Fomento Economico Mexicano S.A.B. de C.V. Annual Report 2020

FY2020 Annual Report · Fomento Economico Mexicano S.A.B. de C.V.

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2 0 2 0 A N N U A L R E P O R T

TABLE OF CONTENTS

2 0 2 0 A N N U A L R E P O R T F E M S A

Financial Summary 53

FEMSA Foundation 41

FEMSA At-A-Glance 03Dear Shareholders 11FEMSA Comercio 15Contact 63Corporate Governance 48FEMSA Strategic Businesses 34Value Creation Highlights 05Coca-Cola FEMSA 26Board of Directors 50Executive Team 52Management’s Discussion & Analysis 552020 ANNUAL REPORT FEMSAFomento Económico
Mexicano, S.A.B. de C.V.,
or FEMSA, is a leading
company that creates
economic and social value
through companies and
institutions and seeks
to be the best employer
and neighbor to the
communities where it
has a presence.

FEMSA’s 2020 integrated Annual Report reflects our commitment to strong corporate governance and transparency,
as exemplified by our
December 31, 2020 compared to the twelve months ended December 31, 2019. For complementary information, please
see our

organizational culture. Our financial and sustainability results are for the twelve months ended

2020 Sustainability Content.

FEMSA participates in the following businesses:• In the retail trade, through FEMSA Comercio, comprising: -a Proximity Division, which operates the OXXO small-format store chain; -a Health Division, which includes pharmacies and related activities; and -a Fuel Division, which operates the service stations chain, OXXO GAS. • In the beverage industry, through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products and trademark beverages in the world by sales volume; and in the beer sector, as a shareholder of HEINEKEN, one of the world’s leading brewers with operations in more than 70 countries. • In certain adjacent businesses, through FEMSA Strategic Businesses (FEMSA Negocios Estratégicos), including logistics services; specialized janitorial, cleaning and sanitation products distribution; point-of-sale refrigeration solutions; and plastics products for FEMSA companies and external clients.2020 ANNUAL REPORT FEMSAFEMSA AT-A-GLANCE

FEMSA’s mission:

To create economic and social value
through companies and institutions.

United States n

FEMSA Comercio n
Coca-Cola FEMSA n
FEMSA Strategic Businesses n

Corporate Structure

Equity Stakes and Business Units

THE
COCA‑COLA
COMPANY
27.8%

PUBLIC
25.0%

47.2%*

100%

14.8%

COCA‑COLA
FEMSA

FEMSA
COMERCIO

FEMSA
STRATEGIC
BUSINESSES

HEINEKEN

Mexico n n n

Nicaragua n n

Guatemala n

Costa Rica n n

Venezuela 1 n

Panama n n
Colombia n n n
Ecuador n

Peru n

Brazil n n n

Uruguay n

Chile n

Argentina n

* Represents 56% of voting rights.

1. As of December 31, 2017, as a non-consolidated operation, Venezuela is reported as an investment in shares.

We serve more than 290 million
consumers in 13 countries.

2020 ANNUAL REPORT FEMSAHeadcount

Mexico 1

245,157

17,929

45,394

197

Central
America 2

8,033

4,637

4,787

9,004

Colombia

15,448

Brazil

30,281

Argentina

2,167

Ecuador

4,258

181,217

7,836

6,024

21,277

Peru
530

Chile

12,069

Uruguay

898

2,148

526

12,059

United
States

1,777

4,242

We employ more than
320,000 people in the
companies that comprise our
three business units.

FEMSA Comercio n
Coca-Cola FEMSA n
FEMSA Strategic Businesses n

1. Total includes headquarter staff.2. Central America includes Costa Rica, Panama, Nicaragua and Guatemala. 2020 ANNUAL REPORT FEMSAIncome from operations 3

2,086

41,503

2020

2019

%Change

2018 2

%Change

492,966

506,711

(2.7%)

469,744

VALUE CREATION HIGHLIGHTS

Economic value

Millions of pesos

Total revenues

2020 1

24,782

Operating margin

Consolidated net income

Controlling interest net income 4

Controlling interest earnings per BD unit 5

Controlling interest earnings per ADS 6

EBITDA

EBITDA margin

Total assets

Total liabilities

Total equity

Capital expenditures

Total cash and cash equivalents 7

Short-term debt

Long-term debt

Headcount 8

188

(98)

(0.0)

(0.3)

3,618

34,428

18,986

15,442

1,050

5,410

443

9,042

8.4%

3,756

(1,930)

(0.5)

(5.4)

71,973

14.6%

47,152

9.3%

28,048

20,699

5.8

57.8

75,440

14.9%

684,848

637,541

377,661

311,790

307,187

325,751

20,893

107,624

8,801

179,864

320,618

25,579

65,562

16,204

101,747

314,656

(12.0%)

(86.6%)

(109.3%)

(108.6%)

(109.3%)

(4.6%)

7.4%

21.1%

(5.7%)

(18.3%)

64.2%

(45.7%)

76.8%

1.9%

41,576

8.9%

33,079

23,990

6.7

67.0

60,458

12.9%

576,381

240,839

335,542

24,266

62,047

13,674

114,990

297,073

7.9%

13.4%

(15.2%)

(13.7%)

(13.4%)

(13.7%)

24.8%

10.6%

29.5%

(2.9%)

5.4%

5.7%

18.5%

(11.5%)

5.9%

1. U.S. dollar figures are converted from Mexican pesos using the noon-buying rate published by U.S. Federal Reserve Board, which was Ps. 19.8920

per US$1.00 as of December 31, 2020.

2. Starting on January 1st 2019, the Company adopted IFRS16 “Leases” accounting rule using the modified retrospective method under which the

comparative information was not restated.

3. Company’s key performance indicator.
4. Represent the net income that is assigned to the controling shareholders of the entity.
5. “BD” units each of which represents one series “B” share, two series “D-B” shares and two series “D-L” shares. Data based on outstanding

2,161,177,770 BD units and 1,417,048,500 B units.

6. American Depositary Shares, a U.S. dollar-denominated equity share of a foreing-based company available for purchase on an American

stock exchange.

7. Cash consists of non-interest bearing bank deposits and cash equivalents consist principally of short-term bank deposits and fixed rate investments.
8. Includes headcount from Coca-Cola FEMSA, FEMSA Comercio and Other Businesses of FEMSA.

n Coca-Cola FEMSA
FEMSA Comercio:
n Proximity Division
n Health Division
n Fuel Division
n Others*

13%

37%

6% 2%

29%

32%

36%

61%

52%

38%

35%

16%

*
Includes FEMSA Strategic Businesses.
1. Company’s key performance indicator.
2. EBITDA defined as Income from
operations plus depreciation,
amortization and other non-cash items.

Total Revenues by Business Unitmillions of Mexican pesosPs. 492,966Total Assets by Business Unitmillions of Mexican pesosPs. 684,848Income from Operations 1by Business Unitmillions of Mexican pesosPs. 41,503EBITDA 2by Business Unitmillions of Mexican pesosPs. 71,9732020 ANNUAL REPORT FEMSA

OUR FOCUS ON SUSTAINABILITY

Climate
Change

Circular
Economy

Human
Rights

Water
Stewardship

COVID‑19
Resilience

1354The global pandemic in 2020 disrupted the health, mobility, safety, economic and environmental circumstances of our employees, customers, value chain and surrounding communities. Yet FEMSA remained firm in our conviction to continue generating economic and social value. Now, more than ever, is the time to continue pushing for better conditions that will create prosperity, protect our people and preserve our planet. In the following pages, we share a few key examples of our efforts to move forward on these objectives in 2020. Learn more about our performance throughout the rest of this report.22020 ANNUAL REPORT FEMSAClimate
Change

Circular
Economy

Human
Rights

100% of our beverage
manufacturing plants in Mexico
have achieved Zero Waste to
Landfill certification

50% recycled PET fiber in OXXO
store employee uniforms

+60,000 refrigerators
per year – and 90% of their
components – repaired, reused or
recycled by AlPunto at the end of
their useful life

Learn more about our circular

economy strategy

Signatories of the United
Nations Global Compact
and members of the Tent
Partnership for Refugees

+28,000 hours of

Ethics training to employees

+436,000 hours of Human
Rights training to employees

Coca-Cola FEMSA

included in Bloomberg
Gender‑Equality Index

W
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t
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r
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p

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+15,500 sites in Mexico powered with renewable energy+77.6% of electricity needs in Mexico covered by clean sources, avoiding 721,995 tons of CO2e emissions per year80% of Coca-Cola FEMSA’s manufacturing operations powered by clean energy Coca-Cola FEMSA received approval from the Science Based Targets Initiative for its 2030 carbon footprint reduction targets23Climate ActionAffordable and Clean EnergyResponsibleConsumptionand ProductionGender EqualityDecent Work and Economic Growth4512020 ANNUAL REPORT FEMSA

Water
Stewardship

COVID‑19
Resilience

l
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m
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123Coca-Cola FEMSA improved its water-use ratio to reach1.49 liters of water per liter of beverage produced 100% of the water used to produce Coca-Cola FEMSA’s beverages returned to the environment in main markets 26 Water Funds launched in 10 Latin American countries28,871 people in 195 communities accessing safe water through Lazos de Agua program54Clean Water and SanitationGood Health & Wellbeing3Cs of our health and safety focus: Collaborators: Prioritized the wellbeing of our 320,000 peopleCustomers: Enhanced in-store hygienic protocols and helped small businesses re-openCommunity: Contributed to public-private initiatives and donated essential supplies to our neighborsLearn more on page 92020 ANNUAL REPORT FEMSA

OUR CONTRIBUTION TO THE COMMUNITY

We recognize our active role in society as a good and responsible neighbor, investing and connecting with the communities where we have a presence. Here we share some highlights of the most important contributions to social value made by our extended FEMSA family in the fight against COVID-19 during 2020. Learn more about our impacts this year throughout the rest of this report.2020 ANNUAL REPORT FEMSA+32,000 liters of
fuel donated to
ambulances of the
Mexican Red Cross l

+25,100 kilometers
traveled by Solistica to
deliver COVID-19
medical supplies l

+34,000 food packages
delivered to vulnerable
communities, equivalent
to 340 tons of food and
products to cover
basic needs l

UNITED STATES

FEMSA l
FEMSA Comercio l
Coca-Cola FEMSA l
FEMSA Strategic Business l
FEMSA Foundation l

GUATE MALA

PA NAMA

COSTA RICA

VE NE ZUE LA

+US$ 32,629 invested in
+15,200 biosafety elements
donated to hospitals,
institutions and vulnerable
communities l

+US$ 37,300
in donations of
medicines and
personal care items l

Donation of food
to the community l

+US$ 331,000
in donations of
medicines, diapers

and personal
care items l

+Ps. 90.0 million
(US$ 4.5 million)
raised to distribute
protective equipment
to healthcare workers
in Mexico l

+3.8 million liters of beverages
donated in 10 countries
for frontline healthcare
professionals and vulnerable
communities l

URUG UA Y

ARGENTI NA

26,000 PCR COVID‑19
tests donated in
collaboration with
other stakeholders l

+500,000 liters of
sanitizing alcohol
distributed using our
logistics network l

+24,000 vulnerable employees transitioned to work-from-home arrangements l+650 temporary beds and intensive care units built in the Citibanamex Center in collaboration with our partners in Mexico l +1,100 advertising spaces used to communicate preventive health measures l+400,000 plastic face shields designed and manufactured by PTM for donation and sale l1st Mexican-made mechanical respirator designed with engineering expertise from Torrey l+3.15 million face masks donated to police and security forces l+6,700 cans of food and 12,000 face shields donated by Farmacias YZA to health personnel l+3,000 supplies from our Bara discount format stores donated to hospitals in Guanajuato, Aguascalientes, Jalisco and Querétaro l289 organizations supported through the OXXO’s “Rounding Up” your change program l+26,000 shopkeepers protected with plexiglass countertop shields lMEXICONICARAGUAECUADORCOLOMBIABRAZILPERUCHILE+8.1 tons of food from our Doña Tota fast-food restaurants donated through the Food Banks of Mexico l2020 ANNUAL REPORT FEMSADear
Shareholders:

We are proud of the swift and unified actions
of all our teams to develop a comprehensive
management response framework designed
to protect short-term results while maintaining
long-term goals.

The past year was one characterized by
many humanitarian and economic challenges
across the world. FEMSA faced these risks and
opportunities head on, as we are aware of the
important role we play – both as an economic
engine and as a force for social good – in the
regions and communities where we operate.

We are proud of the swift and unified actions
of all our teams to develop a comprehensive
management response framework designed to
protect short-term results while maintaining
long-term goals. Thanks to these efforts, we
emerged as a stronger company within the
robust business ecosystem in which we operate.
Some highlights of our COVID-19 response:

• Our top priority in 2020 was the

health, safety and wellbeing of our
people, customers and consumers. We
implemented work-from-home programs
for our employees, including more than
24,000 of them who had underlying health
conditions or other identified risk factors.

In other cases, we redefined protocols and
expanded infrastructure to support work-
from-home arrangements. For the essential
employees who kept our stores, stations
and facilities open to meet the needs of
our communities, we distributed personal
protective equipment and intensified all
on-site hygienic, disinfection and deep
cleaning standards. To extend protective
measures to our other areas of influence,
we implemented social distancing
measures in accordance with regulatory
guidelines and proactively made important
operational adjustments. For example,
across FEMSA Comercio, we added
plexiglass shields at checkout counters and
used nanotechnology to sanitize service
stations and public restrooms.

• In collaboration with stakeholder

partners, we came together in 2020
to give back to our neighbors and
communities in need. We were proud
to take a leadership role in Juntos por

José Antonio Fernández Carbajal
Executive Chairman of the Board

M. Eduardo Padilla Silva
Chief Executive Officer

Our top priority in 2020 was the
health, safety and wellbeing of our
people, customers and consumers.

2020 ANNUAL REPORT FEMSAla Salud, a public-private initiative to
protect community health in Mexico. With
contributions from governmental bodies
and nearly 600 companies, organizations
and academic institutions, the objective
of the program was to combat COVID-19
by increasing the availability of medical
equipment and supplies for hospital
personnel, security forces and the
employees, suppliers, customers and
consumers of participating companies.

FEMSA’s combined contributions to the
Juntos por la Salud initiative – as well as
many other initiatives during the year
– came from many parts of our diverse
organization. We are so proud of the
leadership of all our colleagues who came
together to contribute their ideas, talents,
time, resources and passion to help save
lives. The team at Torrey contributed in the
design and engineering expertise for the
development of the first
made mechanical respirator (completed
in only 10 weeks) and then Solistica helped
to transport and deliver mechanical
respirators and other medical supplies.
FEMSA Foundation was instrumental
in promoting the #pontecubrebocas
communications campaign to encourage
the correct way and societal normalization
of wearing masks to increase public safety
– messaging that was shared on television,
radio, print, and social media. At year-

100% Mexican-

2 0 2 0 A N N U A L R E P O R T F E M S A

end, Juntos por la Salud had mobilized
more than Ps. 1.4 billion (US$ 71.5 million)
in contributions from more than 33,000
individuals, benefiting 530 hospitals.

• Through a disciplined approach to financial

management, we ensured business
continuity by carefully evaluating capital
expenditures and responsibly preserving
working capital. We set up cash flow “control
towers” and dynamic scenario analyses for
each business unit, allowing us to maintain
precise visibility of cash levels in real time
while better visualizing and anticipating
potential areas of financial stress. Our
consolidated net debt position at year-end
was Ps. 81.0 billion (US$ 4.1 billion), and our
capex decreased 18.3% as we identified and
rationalized noncritical investments. FEMSA
business units followed similarly conservative
approaches. For example, Coca-Cola FEMSA’s
relentless focus on driving efficiencies
resulted in cost and expense savings of
Ps. 7.4 billion (US$ 0.4 billion) for the year.
Such efforts across our business units,
coupled with our conservative balance sheet
management and successful debt financings,
resulted in a solid year-end cash position at
FEMSA of more than Ps. 107.6 billion
(US$ 5.4 billion).

Each of these responsive actions – and
many more – align with FEMSA’s mission to
generate economic and social value through

In collaboration with
stakeholder partners,
we came together
in 2020 as a FEMSA
family to give back
to our neighbors and
communities in need.

2020 ANNUAL REPORT FEMSA

our companies and institutions. They also
underscore our commitment to sustainability,
in every sense of the definition – that is,
maintaining long-term growth and business
continuity despite disruptions, as well as going
further to reduce our environmental footprint
and promote community development. FEMSA
contributes to the United Nations Sustainable
Development Goals and, as a signatory of the
U.N. Global Compact (UNGC), we support its 10
Principles in the areas of human rights, labor,
environment and anti-corruption. By focusing on
environmental sustainability and labor inclusion
priorities today, we are ensuring longer-term
business continuity and success tomorrow.

Despite the challenges of the year’s macroeco-
nomic environment, we continued to execute
on our strategic vision for responsible capital
deployment in high growth, high return assets.

