and different options that we identified within the market, based on our people’s interests. To support all of our workers in our new working schemes, we are giving them different ways to maintain their wellbeing and health. We further analyzed our turnover to design strategies to re- tain our top talent. At all levels of our organization, we ensure that our employees’ remuneration is competitive, and their conditions are equal for both men and women. At all levels of our organization, we ensure that our employees’ remuneration is competitive, and their conditions are equal for both men and women. Additionally, based on studies per- formed by international consulting firms that enable us to make comparisons between coun- tries, we can determine that our employees are receiving an integrated salary that is greater than or equal to the market average. We act in accordance with obligations defined by law and in full respect of labor rights, exceed- ing the conditions and benefits established in the laws of each country where we operate. We respect our people’s right of association and, as such, our collective agreements cover approx- imately 62% of employees. These employment contracts are reviewed and agreed with all our union representatives, respecting the estab- lished validity periods, as well as complying with all notification deadlines. Despite the continuing impact of the COVID-19 pandemic, we were able to keep salaries aligned with local levels of inflation or market references during 2021. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 78 78 SOCIAL DEVELOPMENT KOF Volunteers Program We encourage the development of our employees and their families as re- sponsible 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 wellbeing of the communities where we operate, strengthening our relationships with them, while positively affect- ing our corporate position and reputation. 2,424,873.1 hours of volunteer work since 2015 Aligned with our comprehensive wellbeing mod- el, we promote our people’s integral development and quality of life. To this end, our Social Development Strategy con- centrates on five dimensions: • Health: We promote healthy physical and bio-psychosocial lifestyles for our employees. • Social Relationships: We encourage satisfac- tory relationships in harmony with the environ- ment and community through employee vol- unteering activities. • Economic: We promote the protection of as- sets and the generation of savings through a culture of financial intelligence. • Education: We promote participation in pro- grams and trainings to improve and increase knowledge and personal development skills. • Labor: We promote positive work experiences based on respect and compliance with Human Rights, as well as fostering workspaces that promote safety and labor relations. Our overall volunteer activity is committed to six different causes: Community Development We come together to carry out collective action and generate solutions to com- mon problems to create a positive impact and build stronger and more devel- oped communities. Environment Natural Disasters We are focused on respon- sible environmental man- agement and the responsi- ble care and use of natural resources, with attention to our Strategic Sustainability Framework, especially on issues such as water, ener- gy, carbon emissions, water bodies’ cleanup, and refor- estation. We promote solidarity ef- forts in the event of natural disasters, providing sup- port to people and affected areas, while carrying out prevention activities for greater awareness, with special attention given to the communities where we operate. Health Education Human Rights We undertake activities that promote healthy phys- ical and bio-psychosocial lifestyles, as well as initia- tives related to humanitar- ian aid, nutritional training, and with the health sector in general. Our activities aim to im- prove educational levels and promote cultural, cre- ative, and technological de- velopment. We seek to generate posi- tive volunteer experiences based on respect and com- pliance with Fundamental Human Rights. In this complex environment, we focused on remote and distance volunteering ac- tivities to support the quality of life of our people and communities. During the year, 93,012 participants, including our employ- ees and their families, devoted 254,873 hours to 2,432 volunteer initiatives, sup- ported by an investment of US$279,734.63. Throughout this year, we developed sever- al activities across the countries, regarding the six different causes: for the environ- ment, we performed activities to recycle water bottles and plant trees in Mexico, Colombia, Guatemala, Panamá, and Vene- zuela. For the health cause, we made cam- paigns to support the community with medicines and treatments, and to support our people who are going through diffi- cult situations, we designed a program to give emotional and psychological support to manage difficult situations related to COVID-19 in all our countries. These were some of the activities that we undertook during 2021. Volunteering activities re- mained a challenge because of the com- plex situation wrought by the pandemic. Therefore, we developed distanced and face-to-face activities, taking into account every COVID-19 recommendation to take care of our employees. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 79 79 OCCUPATIONAL HEALTH At Coca-Cola FEMSA, we seek to improve employees’ physical and psycho-emotional health, encourage engagement and a sense of belonging within the organization, and strengthen our health and social programs for an improved work environment. Occupational Health & Wellbeing Management System Our Occupational Health & Wellbeing Man- agement System establishes the vision, strate- gy, objectives, elements, and activities through which we improve the quality of work life for our employees across our company’s work centers and strategic business units. Comply- ing with our legal, ethical, scientific, and orga- nizational framework, this system encompass- es our health and wellbeing processes and programs that we apply according to applica- ble risk matrices, local legislation, and opera- tional needs. 2% improvement in our lost days due to our General Illness Index versus 2020 Health & Wellbeing Policies At Coca-Cola FEMSA, our Corporate Occupa- tional Health area is responsible for propos- ing relevant revisions and updates to our two Health and Wellbeing Policies: • Global Safety and Occupational Health Policy • Human Rights Policy As well as this annual corporate review, which is sent for approval to our Director of Social and Labor Development and Global Director of Hu- man Resources, our company’s internal audit area reviews these policies for dissemination and implementation across our operations. Continuing COVID-19 Actions & Initiatives As a key player within an essential value chain, we take our commitment to provide hydration and nutrition to the communities we serve with all seriousness. More importantly, we know that, to deliver on this commitment, the health, safety, and wellbeing of our employees are at the front and center of our priorities. Lost Days due to General Illness Index per 100 Employees (Less is better) 2021 2020 534.4 545.2 This year, we continued to prioritize the oc- cupational health, safety, and wellbeing of our employees throughout the course of the COVID-19 pandemic. Indeed, many of our rein- forced health, sanitation, and hygiene protocols are becoming not only a daily routine, but also Coca-Cola System and industry benchmarks. Beyond our ongoing health, sanitation, and hygiene protocols, including our protocol to follow-up active and suspicious COVID-19 cas- es, we developed a health app to manage our back to office initiative. With these and other initiatives, we not only take care of all of the defined protocols to keep our people safe, but also proactively monitor our people’s health. We made several efforts to promote the vacci- nation against COVID-19 among our employ- ees; we gave paid labor permissions for our people to attend the vaccination journeys in their corresponding localities, according to the national vaccination plans of the countries in which we operate. In some operations, private transportation has been provided from the op- erating unit to the vaccination center, so that workers have greater comfort and are motivat- ed to get vaccinated. There are also various communication cam- paigns with the benefits of the vaccines, we have designed talks given by our medical ser- vices, as well as webinars and virtual confer- ences, with medical specialists to explain and clarify all doubts related to vaccines. Employee Support Program Throughout 2021, we continued with our Em- ployee Support Program across all of our oper- ations. This emotional support program is de- signed to help our people and their families to cope with any situation that may cause stress, anxiety, and depression, among other emo- tional disturbances, and to give them psycho- logical support. This program is part of our comprehensive welfare strategy to reduce psychosocial risk factors inside and outside of work through the counseling and attention of psychologists and other health professionals according to our people’s different situations. