Carlos Laboy

Carlos Laboy from HSBC sought insights into OXXO's affordability strategy, beyond just savings, asking what drives consumer sampling, repeat consumption, and adoption of successful discount brands in Mexico. He also questioned if the pressure from discount brands is enhancing differentiated propositions from OXXO's major branded suppliers to increase foot traffic.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, explained that affordability is a permanent strategy due to increasing price-consciousness in Mexico. He noted that while discount channels are growing, OXXO can gain traffic by offering complementary items. He highlighted the success of returnable glass and multi-packs in beer and soft drinks for replenishment occasions. He also observed that value tobacco brand buyers are often new customers, reducing cannibalization fears. OXXO collaborates with suppliers to offer both value and premium promotions, leveraging its model to drive affordability and premiumization regionally.

Carlos Laboy sought more insights into OXXO's affordability strategy in Mexico, beyond just savings, asking what drives consumer sampling and repeat consumption of discount brands. He also questioned if the pressure from discount brands is enhancing OXXO's differentiated proposition from its major branded suppliers to attract foot traffic.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, explained that while discount channels are growing, less than 10% of OXXO stores are near them, creating a dynamic where OXXO can lose sales in some categories but gain traffic in others. He noted that affordability is crucial for price-conscious Mexican consumers, driving relevance in replenishment categories like beer (returnable glass, multi-packs) and soft drinks (mini multi-packs). He observed that value tobacco brand buyers are often new customers, reducing cannibalization fears, and that OXXO collaborates with suppliers to offer both affordable and premium options across regions.

Carlos Laboy from HSBC asked about the interactions between Spin's leadership and the FEMSA Board of Directors, focusing on the board's level of support and evolving understanding of the company's digital needs.

Answer

Juan Carlos Guillermety, CEO of Spin, described the board's support as strong, with a push for faster execution and synergy between the physical and digital assets. CFO Martín Yániz added that digitally-savvy board members provide valuable challenges and that management is implementing joint KPIs to improve cooperation. The recent addition of Carlos Arroyo to OXXO leadership was also cited as a positive for collaboration.

Carlos Laboy asked about the interactions between Spin's leadership and the FEMSA Board of Directors, their level of support, and the evolution of the board's digital expertise.

Answer

Juan Carlos Guillermety, CEO of Spin, described the board's support as strong, with a push for faster execution and synergy with OXXO. CFO Martín Yániz noted that digitally-experienced board members provide valuable input while also urging caution on credit risk. Management also highlighted that the board's composition has evolved to align with the company's current strategic challenges.

Carlos Laboy of HSBC asked why FEMSA doesn't acquire the public float of Coca-Cola FEMSA (KOF) given its relatively low valuation compared to other beverage deals. He also asked how FEMSA values KOF's data for its digital ecosystem.

Answer

CFO Martin Arias Yaniz detailed the strategic benefits of keeping KOF public, including its use as an M&A currency, its strong independent balance sheet, and the governance benefits of a public listing. Regarding data, he stated that while it's impossible to assign a specific monetary value today, there is strong conviction in the long-term potential of integrating data across the entire FEMSA ecosystem, though it is a complex, multi-year undertaking.

Carlos Laboy asked about the brand positioning of Corona, questioning if its long-standing 'beach, rest, and relaxation' theme has become too sedentary for today's premium beer consumer who increasingly seeks active lifestyle positionings, and how the brand might be refreshed or tweaked.

Answer

CEO Bill Newlands noted the evolution of Corona's advertising to refocus on the beer's essence and iconic beach value, moving away from being 'celebrity heavy.' He argued that the beach lifestyle aligns with consumer desires for refreshment and experimentation, citing Corona Sunbrew as an example of leveraging this into an active lifestyle proposition, while maintaining consistent brand positioning over time.

Carlos Laboy inquired about the brand positioning of Corona, asking how it might be refreshed or tweaked. He questioned if the traditional 'beach, rest, and relaxation' theme has become too sedentary for today's active lifestyle consumers, citing Michelob Ultra and international interpretations of Corona.

Answer

CEO Bill Newlands noted the evolution of Corona's advertising to refocus on the beer and its iconic beach essence. He argued that the beach lifestyle aligns with consumer desires for refreshment and experimentation, citing Corona Sunbrew as an example of leveraging this into an active lifestyle positioning. He emphasized consistent brand positioning over time, with minor evolutions rather than frequent changes.