• Seeking to apply our capabilities in high-
frequency, process-enabled distribution,
and expand our footprint into markets
with favorable growth potential and
visibility, we acquired a majority controlling
interest in a new combined company that
brought together two market leaders in
the specialized distribution industry, with a
focus on janitorial and sanitary (“jan-san”)
supply solutions: WAXIE Sanitary Supply
and North American Corporation. During
the year, we completed significant steps in
their integration process, including bringing

in a new CEO to lead the combined
company and move forward on our growth
strategy for industry consolidation. In
late 2020, we took a couple of additional,
relevant steps to advance that strategy by
acquiring SW Plus and Southeastern Paper
Group, Inc., further expanding our U.S.
reach while continuing to build a national
distribution platform.

• We also continued to build our reach and
capabilities in Latin America. For example,
Solistica completed a full year as the
first fully integrated third-party logistics
solution provider in the Brazilian market
following the successful acquisition of AGV
last year. Similarly, following last year’s
announcement of FEMSA Comercio’s entry
into Brazil through Grupo Nós, our joint
venture with Raízen, the first OXXO store in
Brazil opened its doors to the public in the
city of Campinas in December 2020.

• Reflecting the challenging and complex
operating environment across our
company in 2020, total revenues decreased
2.7% from the previous year to
Ps. 493.0 billion (US$ 24.8 billion); income
from operations decreased 12.0% to
Ps. 41.5 billion (US$ 2.1 billion); and net
consolidated income decreased 86.6% to
Ps. 3.8 billion (US$ 0.2 billion). Net majority
loss per BD Unit was Ps. 0.54 in 2020
(US$ 0.27 per ADS).

Despite the
challenges of the
year’s macroeconomic
environment, we
continued to execute
on our strategic vision
for responsible capital
deployment in
high growth, high
return assets.

2020 ANNUAL REPORT FEMSA FEMSA Comercio felt the effects of pandemic-

driven reduced customer mobility, which
significantly impacted certain consumption
occasions and store segments. We faced broad
health-related operating restrictions on small
box retail formats, contributing to a slow pace of
recovery in OXXO stores. Many of the consumer
needs we serve – such as thirst or craving for a
snack or meal on-the-go – involve immediate,
spur-of-the-moment purchasing decisions, and
those categories were particularly exposed to
the lack of consumer mobility. Nevertheless,
same-store sales during the second half of the
year showed a gradual, but sustained trend of
recovery that stabilized in the final weeks of
December, though still below the levels of the
comparable period of 2019. Reduced mobility
also impacted the results of our Fuel Division,
while the Health Division had a strong year as
our operations in Mexico continued their strong
momentum and we catered to our customers’
health needs across markets.

Coca‑Cola FEMSA, having embarked on a
deep transformation to create a leaner, more
agile organization prior to the pandemic, was
well positioned to adapt to the challenges of the
year resiliently. We saw sequential operational
improvements during the year driven by the
gradually recovering consumer demand,
portfolio innovation and affordability initiatives,
and accelerated rollouts of new digital strategies.
Coca-Cola FEMSA also benefited from a
favorable environment for certain raw materials

2 0 2 0 A N N U A L R E P O R T F E M S A

and achieved strong efficiencies and expense
containment across operations, protecting
their profitability. Importantly, in support of our
sustainable development objectives, we are very
proud that Coca-Cola FEMSA issued its first green
bond in the international capital markets for
US$ 705 million priced at US Treasury +120 basis
points and a coupon of 1.85% and due 2032, the
largest for a Latin American Corporation and a
first for the Coca-Cola System.

We know that our resilience this year would
not have been possible without the remarkable
adaptability, agility and commitment from all of
FEMSA’s more than 320,000 people. We thank
our colleagues, as well as all stakeholders, for
their unwavering partnership and cooperation
with us throughout the year. To learn more
about the positive impacts we made together
as a team, we invite you to explore the rest
of this 2020 Annual Report, as well as our
accompanying 2020

Sustainability Content.

As we begin a new year, we are optimistic about
the prospects of a healthier, better tomorrow,
and we thank you for joining us as we continue
to work to move FEMSA forward. We wish you a
healthy and successful 2021.

José Antonio Fernández Carbajal

Executive Chairman of the Board

M. Eduardo Padilla Silva

Chief Executive Officer

While the second and third
quarters of 2020 were
challenging across FEMSA’s
operations, we began to
see consistent gradual
improvement across our
business units by the
fourth quarter.

2020 ANNUAL REPORT FEMSA2 0 2 0 A N N U A L R E P O R T F E M S A

FEMSA COMERCIO

The three divisions of FEMSA Comercio (FEMCO)—Proximity, Health

and Fuel— deliver economic and social value for all our stakeholders.

Our brands include OXXO proximity stores; drugstores (under the

brands Cruz Verde, Farmacias YZA, Moderna, Farmacon, Fybeca,

Sana Sana and Maicao beauty stores); and OXXO GAS service stations.

2020 ANNUAL REPORT FEMSA2020 ANNUAL REPORT FEMSACreating Social Value Across FEMSA Comercio

COVID‑19
Resilience

Human
Rights

Through our divisions we contribute to
the direct employment of more than
204,000 people across Latin America, deliver
close to 33.1 million products and services
and serve approximately 12.2 million
consumers every day.

An important part of our business model is
our commitment to sustainability. FEMCO
divisions conducted a comprehensive
update to their materiality assessment
in 2020 to identify the environmental,
social and governance (ESG) topics that
are most material to our business and our
stakeholders. These assessments confirmed
and validated our sustainability commitments
through setting new targets around climate
change, circular economy, gender equality
and community development. Also, our
divisions made significant progress during
the year in contributing to FEMSA’s corporate
goals and sustainability strategy by working
on initiatives and programs aligned with our
material topics.

The top priority for FEMSA Comercio (FEMCO) in 2020 was protecting our employees, customers and business operations. Business continuity was essential to be able to continue providing products and services to our consumers during the health emergency. In response to COVID-19, FEMCO maintained its leadership position in creating social value by addressing the needs of communities. We procured donations of food, medicines and healthcare supplies while supporting local initiatives to support economic recovery.Next, a second wave of social value creation was oriented towards global economic recovery and human rights. These efforts are in line with our broader Inclusion and Diversity (I&D) strategy, which is focused on providing job opportunities for young people, elderly and vulnerable populations, as well as and adopting an open culture that celebrates the authentic contributions of everyone’s unique talents. We promote full and productive employment and decent work for all people. In 2020, FEMSA joined the Tent Partnership for Refugees, a global non-profit coalition of more than 140 multinational companies working toward the economic integration of refugees by supporting dignified and formal employment opportunities. In partnership with Tent and the United Nations High Commissioner for Refugees (or ACNUR by its Spanish acronym) in Mexico, we hired more than 200 refugees in OXXO stores. Since 2005, more than 1,600 OXXO stores and OXXO GAS facilities have been recognized with the Gilberto Rincón Gallardo Inclusive Company Distinction, awarded by the Ministry of Labor and Social Security in Mexico, for their good labor practices related to equal opportunities, inclusion, development and non-discrimination of vulnerable populations. These achievements reflect our ambition to become a top employer and neighbor in our communities. For more information on the sustainability progress of the FEMSA Comercio Proximity, Health and Fuel Divisions, please visit our 2020 Sustainability Content. Gender EqualityDecent Work and Economic GrowthGood Health & Wellbeing2020 ANNUAL REPORT FEMSAProximity
Division

FEMSA Comercio’s Proximity Division
operates the largest chain of small-format
stores in Latin America and is the second
largest retailer, in terms of revenues, in
Mexico. Under the brand name, OXXO, our
aim is to deliver convenience and simplify the
lives of our customers.

Historically, one-stop shopping at OXXO has
meant responding to our customers’ busy
lives and on-the-go needs in a fast, simple
way. But in 2020, the pace of mobility slowed
down around the world. Many people paused
their normal commutes to work or school,
significant operating restrictions were put into
place by local governments and consumer
preferences shifted toward in-home food
consumption. Yet, with agility and resiliency,
we were able to keep the large majority of
stores in Mexico open during the pandemic to
meet our customers’ changing needs.

To ensure continued financial liquidity, we
focused on expense efficiencies and cost
containment, including moderating store
expansions, closing stores with marginal or
subpar productivity and adjusting opening
hours. We completed the year with 236 net
store additions.

Climate
Change

Circular
Economy

The Proximity Division continued to move toward FEMSA’s energy efficiency vision and corporate clean energy goal to mitigate climate
change. During 2020, we took the following climate actions:

Sustainability Progress

14,847 stores and
13 OXXO distribution
centers powered with
renewable wind energy

16,377 stores, 18 OXXO
distribution centers and
26 offices equipped with
smart energy systems

6,298 stores utilizing
solar control films
to regulate heating,
ventilation and air
conditioning systems

+35% reduction in store
energy consumption
through our Energy
Efficiency Program
compared to 2009 baseline

We also further expanded our circular economy objectives by:

Equipping 11,736
stores with waste
separation capabilities
and recycling bins

Recycling 16,657 used
OXXO stores uniforms
into other products

Reducing plastic bag
utilization by 70% below
2015 levels through the
“¡Sin Bolsa, Gracias!” (“No
bag, thank you!”) campaign

Recycling 1,599 tons
of office equipment and
furniture that reached its
end of life

To support COVID-19 relief, among many other collaborative initiatives across our proximity division, OXXO carried out more than
700 community development actions (focused on health, food and economic recovery). We allocated more than Ps. 100 million products
not marketed through the Mexican Food Bank Network and we invested more than Ps. 53.0 million (US$ 2.7 million) to mitigate pandemic
effects. This included providing a total of 3.15 million facemasks to healthcare workers and public security personnel, 9.3 million personal
health supplies to frontline workers and 34,000 pantry packages to those in need.

2020 ANNUAL REPORT FEMSA

Colombia
110

Chile
104

We also expanded the andatti product line
and launched a new
to offer customers premium coffee options
for at-home consumption.

e-commerce platform

We adjusted SKUs in our portfolio
to focus on health, hygiene,
groceries and self‑care. In response
to the new needs of our consumers

Mexico
19,295

Peru
57

Proximity Division
Points of Sale 2020
Total: 19,566

Redefining Food, Beverage and
Self‑Care Convenience

As foot traffic in stores dipped and same-
store sales contracted in 2020, we adapted
our value proposition to best meet customer
needs. For example:

We revised our strategy for
fresh, fast food products and
other perishable categories

to ensure safety while preserving
profitability. This included reducing the
operating hours of our popular freshly
prepared food brand ¡O’Sabor! but expanding
its offerings to offer attractive new options for
in-home consumption, such as hearty stews.
For coffee, we restricted the service hours and
varieties and replaced traditional self-serve
supplies with pre-packaged kits at check-out.

We expanded our selection of
alcoholic beverages, increasing
sales in adjacent categories at
OXXO such as the Wines & Spirits

category. Following temporary government-
mandated interruptions of beer production
across Mexico, we saw an opportunity to
serve consumers in a new way. By working
closely with suppliers on packaging and
flavors exclusive to OXXO, we made wider
selections available for affordable new
consumption occasions. As supply chain
disruptions for beer eased throughout the
year, we continued to offer brands produced
and distributed by Heineken Mexico and
increasingly, by Grupo Modelo – currently
both available in more than half of our stores
in Mexico.

and our communities, we increased the
availability of essential pantry items (such
as cooking oil and toilet paper) as well as
personal protection (such as sanitizing gels,
disinfectant wipes and face masks). We also
created new displays for these items in
high-visibility exhibition zones throughout
the store.

We also expanded the
andatti product line
and launched a new
e‑commerce platform
to offer customers
premium coffee
options for at‑home
consumption.

2020 ANNUAL REPORT FEMSA
Building Trust through Financial Inclusion

At OXXO, we are committed to helping our
customers conveniently execute their day-
to-day financial transactions in one place. As
consumer habits and needs changed during
the pandemic, and given a largely cash-
dependent Mexican economy, we achieved
strong performance in real-time service
payments. Currently, customers can access
more than 7,000 services in an OXXO store,
including making payments for utility bills
and basic household needs, such as internet,
electricity and streaming entertainment.

We expanded our OXXO PAY service, through
which customers can make cash payments in
real time for digital goods. For example, users
can now initiate or renew their subscriptions
online to services like Spotify Premium and
pay in cash at any OXXO store.

Opportunities in the telecommunications
industry in Mexico this year led us to
continue integrating partnerships with
mobile operators and launch a new basic
smartphone at an accessible price, Kaios
Phone – helping our customers stay
connected and supporting the digital
inclusion of more people in our community.

Customers can
access more than
7,000 services in an
OXXO store, including
making payments for
utility bills and basic
household needs.

Additionally, through a new alliance with
Amazon México, users that do not have a
credit or debit card can now access millions
of products on amazon.com.mx and pay
within 48 hours at their local OXXO store.

While in the store, customers can also make
deposits into accounts at correspondent bank
partners, send remittances and prepay their
mobile phones. For example:

• As part of our commitment to

communities and generating economic
and social value, we increased the
number of our partnerships with
correspondent financial institutions.
We are now connected to 18 banks and
12 SOFIPOS (or Sociedad Financiera
Popular financial entities) and we offer
the ability to make cash withdrawals
from eight partner banks.

• We announced a strategic partnership

with
Ria Money Transfer, through
which OXXO customers can receive
up to $ 100 USD per transaction at
advantageous, transparent exchange
rates through Ria’s network of
approximately 402,000 locations in more
than 150 countries. Customers can also
withdraw up to $ 2,500 Mexican pesos in
cash at any OXXO store.

2020 ANNUAL REPORT FEMSA
Strengthening our Digital Strategy
Beyond supporting the digital economy in
Mexico, we are also accelerating our own
digital transformation. We expanded the reach
of our “Mi OXXO” home delivery concept –
which had previously begun as a pilot program
within an enclosed region in the city of
Monterrey – to cover the entire metropolitan
area of greater Monterrey. Elsewhere in
Mexico, we activated a new web service in
association with regional distribution partners
to facilitate a home delivery offering in the
same way and we will continue to build this
program out moving forward.

As a cornerstone of our ongoing consumer
relations strategy, in 2020 we launched a new
loyalty program in select regions in Mexico,
following insights from earlier pilot programs.
Consisting of both a physical card and an
app for smart phones, the program allows
us to optimize consumer communication
campaigns while leveraging data and analytics
to inform and personalize promotions
and rewards that resonate with consumer
behavior and purchasing decisions.

Expanding to New Markets
We continue to strengthen our position
outside of Mexico and leverage our scalable
business platform in new markets. This
includes utilizing our expertise in retail

store formats, technology and operational
practices, which will allow us to continue to
achieve sustainable growth.

In 2020, we opened our first OXXO store
in Brazil, planting the seeds for the future
growth of the OXXO brand in this large,
key market. Our value proposition for
the Brazilian consumer maintains the
flagship elements of the chain that have
been so successful in Mexico, while
also “regionalizing” the stores to deliver
the most relevant, differentiated and
highly competitive solutions that cater
to Brazilians’ tastes. This move follows
our 2019 acquisition of 50% of Raízen
Conveniências, comprised of franchised or
licensed Shell Select convenience stores
within the network of Raízen gas stations.
In total, we opened 96 new stores in Brazil
in 2020, including 86 franchised Shell Select
stores and 10 company-operated stores
(comprised of both OXXO and Shell Select
stores). We also opened our first district
office and distribution center in the city
of Campinas, near São Paulo. Looking
ahead, we will continue to strengthen our
international presence by continuing to
build the OXXO brand in Brazil and across
our South American markets, as well as by
increasing the number of Shell Select brand
convenience stores at Raízen gas stations.

We activated a
new web service
in association with
regional distribution
partners to facilitate
home delivery.

2020 ANNUAL REPORT FEMSAHealth
Division

FEMSA Comercio’s Health Division responds
to the healthcare needs of the communities
where we have a presence. Through a growing
network of drugstores and related operations,
we distribute and sell patented and generic
pharmaceutical drugs, beauty products,
medical supplies and wellness and personal
care products, among other categories. FEMSA
Comercio started to build the Health Division
in 2012 and as of 2020, our brands now
represent the second largest pharmacy chain
in Latin America in terms of units.

This year healthcare was top of mind for the
world. Our pharmacies played an essential
role in ensuring that people across Latin

Ecuador

693

Colombia

444

México

1,331

Chile*
900

Health Division Points of Sale 2020
Total: 3,368

* Including 172 Maicao beauty stores

America were able to access important
medicines, sanitizers and other self-care and
immunity-boosting supplies. For this reason,
despite restrictions on mobility, ensuring
business continuity at our pharmacies was an
extremely important priority.

To maintain a healthy financial position
amidst the economic uncertainties of the
year, we slowed down our store expansion
rate, particularly in Colombia and Ecuador.
We expanded our drugstore count by 207 net
new stores to reach a total of 3,368 open units
across our territories as of year-end. Despite
the challenging year, our overall market share
increased in different countries, such as Mexico
and Colombia, reflecting the adaptability and
agility of the organization in response to new
business risks and opportunities.

Climate
Change

Circular
Economy

COVID‑19
Resilience

In 2020, the Health Division continued
to support FEMSA’s Sustainability
Strategy by accelerating climate
actions, including in-store energy
efficiency and renewable energy
goals. 640 pharmacies are now
powered by renewable energy, and
in Mexico, we reduced our energy
consumption by 3.6% below the prior
year by implementing strategies
such as expanding LED illumination
systems, among other examples.

In alignment with FEMSA’s zero
waste to landfill goal by 2030, we
responsibly managed our different
types of waste, including recycling
750 tons of waste from our
distribution centers.