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 80 80 PATH TO DIGITAL During the year, we carried on working to move our HR function into the digital era while improving our employee experience. n dardiz a ti o Stan S t e p t o clo u d I n t e g r a t i o n Employee Experience t n e m powerm e & E v i c r e s - f S e l To this end, we continued the deployment of our Success Factors Platform (SSFF) through- out all of our operations. Ultimately impact- ing all of KOF’s employees, this platform will integrate, improve, and simplify our leaders’ and employees’ experience with HR process- es. Currently, we are working on standard- izing and migrating our HR Administration backbone, including our master database and payroll systems, to a cloud-based solu- tion in order to meet market trends and set the foundation for our path to digital. This year, we finished the implementation of Employee Central across all of our operations. This tool is designed to transform personnel administration management, promoting leaders’ empowerment while improving our employee experience. It is the base of glob- al HR tools where the organization’s master data is housed. We also continued to make significant progress on HR process standard- ization and automation for our third parties management, variable compensation, and time and attendance processes. Notably, we deployed in 2021 the cloud version of our vari- able compensation tool in Brazil, Colombia, and Panama, while implementing our time and attendance tool in our corporate offices. Furthermore, we began implementing a tool to gather greater information about our em- ployee voice, so we can develop and launch more surveys to give us valuable employee insights for our strategy. Additionally, we an- alyzed our current information capabilities and KPIs to design a standardization strategy across all of our operations through a central community, which will enable us to auto- mate our dashboards, continuously improve our reports, provide equal information or benchmarks, and in the future, utilize predic- tive analytics. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 81 81 APPENDICES Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 82 82 FINANCIAL SUMMARY Amounts expresed in millions of U.S. dollars and mexican pesos, except data per share and headcount. INCOME STATEMENT 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 Consolidated net income Equity holders of the parent for cotinuing operations Non-controlling interest net income for continuing operations RATIOS TO REVENUES (%) Gross margin Net income margin CASH FLOW Operative cash flow Capital expenditures (7) Total cash, cash equivalents U.S. (*) 2021 2020 2019 2018(4)(5)(6) 2017(2)(3)(4) 2016(1) 9,496 5,177 4,319 2,960 39 206 1,114 322 4 796 766 30 45.5 8.4 1,595 676 2,303 194,804 106,206 88,598 60,720 807 4,219 22,852 6,609 88 16,331 15,708 623 45.5 8.4 32,721 13,865 47,248 183,615 100,804 82,811 56,444 3,611 6,678 16,077 5,428 (281) 10,368 10,307 61 45.1 5.6 35,147 10,354 43,497 194,471 106,964 87,507 60,537 2,490 6,071 18,409 5,648 (131) 12,630 12,101 529 45.0 6.5 31,289 11,465 20,491 182,342 183,256 177,718 98,404 83,938 57,924 1,881 6,943 99,748 83,508 58,044 31,357 5,362 17,190 (11,255) 5,260 (226) 15,070 10,936 768 46.0 8.3 29,687 11,069 23,727 4,184 60 (11,654) (16,058) 679 45.6 (6.4) 33,236 14,612 18,767 98,056 79,662 55,462 3,812 6,080 14,308 3,928 147 10,527 10,070 457 44.8 5.9 32,446 12,391 10,476 Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 83 83 BALANCE SHEET Current assets Investment in shares Property, plant and equipment, net Intangible assets, net Deferred charges and other assets, net Total Assets Liabilities 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 Equity attributable to equity holders of the parent FINANCIAL RATIOS (%) Current Leverage Capitalization Coverage DATA PER SHARE Book Value (8) Loss (income) tributable to the holders of the parent (9) Dividends paid (10) Headcount (11) U.S. (*) 2021 2020 2019 2018(4)(5)(6) 2017(2)(3)(4) 2016(1) 3,918 365 3,031 4,981 872 13,238 120 40 2,094 4,062 704 7,019 6,219 294 5,925 1.74 1.13 0.41 6.11 0.353 0.030 0.031 80,364 7,494 62,183 102,174 17,880 271,567 2,453 811 42,957 83,329 14,445 143,995 127,572 6,022 72,440 7,623 59,460 103,971 18,294 263,066 5,017 712 37,116 82,461 15,303 140,609 122,457 5,583 56,796 9,751 61,187 112,050 16,673 257,839 11,485 439 39,086 58,492 18,652 128,154 129,685 6,751 57,490 10,518 61,942 116,804 17,033 263,787 11,604 497 33,423 70,201 16,312 132,037 131,750 6,806 121,550 116,874 122,934 124,944 1.74 1.13 0.41 6.11 7.232 0.935 0.634 1.69 1.15 0.43 5.13 6.954 0.610 0.608 1.11 0.99 0.37 5.51 7.315 0.723 0.443 1.26 1.00 0.41 4.22 7.434 0.831 0.419 83,754 83,754 82,334 82,186 83,364 55,657 12,540 75,827 124,243 17,410 285,677 12,171 487 42,936 71,189 18,184 144,967 140,710 18,141 122,569 1.00 1.03 0.39 4.20 7.293 (0.765) 0.422 79,636 45,453 22,357 65,288 123,964 22,194 279,256 3,052 520 36,296 85,857 24,298 150,023 129,233 7,096 122,137 1.14 1.16 0.41 4.80 7.365 0.607 0.419 85,140 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 (8) Based on 16,806.7 million ordinary shares as of December 31, 2021, 2020, 2019, 2018 and 2017, and 16,583.4 million shares as of December 31, 2016. (9) Computed based on the weighted average number of shares outstanding during the periods presented:16,806.7 million for 2021, 2020, 2019 and is included as investement in shares as of December 31, 2017. 2018, 16,730.8 million in 2017 and 16,730.8 million in 2016. (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) Income statement information includes 8 months of the financial results 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. (10) Dividends paid during the year based on the prior year's net income, using 16,806.7 millions outstanding ordinary shares for 2021, 2020, 2019 and 2018 and 16,583.4 million oustanding ordinary shares for paid on 2017 and 2016. (11) Includes third-party and for 2017 excludes 16,566 employees for our discontinued operation in Phillipines. * Exchange rate as of December 31, 2021 Ps. 20.514 per U.S. dollar solely for the convenience of the reader according to the federal USA reserve. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 84 84 MANAGEMENT DISCUSSION & ANALYSIS Results for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 Consolidated Results The comparability of our financial and operating performance in 2021 as compared to 2020 was affected by the following factors: (1) translation effects from fluctuations in exchange rates; and (2) our results in Argen- tina, whose economy satisfied the conditions to be considered a hyper- inflationary economy. For the convenience of the reader, we have in- cluded a discussion of the financial information below on a comparable basis, excluding the translation effects from fluctuations in exchange rates. To translate the full-year results of Argentina for the years end- ed December 31, 2021 and 2020, we used the exchange rate at Decem- ber 31, 2021 of 102.72 Argentine pesos per U.S. dollar and the exchange rate at December 31, 2020 of 84.15 Argentine pesos per U.S. dollar. The depreciation of the exchange rate of the Argentine peso at December 31, 2021, as compared to the exchange rate at December 31, 2020, was 22.1%. In addition, the average depreciation of currencies used in our main operations relative to the U.S. dollar in 2021, as compared to 2020, were 4.6% for the Brazilian real and 1.3% for the Colombian peso, and an appreciation of 5.6% for the Mexican peso relative to the U.S. dollar. Total Revenues. Our consolidated total revenues increased by 6.1% to Ps. 194,804 million in 2021 as compared to 2020, mainly as a result of our pricing initiatives, coupled with favorable price-mix effects and vol- ume growth. These effects were partially offset by unfavorable currency translation effects from some of our operating currencies into Mexican pesos and a decline in beer revenues related to the partial transition of the beer portfolio in