Fernando Olvera Espinosa de los Monteros

Asked about the cost outlook for the rest of the year and the specific measures being taken to achieve the stated priority of recovering profitability.

Answer

The executive noted that while some raw material costs are softer, others like pulp are at record highs, and the volatile Chilean peso continues to exert pressure. The company's 'HerCCUles' plan is the primary vehicle for margin recovery, focusing on cost efficiency, revenue management, and digital transformation, with an expected improvement in H2 results.

Fernando Olvera from Bank of America asked for the cost outlook for the remainder of the year, balancing lower commodity prices against currency depreciation, and inquired about specific measures being taken to achieve the short-term priority of recovering profitability.

Answer

CFO Felipe Dubernet noted that while some raw material costs have softened, others like orange juice pulp are at record highs, and the volatile Chilean peso remains the largest uncertainty. CEO Patricio Jottar Nasrallah added that recovering profitability is the top priority, driven by the HerCCUles efficiency plan, revenue management, SKU and employee controls, and digital transformation.

Fernando Olvera from Bank of America inquired about the cost outlook for the remainder of the year, considering commodity trends and FX depreciation. He also asked for more detail on the specific measures being implemented to achieve the short-term priority of recovering profitability.

Answer

CFO Felipe Dubernet noted that while some costs like sugar are softer, they remain above last year's levels, and orange juice pulp is at a record high. He identified the volatile Chilean peso as the biggest uncertainty, stating cost pressures will likely continue. CEO Patricio Jottar Nasrallah added that profitability is the top priority, driven by the HerCCUles plan which focuses on cost efficiencies, revenue management, SKU rationalization, and digital transformation.

Fernando Olvera Espinosa de los Monteros from Bank of America asked for a month-by-month breakdown of Chilean volume performance in Q1 and the difference between alcoholic and non-alcoholic beverages. He also inquired about the gross margin outlook for Chile given FX volatility and input costs.

Answer

Chief Financial Officer Felipe Dubernet stated that Chilean volumes were consistent month-to-month in Q1, with non-alcoholic volumes flat and alcoholic volumes seeing a low single-digit decrease due to competitor promotions. He acknowledged new margin pressures from the peso's devaluation and rising input costs, emphasizing that the HerCCUles plan's focus on revenue management and cost control is crucial to protect prior margin gains.

Fernando Olvera Espinosa de los Monteros asked for details on Chile's volume performance, including a month-by-month breakdown for Q1, differences between alcoholic and non-alcoholic drinks, and the outlook for gross margin given FX and input cost volatility.

Answer

Chief Financial Officer Felipe Dubernet stated that Chile's volume trend was consistent across all months of the quarter. He noted non-alcoholic volumes were flat while alcoholic beverages saw a low single-digit decline due to competitor promotions. Regarding margins, he acknowledged significant pressure from the peso's devaluation but reiterated that the HerCCUles plan, focusing on revenue management and cost controls, aims to protect the margin gains achieved in 2023.

Asked about the cost and margin outlook for Chile given foreign exchange pressures, and for details on the company's SKU reduction strategy and its impact on profitability.

Answer

The significant depreciation of the Chilean peso is a major risk for costs, which will be countered by enhanced revenue management and efficiency initiatives to stabilize margins. The company eliminated about 100 SKUs (5%) in 2023 as part of a discipline to focus on profitable, brand-enhancing products, rather than as a continuous reduction program.

Fernando Olvera Espinosa de los Monteros inquired about Coca-Cola FEMSA's volume guidance for the remainder of the year following a strong first half, and asked for an update on market share performance in its key markets of Mexico and Brazil.

Answer

Executive Jorge Alejandro Pereda stated that the company is maintaining its full-year guidance of mid-single-digit volume growth, considering it is only halfway through the year. CEO Ian Marcel Craig García explained that market share in Mexico was impacted by supply shortages, while Brazil's strong year-to-date share gains were recently offset by losses in Rio Grande do Sul due to flooding. Management confirmed actions are underway to resolve capacity constraints.