In addition to supporting our
neighbors and communities through
the portfolio of health products and
services we offer, we implemented
other social value initiatives
throughout the year, including the
donation of medicines, food and
personal protection supplies. Through
the “Redondeo” or “Dona tu Vuelto”
(Donate your Change) programs,
customer donations are directed to
support institutions that work for
the benefit of society. In 2020, these
programs at Farmacias YZA in Mexico
channeled Ps. 4.45 million to
local institutions.

Finally, in collaboration with FEMSA
Foundation, Nestlé and other
partners, Farmacias YZA took a
leadership role in addressing the
issue of food insecurity in vulnerable
communities in Mexico in 2020. Again,
thanks to the generosity of customer
donations, volunteers helped to safely
distribute food and other pantry
staples for children and families, as
well as share tips and key messages
about COVID-19 safety and preventive
health measures.

Sustainability ProgressClimateActionAffordable and Clean EnergyResponsible Consumptionand Production2020 ANNUAL REPORT FEMSA
Strengthening and Scaling Up
the Organization

As of January 2020, we now own 100%
of our health platforms in Mexico and
South America, which represents another
successful milestone in our long-term effort
to continue gaining relevant scale and brand
recognition by building a leading regional
drugstore platform. This move has also been
an important foundation for strengthening
the synergies of our organization and
continuing to consolidate a fragmented
industry. As we gradually implement a more
standardized business model and fine-tune
it as needed across markets, we are building
a solid platform for future regional growth.
Full ownership status has also allowed us
to strategically deploy talent in different
parts of the platform and to establish a free
flow of best practices across brands and
countries. For example, we are establishing
a consistent leadership approach that is
increasing efficiencies and margins, even
in a year characterized by a challenging
macroeconomic environment.

Enhancing our Customer Value Proposition
In 2020, we continued to enhance our
customer value proposition in several

important ways:

Building community trust: We
pride ourselves on being trusted
by the communities we serve.

In Latin America, where healthcare costs are
often out-of-pocket and doctor visits may be
unaffordable, visiting the local pharmacy for
over-the-counter medicines and healthcare
advice can be invaluable, and we take this
responsibility very seriously. 100% of our
store team leaders and pharmacists across
all markets and brands are fully trained on
an ongoing basis to assist our customers.
We also ensure a consistent standard of care
across markets and brands, which allows
us to efficiently staff pharmacists wherever
talent is needed in the community.

Loyalty program: Our loyalty
programs not only reward
customers with significant
product discounts that support

health and wellness needs, but also inform
our product sourcing and geographic
distribution decisions. In Chile, as of 2020,
6.3 million customers are enrolled in our
loyalty program, representing 50% of the
country’s total population older than 18
years of age, and driving approximately 50%
of our pharmacy sales. We digitally deliver
approximately 300 personalized campaigns
per month to program members, thereby
increasing product demand and making
it easier and more affordable for them to
stay engaged with our stores and adhere
to healthcare treatments as needed. On
average, a program customer visits our stores
more frequently and spends more than

In Chile, as of
2020, 6.3 million
customers are
enrolled in our
loyalty program.

2020 ANNUAL REPORT FEMSA
our customers time, but in the context of
COVID-19, have helped to increase safety
and reduce levels of physical exposure in
stores. We accelerated developments in these
programs in 2020, including strengthening
our e-commerce, digital marketing and online
order management system capabilities, which
increased sales growth throughout the year.
Looking ahead, the development of our digital
ecosystem – including the development of an
app and a health marketplace for expanded
offerings – will remain our top strategic priority
in Chile, Mexico, Colombia and Ecuador.

non-members by a factor of approximately
four. Loyalty program insights help us offer
a broader assortment of product options
for our consumers. Keeping connected and
engaged in 2020 helped us to effectively
communicate important preventive COVID-19
guidance, as well as offer specialized
products, services and information to support
health and immunity, strengthening our
leadership in the market.

Digital strategy: An important
part of our transformation of the
customer pharmacy experience
is through the development of
a digital ecosystem in which

we can provide personalized omnichannel
interactions on a technological platform that
is scalable and unique in the region. Prior
to the pandemic, we had begun to offer
several new digital capabilities, including a
“click-and-collect” service (in which customers
click on the products they need via our
website or app, and collect their products at
a convenient location); a last mile delivery
service; and full visibility into our prescription
inventories. These advantages not only save

An important part of
our transformation
of the customer
pharmacy experience
is through the
development of a
digital ecosystem.

2020 ANNUAL REPORT FEMSAFuel
Division

FEMSA Comercio’s Fuel Division operates the
OXXO GAS brand of retail service stations
across 17 states in Mexico, selling quality fuels
(gasoline and diesel) and lubricants. OXXO
GAS’ value proposition is based on always
providing the customer with a superior and
distinctive service, supported by the values
of honesty and trust.

Mobility restrictions related to COVID-19
caused a severe contraction in vehicle usage
and consequently an impact on the sales of
OXXO GAS. However, being designated as an
essential activity, OXXO GAS remained open
during the contingency while implementing
sanitization protocols in all our service
stations in order to safeguard both our
employees and customers.

Like we did in the Proximity and Health
Divisions given economic conditions, we
slowed the unit expansion rate of the Fuel
Division, adding twelve net new gas stations
during the year. Despite this deceleration in
our sustainable growth plans, as of the end
of 2020, OXXO GAS remained the largest
player in the service station market in Mexico,
operating a total of 558 service stations out
of a total of more than 12,770 stations across
the country.

Climate
Change

Water
Stewardship

Circular
Economy

COVID‑19
Resilience

Competitive Differentiation
In Mexico, the fuel consumer is
used to receiving a full-service
experience. For this reason,
at OXXO GAS, we focus on

differentiation by delivering the industry’s
most courteous, efficient and reliable customer
service, making it a fundamental aspect of
our value proposition. We are able to deliver
this experience thanks to our employees, who
are empowered, well trained and committed
to upholding our organizational culture in
which the customer comes first. Moreover,
we are committed to offering our consumers
convenient locations, with safe and clean
facilities and excellent sales promotions.

OXXO GAS’ value
proposition is based
on always providing
the customer with a
superior and distinctive
service, supported by
the values of honesty
and trust.

Sustainability ProgressAs part of our commitments to climate action and water stewardship, 32 service stations are powered by clean and renewable energy.100% of all stations have energy efficient LED illumination systems; and 100% of our stations have waterless urinals in restrooms. Our circular economy efforts are focused on organizing efficient waste sorting and promoting recycling, and 100% of our stations have specific areas where waste is collected and sorted for proper disposal. To support FEMSA’s wider COVID-19 response strategy, OXXO GAS launched the Un Litro Con Causa (A Liter with a Cause) initiative, through which we donated more than 32,000 liters of fuel to the Mexican Red Cross to support the transfer of people with COVID-19 symptoms located in large cities across six states in Mexico, benefiting more than 600 ambulances.Responsible Consumptionand ProductionClimateActionClean Water and SanitationAffordable and Clean Energy2020 ANNUAL REPORT FEMSA

Despite the challenges
faced during the year,
we continued to develop
new projects focused
on strengthening our
customer experience and
differentiating from
our competition.

In the context of the pandemic, we reinforced
our communication protocols with all
employees to strengthen preventive health
measures both inside and outside of our
OXXO GAS service stations. Employees were
trained to make the stations a safe place for
everyone. For example, nanotechnology was
utilized to regularly sanitize service stations
and each gas pump was equipped with
sanitizing products to keep all high contact
areas clean.

Looking ahead, our strategy is to continue
growing and innovating to maintain our
status as a leading brand in the fuel industry
in Mexico while continuing to create value for
all our stakeholders. Our philosophy and our
values-based culture commit us to satisfying
our consumers through excellent promotions,
accessibility, proximity, safety, reliability and
of course, full liters. We aim to grow our
footprint and to bring our value proposition
of quality service to more Mexicans at all
OXXO GAS stations.

Given the macroeconomic challenges
during the year, including reduced mobility
overall due to the pandemic, we also took
the opportunity to develop new projects
focused on offering superior services and
differentiating ourselves further from our
competition. Among the new initiatives, we
implemented a new contactless point of sale
process that streamlines the operation to
help improve the efficiency of the customer
interaction at our service stations. New
functionalities include a faster and more
agile billing process carried out in real-time at
the pump. We also launched a new app that
allows users to locate our service stations,
check prices, confirm amenities offered and
access billing options, offering yet another
flexible option to meet the needs of
our customers.

Supporting our Employees
Our employees are trained and
equipped with the tools they need
to succeed, and we implement a
variety of programs that support

their personal and professional growth.
Through targeted training and coaching
programs—along with above-industry wages
and compensation structures—we support
employee development and reduce turnover.

2 0 2 0 A N N U A L R E P O R T F E M S A

2020 ANNUAL REPORT FEMSA

2 0 2 0 A N N U A L R E P O R T F E M S A

2626

COCA‑COLA FEMSA

Coca-Cola FEMSA has overcome crises before, demonstrating

the ability to successfully adapt to and capitalize on dynamic

environments to emerge a stronger company.

This year, we acted swiftly to develop a comprehensive
management framework to guide our COVID-19
mitigation actions and comeback plans. This allowed us to
protect our short-term results while fostering our
long-term goals. Our top priority was – and remains –
the health and wellbeing of our employees, customers
and consumers. As the countries in which we operate
began implementing restrictive measures at different
paces and levels, we worked closely with FEMSA,
The Coca-Cola Company and the rest of the global Coca-Cola
System to share and adopt the best practices that allowed
us to successfully navigate the challenging environment.

By embarking on a deep transformation to create a
leaner, more agile organization before the pandemic
with the rollout of our Fuel for Growth program,
Coca-Cola FEMSA was better positioned to adapt to
the fluid market environment of 2020 in a nimbler
and more disciplined way. Keeping
in mind the importance of our
purpose to “Refresh the world,”
we utilized four strategic
priorities to facilitate
our transformation and
growth as an integrated
commercial beverage
platform:

• Build a portfolio for

every occasion

• Drive an overall digital

transformation

• Ensure business sustainability

• Foster a collaborative culture

The One KOF strategic framework:
One Vision, One Platform, One Future

COVID‑19
Resilience

The 5Cs of Caring
Among many other efforts and collaborations, Coca-Cola FEMSA focused our mitigation actions
in five key areas to ensure business continuity.

See the video here

CollaboratorsProtect the health and wellbeing of our entire workforce. We reinforced health, sanitation and hygiene protocols for all employees and provided Personal Protective Equipment (PPE) to our manufacturing, commercial and distribution teams. We implemented daily monitoring and communication protocols across our organization, and extended health recommendations to our employees’ home environment.ConsumersContinue to offer their beverage of choice anytime, anywhere. To reach consumers in new ways, we prioritized and simplified our portfolio, leveraged affordability, expanded options for platforms and packages and reinforced our digital presence by leveraging direct-to-consumer channels. CommunitiesClosely support our communities through clear social initiatives. For example, we donated more than 3.8 million liters of beverages across our territories and worked with industry partners to bolster healthcare efforts in vulnerable communities. Additionally, to support Mexico City’s Ministry of Health, we teamed up with The Coca-Cola Company and other organizations in the #SumamosPorMexico initiative to transform the Citibanamex Convention Center into a temporary healthcare center. We also collaborated with health authorities to leverage our marketing spaces and trucks to communicate preventive measures. In Brazil, we collaborated with local stakeholders to distribute more than 500,000 liters of sanitizing alcohol and to donate 26,000 COVID-19 tests focused on frontline healthcare professionals. ClientsRemain close and continue to serve them in the best possible way. Through programs such as “Mi Tienda Segura” across Latin America and “Movimento Nos” in Brazil, we contributed to industry efforts to help more than 50,000 “mom & pop” shops re-open their businesses safely, offering them supplies and protocol guidance. In Mexico, we delivered more than 25,000 protective plexiglass shields for store counters and 100,000 masks to traditional trade clients. Cash flowProactively strengthen our balance sheet and protect our cash flow. With a disciplined approach to capital allocation, we prioritized the security of our cash position by developing control towers to optimize our cash sources and uses. We refinanced long-term debt, aggressively targeted savings opportunities and selectively prioritized capital expenditures, enabling us to solidify our financial position in the face of a challenging environment.2020 ANNUAL REPORT FEMSA

We navigated the year with resiliency and
creativity to ensure solid short- and long-
term results and opportunities. While it
was difficult to completely avoid the effects
of COVID-19 health-related measures on
business results, we were able to anticipate
changing consumer behaviors throughout the
year to successfully offset these impacts.

Our volume decreased 2.5% to 3.3 billion unit
cases, and total revenues decreased 5.6% to
Ps. 183.6 billion (US$ 9.2 billion). However,
operating margin increased 60 basis points to
an operating income of Ps. 25.2 billion (US$ 1.2
billion), driven mainly by declining PET costs,
favorable currency hedging initiatives and
our operators’ outstanding ability to generate
savings and efficiencies.

PENDIENTE

We are consolidating
a winning total
beverage portfolio to
satisfy evolving tastes
and lifestyles.

Building a Portfolio
for Every Occasion

Guided by our obsessive consumer focus,
we are consolidating a winning total beverage
portfolio to satisfy evolving tastes and
lifestyles. We are improving our competitive
position in the still beverages category and
expanding our water portfolio to establish
consistent leadership across this growing
category. We are also driving sparkling
beverage growth by leveraging portfolio
innovation and affordability, while driving our
low- and no-sugar beverage portfolio ahead
of consumer trends.

Portfolio Innovation
In 2020, we saw mix shifts as lockdowns
and social distancing measures generated
declines in on-the-go consumption and
reshaped purchase occasions. As consumers
increased at-home consumption, we
responded by developing new packaging
innovations and expanding home delivery
routes. In Mexico, our home delivery
program, “Coca-Cola en tu hogar,” grew double
digits from the prior year. We also further
diversified our portfolio to capture market
share in the growing hydration, nutrition
and energy categories, while entering the
alcoholic ready-to-drink category.

2020 ANNUAL REPORT FEMSA

Examples of Portfolio Innovation

Topo Chico:
a premium sparkling mineral water
that is now part of our portfolio
in Mexico, which grew at an
impressive pace, setting the stage for
continuous growth in the sparkling
water category.

Topo Chico Hard Seltzer:
a premium offering in Latin
America that represents the first
step by the Coca-Cola System into
the alcoholic ready-to-drink space
in the region.

Affordability
With the pandemic came economic
uncertainty around the world. Knowing
our consumers were facing challenging
environments, we prioritized and simplified
our portfolio to offer more affordable options
across categories, and responded swiftly to
increased demand for affordable single-serve
bottles, multipacks and multi-serve returnable
presentations. In 2020, returnables grew
double-digits relative to the prior year across
our key markets. In Argentina, Colombia,
Mexico and Uruguay, we also introduced
the universal bottle presentation, a multi-
serve PET bottle with the flexibility to offer
affordability to our consumers through a
returnable bottle that can be exchanged for
returnable presentations of Coca-Cola, Sprite,
Fanta or Valle Frut (a non-carbonated fruit-
based beverage), successfully expanding our
affordability with returnables to our flavored
sparkling and still categories.

We prioritized
and simplified our
portfolio to offer
more affordable
options across
categories.

To incentivize and accelerate “easy”
transactions, we also continued to execute
on our Magic Price Points strategy, which
conveniently prices single-serve beverages at
the value of a single common coin or bill.

2020 ANNUAL REPORT FEMSADriving an Overall
Digital Transformation

Our second strategic priority in 2020 was to
deepen our ongoing digital transformation
and omnichannel capabilities to fulfill
our vision of becoming a fully digital,
interconnected, agile and flexible platform.
This not only included internal automations
such as scaling and optimizing human
resources and finance processes, but
deploying new solutions for order taking,
customer care, route-to-market and logistics
models. When COVID-19 hit, we leveraged
our omnichannel strategy and capabilities –
including accelerating planned technology
rollouts – to reduce physical interactions and
accept more orders through digital channels
and B2B platforms. In total, our digital
channels grew more than 75% year-over-year
on a consolidated basis.

Our new WhatsApp-based chatbot feature
for accepting orders digitally was rolled
out in Brazil and Mexico and the number
of orders placed through this channel
climbed exponentially throughout the year.
These applications have fully automated
functionality, offering the most convenient
and efficient selling windows for our clients –
24 hours a day, 7 days a week. As of year-end,
we had more than 270,000 active customers
registered with us on WhatsApp in Brazil and
Mexico. By the end of 2020, we were digitally
accepting as many as 15,000 orders per day
and growing – the equivalent of having more
than 200 additional salespeople making
customer visits.

In total, our digital
channels grew
more than 75%
year‑over‑year on a
consolidated basis.

2020 ANNUAL REPORT FEMSA
Ensuring Business
Sustainability

Our third strategic driver in 2020 focused on our environmental
sustainability agenda. We strengthened key performance indicators
throughout the year and met our 2020 goals on time, specifically:

Water
Stewardship

Improved our water-use ratio per liter of
beverage produced, from 1.52 liters in 2019
to 1.49 in 2020– an industry benchmark.
We also returned to the
environment more than
100% of water used
in the production of
beverages in Argentina,
Brazil, Central America,
Colombia and Mexico.

Circular
Economy

Increased our use of recycled PET
from 24% in 2019 to 29% in 2020,
exceeding our 2020 target of 25%.