Brazil. In addition, this figure includes other oper- ating revenues related to entitlements to reclaim Ps. 254 million in tax payments in Brazil in 2021. See Note 23.2.1 to our consolidated finan- cial statements. On a comparable basis, total revenues would have in- creased by 11.1% in 2021 as compared to 2020. Total sales volume increased by 5.3% to 3,457.9 million unit cases in 2021 as compared to 2020, driven mainly by volume growth in Mexico, Central America, Colombia, Argentina, and Uruguay. This increase was partially offset by a slight volume decline in Brazil. • In 2021, sales volume of our sparkling beverage portfolio increased by 4.2%, sales volume of our colas portfolio increased by 3.1%, and sales volume of our flavored sparkling beverage portfolio increased by 8.9%, in each case as compared to 2020. • Sales volume of our still beverage portfolio increased by 18.9% in 2021 as compared to 2020. • Sales volume of our bottled water category, excluding bulk water, in- creased by 18.3% in 2021 as compared to 2020. • Sales volume of our bulk water category decreased by 1.3% in 2021 as compared to 2020. Consolidated average price per unit case increased by 7.4% to Ps. 53.0 in 2021, as compared to Ps. 50.6 in 2020, mainly as a result of favorable price-mix effects and price increases aligned with or above inflation. This was partially offset by the negative translation effect resulting from the depreciation of all of our operating currencies relative to the Mex- ican peso. On a comparable basis, average price per unit case would have increased 9.0% in 2021 as compared to 2020, driven by our revenue management and pricing initiatives. Gross Profit. Our gross profit increased by 7.0% to Ps. 88,598 million in 2021 as compared to 2020, with a gross margin increase of 40 basis points as compared to 2020 to reach 45.5% in 2021. This gross margin increase was driven mainly by favorable price-mix effects, our raw mate- rial hedging strategies, and the positive effect of the resumption of tax credits on concentrate purchased from the Manaus Free Trade Zone in Brazil, partially offset by higher raw material prices, higher concentrate Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 85 85 costs in Mexico, and the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dollar-denominated raw materi- al costs. On a comparable basis, our gross profit would have increased by 11.3% in 2021 as compared to 2020. The components of cost of goods sold include raw materials (principally con- centrate, 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. Con- centrate prices are determined as a percentage of the retail price of our prod- ucts in local currency, net of applicable taxes. Packaging materials, mainly PET resin and aluminum, and HFCS, used as a sweetener in some countries, are de- nominated in U.S. dollars. Administrative and Selling Expenses. Our administrative and selling expens- es increased by 7.6% to Ps. 60,720 million in 2021 as compared to 2020. Our ad- ministrative and selling expenses as a percentage of total revenues increased by 50 basis points to 31.2% in 2021 as compared to 2020, mainly as a result of the normalization in labor, maintenance, and marketing expenses. In 2021, we continued investing across our territories to support marketplace execution, in- crease our cooler coverage, and bolster our returnable presentation base. Other Expenses Net. We recorded other expenses net of Ps. 807 million in 2021 as compared to Ps. 3,611 million in 2020, which decrease was mainly as a result of certain extraordinary other operating expenses related to impair- ments in Estrella Azul in Panama and in Leão Alimentos, our non-carbonated beverage associate in Brazil during 2020. For more information, see Notes 8 and 18 to our consolidated financial statements. Comprehensive Financing Result. The term “comprehensive financing re- sult” refers to the combined financial effects of net interest expenses, net fi- nancial foreign exchange gains or losses, net gains or losses on the monetary position of hyperinflationary countries where we operate, and market value gain (loss) on financial instruments. Net financial foreign exchange gains or losses represent the impact of changes in foreign exchange rates on finan- cial assets or liabilities denominated in currencies other than local currencies, and certain 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 and the date it is repaid, 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 2021 recorded an expense of Ps. 4,219 mil- lion as compared to an expense of Ps. 6,679 million in 2020. This 36.8% decrease was driven mainly by a one-time interest expense related to the repurchase and redemption in full of our 3.875% senior notes due 2023, recorded during 2020. In addition, in 2021 we recorded an increase in our foreign exchange gain and a gain in financial instruments. Income Taxes. In 2021, our effective income tax rate decreased to 28.9%, as compared to our effective income tax rate of 33.8% in 2020, mainly as a result of a favorable deferred tax credit in Brazil recognized in 2021, and deferred tax ad- justments in Mexico that were recognized during 2020. For more information, see Note 25 to our consolidated financial statements. Share in the Profit of Equity Accounted Investees, Net of Taxes. In 2021, we recorded a gain of Ps. 88 million in the share in the profit of equity accounted investees, net of taxes, mainly due to the results of Jugos del Valle, our associ- ate in Mexico. Net Income (Equity holders of the parent). We reported a net controlling in- terest income of Ps. 15,708 million in 2021, as compared to Ps. 10,307 million in 2020. This 52.4% increase was driven mainly by solid operating results, coupled with a decrease in our comprehensive financial result. Results by Consolidated Reporting Segment Mexico and Central America Total Revenues. Total revenues in our Mexico and Central America consolidat- ed reporting segment increased by 8.4% to Ps. 115,794 million in 2021 as com- pared to 2020, mainly as a result of a volume increase in all of our territories, coupled with favorable price-mix effects and pricing initiatives. Total sales volume in our Mexico and Central America consolidated report- ing segment increased by 3.3% to 2,057.9 million unit cases in 2021 as com- pared to 2020, as a result of increases in mobility and gradual recoveries across our territories. • Sales volume of our sparkling beverage portfolio increased by 2.4% in 2021 as compared to 2020, driven mainly by a 2.0% increase in our colas portfolio. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 86 86 • Sales volume of our still beverage portfolio increased by 13.2% in 2021 as compared to 2020, due to a solid performance in Mexico and double-digit increases in Central America. • Sales volume of bottled water, excluding bulk water, increased by 17.7% in 2021 as compared to 2020, due to double-digit increases in both Mexico and Central America. • Sales volume of our bulk water portfolio remained flat in 2021 as compared to 2020. Sales volume in Mexico increased by 1.8% to 1,790.0 million unit cases in 2021, as compared to 1,759.2 million unit cases in 2020, mainly as a result of gradual recoveries and increases in mobility. • Sales volume of our sparkling beverage portfolio increased 0.6% in 2021 as compared to 2020, driven by a 0.6% increase in our colas portfolio and a 1.0% increase in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 9.5% in 2021 as com- pared to 2020. • Sales volume of bottled water, excluding bulk water, increased by 17.3% in 2021 as compared to 2020. • Sales volume of our bulk water portfolio remained flat in 2021 as compared to 2020. Sales volume in Central America increased by 15.2% to 267.8 million unit cas- es in 2021, as compared to 232.4 million unit cases in 2020, mainly as a result of solid execution, increases in mobility, and recoveries across all of our territories in the region. • • • • • Sales volume of our sparkling beverage portfolio increased by 13.2% in 2021 as compared to 2020, driven by a 11.0% increase in colas and 23.9% increase in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 37.5% in 2021 as compared to 2020. • Sales volume of bottled water, excluding bulk water, increased by 21.2% in 2021 as compared to 2020. • Sales volume of our bulk water portfolio increased by 7.1% in 2021 as com- pared to 2020. Gross Profit. Our gross profit in this consolidated reporting segment in- creased by 8.4% to Ps. 57,366 million in 2021 as compared to 2020, and gross profit margin remained flat as compared to 2020. Gross profit increased main- ly as a result of our pricing initiatives, favorable price-mix effects, and our raw material hedging strategies. These factors were offset by higher raw material prices, higher concentrate costs in Mexico, and the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dol- lar-denominated raw material costs. Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment in- creased by 50 basis points to 32.9% in 2021 as compared to the same period in 2020. Administrative and selling expenses, in absolute terms, increased by 9.9% in 2021 as compared to 2020, driven mainly by the normalization of certain op- erating expenses primarily in labor and maintenance. South America Total Revenues. Total revenues in our South America consolidated reporting segment increased by 2.8% to Ps. 79,010 million in 2021 as compared to 2020, mainly as a result of favorable price-mix effects and our pricing initiatives. These factors were partially offset by unfavorable currency translation effects resulting from the depreciation of all of our operating currencies as compared to the Mexican peso. In addition, this figure includes other operating revenues related to entitlements to reclaim Ps. 254 million in tax payments in Brazil in 2021. See Note 23.2.1 to our consolidated financial statements. Total revenues for beer amounted to Ps. 10,677.2 million in 2021. On a comparable basis, total revenues would have increased by 13.1% in 2021 as compared to 2020. Total sales volume in our South America consolidated reporting segment increased by 8.3% to 1,400.0 million unit cases in 2021 as compared to 2020, mainly as a result of double-digit volume growth in Colombia and Argentina, coupled with volume growth in Brazil and Uruguay. • Sales volume of our sparkling beverage portfolio increased by 6.8% in 2021 as compared to 2020. • Sales volume of our still beverage portfolio increased by 28.6% in 2021 as compared to 2020. • Sales volume of our bottled water category, excluding bulk water, increased by 18.9% in 2021 as compared to 2020. • Sales volume of our bulk water portfolio decreased by 11.4% in 2021 as com- pared to 2020. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 87 87 Sales volume in Brazil increased by 4.7% to 903.3 million unit cases in 2021, as compared to 862.9 million unit cases in 2020. • Sales volume of bottled water, excluding bulk water, increased by 22.1% in 2021 as compared to 2020. • Sales volume of our sparkling beverage portfolio increased by 4.1% in 2021 as compared to 2020, as a result of an increase of 1.9% in our colas portfolio and an increase of 10.8% in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 18.9% in 2021 as compared to 2020. • Sales volume of our bulk water portfolio decreased by 7.2% in 2021 as com- pared to 2020. Sales volume in Uruguay increased by 5.2% to 43.4 million unit cases in 2021, as compared to 41.2 million unit cases in 2020. • Sales volume of our bottled water, excluding bulk water, increased by 3.5% in • Sales volume of our sparkling beverage portfolio increased by 2.6% in 2021 as 2021 as compared to 2020. compared to 2020. • Sales volume of our bulk water portfolio decreased by 18.3% in 2021 as com- • Sales volume of our still beverage portfolio increased by 68.9% in 2021 as pared to 2020. compared to 2020. • Sales volume of bottled water increased by 20.9% in 2021 as compared to Sales volume in Colombia increased by 16.9% to 298.0 million unit cases in 2021, as compared to 254.8 million unit cases in 2020. 2020. • Sales volume of our sparkling beverage portfolio increased by 12.6% in 2021 as compared to 2020, driven mainly by a 8.0% growth in colas and 44.1% vol- ume growth in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 63.3% in 2021 as compared to 2020. • Sales volume of bottled water, excluding bulk water, increased by 59.6% in 2021 as compared to 2020. • Sales volume of our bulk water portfolio decreased by 8.9% in 2021 as com- pared to 2020. Sales volume in Argentina increased by 16.2% to 155.5 million unit cases in 2021, as compared to 133.8 million unit cases in 2020. • Sales volume of our sparkling beverage portfolio increased by 15.6% in 2021 as compared to 2020, impacted mainly by a 15.7% increase in colas and 15.4% increase in our flavored sparkling beverage portfolio. • Sales volume of our still beverage portfolio increased by 30.5% in 2021 as compared to 2020. Gross Profit. Gross profit in this consolidated reporting segment amounted to Ps. 31,232 million, an increase of 4.4% in 2021 as compared to 2020, with a 60 basis point margin expansion to 39.5%. This increase in gross profit was driven mainly by a favorable price-mix effect, our raw material hedging strategies, and lower concentrate costs in Brazil related to the resumption of tax credits on concentrate purchased from the Manaus Free Trade Zone. These factors were partially offset by the depreciation of the average exchange rate of all of our operating currencies in the consolidated reporting segment as applied to our U.S. dollar-denominated raw material costs. Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment in- creased by 30 basis points to 28.7% in 2021 as compared to 2020, driven mainly by the normalization of our operating expenses in the region. Administrative and selling expenses, in absolute terms, increased by 3.9% in 2021 as compared to 2020. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 88 88 CAPITAL & COMPANY ENGAGEMENT Human Our people and the way they work together are our com- pany’s most valuable assets. Accordingly, we encourage their comprehensive professional and personal development, while creating an inclusive, diverse, and safe work en- vironment. Through our continuous talent management and development, we promote trust, transparency, and teamwork, prepare the next generation of leaders, advance meritocracy, recog- nize and celebrate teams’ success, while providing honest, regular feedback. In this way, we look to attract, retain, and develop the best multicultural talent to ensure our sustainable success. Nature Our business is committed to the responsible use of nat- ural resources. As the main ingredient in our beverages, our comprehensive water strategy fo- cuses on ensuring efficient water man- agement, facilitating access to safe wa- ter and sanitation, and implementing water conservation and replenishment projects to protect the environment. We also work to increase energy efficiency across our value chain, while integrating clean and renewable energy to reduce carbon emissions. Aligned with The Coca-Cola Company’s “World With- out Waste” global initiative, we continue to focus on comprehensive and respon- sible waste management, to increase the use of recycled materials in our packag- ing, and to participate in schemes and models that support post-consumption collection and recycling. Social & Relationship Our communities and oth- er stakeholders are key en- ablers of business success. Therefore, we are commit- ted to creating economic and social value and environmental wellbeing by encouraging dialogue and continu- ous interaction with our neighbors and stakeholders in order to develop and im- plement programs and initiatives that address their particular needs and guar- antee the continuity of our social license to operate. Financial Our financial and operat- ing discipline, strong capital structure and financial flexi- bility, transformational digital initiatives, and adaptability to changing market dynamics enable us to capture organic and inorganic growth opportu- nities in our industry, while creating sus- tainable value for our investors. Intellectual We’re accelerating the digital re-evolution of our business. To this end, we’re building out an open omnichannel multi-category commercial platform. Through our digital and analytics hub, we’re transforming the way we work, driving an agile methodology, mindset, and culture to maximize our compet- itiveness, proactively address industry challenges, capitalize on market oppor- tunities, and foster intellectual develop- ment across our organization. Manufactured Our highly experienced team of specialists operate 49 bot- tling plants and 260 distri- bution centers across nine countries, deliver approximately 3.5 bil- lion unit cases of beverages through a primary and secondary fleet to 2 million points of sale, and serve a population of more than 266 million people. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 89 89 COMPREHENSIVE RISK MANAGEMENT Our company is present in different countries and regions. Consequently, we are continually ex- posed to an environment that presents challenges and risks. Our ability to manage the risks that may arise in the global environment where we operate is vital for our business’ value creation. Ac- cordingly, our strategy includes a Comprehensive Risk Management Process through which we are able to identify, measure, register, assess, prevent, and/or mitigate risks. Main Risk Potential Impacts Key Mitigation Actions Main Risk Potential Impacts Key Mitigation Actions Strategic Shareholder Relationships Our business de- pends on our relationship with The Coca-Cola Company and FEMSA, and changes in this relationship may adverse- ly affect us. Consumer Preferences Changes in con- sumer preferenc- es, purchase drivers, and consumption habits might generate variability in the demand for some of our products. Coca-Cola Trademarks Coca-Cola’s brand reputation or brand violations could adversely af- fect our business. • Termination of the bot- • Comply with the bottler agree- tler agreements ments • Actions contrary to the interests of our share- holders other than The Coca-Cola Company and FEMSA • Work together and promote ef- fective interaction between our strategic shareholders in order to maximize value creation Competition Competition could adversely affect our business, financial performance, and results of operations. Cyber Incidents Since information systems are critical to our business, it may be impacted by the vi- olation of security controls, affecting the confidentiality, integrity or availability of in- formation assets. • Variability in the demand for our products • Damage to Coca-Cola’s trademark reputation • Transform into a total beverage company aligned with consum- ers’ changing tastes and lifestyles • Build a winning total portfolio of products and presentations • Drive our low- and no-sugar port- folio ahead of consumer trends • Promote healthy habits • Offer sustainable packaging op- tions for our beverages • Maintain the reputation and intellectual property rights of Coca-Cola trademarks • Effective brand protection • Strictly comply with Responsible Marketing Policies • Changes in consumer • Offer affordable prices, return- preferences • Lower pricing by com- petitors • Business disruption • Theft or unauthorized exposure of sensitive in- formation able packaging, effective promo- tions, access to retail outlets and sufficient shelf space, enhanced customer service, and innovative products Identify, stimulate, and satisfy consumer preferences • • Systemic approach to cyber secu- rity based on industry standards • Cyber security-focused organiza- tional structure • Regulatory noncompli- • Oversight by the Board’s Audit ance • Fraud • Economic loss • Reputational damage and/or impact on share value Committee among other gover- nance bodies • Risk management process sup- ported by independent assess- ments • Personnel awareness and train- ing program • Continuous investment to strengthen the security of exist- ing processes and technologies • Security by design approach to business digital initiatives • Continuous improvement of monitoring incidents response and resilience capabilities Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 90 90 Main Risk Potential Impacts Key Mitigation Actions Main Risk Potential Impacts Key Mitigation Actions Economic, Political, and Social Conditions Adverse econom- ic conditions, political, and social events in the coun- tries where we operate and elsewhere, and changes in governmental policies may adversely affect our business, financial condition, results of operations, and prospects. • Affect and reduce con- sumer per capita in- come, which could result in decreased consumer purchasing power • Lower demand for our products, lower real pric- ing of our products or a shift to lower margin products • Negatively affect our company and materially affect our financial con- dition, results of opera- tions, and prospects • Through a risk management strategy, hedge our exposure to interest rates, exchange rates, and raw material costs • Annually or more frequently eval- uate, when the circumstances require, the possible financial ef- fects of these conditions and, to the extent possible, anticipate mitigation measures Regulations Taxes and chang- es in regulations in the regions where we operate could adversely affect our business. • Increase in operating and compliance costs • Restrictions imposed on • our operations Identify regulatory risks and pro- posals of changes to regulations that directly affect our operation or financial condition • Advocacy work to provide advice on legislators’ proposed regulato- ry changes • Comply with applicable laws and regulations and comply with workplace rights policy • Legal Proceedings Unfavorable out- comes of legal pro- ceedings could ad- versely impact our business. Investigations and pro- ceedings on tax, con- sumer protection, en- vironmental, and labor matters Weather Conditions, Natural Disasters, and Public Health Crises • Impact consumer pat- terns and beverage sales • Affect plants’ installed capacity, road infrastruc- ture, and points of sale Adverse weather conditions, natural disasters, and public health crises may adversely affect our business, financial condition, results of opera- tions, and prospects. Acquisitions and Business Alliances Inability to success- fully integrate ac- quisitions or achieve expect- ed synergies could adversely affect our operations. • Negatively affect our business, financial con- dition, results of opera- tions, and prospects • Difficulties and unfore- seen liabilities or addi- tional costs in restruc- turing and integrating operations Foreign Exchange Depreciation of the local currencies of the countries • Financial loss • Increase cost of some raw materials • Adversely affect our re- where we operate relative to the U.S. dollar could adverse- ly affect our financial condi- tion and results. sults, financial condition, and cash flows in future periods Climate Change Adverse weather conditions could adversely affect • Negatively affect con- sumer patterns and re- duce sales • Affect plants’ installed our business and results of operations. capacity, road infrastruc- ture, raw material supply, and points of sale • • • • Implement business continuity plans and safety protocols to pro- tect employees and avoid signifi- cant disruptions to our business Insure assets and operations against such adverse events Integrate acquired or merged businesses’ operations in a timely and effective way, retaining key qualified and experienced profes- sionals • Closely monitor developments that may affect exchanges rates • Hedge our exposure to the U.S. dollar with respect to certain lo- cal currencies, our U.S. dollar-de- nominated debt obligations, and the purchase of certain U.S. dol- lar-denominated raw materials • Identify sources of our operations’ CO2 emissions • Support and comply with climate change mitigation measures Identify and reduce our environ- mental footprint through effi- cient use of water, energy, and materials Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 91 91 Main Risk Potential Impacts Key Mitigation Actions Main Risk Potential Impacts Key Mitigation Actions Raw Materials Increases in the price of raw materi- als we use to man- ufacture our products could adversely affect our produc- tion costs. Insufficient availability of raw materials could limit the pro- duction of our beverages. • • Shortage or insufficient availability of raw mate- rials may adversely affect our capacity to ensure production continuity Implement measures to mitigate the negative effect of product pricing on our margins such as hedging via derivative instru- ments • Adjustments to our • Proactively address risk of supply product portfolio accord- ing to availability on our value chain • Strict compliance with our Sup- plier Guiding Principles • Strategically adjust our product portfolio to enable us to minimize the impact of certain operating disruptions Social Media Negative or inaccurate information on social media could adversely affect our reputation. • Damage to our brands or corporate reputation without affording us an opportunity for correc- tion Water Water shortages or failure to maintain our current water • Water supply may be insufficient to meet our future production needs • Water supply may be concessions could adversely affect our business. adversely affected due to shortages or changes in governmental regula- tions or environmental changes • Water concessions or contracts may be termi- nated or not renewed • Effective brand protection • Proactive external communica- tion • Efficient water usage • Execute water conservation and replenishment projects • Maintain 100% legal compliance • Develop a water risk index, in- cluding four issues that need to