Fomento Economico Mexicano Sab de CV Units Cons. of 5 ShsB · BMV:FEMSA/UB
Fomento Economico Mexicano Sab de CV Units Cons. of 5 ShsB — Femsa — Investor Presentation (December 2008)
34 slides from Fomento Economico Mexicano Sab de CV Units Cons. of 5 ShsB's investor presentation, December 2008
Slide 1: FEMSA Company Overview
Slide 2: Safe Harbor Statement
Safe Harbor Statement During this presentation management may discuss certain forward- looking statements concerning FEMSA’s future performance that should be considered as good faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon c
Slide 3: The Right Business Model...
The Right Business Model... Publicly Held 14.7% 31.6% 53.7% 100% 100% LTM 08 Total Revenue: US$ 14.7 bn LTM 08 EBITDA: US$ 2.8 bn 26% 13% 28% 33% 46% 54% Note: Figures in Mexican pesos converted to US dollars using the period-end exchange rate from each period. 3 Last Twelve Months information as of
Slide 4: ... and an expanding continental footprint
... and an expanding continental footprint Large Scale • 2.2 bn unit cases of soft drinks • 41 mm hectoliters of beer Powerful Brands • #1 in soft drinks in all regions • #2 in beer in Mexico • Significant player in US imports and Brazil Efficient Production • 31 bottling plants • 14 breweries Broad
Slide 5: Strategic framework driving competitive advantage
Strategic framework driving competitive advantage Operating • Efficiencies Information • Integrated Processes Technology Improvements • Shared Service Centers • Best Practices Human • Multiple Category and Channels Resources Execution Economic Value Added 5
Slide 6: Delivering consistent growth
Delivering consistent growth Total Revenue EBIT (US$ million) 14,698 (US$ million) 1,990 6,751 1,078 3,387 477 1998 2003 LTM 2008 1998 2003 LTM 2008 CAGR 98-LTM 08: 16% CAGR 98-LTM 08: 15% CAGR 03-LTM 08: 17% CAGR 03-LTM 08: 13% Note: Figures in Mexican pesos converted to US dollars using the period
Slide 7: FEMSA Cerveza
Slide 8: Significant player in three top beer markets
Significant player in three top beer markets USA • Mexico 302 mm people 79 lt per capita – Brand health indicators at all-time 34 mm Hl(1) high • United States Imports Mexico – Double-digit volume growth 106 mm people 58 lt per capita – Strategic complementary fit with 63 mm Hl Heineken • Brazil – B
Slide 9: Delivering consistent growth
Delivering consistent growth Total Revenue EBIT (US$ million) (US$ million) 3,877 516 319 1,950 197 1,339 1998 2003 LTM 2008 1998 2003 LTM 2008 CAGR 98-LTM 08: 11% CAGR 98-LTM 08: 10% CAGR 03-LTM 08: 15% CAGR 03-LTM 08: 10% Note: Figures in Mexican pesos converted to US dollars using the period-end
Slide 10: Targeted Brand-Building Strategy
Targeted Brand-Building Strategy Brand Value Building Process Emerging Brands Purchase Awareness Trial Acceptance Intention Consumer Base Frequency Developed Brands Favorite Brand Consumer Base (∆ Pp 07 vs 04) (∆% 07 vs 04) Preference Market Position Strong +3.7 Favorite Balanced +7.2 +6.2 Brand Dev
Slide 11: Driving per capita consumption through innovation and segmentation
Driving per capita consumption through innovation and segmentation… Per Capita Consumption (Lt) 79 78 79 58 54 53 51 48 49 Mexico Brazil USA 2003-2004 2005-2006 2007-2008 2003 2005 2007 Total SKU Portfolio: 61 70 186 Source: Impact Databank and International Monetary Fund, CONAPO, US Census Bureau a
Slide 12: ..while improving efficiencies along the value chain
..while improving efficiencies along the value chain 2003 2005 2007 2003 2005 2007 HL Production per Employee Distribution Centers 1,272 1,303 1,358 448 442 347 % Capacity Utilization % Direct Distribution 74 78 86 76 77 75 2003 2005 2007 % Presale 80 86 87 HL Distribution per Route 11,225 12,025 12
Slide 13: USA: Long-term partnership Heineken USA-FEMSA Cerveza brands
USA: Long-term partnership Heineken USA-FEMSA Cerveza brands • Segmenting portfolio through pricing, Vol. Growth of FEMSA Exports product and channel vs. U.S. Beer Industry (%) • Reinforcing distribution and product offering • Strengthening presence in on-premise 15.3 14.6 channel and East Coast 13.
Slide 14: Brazil: Taking steps in the right direction
Brazil: Taking steps in the right direction Kaiser Volume • Revert sharp volume decline trend (mm Hl) • Stabilize financial losses, sourcing 14.9 marketing funds 12.8 +1.7 • Improvements along the value-chain -43% +20% mm Hl • Adjust product portfolio 10.3 10.0 9.8 – Repositioning existing brands 9.