Climate
Change

Expanded the use of clean energy in our
manufacturing facilities in Mexico from
71% in 2019 to complete eight months above
85% in 2020 and peaking
at 96% by year-end, thus
meeting our original goal
of 85%.

Having achieved our 2020 sustainability
goals, we began working on more ambitious
future objectives. We confirmed our risks
and opportunities by completing a revised
materiality analysis to inform our priorities.
We became the first Mexican company and
the third Latin American company to achieve
the approval of the
Science Based Targets
initiative (SBTi) for our 2030 greenhouse gas
(GHG) emissions reduction goals. We now
have a clearly-defined, third party-approved
pathway to reduce our GHG emissions in
line with what is necessary to meet the goals
of the Paris Agreement, including limiting
global warming to well-below 2°C above
pre-industrial levels. We also issued our first
ever green bond in the international capital
markets for US$705 million due in 2032,
representing the largest for a Latin American
corporation and a first for the Coca-Cola
System. View our Green Bond Framework

here.

We became the first Mexican
company and the third
Latin American company
to achieve the approval of
the Science Based Targets
initiative (SBTi) for our
2030 greenhouse gas (GHG)
emissions reduction goals.

2020 ANNUAL REPORT FEMSA

Looking ahead, we intend to allocate an amount equal to the net proceeds from the green bond offering to finance eligible green
projects in three categories where we know we can contribute the most to the United Nations Sustainable Development Goals:

Climate
action

Climate action:
Our new SBTi-approved 2030
Emissions Reduction Plan aims
to drive positive environmental
change across our entire value
chain to:

• Reduce absolute scope

1 and 2 GHG emissions by
50% below 2015 levels

• Reduce absolute scope 3 GHG
emissions by 20% below
2015 levels

Affordable and
Clean Energy

•

Increase annual sourcing of
renewable energy
to 100%

Water
stewardship

Water stewardship:
We will seek opportunities to
use water more efficiently and
to further protect water security
in the territories where we
operate. By 2030, we will continue
to return to the environment the
same amount, or more, of
water used in the production
of beverages.

Responsible
Consumption
and Production

Circular economy:
In alignment with FEMSA’s Zero
Waste to Landfill goal, as of 2020,
65% of our bottling plants have
earned Zero Waste to Landfill
certification, including 100% of our
manufacturing facilities in Mexico.
We also remain committed to
“World Without Waste”, the global
initiative led by The Coca-Cola
Company, which includes 2030
targets to collect and help recycle
the equivalent of 100% of the
primary packaging we place in the
market, as well as integrating
50% of recycled PET resin into
our bottles.

In 2020, Coca-Cola FEMSA was the only Latin American company in the
beverage industry included in the
Markets Index for the eighth consecutive year, and is part of the Dow Jones
Sustainability MILA (Mercado Integrado Latinoamericano) Pacific Alliance
Index for the fourth consecutive year since its creation. We are also proud
to be included in the 2021 S&P Sustainability Yearbook, the
FTSE4Good
Emerging Index, the new

S&P/BMV Total Mexico ESG Index and the

Dow Jones SustainabilityTM Emerging

Bloomberg Gender-Equality Index.

2020 ANNUAL REPORT FEMSA

Fostering a
Collaborative Culture

Our fourth strategic priority in 2020 – and
the final building block of our foundation
for success – was nurturing a collaborative,
value-driven culture for all employees. In
2020, we continued the important work
we first embarked on in 2019 to create a
leaner and more agile organization fully
focused on consumers. As part of our
People 4 Growth area of transformation,
for example, we continued to focus on
a series of functionalization initiatives
for key departments, intended to better
align regional strategies and more easily
share best practices. We strengthened our
Human Resources organizational model
by implementing a labor risk methodology
to understand the changing needs of our
people, inform new ways of working and
mitigate identified gaps.

We also continued to deploy our “KOF DNA,”
a model that guides our people with the
tools and capabilities they need to succeed.
Toward this end, we improved communication
channels through new digital optimization
processes and launched a series of
companywide engagement surveys.

Among the four values that make up the
KOF DNA - Operational excellence, Owners
mentality, People first, and Agile decisions –
we truly brought the “People first” mentality
to life in 2020 through the many actions we
undertook to ensure the safety, wellness,
productivity, cohesion and communication
of our people. We also focused on “Agile
decisions” to empower our management
teams, build their leadership capabilities
and equip them to face the year’s challenges
resiliently and resolutely.

For more information, please visit

Coca-Cola FEMSA’s 2020 Annual Report.

In 2020, we continued the
important work we first embarked
on in 2019 to create a leaner and
more agile organization fully
focused on consumers.

2020 ANNUAL REPORT FEMSA

2 0 2 0 A N N U A L R E P O R T F E M S A

FEMSA STRATEGIC BUSINESSES

FEMSA’s strategic business companies are leaders in

their industries or sectors, playing a vital role in the

communities where they operate.

Deploying industry-leading capabilities and
cost-effective strategies that amplify FEMSA’s
competitive advantage, these businesses
provide logistics and transportation; specialized
janitorial, cleaning and sanitation product
distribution; cooling and refrigeration systems;
and foodservice solutions. Across each of these
businesses, we prioritize the development
and integration of low-carbon products and
eco-efficiency services, such as increasing the
content of recycled materials and identifying
energy-saving solutions and opportunities.

In 2020, FEMSA Strategic Businesses
contributed in different ways to the needs of
the company and to support the community
during the COVID-19 pandemic. Through deep
experience, high performance engineering
capabilities and a spirit of innovation, our
employees contributed on-the-ground
solutions to those in need, including the
design and delivery of a new mechanical
respirator for critical patients in need of
respiratory support.

The Mission to Save Lives

COVID‑19
Resilience

After Mexico recorded its first case of the coronavirus at the end
of February 2020, the demand for medical supplies – including
masks, plastic face shields and mechanical respirators – grew
quickly, despite limited supplies. To address this critical need,

Juntos por la Salud was launched as a public-private initiative

to protect the health of hospital personnel, Mexican security
forces, and the employees, suppliers, customers and consumers
of participating companies and organizations. As part of this
effort, the Secretaría de Relaciones Exteriores (Ministry of Foreign
Affairs) and the Salvador Zubirán National Institute of Medical
INCMNSZ, by its Spanish acronym)
Sciences and Nutrition (
called on private industry to design a mechanical respirator to
be manufactured in Mexico. When FEMSA was presented with
the opportunity to save lives in our community, there was no
hesitation in answering the call of duty. In addition to the FEMSA
Foundation, we also tapped FEMSA Strategic Businesses to take
a leadership role, joining a team of 16 other companies and
academic institutions, including Metalsa, GSE Biomedical, and the
Tecnológico de Monterrey.

“Without a doubt, of all the learnings, the biggest one
that I take away is that large companies can come
together, work as a team and act with agility when
the objective is clear and strong - when we do it for
our community.”

Salvador Almaguer Rentería

Director of Operations of AlPunto Food Service.

In a span of 10 weeks, the group combined their talents to design,
produce and secure approvals for the low-cost, 100% Mexican
made, automatic VSZ-20-2 model mechanical respirator. Torrey,
focused on the manufacture of food processing equipment,
transformed itself to be able to design a completely new type
of product with many specialized parts. Imbera supported the
investigation of mechanical ventilation for critical patients and
REPARE contributed to setting up the structure of a post-sale
technical support service. In partnership with other engineers and
medical advisors from the automotive, biomedical and academic
arenas, the FEMSA Strategic Businesses team contributed to several
differentiating features in the final product, including a direct
connection to an oxygen tank to avoid dependence on wall outlets;
an intuitive interface requiring minimal training; and a specialized
alarm and data tracking system to ensure reliable diagnosis and
patient monitoring.

The first set of mechanical respirators were manufactured for
public hospitals in Mexico beginning in August 2020. Since then,
more than 125
mechanical respirators have been delivered
to clinics in Mexico and at least eight more to countries in Central
America and the Caribbean. Once the mechanical respirators
were ready, Solistica took the lead in transporting and delivering
the prototypes and finished products to waiting hospitals. In total,
Solistica traveled more than 25,100 kilometers to deliver important
medical equipment and supplies for COVID-19 relief in support
#ContagiaSolidaridad
of both the
initiatives. In addition, Solistica delivered nearly 36,000 wellbeing
kits (including face masks, sanitizing gel and medicines) to
hospitals in Mexico through the

#JuntosporlaSalud and

IMSS-Bienestar program.

2020 ANNUAL REPORT FEMSA
Logistics

Solistica is a leading third-party logistics
(3PL) solution provider for Latin America,
serving more than 4,000 customers in seven
countries across diverse industries, such as:
pharmaceuticals, automotive, technology
and consumer goods. Our more than 22,000
employees offer comprehensive solutions
in three areas of expertise: Transportation,
Warehousing and Other Value Added
Services. Approximately 30% of our business
is made up of the services we deliver to
FEMSA companies.

Solistica continues to advance our vision
of being the preferred 3PL partner in
Latin America, recognized for our regional
expertise and innovative solutions, and
for consistently exceeding customer
expectations. We continue to advance this
vision by leveraging expert talent in the
region and consolidating our capabilities
and infrastructure.

Following the acquisition of AGV in 2019,
Solistica greatly expanded our warehousing
and distribution capabilities in Brazil, making
us the first fully integrated 3PL solution
provider in the Brazilian market. This year,
by leveraging the synergies, gains and
opportunities that this industry milestone
has provided, we have further unified our

new capabilities to significantly enhance
our customer value proposition in the Latin
America region.

Operational Effectiveness
and Business Continuity
In 2020, COVID-19 affected the logistics
industry, from disruptions in global supply
chains and border closures to new safety
protocols amidst a sharp rise in e-commerce.
By taking bold steps to enhance our customer
value proposition through our operational
effectiveness model prior to the pandemic,
we were well positioned to respond to this
year’s challenges with resilience. This model
strengthens and enables four key areas of
excellence across our organization: safety,
health and environmental; quality and
processes; performance management;
and continuous improvement. Having this
strong foundation also allowed us to focus on
business continuity to ensure that all cargo
entrusted to us reached its destination safely
and on time. We aligned basic standards across
geographies, adapted operational resources to
meet the most pressing needs of the business,
strengthened cost discipline to manage risks
and cash flow, and used scenario-based stress
tests to inform financial planning.

CUSTOMER

To support our customers, we maintained
close communication and developed flexible
transport and storage solutions, including
establishing new routes or temporarily

Solistica’s Business Model ensures
cross-functional collaboration
and alignment to deliver a unified
offering as a single team.

2020 ANNUAL REPORT FEMSA

reassigning services. For example, in Brazil
and Colombia, as several clients suspended
operations, we reallocated employees to
maintain their jobs until operations resumed
in the third quarter.

Sustainability Progress and our
Commitment to Safety
At Solistica, we have always been committed
to ensuring the safety of all our employees
and everyone connected to the supply
chains that we support. During 2020, we
implemented two programs for more than
2,000 middle managers in all Solistica regions
and cross-functional areas. The first, “ZEIF,”
is a culture building program to strengthen
safety behaviors through engaging and
reflective activities. Second, we launched
the “5 Minutes of Safety” program for facility
employees in all operations, consisting of
brief training conversations held on a regular
basis to reinforce the “golden rules” for
having a safe operation.

Of course, safety also took on an important
new meaning in 2020 through the lens of the
pandemic, and our first priority continued
to be the wellbeing of our people.
We implemented strict hygiene and
sanitation practices in compliance with all
health regulations in the countries where
we operate. We provided personal protective
equipment to all teams and launched

awareness campaigns for employees,
which also served to extend knowledge to
their families at home. Face masks were
required of staff and we provided paid
temporary leaves of absence to potentially
vulnerable employees, including those over
60 years old, those with underlying medical
conditions, those pregnant or with parental
leave. To continue to protect our employees,
we also invested in new technologies and
infrastructure capabilities to facilitate remote
work arrangements, as well as to provide
enhanced visibility of logistics operations
in real-time.

Our Environmental Impacts
As a logistics company, we are highly aware of
the environmental impacts of our operations,
and we have established targets to decrease
our energy needs, water use and waste
generation. Through our Sustainable Mobility
program, we are reducing our fossil fuel
usage by optimizing transportation routes.
Our transportation management system
utilizes data and analytics to automate
business processes and integrate planning
into a single application. With real-time
tracking, mapping and planning capabilities,
we identify inefficiencies and opportunities to
decrease our fuel consumption and reduce
carbon emissions while maintaining client
satisfaction. In 2020, our vehicles avoided the
emission of 33,332 tons of CO2.

In 2020, our progress on our sustainability
strategy was recognized by various external
organizations:

• In Mexico, for the tenth consecutive year,
Solistica was recognized by the Ministry
of Environment and Natural Resources
and the Ministry of Communications
and Transportation with the Transporte
Limpio (Clean Transport) award for
achievements to lower industry fuel
consumption and GHGs.

• In Brazil, were recognized for the

second consecutive year by the Union
of Freight Transportation Companies of
the State of São Paulo (SETCESP by its
Portuguese acronym) and Transporte
Moderno magazine. At their sixth
annual Sustainability Awards, Solistica
was highlighted in the Environmental
Responsibility category for our energy
efficiency initiatives.

• In Colombia, we received the Programa

de Excelencia Ambiental Distrital
(District Environmental Excellence
Program) award from the District
Secretary for the Environment in Bogotá
for the 11th consecutive year.

We maintained close
communication and
developed flexible
transport and storage
solutions, including
establishing new
routes or temporarily
reassigning services.

2020 ANNUAL REPORT FEMSA
FEMSA acquired a majority
controlling interest in a
newly combined company
comprised of two market
leading distributors of
consumables: WAXIE
Sanitary Supply and North
American Corporation.

Specialized
Distribution

In 2020, FEMSA acquired a majority
controlling interest in a newly combined
company comprised of two market leading
distributors of consumables with a focus on
the janitorial and sanitary (“jan-san”) supply
and packaging solutions industry in the
United States: WAXIE Sanitary Supply and
North American Corporation. The transaction
was consistent with FEMSA’s expertise and
capability set in managing supply chains and
distribution systems for diverse business and
retail customers.

Founded 75 and 100 years prior, respectively,
WAXIE and North American were both family-
owned and operated with complementary
market footprints in what is still a highly
fragmented industry. Together, they
represented significant scale, operating
a network of 26 distribution centers and
serving more than 27,000 customers in
various industries, including building service
contractors, education, government, retail
and hospitality. Headquartered in San Diego,
California and Chicago, Illinois, respectively,
WAXIE and North American have decisively
expanded FEMSA’s footprint in the
United States.

As COVID-19 began to impact our clients, the
WAXIE and North American teams reacted
quickly and decisively. While certain customer
segments were put under severe pressure,
such as hospitality, other opportunities arose
that offered us the chance to capture fast
growth. Demand for cleaning and sanitizing
solutions, involving not just chemical
products but also delivery systems, increased
significantly. Protective equipment, such
as disposable gloves, suddenly became a
necessity for clients that historically had not
required them in such quantities. We were
able to leverage our supplier network
and our newly acquired scale to capture
these opportunities.

The long-term strategy for this operation has
always included a consolidation component.
We aspire to create a national platform that
will best serve the needs of our customers
across the United States. With that in mind, in
late 2020 we successfully acquired Southwest
Paper Company, Inc. (“SWPlus”), based in
Wichita, Kansas, and Southeastern Paper
Group, Inc., based in Spartanburg, South
Carolina. With these transactions, we will
expand our footprint while gradually making
progress in our effort to consolidate the
national platform.

2020 ANNUAL REPORT FEMSA
Food Service
Solutions

FEMSA Strategic Businesses also include a
group of companies focused on providing
solutions in foodservice equipment,
commercial refrigeration, material handling
and integral services at the point of sale in
Latin America and the world, through AlPunto
Food Service (Torrey, Cooking Depot and
Imbera Food Service), Imbera/REPARE and
PTM. With our five manufacturing plants,
eight distribution centers and 13 retail stores,
we produce and distribute high-quality
products to 50 countries in five continents.

AlPunto Food Service
Torrey, Cooking Depot and Imbera Food
Service manufacture and market the
equipment to process and preserve food and
beverages. We understand the needs of our
users in order to develop profitable solutions
with the best functionality.

Torrey

Imbera/REPARE

Since 1960, Torrey has utilized an extensive
distributor specialist network to deliver high-
quality food processing, preservation and
weighing equipment for butcheries, small
retailers, supermarkets, convenience stores,
hotels and restaurants in more than
50 countries worldwide. In 2020, Torrey took
a leadership role in the fight against COVID-19
by contributing to a multi-sector initiative to
develop the first Mexican-made mechanical
respirator for respiratory patients. Learn
more

here.