be assessed: Community and public perception risks, Scarcity of water and other inputs, Reg- ulatory risks, and Legal risks for each of our bottling plants • Update water risk assessment tool and work plans that con- template aspects such as climate change, resilience to hydrological stress, media and social vulnera- bilities, as well as regulations and production volumes for each of our bottling plants • Secure water concessions for our production facilities Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 92 92 CORPORATE GOVERNANCE Board of Directors Directors appointed by Series A Shareholders José Antonio Fernández Chairman of the Board of FEMSA 29 Years as a Board Member Eduardo Padilla Silva Chief Executive Officer of FEMSA 6 Years as a Board Member Federico Reyes García Independent Consultant Alternate: Javier Gerardo Astaburuaga Sanjines 29 Years as a Board Member John Santa Maria Chief Executive Officer Coca-Cola FEMSA 8 Years as a Board Member Ricardo Guajardo Touché* Independent Consultant 29 Years as a Board Member Enrique F. Senior Hernández* Managing Director of Allen & Company 18 Years as a Board Member Luis Rubio Friedberg* Chairman of México Evalúa Alternate: Jaime A. El Koury (Independent Director) 7 Years as a Board Member Daniel Servitje Montull* Chief Executive Officer of Bimbo 24 Years as a Board Member John Murphy Chief Financial Officer of The Coca-Cola Company Alternate: Stacy Lynn Apter 3 Years as a Board Member Executive Officers John Santa Maria Otazua Chief Executive Officer James Leonard Dinkins Chief Executive Officer of The Honey Baked Ham Company, Llc Alternate: Marie D. Quintero-Johnson 2 Years as a Board Member Constantino Spas Montesinos Chief Financial Officer Karina Awad Pérez Human Resources Officer José Luis Cutrale Chairman of the Board of Sucocítrico Cutrale Alternate: José Henrique Cutrale 18 Years as a Board Member Luis Nicolau Gutiérrez* Partner at Ritch, Mueller, Heather and Nicolau 4 Years as a Board Member Directors appointed by Series L Shareholders Alfonso González Migoya* Managing Partner of Acumen Empresarial, S.A. de C.V. 16 Years as a Board Member Directors appointed by Series D Shareholders José Reyes Lagunes Retired Alternate: Theresa Robin Rodgers Moore 6 Years as a Board Member Charles H. Mctier* Retired 24 Years as a Board Member Víctor Tiburcio Celorio* Independent Consultant 4 Years as a Board Member Francisco Zambrano Rodríguez* Independent Consultant 19 Years as a Board Member Secretary of Board Carlos Aldrete Ancira Secretary of the Board Alternate: Carlos Luis Díaz Sáenz 28 Years as a Secretary Bruno Juanes Gárate Commercial Development Officer María del Carmen Alanis Figueroa Corporate Affairs Officer Rafael Ramos Casas Supply Chain and Engineering Officer Ignacio Echevarría Mendiguren Digital and Technology Officer Fabricio Ponce García Chief Operating Officer—Mexico Ian M. Craig García Chief Operating Officer—Brazil Eduardo G. Hernández García Chief Operating Officer—Latin America * Independent Director. To review the most updated Board of Directors please visit Coca-Cola FEMSA’s Web page. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 93 93 Board Practices Planning and Finance Committee Audit Committee The Planning and Finance Committee works with management to set our annual and long- term strategic and financial plans and moni- tors adherence to these plans. It is responsible for setting our optimal capital structure and recommends the appropriate level of borrow- ing as well as the issuance of securities. Finan- cial risk management is another responsibility of the Planning and Finance Committee. Ri- cardo 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 secre- tary non-member of the Planning and Finance Committee is Constantino Spas Montesinos, our Chief Financial Officer. The Audit Committee is responsible for re- viewing the accuracy and integrity of quarter- ly and annual financial statements in accor- dance with accounting, internal control and auditing requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditor, who reports directly to the Audit Committee (such appointment and compensation being subject to the approval of our board of directors); the internal auditing function also reports to the Audit Committee. The Audit Committee has implemented pro- cedures for receiving, retaining and address- ing complaints regarding accounting, internal control and auditing matters, including the submission of confidential, anonymous com- plaints from employees regarding question- able accounting or auditing matters. To carry out its duties, the Audit Committee may hire independent counsel and other advisors. As necessary, we compensate the independent auditor and any outside advisor hired by the Audit Committee and provide funding for or- dinary administrative expenses incurred by the Audit Committee in the course of its du- ties. Victor Alberto Tiburcio Celorio is the chair- man 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: Al- fonso González Migoya, Charles H. McTier and Francisco Zambrano Rodríguez. Each member of the Audit Committee is an independent di- rector, as required by the Mexican Securities Market Law and applicable New York Stock Exchange listing standards. The secretary non-member of the Audit Committee is José González Ornelas, vice-president of FEMSA’s internal corporate control department. Corporate Practices Committee The Corporate Practices Committee, which consists exclusively of independent directors, is responsible for preventing or reducing the risk of performing operations that could damage the value of our company or that benefit a par- ticular 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, approve the compensation plan of the chief executive officer and relevant officers, and support our board of directors in the elaboration of related reports. The chair- man of the Corporate Practices Committee is Daniel Javier Servitje Montull. Pursuant to the Mexican Securities Market Law, the chair- man of the Corporate Practices Committee is elected at our shareholders meeting. The oth- er members include: Jaime A. El Koury, Luis Rubio Freidberg, Luis A. Nicolau Gutiérrez, and two permanent non-member guests, Miguel Eduardo Padilla Silva and José Octavio Reyes Lagunes. The secretary non-member of the Corporate Practices Committee is Karina Paola Awad Pérez, our Human Resources Office Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 94 94 INTEGRAL ETHICAL SYSTEM Through our ethical culture, we manage under schemes that must be adopted as a way of life and that inspire the actions of all those who are part of the organization through the establish- ment of an integral ethical system. Our ethics management is based on: • Prevent illicit behaviors that may affect our human capital and our heritage • Detect improper acts through open commu- nication channels Specifically, regarding the subject of gifts, cour- tesies and entertainment, our Code of Ethics specifies: • We do not receive, give, pay, offer, promise, or authorize on behalf of Coca-Cola FEMSA or on a personal basis, in a direct or indirect way, money, gifts, advantageous conditions, sala- ries, travel, commissions or anything else of value to obtain any undue advantage or ben- efit of any kind. • We do not give or offer gifts to government • Respond and provide feedback to our organi- officials. zation to build trust Our system is comprised of three fundamental elements: the Code of Ethics, the Ethics Com- mittee, and the whistle-blowing system known as KOF Ethics Line. Code of Ethics The foundation of our organizational culture, the Code of Ethics communicates our values, con- templates our main behaviors, promotes good behavior inside and outside of our organization, and guides our correct decision-making based on ethical principles. Our recently updated Code includes important topics such as Human Rights, Inclusion and Diversity, Discrimination, Violence and Harassment, Conflicts of Interest, Misuse of Information, and Anti-corruption. • We only accept, give, or offer gifts of a promo- tional nature, occasional and of symbolic val- ue. • We only provide hospitalities in accordance with our Corporate Policy and the applicable legal provisions. • When a client or a supplier offers an invita- tion, which implies a trip outside the city or to attend a sporting event or any other en- tertainment, we shall comply with this Code of Ethics and other Internal Guidelines and must obtain prior necessary approval to at- tend such invitation. For further information and access to the full document of our Code of Ethics please access one of the following links: Spanish English