Slide 15: Significant growth opportunities
Significant growth opportunities Mexico and Brazil • Low beer per-capita consumption markets • Broad-based, growing demographic pyramids • Strong competitive position in Mexico and developing in Brazil • Room for advanced multi-segmentation strategies and go-to-market models USA • Differentiated and
Slide 16: OXXO
Slide 17: A dynamic feedback model…
A dynamic feedback model… Consumer Fe n io ed ut ba ec ck Ex Value Store Proposition Enablers 17
Slide 18: Developing store segmentation
Developing store segmentation Replenishment Base Indulgence Groceries Convenience Impulse Full meals Supply Immediate Hunger Replenishment Thirst Satisfaction 18 18
Slide 19: Accelerated profitable growth
Accelerated profitable growth Revenue EBIT (US$ million) (US$ million) 4,293 6.2% 264 bp 0 28 + 1,477 62 3.4% 421 14 1998 2003 LTM 2008 1998 2003 LTM 2008 CAGR 98-LTM 08: 26% CAGR 98-LTM 08: 34% CAGR 03-LTM 08: 24% CAGR 03-LTM 08: 34% Note: Figures in Mexican pesos converted to US dollars using the
Slide 20: Mexico's leading convenience store chain
Mexico’s leading convenience store chain 6,088 1,926 348 Circle K, AmPm, SuperCity 862 7-Eleven Extra 716 OXXO Others • > 740 net new store openings per year • Over US$ 4 bn in revenues in LTM 2008 • Reciprocal leverage with FEMSA beverage operations – Approximately 40% of OXXO sales are beverage-re
Slide 21: Plenty of room for growth: 12,000 OXXO's by 2015
Plenty of room for growth 12,000 OXXO’s by 2015 OXXO Penetration Level by Population Nuevo Leon Population: 4.4 mm OXXO Stores: 607 7,300 people/store Valley of Mexico Population: 23.5 mm OXXO Stores:753 31,200 people/store Source: INEGI and FEMSA estimates as of September 2008. 21
Slide 22: Driving efficiency based on a strong infrastructure backbone
Driving efficiency based on a strong infrastructure backbone 2003 2005 2007 2003 2005 2007 Sales per Sq Ft (US$) Distribution Centers 430 546 580 6 7 9 Transactions per Store (MM) % Direct Distribution 628 978 1,357 21 42 44 2003 2005 2007 OXXO Stores 2,798 4,141 5,563 # SKU’s 2,723 2,103 1,800 22
Slide 23: Significant growth opportunities
Significant growth opportunities • Changes in consumption habits towards convenience • Low OXXO penetration in Central and Southern Mexico • Unmatched footprint for service-provider partners • IT systems in place to enable future incremental revenues and profit streams • Potential to take OXXO model
Slide 24: Coca-Cola FEMSA
Slide 25: Delivering consistent growth
Delivering consistent growth KOF Total Revenue EBIT (US$ million) (US$ million) 1,159 6,907 597 3,178 1,285 161 1998 2003 LTM 2008 1998 2003 LTM 2008 CAGR 98-LTM 08: 18% CAGR 98-LTM 08: 22% CAGR 03-LTM 08: 17% CAGR 03-LTM 08: 14% Note: Figures in Mexican pesos converted to US dollars using the perio
Slide 26: In spite of sustained cost inflation, profitability has grown steadily
In spite of sustained cost inflation, profitability has grown steadily EBITDA per UC COGS per UC (US$ / UC) (US$ / UC) Total additional (1) 364 MM Cost 04-LTM 08: (1) US$ 751 MM(1) 0.7 387 MM 1.6 1.4 0.6 0.5 1.2 2004 2006 LTM 2008 2004 2006 LTM 2008 CAGR 04-LTM 08: 7.2% CAGR 04-LTM 08: 7.8% Note: Fi
Slide 27: KOF Strategic Framework
KOF Strategic Framework Traditional Key Emerging Accounts Categories World-Class Enablers People / Capabilities / Processes / IT Effective Supply Chain Ensure Capacity and Flexibility / Services and Supply / Cost Savings SUSTAINABILITY INNOVATION Level of Execution Expand Go-to-Market / Improve in n
Slide 28: The framework at a glance
The framework at a glance Powerful Multi-category portfolio Tailored POS Execution State of the Art Facilities Over Over 1,200 1,200 SKU’s SKU’s 6.1 6.1 million million unit unit cases cases 100% 100% productivity productivity sold sold every every day day Highly concentrated increase increase since
Slide 29: Driving higher efficiencies
Driving higher efficiencies 2003 2005 2007 2003 2005 2007 Per Capita Consumption (8 OZ) Points of Sale (MM) 244 252 273 1.6 1.5 1.5 # Brands Sales per Point of Sale (M UC) 56 64 79 0.9 1.2 1.4 2003 2005 2007 Productivity per Employee (M UC) 25.5 34.0 36.5 Plants 52 30 30 Distribution Centers 287 228
Slide 30: ...bottled water and emerging categories growing at superior rates
…bottled water and emerging categories growing at superior rates Volumes (Millions of Unit Cases) CAGR 56 26.6% 33 22 105 5.3% 92 85 Emerging Categories 200 5.8% 160 179 Bottled Water Bulk Water 2004 2006 LTM 2008 …with important opportunities of growth within the industry Bottled Water Fruit & Vege
Slide 31: Significant growth opportunities
Significant growth opportunities • Evolving a successful execution model • Boosting our learning capacity to constantly reinvent our business model to face new challenges • Favorable macroeconomic environment • Broad-based, growing demographic pyramid • Water and emerging categories growing at super
Slide 32: Slide 32
Slide 33: FEMSA Investment Highlights
FEMSA Investment Highlights • Largest beverage company in Latin America • Proven track record of profitable growth • Leading market position with strong brands • Unique and dynamic business model and capabilities • Significant growth potential across markets 33
Slide 34: EBITDA Reconciliation By Division
EBITDA Reconciliation By Division In US$ million 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 LTM 2008 Consolidated FEMSA Income from Operations 477 638 737 896 910 1,078 1,232 1,467 1,610 1,793 1,990 Depreciation 137 178 201 212 194 232 298 338 375 399 444 Amortization 102 137 179 192 198 232