Cooking Depot
For 50 years, Cooking Depot has been
meeting the kitchen equipment and accessory
needs of the market’s points of sale and
consumption centers through continuous
innovation in service and by making hundreds
of useful products available to its customers.
Visit our e-commerce platform to learn more:

https://store.cookingdepot.com/

As the world leader in the commercial
refrigeration industry, Imbera/REPARE’s more
than 4,500 employees export equipment
to 60+ countries from three production
facilities in Brazil, Colombia and Mexico.
Through innovation and high performance
engineering capabilities, Imbera has enabled
faster, smarter and more sustainable
products and services solutions. For example,
Imbera’s refrigerators consume 85% less
energy than 2009 models did, thanks to
upgrades such as energy efficient LED interior
lighting. Accelerating the transition to the
circular economy, Imbera is committed to
supporting steps for the responsible disposal
of manufactured equipment, and Imbera’s
coolers use R290 refrigerant, which has a low
environmental impact. REPARE is the largest
division of comprehensive maintenance and
sale of parts and spare parts services in the
American continent. It provides maintenance
and installation services for Imbera, Torrey,
Coca-Cola FEMSA, OXXO and various other
clients in the industry. Our REPARE facility
recovers, reuses or recycles up to 99% of the
parts of refrigerators at their end of life.

2020 ANNUAL REPORT FEMSA

In 2020, PTM
contributed to FEMSA’s
COVID‑19 relief initiatives
and added to its own
portfolio of market
offerings by manufacturing
plastic face shields.

PTM

Plásticos Técnicos Mexicanos (PTM):
Through its high-performance engineering and
recycling capabilities, PTM’s more than 1,000
employees design and manufacture plastic
transformation projects tailored to each
customer in support of their operational and
marketing strategies for materials handling,
food, beverages and automotive. Its facilities
include modern production capacity for
processes such as injection, thermoforming,
extrusion and blow molding. In 2020, PTM
contributed to FEMSA’s COVID-19 relief
initiatives and added to its own portfolio of
market offerings by manufacturing plastic
face shields. PTM’s business model, products
and services address the waste challenge
and promote the principles of the circular
economy. In 2020, PTM redesigned new
plastic boxes made from 100% recovered
material, recovered more than 30,000 tons
of plastic resins, and recycled more than
25,000 tons of plastic. In addition, 80% of
PTM’s products — including plastic pallets
and plastic crates, among others — were
made from recycled materials in 2020.

2020 ANNUAL REPORT FEMSAFEMSA FOUNDATION

An important part of the way FEMSA creates value is by giving

back to our communities through the FEMSA Foundation.

The needs and opportunities for us to make a positive difference

through this channel were perhaps never so great as they were

in 2020, a year in which the challenges related to the COVID-19

pandemic were top of mind for the world.

2020 ANNUAL REPORT FEMSA2020 ANNUAL REPORT FEMSACOVID‑19
Resilience

During the year, the FEMSA Foundation
played a pivotal role in coordinating social
investments and philanthropic responses
to COVID-19 both within FEMSA, as well as
among other multi-sectoral collaborations,
such as
the scale, breadth and reach of the entire
family of FEMSA businesses, the Foundation
helped to foster new and more unified
synergies, while further amplifying our role
as a catalyst for social transformation in
Latin America.

Juntos por la Salud. By leveraging

Spreading Solidarity

#ContagiaSolidaridad initiative – organized by FEMSA

The
Foundation, OXXO and other partner companies, including
Grupo Coppel, Santander, Soriana and Fundación Televisa –
was created in response to the pandemic to protect healthcare
workers in non-COVID-19 hospitals in Mexico. Citizens
contributed donations at more than 5,800 OXXO stores and
at more than 9,000 Santander ATMs. For each peso donated,
FEMSA Foundation and the other organizers committed to
donate four more– quadrupling the financial impact. In total,
more than Ps. 90.0 million (US$ 4.5 million) were raised,
of which Ps. 10.0 million (US$ 5.0 million) came from the
generosity of Mexican citizens. As of the end of 2020, these
funds allowed the coalition to acquire 9.3 million supplies,
including nearly 100,000 kits to healthcare personnel in more
than 180 hospitals and eight Red Cross centers across
29 states, exceeding our initial target by more than 30%.

Each donated kit contained enough supplies for a healthcare
worker or security officer to enhance their protection for one
month: 100 three-layered face masks and four plastic face
shields (which were made in-house by PTM, FEMSA’s plastics
solution provider, thereby more than halving the costs that
would have otherwise been necessary). Once assembled,
nearly 15,000 kilometers were traveled to deliver the kits,
made possible by 130 trucks from FEMSA’s logistics company,
Solistica, in conjunction with 20 OXXO distribution centers.
This collaborative effort underscored the solidarity between
Mexico’s citizens and business sector with the national
healthcare system. FEMSA was proud to seamlessly unite
the strengths and capabilities of so many parts of our
organization to make this a successful model of collaboration
and social value creation.

In 2020, the Foundation also continued to
advance the three long-standing pillars of our
impact agenda: Sustainable Development,
Early Childhood, and the FEMSA Cultural
Program. Although some projects during the
year had to be reprioritized, the pandemic
also revealed many new opportunities. In
all cases, we knew our impacts would go
the farthest through collective action and
collaboration – key strengths of the
FEMSA Foundation.

2020 ANNUAL REPORT FEMSASustainable
Development

Over the last 12 years, the FEMSA Foundation has created environmental value by participating and investing in projects
that ensure the sustainable development of the communities where we operate. For example:

Circular
Economy

Water
Stewardship

In November 2020, the governor of Guanajuato, Lic. Diego
Sinhue Rodríguez Vallejo, as well as leaders from FEMSA
Foundation, HEINEKEN México and Coca-Cola FEMSA, among
others, publicly launched Cauce Bajío, the Guanajuato Water
Fund – a coalition committed to expanding local water
security through collective action.

Fondos de Agua (Water Funds)Fondos de Agua (Water Funds): First launched in 2011, FEMSA Foundation co-founded the Latin American Water Funds Partnership (LAWFP), an agreement to contribute to water security in Latin America and the Caribbean through the creation and strengthening of Water Funds – coalitions of organizations that promote sustainable watershed management through stakeholder engagement, informed decision-making and responsible governance. To date, 26 Water Funds have been launched in 10 Latin American countries, including most recently in Guanajuato, Mexico, in 2020. The state of Guanajuato faces water-related challenges that put its people and industries at risk. Cauce Bajío, the Guanajuato Water Fund, has been joined by more than 25 organizations who are working toward a shared mission of strengthening the state’s water security through multisectoral cooperation and science-based decision-making.Lazos de AguaOriginally launched in 2013 to increase access to safe water services, sanitation and hygiene in Latin America, Lazos de Agua is now in its second phase with a focus on promoting behavioral change through social awareness. The alliances formed for the second phase – including the Inter-American Development Bank (IDB), One Drop and The Coca-Cola Foundation – are enabling us to amplify our impact in Colombia, Guatemala, Mexico, Nicaragua and Paraguay. In 2020, following an assessment of the greatest community needs in these five countries, we redirected funds to support local food pantries, as well as water and sanitation programs –emphasizing the connection between nutrition and hygiene in the prevention of contagion. With an initial investment of more than Ps. 247.2 million (US$ 12.3 million), this year more than 28,800 people have benefited directly and indirectly through the program to reach 245,670 people in 195 communities to date.#SinDesperdicioAs part of our focus on the circular economy and the water-energy-food nexus, in 2020 we joined with non-profit, corporate and advisory partners – including OXXO and the IDB – to address the issue of food waste and food insecurity. Approximately 127 million tons of food are lost and wasted every year in Latin America and the Caribbean, despite being a region where 42 million people suffer from hunger. #SinDesperdicio is a platform of partners committed to reducing regional food waste through innovation, public policy changes, knowledge sharing and the promotion of sustainable behaviors. The program grants seed capital and personalized incubation opportunities to social entrepreneurs that present the most viable solutions. During 2020, we were proud to support competitive programs in Mexico, Colombia and Central America. Learn more about the program’s young innovators here.2020 ANNUAL REPORT FEMSA

Early
Childhood

Climate
Change

FEMSA Foundation has long believed that
when children have the means to harness and
achieve their maximum developmental potential,
communities can be transformed for the better.
To support this vision, we focus our strategy on
nurturing early childhood development in three
primary areas:

Resilient communities
Through unique educational tools and
services, we seek to strengthen early childhood
development and socio-emotional competencies,
including cognitive, linguistic and motor skills. For
the last three years, we have supported ¡Listos a
Jugar!, a cross-platform educational program—
created by Sesame Workshop in collaboration
with FEMSA Foundation and other partners — to
promote healthy habits in preschool children
related to eating, playing and personal care. The
program uses technology to bring useful content
to children in 13 Latin American countries through
episodes and songs starring Sesame Street
characters. Given the closures of pre-schools
and childcare centers due to the pandemic in
2020, the reach of ¡Listos a Jugar! (via television, a
microsite, digital channels and an app for mobile
phones and tablets) became an even more
important tool to use at home for more than
64,000 direct beneficiaries and more than
70 million indirect beneficiaries, including
parents, educators and caregivers.

Reconnecting Children with NatureAs the world grapples with the effects of social isolation in 2020 – which have been exacerbated for many children living in densely urban areas – FEMSA Foundation was proud to invest in a movie that celebrates the linkages between childhood and nature. Although lately we have all been told to “stay indoors,” this movie reminds us that the power to revolutionize our shared sustainable future can be found outside. Based on scientific evidence indicating that separation from nature can harm physical and mental health, El Comienzo de la Vida 2 (Beginning of Life 2) shows how renewed connections to the Earth can be a key to wellbeing and happiness, particularly for children.The movie launched in November 2020 and can now be found worldwide on Netflix and other digital platforms. We invite you to join the movement ignited by this film! Learn more here.“In this movie, we find a powerful message for Latin America and the world: contact with a harmonious and sustainable environment from the beginning of life can have a profoundly transformative effect on communities.”Lorena Guillé-LarisFEMSA Foundation 2020 ANNUAL REPORT FEMSA

COVID‑19
Resilience

Public policy
In order to position early childhood on the
public agenda in Latin America, we seek to
train advocates for early childhood. For this,
we equip officials and other decision-makers
with the right training and information through
alliances with governments, academia and
civil society. For example, in Mexico, along
with more than 440 companies, corporate
foundations, universities and international
organizations, we continued to participate
in the
Pacto por la Primera Infancia, an
advocacy initiative calling on the government
to enact policies that support early childhood
development. In Colombia, we are proud to
support
100 organizations committed to the wellbeing
of children by ensuring the inclusion of
children’s rights in government programs.

NiñezYA, a coalition of more than

accompanying app provide free access to
tools, guidance and advice on a variety of
important topics to help working parents,
family members and caregivers foster a
positive and emotionally balanced upbringing
for their children so they can reach their
full potential.

Additionally this year, we had the
opportunity to work with the Consejo
Coordinador Empresarial (CCE or Business
Coordinating Council of Mexico) – the highest
representative body of the private sector
in the country – to create a new committee
with the objective of bringing awareness to
the private sector around important early
childhood issues.

Companies and families
Thirdly, we seek to strengthen early childhood
by supporting transformations around
family wellbeing and economic prosperity.
In 2020, we launched
Juntos (Beginning Together) to the public,
a technology platform with a social impact
that had previously been made available
as a benefit to FEMSA employees and
other corporate partners. The website and

Comenzando

Supporting Early Childhood in a Pandemic The pandemic brought with it incredible challenges and stress for millions of children, parents, families and caregivers around the world, and childhood development has been particularly affected. Social isolation, limited access to services, and closures of education and childcare centers have contributed to the problem. To help ease the strain, FEMSA Foundation joined forces with strategic partners to offer support and guidance. For example:• Along with the Pacto por la Primera Infancia, CONAFE (Consejo Nacional de Fomento Educativo) and other partners, we designed and delivered 30,000 “play kits”, comprised of educational items and games, to children under six years of age in some of the most remote and vulnerable communities in Mexico. The Iniciativa Kits JUEGAA reinforce social and emotional skills and wellbeing of children during the difficult days of confinement and quarantine by helping them learn, play and stay calm. • We joined with the IDB, Open Society Foundations and Fundação Maria Cecilia Souto Vidigal to support the September 2020 launch of the Early Childhood Development Hub: Knowledge and Innovation for Latin America and the Caribbean, a first-of-its kind online portal that provides resources, tools and best practices to support the development of children up to five years old. Available in Spanish, English and Portuguese, the initiative aims to promote knowledge exchange among governments, non-governmental organizations, civil society and families through publications, blogs, measurement tools, events and more. The tool also includes COVID-19 guidance and an interactive map of innovative childhood development programs in the region. • We partnered with Glasswing International, Save the Children and United Way to address the issues of food security and mental health by distributing emotional wellbeing kits to families in Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Mexico, Panama and Nicaragua – benefiting nearly 40,000 children, parents, teachers and caregivers. The packages included food, personal hygiene products, cleaning supplies, art and science educational materials, children’s books, mindfulness exercises, and other early childhood care resource from Sesame Workshop “¡Listos a Jugar!” program. 2020 ANNUAL REPORT FEMSA
FEMSA Cultural
Program

Another important part of FEMSA Foundation’s
mission is to develop projects that engage
communities through experiences with the
arts. Since 1977, the FEMSA Collection has
sought to promote the cultural and artistic
appreciation of modern and contemporary
artistic production in Latin America during the
twentieth and twenty-first centuries. To date,
the Collection comprises 1,387 works from
785 artists, which FEMSA shares with diverse
communities through exhibitions, a loan
program and multiple cultural activities.

In 2020, FEMSA Foundation’s Cultural Program
carefully considered how art and cultural
institutions could best respond to the impacts
of COVID-19. We adapted our outreach to
share the richness of the FEMSA Collection
in new ways, including through virtual talks
and online content in partnership with like-
minded educational and cultural institutions.
In total, the FEMSA Cultural Program reached
nearly 200,000 people in 2020 – including
almost 35,000 people in-person and many
more virtually – through four exhibitions and
88 activities in digital spaces. We also hit more
than 4 million views of our content posted on
our social media channels during the year.
Join us on Facebook, Instagram or YouTube
at /ColeccionFEMSA, or on Twitter at
@FEMSAColeccion.

FEMSA Biennial
For more than 28 years, the FEMSA Cultural
Program has also presented the FEMSA
Biennial, a unique traveling platform of
collaborative events and exhibitions that serve
as a vehicle to recognize, strengthen, stimulate
and disseminate artistic talent and visual
creation across Mexico. The XIV edition – which
ran through the first months of 2021 in the
state of Michoacán, Mexico with support from
OXXO, Imbera and Coca-Cola FEMSA – opened
in February 2020, just prior to the onset of
the pandemic.

The exhibition has always been designed to
be a rich, in-person experience, but under
our guiding principle that art is an engine
of social, personal and collective wellbeing,
it was very important for us to not cancel it
entirely during such a difficult time in the
world. Instead, we restructured our delivery
strategy and focused our content on how
art and culture can make a positive social
and community impact. The result was a
hybrid program, held partially in-person (for
those living nearby who could travel safely
and socially distance while present); and
partially online. For digital visitors, we offered
video capsules and other materials (such as
readings and audio presentations by artists
and curators), as well as content from cultural
partners, such as the Michoacán Secretariat
of Culture.

As of the end of 2020, we have had nearly
60,000 virtual and in-person Biennial
participants, (up from 34,000 in-person
only attendees at the previous XIII edition).
This success has revealed that despite the
challenges, we were able to connect more
people to the arts than ever this year,
including new audiences and demographics
that we might not otherwise have reached.

The Collection comprises
1,387 works from 785 artists,
which FEMSA shares with
diverse communities through
exhibitions, a loan program and
multiple cultural activities.

2020 ANNUAL REPORT FEMSA

Human
Rights

2 0 2 0 A N N U A L R E P O R T F E M S A

The gardens allow families to grow their own fresh vegetables at very low cost, which puts them in greater control of their diet and nutrition choices. To date, the delivery of urban gardens has benefited more than 450 migrants and refugees and their families in Nuevo León. Planting the Seeds of Support Economic hardship and food insecurity have been pressing challenges during the pandemic for vulnerable populations around the world. Yet the power of art can contribute to remarkable social transformations. In 2020, FEMSA Foundation’s Cultural Program launched Puerto Abierto, a series of community programs aimed at using artistry and creativity to build bridges of collaboration and support with the families of migrants and refugees living in the Monterrey, Nuevo León, Mexico area. This program helped provide more than 50,000 meals to the community through Casanicolás, a local organization providing support and solidarity to national and foreign migrants in the Monterrey area. To contribute in other ways to food security, FEMSA Foundation staff, in collaboration with local organizations, also built and delivered 100 urban gardens in the town of Juárez by repurposing wooden pallets that had previously been used to transport the FEMSA Collection’s artwork. Our teams also provided seeds for families to grow vegetables, as well as guidance for tending to the gardens so they can be maintained in a sustainable way. The gardens allow families to grow their own fresh vegetables at very low cost, which puts them in greater control of their diet and nutrition choices. To date, the delivery of urban gardens has benefited more than 450 migrants and refugees and their families in Nuevo León. A second program also included a series of workshops presented by members of the artistic community in Monterrey, designed as spaces to listen and better understand the interests and skills of migrants and refugees. A third workstream of this initiative was to capture and share the stories of migrant families and children in their own voices through a podcast, Caravana Radiofónica, that will be made available on the Spotify and Apple platforms in 2021. The aim of this project is to use digital channels to promote greater connections of community understanding, awareness and empathy through the sharing of personal experiences.2020 ANNUAL REPORT FEMSA2020 ANNUAL REPORT FEMSACORPORATE GOVERNANCE

At FEMSA, we follow the highest standards of

corporate governance and business ethics.