Portuguese Ethics Committee The Ethics Committee is the oversight and con- trol body that guarantees compliance with the Code of Ethics and attends to the company’s most relevant ethical situations. In each of our territories, there is an Ethics Committee, and each Committee reports to the Corporate Ethics Committee. KOF Ethics Line Whistle-blowing System Complaints about noncompliance with the Code of Ethics are received through KOF Ethics Line, which is managed by a third party. Employees, customers, suppliers, third parties or anyone who has a relationship with Coca-Cola FEMSA can use the system anonymously. A group of investigators analyzes the complaints impartially and confidentially and, if a violation of the Code is found, corrective measures are applied. In 2021, we received 1,616 complaints; of these, none were related to child labor, forced labor or freedom of association. To strengthen our culture, our workers sign a Let- ter of Compliance to our Code of Ethics. Its pur- pose is to ensure that our employees are aware of the Code of Ethics, understand the main acts or omissions that may be incurred and can put our organization at risk, and report any violation of the Code that they know. In review 28.9% Substantiated 31.9% Complaints by Status Unsubstantiated 39.2% Operational 11.8% Financial Information 0.1% Complaints by Topic Human Resources 88.1% Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 95 95 TURNOVER Turnover by Country Turnover per Gender Mexico Brazil Colombia Argentina Uruguay Panama Costa Rica Nicaragua Guatemala Total Natural induced 7.0% 6.9% 16.8% 9.5% 16.5% 1.9% 10.3% 4.9% 100.5% 11.3% 8.0% 14.5% 5.5% 1.4% 2.4% 5.7% 7.8% 4.7% 2.1% 8.9% Female Male Natural 13.33% 11.07% induced 7.50% 9.10% Turnover by age group Natural Induced 18-34 16.76% 10.19% 35-44 6.12% 7.85% 45-59 3.27% 6.38% 60+ 23.39% 20.81% Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 96 96 RECOGNITIONS Recognitions obtained by our Mexico operation In recognition of our efforts to reduce our pri- mary and secondary fleet’s emissions, we earned the Clean Transportation Award from Mexico’s ministries of Environment and Natural Resources (SEMARNAT) and Communications and Transportation (SCT) for the ninth year. Currently, 18 of our plants in Mexico have ob- tained Clean Industry certification from the Federal Environmental Protection Agency (PROFEPA). Moreover, in 2021, 35 of our distri- bution centers in Mexico received air quality certifications from PROFEPA, the state of Mex- ico’s Environmental Agency, and Mexico City’s Ministry Secretary of the Environment (SEDE- MA). These and other recognitions confirm our commitment to the environment and overall sustainability. Recognitions given out to operations’ suppliers The good performance of our suppliers on sustainability is a very important issue for us, which is why we recognize all of those suppli- ers 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. During 2021, we conducted virtual recognition forums for our Brazil, Costa Rica, Guatemala, Mexico, and Panama operations, where we recognized 64 suppliers from over 374 participating com- panies for their remarkable practices. Almost 400 companies participated in these events sharing their best practices. The following are some of the projects that we recognized: Mexico: “Leaderson the Move” - Daimler’s project; “The sun will shine differently in Querétaro” - Siemens’s project; “Multilateral Gathering Program: Clean Points Tulum” - Tetrapack’s project; “Circular Economy - Stretch Film Heat Shrink Film" Packsys Mexico’s project. Guatemala: “Fundación Miguel Torrebiarte Sohanin” - Luces del Norte’s project; “El poder de una ilusión” - Representaciones Comerciales F. Mansillay’s project; “Programa de recuperación y reciclaje de producto final” - CEK’s project. Nicaragua & Costa Rica: “PlanEco Award” - Casa Pellas’s Project; “Seguridad Vial” - Geocycle’s Project; “Gestión de sostenibilidad” Ecolab’s Project. Colombia: • Sustainability “New technology– DRYEXDUO” - Ecolab’s project; “Planta deReciclajePost-consumo” - Plastilene’s Project. • Innovation “Diseño Especializado de Remolques” - Solistica’s project “Sistema de Control de Plataforma de Carga Primaria (SGAFP)” - Contacamos’s project. Brazil • Logistics: Transportes Cavalinho, Ritmo Logistica y Dinon Transportadora • Services: Fardas Uniformes Profissionais LTDA, Sodexho Do Brasil, Sodexo Pass do Brasil • Constructions work: SP & G Engenharia LTDA, GAP – BR Construcoes LTDA, Mundo Vertical Trabalho Em Altura and; Industrial: O prendin Montagens, Tecsul Equipamentos e Sevices y Endress Hauser. Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 97 97 Av. Ejército Nacional 843-B Antara Polanco 11520 Mexico, D.F. Tel: +55 5283 1300 Fax: +55 5283 1392 ey.com/mx Independent Limited Verification Report Performance indicators Annex A Verified GRI contents and Coca Cola FEMSA’s own indicators GRI Name of the disclosure or performance indicator Scope of the information Reported information Total number of employees All countries where we operate 84,568 INDEPENDENT LIMITED VERIFICATION REPORT: PERFORMANCE METRICS To the Board of Directors of Coca Cola FEMSA, S.A.B. de C.V.: Scope of our Work We have undertaken an independent limited verification of the information and performance indicators included in Annex A and presented in the Annual Integrated Report (the “Report”) of Coca Cola FEMSA, S.A.B. de C.V. (“KOF” or the “Company”) corresponding to the year calendar 2021, in accordance with the reporting criteria set forth in the GRI Standards (the “Criteria”). The preparation of this report is the responsibility of KOF’s Management. KOF’s Management is also responsible for the information and the assertions contained therein, defining the scope of the Report and the management and control of the information systems that provided the reported information. Our work was conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000 issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). This standard requires that we plan and perform our engagement to obtain limited assurance about whether the report is free from material misstatement and that we comply with ethical requirements, including the independence requirements included in the Code of Ethics of the International Ethics Standards Board for Accountants (IESBA). Standards and verification procedures The verification procedures performed focused on the following: • Interviews with the individuals responsible for the information to understand the activities performed and the procedures used to gather the information. • Review of the structure and content of the Report in accordance with the GRI Standards. • Understanding of the procedures used in compiling and consolidating quantitative and qualitative data, as well as their traceability. • Review of the support documentation through analysis and recalculations, as well as sampling, to increase the certainty of the indicators reported. It is worth mentioning that the scope of this review is substantially less than a reasonable assurance engagement. Therefore, the assurance provided is also less. This Report shall in no way be considered an audit report. Conclusions Based on our work described in this Report, nothing has come to our attention that causes us to believe that the performance indicators selected are not presented, in all material respects, in accordance with the applicable criteria. This report has been exclusively prepared for the Board of Directors of Coca Cola FEMSA, S.A.B. de C.V., in accordance with the terms of our engagement agreement. Mancera, S.C. A Member Practice of Ernst & Young Global Limited Saúl García Arreguín Partner March 28th 2022; Mexico City Member Practice of Ernst & Young Global Limited Percentage of employees by gender All countries where we operate IP Percentage of employees by age group All countries where we operate IP Resin materials used by weight All countries where we operate 301-2 Recycled input materials All countries where we operate 302-1 Energy consumption within the organization All countries where we operate IP 302-3 Energy from clean sources All countries where we operate Energy intensity All countries where we operate GRI Name of the disclosure or performance indicator Scope of the information Extracción de agua All countries where we operate Consumption of water from the municipal network 303-1 Groundwater consumption Surface water consumption (rivers) Rainwater consumption All countries where we operate All countries where we operate All countries where we operate All countries where we operate Efficiency in water consumption All countries where we