Carlos Alberto Laboy asked for the case for Corona Extra, questioning if it was a declining brand and how the company plans to stabilize it, suggesting it might be a structural hurdle.

Answer

CEO William Newlands countered by focusing on the entire Corona brand family, highlighting growth from Corona Familiar and innovation like Corona Sunbrew. He emphasized Corona's powerful brand equity as the most loved beer brand in the U.S. and noted it delivers strong returns on advertising, with plans to increase that spend in the current fiscal year.

Carlos Laboy from HSBC asked for an outlook on trade management in Europe, given the company's digital capabilities, and whether the low-hanging fruit has been captured.

Answer

CEO Damian Gammell detailed a two-pronged digital strategy: the myccep.com platform for organized trade, and a newer eB2B platform for the fragmented trade, starting in Spain. He indicated significant opportunity remains, especially in expanding these tools to the Philippines and Indonesia.

Carlos Laboy from HSBC asked for an outlook on trade management in Europe, given the company's digital capabilities, and whether most of the low-hanging fruit has been captured.

Answer

CEO Damian Gammell expressed significant excitement for this area, highlighting the myccep.com B2B platform for organized trade and major progress in the fragmented trade, where they now have outlet-level visibility on over 70% of revenue. He noted that while much has been achieved, there is more to come, including expansion into the Philippines and Indonesia.

Carlos Laboy of HSBC requested an expansion on the cash flow offsets mentioned earlier, specifically the tax benefits and working capital improvements that support the reaffirmed free cash flow guidance.

Answer

CFO Tracey Joubert confirmed that cash tax benefits and favorable working capital are the two primary factors enabling the company to maintain its free cash flow guidance of $1.3 billion, plus or minus 10%. CEO Gavin Hattersley added that a significant driver of the tax benefit relates to capital deductibility.

Carlos Laboy from HSBC asked how the company's focus on demand creation and recruiting new consumers is intensifying now that most of its refranchising efforts are complete.

Answer

President and CFO John Murphy clarified that a few large refranchising deals are still in progress. He emphasized that the core focus is on driving top-line growth through their portfolio of billion-dollar brands, powered by an ongoing marketing and innovation transformation. He also highlighted that the company's relationship with its bottling partners has evolved to be stronger and more collaborative, leading to better execution.

Carlos Laboy of HSBC inquired about the most promising digital capabilities being built in the North American bottling system and how bottlers are being encouraged to make these investments.

Answer

Chairman and CEO James Quincey highlighted the expansion of digital engagement with independent 'mom-and-pop' retailers. This includes 24/7 ordering platforms and the use of AI to provide retailers with suggested orders. He described this as enabling the human workforce, not replacing it, and noted that bottlers are 'leaning in' to these investments.

Carlos Laboy from HSBC asked CEO Carlos Lisboa to elaborate on the positioning of Ambev's mega brands within the portfolio and how the company is approaching segmentation by occasion, brand, package, and price at the point of sale.

Answer

CEO Carlos Eduardo Lisboa explained that the primary goal is to lead and grow the beer category by leveraging Ambev's diverse portfolio to penetrate more consumption occasions, drawing inspiration from other markets like Mexico. CFO Lucas Lira added that digital platforms like BEES and Zé Delivery are crucial enablers, facilitating direct engagement with customers and consumers to optimize product assortment and offerings.

Carlos Laboy questioned the rationale for Ambev remaining a publicly listed company, citing its low valuation multiple compared to peer transactions. He asked if conditions exist for Ambev to retire its float or for parent company ABI to tender for the shares.

Answer

Executive Lucas Lira responded that from Ambev's perspective, being a listed entity in Brazil provides value due to its significant local presence. He also emphasized its importance for talent attraction and retention via share-based compensation. Lira noted that future share buybacks are an alternative that the Board will consider at the end of the year as part of its capital allocation review.

Carlos Alberto Laboy from HSBC questioned management's confidence in the current level of incremental CapEx relative to future growth and asked how the company's ROIC trajectory might evolve over the next three years, questioning if it is approaching a ceiling.

Answer

CEO Ian Marcel Craig García expressed high confidence in the CapEx plan, stating that the investment is necessary to address significant out-of-stocks and that the company is still below its target 10% capacity slack. He expects ROIC to remain flat at its current high level of 15.1% in 2025 despite record spending. CFO Gerardo Celaya added that long-range projections still account for ROIC improvement.