We adhere to rigorous, accurate and reliable
business practices for disclosing information
and delivering financial transparency and
accountability for all our stakeholders.

Our corporate practices comply with the
laws of all countries where we operate. As
a publicly-listed company in the Mexican
Stock Exchange and the New York Stock
Exchange, we also comply with all applicable
standards, rules and regulations in Mexico
and the United States, including the Mexican
Securities Market Law and the U.S. Sarbanes-
Oxley Act, as applicable for foreign issuers.

Additionally, we observe the recommendations
of the Code of Best Corporate Practices of
the Business Coordinating Council (Consejo
Coordinador Empresarial).

Code of Ethics – which is reviewed

Code of Ethics
Our
annually – forms the basis of our corporate
behavior and the foundation of our policies,
guidelines and procedures for responsible
business conduct. The Code establishes
the fundamental principles and standards
that guide our ethical behavior in relation
to our shareholders, customers, suppliers,
authorities, civil society organizations, the
environment, communities and everyone
who interacts with FEMSA. It also indicates
the steps to follow for reporting any breach,
conduct or practice that does not comply
with our Code of Ethics and the rest of our
corporate guidelines. The Code, approved by
the Board of Directors, applies to members of
the Board and employees in all the countries
where we operate.

Likewise, we request our suppliers of
goods and services to adhere to the FEMSA
Suppliers’ Guiding Principles, which
describe our policies and expectations for
sustainability criteria, including labor rights,
the environment, community and ethics and
values. Our commitment is to work with all
companies to increase sustainability practices
along our value chain.

Our Code of Ethics – which is
reviewed annually – forms the basis
of our corporate behavior and the
foundation of our policies, guidelines
and procedures for responsible
business conduct.

2020 ANNUAL REPORT FEMSA
Corporate Policies
In addition to our annual review of the Code of Ethics, we also made public in 2020 corporate
policies which constitute an essential part of our corporate governance. These mandatory
policies establish the guidelines that all employees are expected to follow as part of FEMSA’s
culture of respect, honesty and integrity. To comply with these policies, we have established
the required internal controls to prevent, identify, investigate, sanction and remedy any
possible risks of violation.

Human
Rights

Anti-Corruption Policy

Environment Policy

We know, address and mitigate
the risks associated with the
environmental impact of energy,
water and waste management use
throughout the value chain of all
our operations.

Community Commitment Policy

We recognize our commitment to
contribute to the development of
communities through our business
management, which is an example
of the principles and values we have
practiced since our origin.

We conduct business practices
in accordance with the law, in an
honest and ethical manner, with
zero tolerance for bribery, rejecting
and fighting any act of corruption.

Human and Labor Rights Policy

We recognize that human
and labor rights are the set of
prerogatives based on human
dignity, the effective realization of
which is essential for the integral
development of the person.

Sustainability Policy

We carry out business practices
seeking to generate the social,
environmental and economic
conditions necessary to operate
today and grow over time in
harmony with the environment.

FEMSA Ethics Line In accordance with the provisions established in our Code of Ethics, we have an Ethics Line for collaborators and stakeholders to make reports of illegal practices, inappropriate behavior and other breaches or possible breaches of our Code of Ethics and corporate policies. Our Ethics Line, which operates 24 hours a day, throughout the year, is managed by an external provider that guarantees the confidentiality of the information and offers various communication channels with the possibility of reporting anonymously: telephone, website and e-mail.Get to know the Ethics Line through: www.lineaeticafemsa.com2020 ANNUAL REPORT FEMSA
Board of
Directors

FEMSA’s Board of Directors is responsible
for determining the Company’s corporate
strategy; defining and supervising the
implementation of its vision and values; and
approving related operations, including those
outside the ordinary course of business.

During 2020, the Board of Directors was
composed of 18 directors, of which 78% were
men and 22% were women, assisted by one
Secretary (non-member) and one Alternate
Secretary (non-member). In accordance with
our bylaws and the Mexican Securities Law,
at least 25% of the members of our Board
of Directors are independent. Directors are
appointed for a term of one year and are
eligible for re-election after the completion
of their term in office. The By-Laws of the
Company provide that the holders of the
FEMSA B Shares may elect at least eleven
Directors and the holders of the FEMSA D
Shares may elect five Directors.

Since 2014, José Antonio Fernández has
presided as Executive Chairman of the
Board of Directors.

Our Board of Directors is the following:

SERIES B DIRECTORS

José Antonio Fernández Carbajal C
Executive Chairman of the Board of FEMSA
Director since 1984 and Executive Chairman
since 2014
Alternate: Federico Reyes García C, I

Javier Gerardo Astaburuaga Sanjines C
Business Consultant
Since 2006

Bárbara Garza Lagüera Gonda
Private investor and president of the acquisitions
committee of the FEMSA Collection
Since 1998
Alternate: Eva María Garza Lagüera Gonda

Mariana Garza Lagüera Gonda
Private investor
Since 1999

José Fernando Calderón Rojas
Chief Executive Officer and chairman of the
Board of Directors of Franca Servicios, S.A. de
C.V., Servicios Administrativos de Monterrey, S.A.
de C.V., Regio Franca, S.A. de C.V., and Franca
Industrias, S.A. de C.V.
Since 1984
Alternate: Francisco José Calderón Rojas

Alfonso Garza Garza
Chief Executive Officer of FEMSA
Strategic Businesses
Since 2001
Alternate: Juan Carlos Garza Garza

Bertha Paula Michel González
Professor at Universidad Nacional
Autónoma de México
Since 2020
Alternate: Maximino José Michel González

Alberto Bailleres González
Chairman of the Board of Directors of Industria
Peñoles S.A.B. de C.V., Grupo Nacional Provincial,
S.A.B., Fresnillo Plc, Grupo Palacio de Hierro,
S.A.B. de C.V., Grupo Profuturo, S.A.B. de C.V. and
subsidiaries, Controladora Petrobal, S.A. de C.V.,
Energía BAL, S.A. de C.V., Energía Eléctrica BAL,
S.A. de C.V., and Tane, S.A. de C.V.
Since 1989
Alternate: Alejandro Bailleres Gual

Francisco Javier Fernández Carbajal C
Chief Executive Officer of Servicios Administrativos
Contry, S.A. de C.V.
Since 2004

Paulina Garza Lagüera Gonda
Private investor
Since 2009

Alfonso de Angoitia Noriega I
Co-Chief Executive Officer of Grupo Televisa, S.A.B.
Since 2015

M. Eduardo Padilla Silva
Chief Executive Officer of FEMSA
Since 2014

Ricardo Ernesto Saldívar Escajadillo B, C, I
Private investor
Since 2006
Alternate: Francisco Zambrano Rodríguez I

SERIES D DIRECTORS

Víctor Alberto Tiburcio Celorio A, I
Independent consultant
Since 2018

Michael Larson C, I
Chief Investment Officer for William H. Gates III
Since 2010

Robert Edwin Denham B, C, I
Partner at Munger, Tolles & Olson LLP
Since 2001

Alfonso González Migoya A, I
Business consultant and managing partner of
Acumen Empresarial, S.A. de C.V.
Since 2006
Alternate: Enrique F. Senior Hernández C, I

Ricardo Guajardo Touché B, C, I
Chairman of the Board of Directors of Solfi, S.A. de C.V.
Since 1988

SECRETARIES

Carlos Eduardo Aldrete Ancira
Secretary of the Board of Directors
(Non-member)

Alejandro Gil Ortiz
Alternate Secretary of the Board of Directors
(Non-member)

Key: A Audit Committee / B Corporate Practices Committee / C Strategy and Finance Committee / I Independent Director

2020 ANNUAL REPORT FEMSA

Board Committees

The following committees support the Board of Directors by analyzing strategic issues critical to
the success of the business. They provide recommendations related to the focus areas shown
below, including economic, social and environmental matters.

AUDIT COMMITTEE*

CORPORATE PRACTICES COMMITTEE*

STRATEGY AND FINANCE COMMITTEE

Supports the Board of Directors in the
following areas:

• Reviewing the accuracy and integrity of

quarterly and annual financial statements in
accordance with accounting, internal control
and auditing requirements, as well as the
submission of confidential, anonymous
complaints from employees regarding
questionable accounting or auditing matters

The appointment, compensation, retention
and oversight of the independent auditor,
who reports directly to the Audit Committee;
and

Identifying and following-up on contingencies
and legal proceedings.

•

• Preventing or reducing the risk of performing
operations that could damage the value of
the Company or that benefit a particular
group of shareholders;

• Approving policies related to the use of
Company assets or transactions with
related-party transactions; approving the
compensation of the Chief Executive Officer
and relevant officers; and

•

Supporting the Board of Directors in
the preparation of reports on
accounting practices.

•

Evaluating the investment and financing
policies of the Company;

• Assessing the risk factors to which the

Company is exposed, as well as evaluating its
management policies;

• Making recommendations on the Company

dividend policy;

• Analyzing the Company’s business units and

strategic alternatives for growth; and

• Making recommendations to the Board of

Directors on annual operation plans and
strategic projects for the business units.

*All members of the Audit Committee and the Corporate Practices Committee are independent directors, as required by the Mexican Securities Law, applicable U.S. Securities Laws and applicable NYSE listing standards.

2020 ANNUAL REPORT FEMSA

Executive
Team

Our executive team is focused on driving business growth by creating economic, social and environmental value for all our
stakeholders. Each of our executive leaders has significant professional experience within the industries related to our business.

José Antonio Fernández Carbajal
Executive Chairman of the Board of
Directors of FEMSA
Mr. Fernández began his career at FEMSA in 1988,
serving in various positions, including CEO of OXXO. He
was appointed CEO of FEMSA in 1995 and Chairman
of the Board in 2001, serving in both positions until
January 2014. He is also Chairman of the Board of
Coca-Cola FEMSA. In 2010, he was appointed Vice
President of Heineken Holding NV’s Board of Directors
and Chairman of Heineken’s Americas Committee.
Since 2012, Mr. Fernández has been Chairman of
the Board of Tecnológico de Monterrey, where he
has served as Vice Chairman since 1997. In 2017, he
was elected as a full-term member of Massachusetts
Institute of Technology (MIT) Corporation, where he
contributes to the Dean for Student Life and Dean
for Undergraduate Education committees. Currently,
he also participates as a board member of Industrias
Peñoles. He holds a degree in Industrial Engineering
and Systems from Tecnológico de Monterrey, where
he earned an MBA in 1978 and has been a professor
for more than 20 years.

M. Eduardo Padilla Silva
Chief Executive Officer of FEMSA
Mr. Padilla joined FEMSA in 1997 and was named
to his current position in January 2018. Previously
he served as Chief Financial and Corporate Officer
of FEMSA, CEO of FEMSA Comercio, CEO of FEMSA
Strategic Businesses, and FEMSA’s Planning and
Control Officer. He earned a Bachelor’s degree
in Mechanical Engineering from ITESM and an
MBA from Cornell University. He also completed
executive management studies at IPADE
Business School.

Francisco Camacho Beltrán
Chief Corporate Officer of FEMSA
Mr. Camacho joined FEMSA in 2020 after a long
track record in senior management positions in
consumer product companies around the world,
including Procter & Gamble and Revlon. In 2000,
he joined Danone as head of its Bonafont water
operations in Mexico. For the next 20 years, he
held varying responsibilities in the water and dairy
segments, while driving growth and innovation. In
2011, he became a member of Danone’s Executive
Committee, leading the Global Customer Team and
serving as Corporate Chief Growth and Innovation
Officer. He was Executive Vice President and global
head of the Essential Dairy and Plant Based business
and responsible for Global Industrial Operations
and Supply Chain.

Gerardo Estrada Attolini
Senior Vice President of Administration
and Corporate Control of FEMSA
Mr. Estrada joined FEMSA in 2000 and was
appointed to his current position in 2020. Previously,
he served as Chief Financial Officer of FEMSA
Cerveza and Corporate Finance Vice President
of FEMSA. Prior to FEMSA, he served in various
executive level positions in the finance functions of
Mexican companies in the financial and industrial
sectors. He holds an Accounting degree and an
MBA from ITESM.

Alfonso Garza Garza
Chief Executive Officer of Strategic
Businesses of FEMSA
Mr. Garza joined FEMSA in 1985 and held various
positions including CEO of FEMSA Empaques. In
2009 he was appointed to his current position.

He is President of the Monterrey Metropolitan Water
Fund, Vice Chairman of the executive commission
of the National President of the Employers
Confederation of Mexico (Coparmex). He is a member
of the Board of Directors of FEMSA, ITESM, Grupo
Nutec, S.A. de C.V. He is also an alternate member
of the Board of Directors of Coca-Cola FEMSA. He
graduated from ITESM in Industrial Engineering
and completed postgraduate coursework at IPADE
Business School.

Roberto Campa Cifrián
Senior Vice President of Corporate Affairs of FEMSA
Mr. Campa joined FEMSA in 2019, after a long
career in the public, private and social sectors. He
has served in the federal government of Mexico as
Secretary of Labor and Social Welfare, Undersecretary
of the Interior, and Head of the Federal Consumer
Protection Agency. He has also served as a
representative in the Mexico City Legislative Assembly
and as a federal congressional representative. He
holds a law degree from Universidad Anáhuac, where
he is also a professor of macroeconomic theory and
President of the Federation of Student Societies.

John Anthony Santa Maria Otazua
Chief Executive Officer of Coca-Cola FEMSA
Mr. Santa Maria was appointed to his current position
in 2014. He joined Coca-Cola FEMSA in 1995 and
has served in several senior management positions
since then, including COO of the Company’s Mexico
Division, and Strategic Planning and Commercial
Development Officer. He earned a Bachelor’s degree
and an MBA with a major in Finance from Southern
Methodist University.

Daniel Alberto Rodríguez Cofré
Chief Executive Officer of FEMSA Comercio
Mr. Rodríguez joined FEMSA in 2015 as Chief Financial
and Corporate Officer and was named to his current
position in January 2016. Prior to joining the Company,
he was CFO and then CEO of CENCOSUD (Centros
Comerciales Sudamericanos S.A.), among other senior
finance and management positions in Latin America,
Europe and Africa. He is an alternate member of the
Boards of Coca-Cola FEMSA and FEMSA. He holds a forest
engineering degree from Austral University of Chile and an
MBA from Adolfo Ibañez University.

Raymundo Yutani Vela
Senior Vice President of Human Resources of FEMSA
Raymundo Yutani was appointed Director of Human
Resources at FEMSA in 2018. He joined FEMSA Comercio
in 1999 as Director of Human Resources, a position he
held until 2014. Between 2014 and 2018, he was Director
of Human Resources at Coca-Cola FEMSA. Before joining
the company, he was Director of Human Resources North
at Banca Serfín, today Santander. He is a graduate of
the Public Accountant career and has a master’s degree
in Business Administration from the Regiomontana
University. Additionally, he completed the AD1 program at
IPADE and is certified as a Coach by Newfield Consulting.

2020 ANNUAL REPORT FEMSA

Financial
Summary

Amounts expressed in millions of Mexican pesos (Ps.) as of December 31

Income Statement
Net sales

Total revenues

Cost of goods sold

Gross profit

Operating expenses

Income from operations 3

Other non-operating expenses (income), net

Financing expenses, net

Income before income taxes and share of the profit of equity accounted investees

Income taxes

Share of the profit of equity accounted investees, net of taxes

Net income from continuing operations

Net income from discontinuing operations 2

Consolidated net income

Controlling interest

Non-controlling Interest

Financial ratios (%)

Gross margin

Operating margin

Consolidated net income

Other information

Depreciation

Amortization and other non cash charges to income from operations

Operative Cash Flow (EBITDA)

Capital expenditures 4

2020

2019

2018 1

2017 2

2016

Ps. 490,425

Ps. 504,059

Ps. 468,894

Ps. 439,239

Ps. 398,622

492,966

303,313

189,653

148,150

41,503

7,656

14,911

18,936

14,819

(361)

3,756

(1,930)

5,686

38.5%

8.4%

0.8%

25,006

5,464

71,973

20,893

506,711

315,230

191,481

144,329

47,152

1,573

13,492

32,087

10,476

6,437

28,048

20,699

7,349

37.8%

9.3%

5.5%

23,344

4,944

75,440

25,579

469,744

294,574

175,170

133,594

41,576

874

7,380

33,322

10,169

6,560

29,713

3,366

33,079

23,990

9,089

37.3%

8.9%

6.3%

14,698

4,184

60,458

24,266

439,932

277,842

162,090

121,828

40,262

1,285

3,302

35,674

10,213

8,021

33,480

3,726

37,206

42,408

(5,202)

36.8%

9.2%

7.6%

13,799

4,104

58,165

23,486

399,507

251,303

148,204

110,777

37,427

4,208

4,619

28,600

7,888

6,463

27,175

21,140

6,035

37.1%

9.4%

6.8%

12,076

5,484

54,987

22,155

2020 ANNUAL REPORT FEMSA

Balance Sheet
Assets

Current assets

Equity accounted investees

Property, plant and equipment, net 3

Intangible assets,net

Right-of-use asset

Other assets, net

Total assets

Liabilities

Short-term bank loans and current portion of long-term bank loans and notes payable

Current portion of leases

Other current liabilities

Long-term bank loans and notes payable

Long-term lease liabilities

Employee benefits

Deferred tax liabilities

Other non-current liabilities

Total liabilites

Total equity

Controlling interest

Non-controlling interest

Financial ratios (%)

Liquidity

Leverage

Capitalization

Data per share

Controlling interest book value 4

Net controlling interest income 5

Dividends paid 6

Series B shares

Series D shares

Number of employees 7

Number of outstanding shares 8

2020

2019

2018 1

2017 2

2016

201,269

98,270

113,106

155,501

54,747

61,955

684,848

8,801

6,772

102,840

179,864

51,536

7,253

6,033

14,562

377,661

307,187

237,743

69,444

1.803

1.229

0.39

13.288

(0.108)

Ps. 172,579

Ps. 177,607

Ps. 181,188

Ps. 117,951

97,470

114,513

146,562

52,684

53,733

637,541

16,204

7,387

112,943

101,747

47,292

6,347

6,946

12,924

311,790

325,751

251,989

73,762

1.336

0.957

0.28

14.085

1.157

94,315

108,602

145,610

50,247

576,381

13,674

87,790

114,990

4,699

5,886

13,800

240,839

335,542

257,053

78,489

1.750

0.718

0.29

14.368

1.341

96,097

116,712

154,093

40,451

588,541

13,590

91,432

117,758

5,373

6,133

17,343

251,629

336,912

250,291

86,621

1.725

0.747

0.29

13.990

2.370

128,601

102,223

153,268

43,580

545,623

7,281

79,008

131,967

4,447

11,037

25,713

259,453

286,170

211,904

74,266

1.367

0.907

0.33

11.844

1.182

0.517

0.646

320,618

17,891.13

0.483

0.604

314,656

17,891.13

0.460

0.575

297,073

17,891.13

0.431

0.538

295,027

17,891.13

0.417

0.521

266,144

17,891.13

1. Starting on January 1st 2019, the Company adopted IFRS16 “Leases” accounting rule using the modified retrospective method under which the comparative information was not restated.
2. The consolidated income statement of 2017 was revised for the discontinued operations of Coca-Cola FEMSA..
3. Includes bottles and cases.
4. Controlling interest divided by the total number of shares outstanding at the end of each period.
5. Net controlling interest income divided by the total number of shares outstanding at the end of the each period.
6. Expressed in nominal pesos of each period.
7. Includes incremental employees resulting from mergers & acquisitions made during the period.
8. Total number of shares outstanding at the end of each period expressed in millions.