operate Direct GHG emissions (scope 1) All countries where we operate Unit Employees % of male employees % of female employees % from 18 –34 years old % from 35 – 44 years old % from 45-49 años years old % over 60 years old Thousand tons of total resin Thousand tons of virgin resin Thousand tons of recycled resin % of recycled resin Millions of MJ total energy consumption Millions of MJ thermal energy 86 14 54 29 16 1 271 188 83.1 31 3,379 1,619 1,158 Millions of MJ electricity from renewable energy 509 85 5.66 Millions of MJ electricity from other sources % from clean electricity Liters of beverage produced per MJ Reported information 28 8.43 18.07 1.49 0.005 1.47 86 Unit Billions of litres Billions of litres Billions of litres Billions of litres Billions of litres Liters of wáter per liters of beverage produced Thousand tons of CO2e Energy indirect GHG emissions (scope 2) All countries where we operate 41.90 Thousand tons of CO2e GHG emissions intensity All countries where we operate Percentage of recycled waste All countries where we operate Total incident rate (TIR) Lost time incident rate (LTIR) All countries where we operate1 Fatalities 181 98 1.04 0.58 5 grams of CO2e per liter of beverage % of recycled waste Cases per 200000/ Worked hours Cases per 200000/ Worked hours Number of fatalities IP 305-1 305-2 305-4 IP IP 1 Not includes Venezuela Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 98 98 Annex A Green Bond Proceeds Allocation - 2021 Category Total investment Circular Economy Climate Change Water Stewardship Figure 114.64 93.19 16.85 4.59 Unit Millions USD Millions USD Millions USD Millions USD INDEPENDENT REASONABLE VERIFICATION REPORT: GREEN BOND Av. Ejército Nacional 843-B Antara Polanco 11520 Mexico, D.F. Tel: +55 5283 1300 Fax: +55 5283 1392 ey.com/mx Independent Reasonable Verification Report To the Board of Directors of Coca Cola FEMSA, S.A.B. de C.V.: Scope of our Work We have undertaken an independent reasonable verification of the proceeds allocation included in Annex A and presented in the Annual Integrated Report (the “Report”) of Coca Cola FEMSA, S.A.B. de C.V. (“KOF” or the “Company”) corresponding to the calendar year 2021, in accordance with the reporting criteria set forth in the Green Bond Principles (the “Criteria”). The preparation of this report is the responsibility of KOF’s Management. KOF’s Management is also responsible for the information and the assertions contained therein, defining the scope of the Report and the management and control of the information systems that provided the reported information. Our work was conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000 issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). This standard requires that we plan and perform our engagement to obtain reasonable assurance about whether the report is free from material misstatement and that we comply with ethical requirements, including the independence requirements included in the Code of Ethics of the International Ethics Standards Board for Accountants (IESBA). Standards and verification procedures The verification procedures performed focused on the following: • Interviews with the individuals responsible for the information to understand the activities performed and the procedures used to gather the information. • Review of the structure and content of the Report in accordance with the Green Bond Principles. • Understanding of the procedures used in compiling and consolidating quantitative and qualitative data, as well as their traceability. • Review of the support documentation through analysis and recalculations, as well as statistical sampling, to increase the certainty of the indicators reported. Conclusions Based on our work described in this Report, proceeds allocation is presented, in all material respects, in accordance with the applicable criteria. This report has been exclusively prepared for the Board of Directors of Coca Cola FEMSA, S.A.B. de C.V., in accordance with the terms of our engagement agreement. Mancera, S.C. A Member Practice of Ernst & Young Global Limited Saúl García Arreguín Partner March 28th 2022; Mexico City Member Practice of Ernst & Young Global Limited Overview Overview Our Framework Our Framework Our Strategic Corridors Our Strategic Corridors Appendices Appendices 99 99 SHAREHOLDER & ANALYST INFORMATION KOF New York Stock Exchange Quarterly Stock Information U.S. Dollars per ADS Quarter ended Dec-30 Sep-30 Jun-30 Mar-31 U.S. Dollars per ADS Quarter ended Dec-31 Sep-30 Jun-28 Mar-29 $ High 56.52 58.94 52.93 48.97 $ High 46.93 44.91 48.39 64.95 $ Low 47.53 51.99 46.56 42.21 $ Low 36.20 39.63 38.09 38.44 KOFUBL Mexican Stock Exchange Quarterly Stock Information Mexican Pesos Quarter ended Dec-30 Sep-30 Jun-30 Mar-31 Mexican Pesos Quarter ended Dec-31 Sep-30 Jun-28 Mar-29 $ High 114.98 117.34 105.71 100.95 $ High 93.88 100.3 106.29 121.02 $ Low 101.17 104.14 93.88 87.79 $ Low 77.30 86.26 91.49 90.56 2021 $ Close 54.38 56.27 52.93 46.20 2020 $ Close 46.10 40.72 43.85 40.23 2021 $ Close 111.54 116.32 105.47 94.41 2020 $ Close 91.51 90.19 100.62 95.65 Coca-Cola FEMSA, S.A.B. de C.V. Mario Pani N° 100 Col. Santa Fe Cuajimalpa 05348, Ciudad de Mexico, Mexico (5255) 1519 5000 Investor Relations Independent Accountants Jorge Collazo Lorena Martin Marene Aranzabal José Enrique Solís kofmxinves@kof.com.mx Sustainability Luis Darío Ochoa Rosaura Castañeda Elena Huante Fernanda Turcott Daniel Insulza sostenibilidad@kof.com.mx Corporate Communication Aurea Patiño Diana Pino Aldana Solano Legal Counsel of the Company Carlos L. Díaz Sáenz Mario Pani Nº 100 Col. Santa Fe Cuajimalpa 05348, Ciudad de Mexico, Mexico. Phone: (52 55) 1519 5000 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, Mexico Phone: (5255) 5283 1400 Stock Exchange Information 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. Transfer Agent and Registrar Bank of New York Bank of New York 101 Barclay Street 22W New York, New York 10286, U.S.A ABOUT OUR INTEGRATED REPORT From our headquarters in Mexico City, we present our Integrated Report 2021 edi- tion. This report was developed following the guidelines of the International Inte- grated Reporting Council (IIRC) and in accordance with the GRI (Global Report- ing Initiative) Standards, as well as mate- rial indicators of the SASB (Sustainability Accounting Standards) for the Non-Al- coholic Beverage Industry. Furthermore, this report elaborates on our annual Communication on Progress (COP) to the United Nations Global Compact, included by FEMSA in its 2021 report. The information contained in this report corresponds to the period from January 1 to December 31, 2021. It includes data from the countries where Coca-Cola FEMSA, S.A.B. de C.V. has op- erations or a majority share. Its opera- tions encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, and Uruguay.1 The company is a member of the Dow Jones Sustainability Emerging Mar- kets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the S&P/BMV Total Mexico ESG Index, among others. Chief Financial Officer Constantino Spas Montesinos Corporate Affairs Officer María del Carmen Alanis Figueroa 1. For comparability purposes, the non-financial quantitative data for 2021, 2020, 2019, and 2018 is represented without Venezuela, since as of December 31, 2017, Venezuela is a deconsolidated operation reported as an investment in shares. Moreover, the 2017 information is represented without the Philippines. 2. References herein to “Mexican pesos” or “Ps.” are to the lawful currency of the United Mexican States, or Mexico 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”) pursu- ant to the rules and regulations of the SEC (that apply to foreign private issuers) and of the BMV. Filings we make elec- tronically 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 bev- erages of The Coca-Cola Company, offering a wide portfolio of 131 brands to a population of more than 266 million. With over 80 thousand employees, the company markets and sells approximately 3.5 billion unit cases through close to 2 mil- lion points of sale a year. Operating 49 manufacturing plants and 260 distribution centers, Coca-Cola FEMSA is commit- ted to generating economic, social, and environmental value for all of its stakeholders across the value chain. The compa- ny is a member of the Dow Jones Sustainability Emerging Markets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the S&P/BMV Total Mexico ESG Index, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and in Venezuela through its investment in KOF Venezuela. For further information, please visit www.coca-colafemsa.com 

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