2020 ANNUAL REPORT FEMSA

Management’s
Discussion & Analysis

Audited Financial Results for the twelve months ended December 31, 2020. Compared to the twelve months ended December 31, 2019.

Fomento Económico Mexicano, S.A.B. de C.V.
(“FEMSA”) is a Mexican holding company.
Set forth below is certain audited financial
information for FEMSA and its subsidiaries
(the “Company” or “FEMSA Consolidated”)
(NYSE: FMX; BMV: FEMSA UBD, FEMSA BD).
The principal activities of the Company
are grouped mainly under the following
subholding companies (the “Subholding
Companies”): Coca-Cola FEMSA, S.A.B de C.V.
(“Coca-Cola FEMSA” or “KOF”), (NYSE: KOF,
BMV: KOFL) which engages in the production,
distribution and marketing of beverages,
and FEMSA Comercio, S.A. de C.V. (“FEMSA
Comercio”), including its Proximity Division
operating OXXO, a small-format store chain, a
Health Division, which includes all drugstores
and related operations, and a Fuel Division,
which operates the OXXO GAS chain of
retail service stations. Additionally, through
its Strategic Businesses unit, it provides
logistics, point-of-sale refrigeration solutions
and plastics solutions to FEMSA’s business
units and third-party clients. FEMSA also
participates in the specialized distribution
industry in the United States.

The consolidated financial information
included in this annual report was prepared
in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board
(“IASB”).

The 2020 and 2019 results are stated in
nominal Mexican pesos (“pesos” or “Ps.”).
Translations of pesos into US dollars (“US$”)
are included solely for the convenience of the
reader and are determined using the noon
buying rate for pesos as published by the
U.S. Federal Reserve Board in its H.10 Weekly
Release of Foreign Exchange Rates as of
December 31, 2020, which was 19.8920 pesos
per US dollar. This report may contain certain
forward-looking statements concerning
Company’s future performance that should
be considered good faith estimates made
by the Company. These forward-looking
statements reflect management expectations
and are based upon currently available data.
Actual results are subject to future events and
uncertainties, which could materially impact
the Company’s actual performance.

FEMSA Consolidated
2020 amounts in millions of Mexican pesos

Total
Revenues

% Growth
vs’19

Gross
Profit

% Growth
vs’19

FEMSA Consolidated

492,966

(2.7%)

189,653

(1.0%)

Coca-Cola FEMSA

183,615

(5.6%)

82,811

(5.4%)

FEMSA Comercio –
Proximity Division

FEMSA Comercio –
Health Division

FEMSA Comercio –
Fuel Division

181,277

(1.9%)

74,296

(1.1%)

65,172

10.6%

19,575

10.9%

34,292

(28.3%)

4,300

(9.9%)

FEMSA’s consolidated total revenues
decreased 2.7% to Ps. 492,966 million in 2020
compared to Ps. 506,711 million in 2019.
Coca-Cola FEMSA’s total revenues decreased
5.6% to Ps. 183,615 million, driven mainly by
unfavorable price-mix and currency translation
effects resulting from the depreciation of all
of Coca-Cola FEMSA’s operating currencies
in South America into Mexican Pesos, mainly

2020 ANNUAL REPORT FEMSA
driven by a 14.5% unfavorable translation
effect from the Brazilian Real. This figure
includes an extraordinary income related to
an entitlement to reclaim tax payments in
Brazil, recognized in the third quarter. FEMSA
Comercio – Proximity Division’s revenues
decreased 1.9% to Ps. 181,277 million, driven
by an average decrease of 5.4% in same-store
sales reflecting reduced customer mobility
coupled with operating restrictions driven by
the COVID-19 pandemic. FEMSA Comercio –
Health Division’s revenues increased 10.6%
to Ps. 65,172 million, driven by an average
increase of 1.4% in same-store sales, and the
addition of 207 net new stores, partially offset
by strict mobility restrictions across our South
American operations and a negative currency
translation effect related to the depreciation of
the Chilean and Colombian pesos compared
to the Mexican peso. FEMSA Comercio – Fuel
Division revenues decreased 28.3% to
Ps. 34,292 million, driven by a 29.2% decrease in
same-station sales, reflecting reduced mobility
in connection to the COVID-19 pandemic.

Consolidated gross profit decreased 1.0%
to Ps. 189,653 million in 2020 compared to
Ps. 191,481 million in 2019. Gross margin
increased 70 basis points to 38.5% of total
revenues compared to 2019, reflecting gross
margin expansion across all our business units.
Consolidated operating expenses increased
2.6% to Ps. 148,150 million in 2020 compared
to Ps. 144,329 million in 2019. As a percentage

of total revenues, consolidated operating
expenses increased from 28.5% in 2019 to
30.1% in 2020.

Consolidated administrative expenses
increased 15.3% to Ps. 22,988 million in 2020
compared to Ps. 19,930 million in 2019. As
a percentage of total revenues, consolidated
administrative expenses increased 80 basis
points, from 3.9% in 2019 to 4.7%
in 2020.

Consolidated selling expenses increased 1.3%
to Ps. 123,405 million in 2020 as compared to
Ps. 121,871 million in 2019. As a percentage
of total revenues, selling expenses increased
90 basis points, from 24.1% in 2019 to 25.0%
in 2020.

Consolidated income from operations
decreased 12.0% to Ps. 41,503 million in 2020
as compared to Ps. 47,152 million in 2019.
As a percentage of total revenues, operating
margin decreased 90 basis points, from 9.3%
in 2019 to 8.4% in 2020 reflecting margin
contraction at FEMSA Comercio´s Proximity
and Fuel Divisions reflecting the impact of
the COVID-19 pandemic on their operating
leverage, partially offset by an operating
margin expansion at Coca-Cola FEMSA and
FEMSA Comercio´s Health Division, mainly
reflecting resilient consumer demand and
strict cost and expense discipline across
their territories.

Some of our subsidiaries pay management
fees to us in consideration for corporate
services we provide to them. These fees
are recorded as administrative expenses
in the respective business segments. Our
subsidiaries’ payments of management
fees are eliminated in consolidation and,
therefore, have no effect on our consolidated
operating expenses.

Net financing expenses increased to
Ps. 14,911 million from Ps. 13,492 million
in 2019, reflecting higher interest expense,
partially offset by a foreign exchange gain
related to the effect of FEMSA’s US Dollar-
denominated cash position, as impacted by the
depreciation of the Mexican peso during 2020.

Income before income taxes and share of the
profit in associate results decreased 41.0% to
Ps. 18,936 million in 2020 compared with
Ps. 32,087 million in 2019, reflecting a decrease
in our income from operations, higher other
non-operating expenses and an increase in net
financing expenses described above.

Our accounting provision for income taxes
in 2020 was Ps. 14,819 million, as compared
to Ps. 10,476 million in 2019, resulting in
an effective tax rate of 78.3% in 2020, as
compared to 32.6% in 2019 reflecting lower
income before income taxes and share of the
profit in associate results described above
and the extraordinary tax payment agreed

2020 ANNUAL REPORT FEMSA
with the Mexican tax authority during the
second quarter.

Consolidated net income was Ps. 3,756 million
in 2020 compared to Ps. 28,048 million in 2019,
reflecting i) lower income from operations;
ii) higher taxes and other non-operating
expenses reflecting the extraordinary tax
payment of Ps. 8,754 million agreed with
the Mexican tax authority during the second
quarter; iii) impairments including for certain
assets at Coca-Cola FEMSA and the closure of
our Specialty’s Café and Bakery operation also
during the second quarter; iv) higher interest
expenses; and v) a negative impact due to
FEMSA’s participation in Heineken’s results.
These were partially offset by a non-cash
foreign exchange gain related to FEMSA’s U.S.
dollar-denominated cash position as impacted
by the depreciation of the Mexican peso.

Controlling interest loss amounted to Ps. 1,930
million in 2020 compared to a Ps. 20,699 gain
in 2019. Controlling interest loss in 2020 per
FEMSA Unit1 was Ps. 0.54 (US$ 0.27 per ADS).

Coca-Cola
FEMSA

Coca-Cola FEMSA total revenues decreased
5.6% to Ps. 183,615 million in 2020, compared

to Ps. 194,472 million in 2019. Total revenues
were impacted mainly by unfavorable price-
mix and currency translation effects resulting
from the depreciation of all Coca-Cola
FEMSA’s operating currencies as compared
to the Mexican Peso, mainly driven by a
14.5% unfavorable translation effect from
the Brazilian Real. This figure includes
extraordinary other operating income related
to an entitlement to reclaim tax payments in
Brazil recognized in the third quarter. These
factors were partially offset by pricing and
revenue management initiatives.

Coca-Cola FEMSA gross profit decreased 5.4%
to Ps. 82,811 million in 2020, compared to
Ps. 87,508 million in 2019, with a gross margin
expansion of 10 basis points. A more favorable
raw material environment, lower PET prices,
revenue management initiatives, and favorable
currency hedging strategies were partially
offset by: i) an unfavorable price-mix effect;
ii) higher concentrate costs in Brazil, related
to the reduction of tax credits on concentrate
purchased from the Manaus Free Trade Zone;
iii) higher concentrate costs in Mexico; iv) and
the depreciation in the average exchange
rate of most of Coca-Cola FEMSA’s operating
currencies as applied to our U.S. dollar-
denominated raw material costs. Gross margin
reached 45.1% in 2020.

The components of cost of goods sold include
raw materials (principally concentrate,
sweeteners and packaging materials),
depreciation costs attributable to our
production facilities, wages and other
employment costs associated with labor force
employed at our production facilities and
certain overhead costs. Concentrate prices
are determined as a percentage of the retail
price of our products in the local currency,
net of applicable taxes. Packaging materials,
mainly PET and aluminum, and HFCS, used
as a sweetener in some countries, are
denominated in U.S. dollars.

Operating expenses decreased 7.3% to
Ps. 57,568 million in 2020, compared
to Ps. 62,085 million in 2019.

Administrative expenses decreased 6.4%
to Ps. 7,891 million in 2020, compared to
Ps. 8,427 million in 2019. Selling expenses
decreased 6.8% to Ps. 48,554 million in 2020
compared with Ps. 52,110 million in 2019.

Income from operations decreased 0.7%
to Ps. 25,243 million in 2020 compared to
Ps. 25,423 million in 2019.

1. FEMSA Units consist of FEMSA BD Units and FEMSA B Units. Each FEMSA BD Unit is comprised of one Series B Share, two Series D-B Shares and two Series D-L Shares. Each FEMSA B
Unit is comprised of five Series B Shares. The number of FEMSA Units outstanding as of December 31, 2020 was 3,578,226,270, equivalent to the total number of FEMSA Shares out-
standing as of the same date, divided by 5.

2020 ANNUAL REPORT FEMSA

FEMSA Comercio
Proximity Division

FEMSA Comercio – Proximity Division total
revenues decreased 1.9% to Ps. 181,277
million in 2020 compared to Ps. 184,810
million in 2019, reflecting an average
decrease in same-store sales of 5.4%. As of
December 31, 2020, there were a total of
19,566 OXXO stores. As referenced above,
OXXO same-store sales decreased an average
of 5.4% compared to 2019, driven by a 16.8%
decrease in store traffic, partially offset by a
13.7% increase in average customer ticket.

the gradual shift from commission-based store
teams to employee-based teams; and
ii) higher expenses related to IT programs
and infrastructure.

Administrative expenses increased 24.1% to
Ps. 5,696 million in 2020, compared to Ps. 4,590
million in 2019; as a percentage of sales, they
increased to 3.1% in 2020, from 2.5% in 2019.

Selling expenses increased 6.6% to Ps. 56,030
million in 2020 compared with Ps. 52,545
million in 2019; as a percentage of sales they
reached 31.0%.

Cost of goods sold decreased 2.5% to
Ps. 106,981 million in 2020, compared to
Ps. 109,711 million in 2019. Gross margin
increased 40 basis points to reach 41.0%
of total revenues. This increase reflects the
sustained growth of the services category,
including income from financial services and
commercial income activity. As a result, gross
profit decreased 1.1% to Ps. 74,296 million in
2020 compared with 2019.

Income from operations decreased 31.6%
to Ps. 12,020 million in 2020 compared to
Ps. 17,572 million in 2019, resulting in an
operating margin contraction of 290 basis
points to reach 6.6% as a percentage of total
revenues for the year, compared with 9.5% in
2019, mainly reflecting operating deleverage,
as our largely fixed cost structure base
continues to face lower revenues coupled with
higher operating expenses as described above.

Operating expenses increased 8.3%
to Ps. 62,276 million in 2020 compared to
Ps. 57,527 million in 2019. The increase
in operating expenses was driven by:
i) our continuing initiative to strengthen
our compensation structure of key in-store
personnel in a tight labor market, including

FEMSA Comercio
Health Division

FEMSA Comercio – Health Division total
revenues increased 10.6% to Ps. 65,172
million compared to Ps. 58,922 million in

2. Excludes the effects of significant mergers and acquisitions in the last twelve months

2019, mainly driven by a same-store sale
increase of 1.4%, reflecting positive trends
in Mexico. This was partially offset by strict
mobility restrictions across our South
American operations and a negative currency
translation effect related to the depreciation
of the Chilean and Colombian peso compared
to the Mexican Peso. As of December 31,
2020, there were a total of 3,368 drugstores
in Mexico, Chile, Colombia and Ecuador. On
an organic basis2, total revenues grew 3.1%.

Cost of goods sold increased 10.5% to
Ps. 45,597 million in 2020, compared with
Ps. 41,277 million in 2019. Gross margin
increased 10 basis points to reach 30.0% of
total revenues. This was mainly driven by;
i) positive sales mix effect driven by consumer
behavior shifts in connection to the strict
mobility restrictions in our operations in South
America; and ii) more effective collaboration
with key supplier partners across our
operations. Gross profit increased 10.9% to
Ps. 19,575 million in 2020 compared with 2019.

Operating expenses increased 10.1%
to Ps. 16,919 million in 2020 compared with
Ps. 15,360 million in 2019. This increase
was driven by the organic growth in Mexico
and South America, partially offset by
cost efficiencies and tight expense control
throughout our territories.

2020 ANNUAL REPORT FEMSA

Administrative expenses increased 22.3% to
Ps. 3,314 million in 2020, compared with
Ps. 2,709 million in 2019; as a percentage of sales,
they reached 5.1% in 2020. Selling expenses
increased 8.7% to Ps. 13,540 million in 2020
compared with Ps. 12,462 million in 2019; as a
percentage of sales, they reached 20.7% in 2020.

Cost of goods sold decreased 30.4% to
Ps. 29,992 million in 2020, compared with
Ps. 43,077 million in 2019. Gross margin
increased 250 basis points to reach 12.5%
of total revenues. This increase reflects
improved supply terms. Gross profit
decreased 9.9% to Ps. 4,300 million in 2020
compared with 2019.

This decrease reflects lower operating
leverage driven by the decrease in sales
described above, coupled with higher
administrative expenses.

Key Events during 2020
The following text reproduce our press
releases as they were published.

Income from operations increased 16.2%
to Ps. 2,656 million in 2020 compared with
Ps. 2,285 million in 2019, resulting in an
operating margin expansion of 20 basis
points to 4.1% as a percentage of total
revenues for the year, compared with 3.9%
in 2019, which reflects higher operating
leverage. On an organic3 basis, income from
operations increased 10.7%.

FEMSA Comercio
Fuel Division

FEMSA Comercio – Fuel Division total revenues
decreased 28.3% to Ps. 34,292 million in 2020
compared to Ps. 47,852 in 2019, reflecting a
29.2% average decrease in same-station sales. As
of December 31, 2020, there were a total of 558
OXXO GAS service stations. As referenced above,
same-station sales decreased an average of
29.2% compared to 2019, as the average volume
decreased 24.3% and the average price per liter
decreased by 6.6%, reflecting reduced mobility in
connection to the COVID-19 pandemic.

Operating expenses decreased 2.9% to
Ps. 3,487 million in 2020 compared with
Ps. 3,591 million in 2019. The decrease in
operating expenses reflects tight expense
control and increased expense efficiencies.

Administrative expenses increased 17.2%
to Ps. 252 million in 2020, compared with
Ps. 215 million in 2019; as a percentage of
sales, they increased 30 basis points to 0.7%
in 2020. Selling expenses decreased 1.7%
to Ps. 3,226 million in 2020 compared with
Ps. 3,281 million in 2019; as a percentage
of sales, they increased 250 basis points to
9.4% in 2020.

FEMSA Announces Successful
Issuance in the U.S. Bond Market
On January 16, 2020, FEMSA announced
the placement of a U.S.-denominated
SEC-registered offering of Senior Unsecured
Notes in the international capital markets.

FEMSA successfully issued USD $1,500 million
in 30-year senior unsecured notes. The notes
will bear interest at an annual rate of 130
basis points over the relevant benchmark, for
a yield of 3.608%.

This issuance received credit ratings of A- from
Standard & Poor’s and A from Fitch Ratings.

Income from operations decreased to
Ps. 813 million in 2020 compared with
Ps. 1,184 million in 2019, resulting in an
operating margin contraction of 10 basis points
to 2.4% as a percentage of total revenues for
the year, compared with 2.5% in 2019.

The proceeds from this issuance will be used
for general corporate purposes, improving
FEMSA’s cost of debt. FEMSA has also increased
its financial flexibility under extremely
favorable conditions in order to continue to
advance its long-term growth strategy.

3. Excludes the effects of significant mergers and acquisitions in the last twelve months.

2020 ANNUAL REPORT FEMSA

Coca‑Cola FEMSA Announces the
Closing of its Senior Notes due 2030
and the Repurchase of its Senior
Notes Due 2023
On January 23, 2020, Coca-Cola FEMSA
announced the closing of the public offering
of US$1.25 billion principal amount of senior
notes due 2030 (the “2030 Notes”) published
on January 9, 2020, as well as its intention
to use the net proceeds from the sale of the
2030 Notes to repurchase and fully redeem
its 3.875% senior notes due 2023 (the “2023
Notes”) and for general corporate purposes.
On January 22, 2020 the Company closed the
offering and used the proceeds from the sale
of the 2030 Notes to partially repurchase the
2023 Notes through the initial settlement of a
tender offer.

market. The Company placed certificados
bursátiles for an aggregate amount of
Ps. 3,000 million for 8 years bearing an annual
fixed interest rate of 7.35%, and certificados
bursátiles for an aggregate amount of
Ps. 1,727 million for 5.5 years bearing a
variable interest rate of TIIE +0.08%.

The certificados bursátiles received credit
ratings of AAA(mex) from Fitch México, S.A.
de C.V. and mxAAA from S&P Global Ratings,
S.A. de C.V.

The Company will use the net proceeds
from the sale of certificados bursátiles for
general corporate purposes. As of today, no
specific or additional corporate purpose has
been defined.

On January 27, 2020, the Company redeemed
100% of the remaining Notes outstanding,
in a principal amount of US$398,208,000.00.
Notices of redemption were sent to all
currently registered holders of the Notes by
the trustee, The Bank of New York Mellon, on
January 22, 2020.

Coca‑Cola FEMSA announces
placement of a Ps. 4,727 million bond
in Mexican Market
On February 6, 2020, Coca-Cola FEMSA
announced the successful placement of two
tranches of Mexican peso denominated bonds
or certificados bursátiles in the Mexican

The transaction received broad participation
from investors, and was over-subscribed
almost four times, confirming investor’s trust
in Coca-Cola FEMSA’s financial discipline and
strong credit profile.

FEMSA Announces Successful Re‑tap to
its Senior Unsecured Notes due 2050
On February 12, 2020, FEMSA announced
the successful placement of a US$300 million
re-tap to its US-denominated SEC-registered
Senior Unsecured Notes due 2050 (“New
Notes”), representing an additional issuance
to FEMSA’s outstanding US$1,500 million
3.500% Senior Unsecured Notes due 2050

issued on January 16, 2020 (“Initial Notes”).
The New Notes will be treated as a single
class with the Initial Notes, raising the total
outstanding balance to US $1,800 million.
The New Notes were priced at 101.433 for an
implied yield to maturity of 3.423%.

The proceeds from this issuance will be used
for general corporate purposes, further
improving FEMSA’s cost of debt.

FEMSA enters the Jan‑San and
Specialized Distribution Industry in
the United States
On March 9, 2020, FEMSA announced that it
had entered into definitive agreements with
the shareholders of WAXIE Sanitary Supply
(“WAXIE”) and North American Corporation
(“North American”) to form a new platform
within the Jan-San, Packaging and Specialized
distribution industry in the United States.
The platform will bring together two market
leaders in this field: WAXIE And North
American, with FEMSA acquiring a majority
controlling interest in the combined company.
Current shareholders of WAXIE and North
American will remain investors. Each company
maintained their current management teams,
with Charles Wax of WAXIE and John Miller of
North American, members of the founding
families of their respective companies and
current CEOs, now serving as co-CEOs of the
new enterprise. FEMSA’s investment in this
venture is US$900 million.

2020 ANNUAL REPORT FEMSA
About WAXIE and North American
Founded 75 and 100 years ago respectively
and family-owned and managed, WAXIE and
North American are leading distributors
of consumables in the janitorial, sanitary
supply and packaging industry, with
complementary market footprints and
combined annual revenues of more than
US$900 million. Together they will have
significant scale, operating a network of
26 distribution centers across the country
and serving more than 27,000 customers in
various industries such as building service
contractors, education, government, retail
and hospitality. WAXIE is headquartered in
San Diego, California, and North American is
headquartered in Chicago, Illinois.

Transaction Rationale
This transaction is consistent with FEMSA’s
capability set and fits well with our strategic
intent of investing in adjacent businesses that
can leverage those capabilities across different
markets, while providing an opportunity for
attractive growth and risk-adjusted returns.
FEMSA has developed expertise in the
organization and management of supply
chains and distribution systems, serving
very large numbers of business and retail
customers through millions of interactions, in
different industries.

The transaction was successfully closed on
May 15,2020.

FEMSA reaches agreement with the
Mexican tax authority to resolve
interpretative differences and
make payment
On May 29, 2020, FEMSA announced that
it reached an agreement with the Mexican
tax authority (the Servicio de Administración
Tributaria), to resolve interpretative
differences over taxes paid outside of Mexico,
without judicial action. Under the agreed
terms, FEMSA will pay the amount of Ps. 8,790
million, that will be recognized in FEMSA’s
financial statements during the second
quarter of 2020.

FEMSA announces successful Re‑tap to
its Senior Unsecured Notes due 2050
On June 25, 2020, FEMSA announced the
successful placement of a US$700 million
re-tap to its US-denominated SEC-registered
Senior Unsecured Notes due 2050 (“New
Notes”), representing an additional issuance
to FEMSA’s outstanding US$1,500 million
3.500% Senior Unsecured Notes due 2050
issued on January 16, 2020 (“Initial Notes”),
and the outstanding US$300 million re-tap
notes issued on February 12, 2020 (“Re-Tap
Notes”). The New Notes will be treated as a
single class with the Initial Notes and Re-Tap
Notes, raising the total outstanding balance
to US $2,500 million. The New Notes were
priced at 102.620 for an implied yield to
maturity of 3.358%.

The proceeds from this issuance will be used
for general corporate purposes, further
improving FEMSA’s cost of debt.

Coca‑Cola FEMSA prices US$ 705
million green bond, the largest ever
for a Latin American corporation
On August 26, 2020, Coca-Cola FEMSA
announced the pricing of its first ever green
bond in the international capital markets.
The successful public offering of US$ 705
million principal amount of notes due 2032,
priced at US Treasury + 120 basis points and
a coupon of 1.850%. The transaction received
broad participation from investment grade
dedicated investors, confirming Coca-Cola
FEMSA’s financial discipline, strong credit
profile and commitment with sustainability.
The green bond will help the Company
achieve its environmental sustainability
objectives and contribute to the United
Nations Sustainable Development Goals.

“This green bond is consistent with our
goal of ‘refreshing our consumers, anytime,
anywhere, in a sustainable way’ as we plan
to continue to generate economic value and
a positive contribution to society and the
environment. We expect this transaction will
allow us to support the achievement of our
environmental targets and contribute to the
United Nations Sustainable Development
Goals” said John Santa Maria Otazua,
Coca-Cola FEMSA’s Chief Executive Officer.

2020 ANNUAL REPORT FEMSACompany, Inc., (dba “SWPlus”) based in
Wichita, Kansas. Combined revenues of
the acquired businesses for the last twelve
months as of September 2020, were
approximately US$ 380 million.

These acquisitions fit well with FEMSA’s
strategy of creating a national distribution
platform, building on FEMSA’s capabilities
and the foundation formed by the merger of
WAXIE Sanitary Supply and North American
Corporation earlier in the year.

These transactions were successfully closed
during December 2020.

The Company intends to allocate an amount
equal to the net proceeds from this offering
to finance or refinance eligible green projects,
including in the following three areas: • Climate
action: On June 11, 2020, Coca-Cola FEMSA
became the first Mexican corporation to have
carbon footprint reduction goals approved
by the Science Based Targets Initiative (SBTi),
thereby adhering to the goal framework set
out by the Paris Agreement to avoid dangerous
climate change by keeping global temperature
rise well-below 2°C above pre-industrial levels.

in its PET bottles and to collect 100% of the
beverage packages placed in the market by
2030. Consistent with the Ellen McArthur
Foundation’s New Plastics Economy Global
Commitment, the Company is working on
closing bottle-to-bottle loops by developing its
own infrastructure and sharing infrastructure
with other stakeholders through partnerships.
Coca-Cola FEMSA is currently on track to
achieve its commitments with a 50% collection
rate in its main markets and an average of
23.7% use of recycled resin in PET bottles.

The Company plans to achieve its 2030
commitment with a pipeline of specific
projects that expect to allow it to reach its
plan of decreasing greenhouse gas emissions
by 28% across its value chain, in comparison
to its 2015 baseline.

Water stewardship: The Company
continuously seeks for opportunities to make
a more efficient use of water and protect
water sources. With a benchmark water
use ratio of 1.52 liters of water per liter of
beverage produced in 2019, the Company
is committed to return the same amount of
water that is used in its beverage production
through initiatives like the Latin American
Water Funds Alliance and local partnerships.

Circular economy: As part of the “World
Without Waste” initiative, Coca-Cola FEMSA
has a commitment to use 50% recycled resin

As part of the green bond offering, the
Company published its Green Bond
Framework, which is aligned with the
four core components of the Green Bond
Principles 2018 as administered by the
International Capital Market Association.
The Company obtained a Second-Party
Opinion from Sustainalytics in accordance
with industry best practices.

The closing of the transaction and issuance
of the notes was successfully concluded on
September 1, 2020.

FEMSA Comercio announces
agreement with Chilean retailer SMU
to acquire OK Market stores
On October 8, 2020, FEMSA announced that
its subsidiary, FEMSA Comercio has reached
an agreement with SMU, S.A, a leading
Chilean retailer, to acquire its OK Market

store chain for a total amount of 1,515,965
Unidades de Fomento1 or approximately CLP
$43,500 million. The transaction is subject to
final confirmatory due diligence, the signing
of definitive agreements and customary
regulatory and anti-trust approvals and is
expected to close during 2021.

About OK Market
OK Market is a leading small-format proximity
store chain in Chile with more than 120
locations. During 2019, it recorded total sales
of more than CLP $50,000 million.

Daniel Rodríguez Cofre, FEMSA Comercio’s
CEO, commented:
“In recent years, we have made great
progress developing the value proposition
and footprint of our OXXO proximity stores in
Chile. The transaction announced today will
allow us to improve the way we serve this key
market and our Chilean customers.”

1 Unidades de Fomento: Chilean inflationary variable
accounting unit. 1 Unidad de Fomento = 28,715.50 CLP
as of October 08 2020.

FEMSA increases its specialized distri‑
bution footprint in the United States
On December 16, 2020, FEMSA announced
that it had reached agreements to acquire
two independent specialized distribution
businesses in the United States: Southeastern
Paper Group, Inc., based in Spartanburg,
South Carolina and Southwest Paper

2020 ANNUAL REPORT FEMSAContact

FEMSA Corporate Offices

Monterrey
General Anaya Nº 601 Pte.
Col. Bella Vista
Monterrey, Nuevo León, Mexico
C.P. 64410
Phone: +52 (81) 83 28 60 00

Mexico City
Lago Alberto 442 - A Building - 2nd floor
Col. Anáhuac II Sección
Miguel Hidalgo
Mexico City, Mexico
C.P. 11320
Phone: +52 (55) 52 49 68 00

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FEMSA COMERCIO
Edison Nº 1235 Nte.
Col. Talleres Monterrey,
Nuevo León, Mexico
C.P. 64480
Phone: +52 (81) 83 89 21 21

General Counsel
Carlos E. Aldrete Ancira
General Anaya Nº 601 Pte.
Col. Bella Vista Monterrey,
Nuevo León, Mexico
C.P. 64410

Investor Relations
Juan Fonseca Serratos
Enrique Manero Martínez
e-mail: investor@femsa.com.mx

COCA‑COLA FEMSA
Mario Pani N° 100
Col. Santa Fe Cuajimalpa
Mexico City, Mexico
C.P. 05348
Phone: +52 (55) 15 19 50 00

Corporate Communications
Mauricio Reyes López
Erika de la Peña Ibarra
e-mail: comunicacion@femsa.com

Sustainability
Víctor Manuel Treviño Vargas
Gabriel Adrián González Ayala
e-mail: sostenibilidad@femsa.com

FEMSA STRATEGIC BUSINESSES
General Anaya Nº 601 Pte.
Col. Bella Vista
Monterrey, Nuevo León, Mexico
C.P. 64410
Phone: +52 (81) 83 28 63 00

FEMSA FOUNDATION
General Anaya Nº 601 Pte.
Col. Bella Vista, Monterrey,
Nuevo León, Mexico
C.P. 64410
Phone: +52 (81) 83 28 60 00

Independent Accountant
Mancera, S.C.
Integrante de Ernst & Young
Global Limited
Av. Ricardo Margain Zozaya 335,
Floor 14 Col. Valle del Campestre,
San Pedro Garza García,
Nuevo León, Mexico,
C.P. 66265
Phone: +52 (81) 81 52 18 00

Depositary Bank and Registrar
BNY Mellon Shareowner Services
P.O. Box 505000 Louisville, KY 40233-5000
Direct Mailing for overnight packages:
BNY Mellon Shareowner Services
462 South 4th Street
Suite 1600 Louisville, KY 40202
Toll free number for U.S.
calls: +1 888 269 2377
International calls: +1 201 680 6825
www.mybnymdr.com
shrrelations@cpushareownerservices.com

2020 ANNUAL REPORT FEMSA2020 ANNUAL REPORT FEMSA

Stock Markets
and Symbols

Fomento Económico Mexicano, S.A.B. de C.V.
stock trades on the Bolsa Mexicana de Valores (BMV)
in the form of units under the symbols FEMSA UBD
and FEMSA UB. The FEMSA UBD units also trade
on The New York Stock Exchange, Inc. (NYSE) in the
form of ADRs under the symbol FMX.

We are members of the Dow Jones Sustainability
MILA Pacific Alliance Index, the FTSE4Good Emerging
Index and the Mexican Stock Exchange Sustainable
IPC, among other indices that evaluate our
performance in sustainability.

For more extensive information, including the
Audited Financial Statements, please visit us at:
www.femsa.com
https://femsa.gcs‑web.com/
investor@femsa.com.mx
General Anaya Nº 601 Pte. Col. Bella Vista
Monterrey, Nuevo León, Mexico, C.P. 64410
Phone: +52 (81) 83 28 60 00

Since 2005 FEMSA has been committed to the
United Nations Global Compact corporate
responsibility initiative and its principles in the
areas of human rights, labor, the environment
and anti-corruption.

The FEMSA 2020 Annual Report may contain certain forward-looking statements concerning FEMSA and its subsidiaries’ future performance and should be considered as good faith estimates of FEMSA and its subsidiaries. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to further events and uncertainties which could materially impact the Company’s subsidiaries’ actual performance.2020 ANNUAL REPORT FEMSA2020 ANNUAL REPORT FEMSA

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