Coca-cola Femsa Sab De Cv Units Cons Of 5 Shs -l- + 3 Shs Series -b- · BMV:KOF/UBL
Coca-cola Femsa Sab De Cv Units Cons Of 5 Shs -l- + 3 Shs Series -b- — Coca-Cola FEMSA — Investor Presentation (May 2004)
61 slides from Coca-cola Femsa Sab De Cv Units Cons Of 5 Shs -l- + 3 Shs Series -b-'s investor presentation, May 12, 2004
Slide 1: Business Overview
Business Overview Meeting with Investors and Analysts May 12, 2004 Mexico City, Mexico
Slide 2: Agenda
Agenda • Business Context − The Environment in Mexico − The Coca-Cola System in Mexico • 2004 Business Overview − Strategic Imperatives − Key Plan Initiatives 2
Slide 3: Mexico Highlights
Mexico Highlights • Relatively young population − 104 MM inhabitants − 61% below 29 years old • Wealth distribution remains critical structural issue − GDP per capita U$ 5,773 SEL % A/B 8% C 58% D/E 34% • 74% urban − Seven cities with >1 million inhabitants 3
Slide 4: Mexican business landscape before 1992…
Mexican business landscape before 1992… Price Controls Economic Instability Recurrent Crises Protectionism One Political Party 4
Slide 5: …and the soft drink industry
…and the soft drink industry • A single channel • One pack, one size • Under government price controls • Few international brands / several local • No consumer promotions allowed 5
Slide 6: The opening of the economy… significant changes
The opening of the economy… significant changes 6
Slide 7: Coca-Cola response to changes resulting in sustainable growth
Coca-Cola response to changes resulting in sustainable growth C CAAGR G R R 8 8%% C A AGG R** 2,500 h a a tt + + 1 3 3 % % C t h wt h aatt + 1 e G G rroow tt h + um me I G rrooww Voollu m O V O I G sstteem 2,000 KO K Syy OS 1,500 MM u/c 1,000 500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 *Nomin
Slide 8: Our Growth Model
Our Growth Model Brands Strengthen Coca-Cola brand equity and develop new CSDs and non-carbs brands Marketing Consistently investing in all elements of the marketing mix Packages Multiple choices (refillable, non refillable) Channels Developing & serving multiple channels Prices Leverage brand equit
Slide 9: Coca-Cola for Mexicans
Coca-Cola for Mexicans … part of daily life … an entertainer … imbedded in Mexican Culture … a trusted leader 9
Slide 10: Promotions
Consistently building brand equity across all elements of the marketing mix Media Advertising Properties Activation Pack Graphics Promotions Events 10
Slide 11: Portfolio expansion responding to consumer preferences
Portfolio expansion responding to consumer preferences Base 1995 - 1999 2000 - 2003 33 brands brands 12 12 brands brands 22 line line extensions extensions 66 line line extensions extensions 11
Slide 12: Positive growth trends across all segments
Positive growth trends across all segments Volume Mix by category 2,500 2,000 1,500 MM (u/c) 1,000 500 0 1995 1999 2003 Coca-Cola Trademark Other CSDs Ciel and other non-carbs 12
Slide 13: Preferred CSD flavor brands
Preferred CSD flavor brands Favorite brand ratio vs key competitor 2:1 2:1 1.6:1 1.3:1 2003 FY Source: CCV 2003 13
Slide 14: A broad pack portfolio providing consumers with multiple choices
A broad pack portfolio providing consumers with multiple choices, multiple price points + 158 SKUs in Standard Bottler Portfolio 14
Slide 15: Driving a healthy growth across all channels
Driving a healthy growth across all channels Mom & Pops Home w/ sale 59% of sales 9% of sales 1,100,000 Supermarkets Customers Convenience Stores 4% of sales 5% of sales On Premise 11% of sales 15
Slide 16: All bottlers with critical mass
All bottlers with critical mass Group % Mix KOF ARCA ~75% CONTAL OTHERS ~25% Arca Contal KOF Source: SVD 16
Slide 17: We have built a model with competitive advantage
We have built a model with competitive advantage KPI ‘95-03 Growth Volume CAGR (% in u/c) +8 Per capita (8 oz bottles) + 198 Share of CSDs (% pts.) +9 Share of NARTD (% pts.) +3 KO System OI CAGR (%)* + 13 * Internal estimates based on 2003 public information 17
Slide 18: How Do We Make The Coca-Cola System Even Better?
How Do We Make The Coca-Cola System Even Better?
Slide 19: Stability of macroeconomic variables, but low GDP growth
Stability of macroeconomic variables, but low GDP growth 40% GDP Inflation FX 12 11 30% 10 20% 9 Pesos $ % 8 10% 6.8% 6.6% 5.1% 4.9% 3.7% 7 -0.3% 0% 0.9% 1.2% 6 -10% -6.2% 5 1995 1996 1997 1998 1999 2000 2001 2002 2003 • Economic instability (recurrent crises) • Controlled inflation • High inflation
Slide 20: Consumers are increasingly sophisticated
Consumers are increasingly sophisticated Searching for a better New trends in relationship with their - Value favorite brands - Technology - Health More More sophisticated sophisticated consumer consumer •• Young Young but but growing growing •• More More rational in rational in decision- making dec
Slide 21: Competitive landscape is changing
Competitive landscape is changing PepsiCo integration B-brands emergence & Established local expansion brands focusing on niches • Consolidating bottler • Led by KR / Big Cola from • Three groups with network under PBG Peru semi-national (65% of sales) presence (Jarritos, • Limited availability of •
Slide 22: Multiple channels with distinct requirements
Multiple channels with distinct requirements Channel Role Mom & Pops High frequency items, CSDs critical role in business (30% incidence) Home with sale Mostly CSDs (90%), some snacks Supermarkets Inventory build-up C-Stores Impulse Fondas Meals away Schools Meals, snacks Industries Meals at work 22
Slide 23: Synopsis of 2004 Context
Synopsis of 2004 Context • The economy is improving but at a slow rate • Consumers are looking for more beverage choices • Geographic expansion of B-brands, Pepsi shifting strategies to compete more aggressively in pricing • KO System well prepared to accelerate growth 23
Slide 24: Key strategic imperatives
Key strategic imperatives n Accelerate Coca-Cola’s growth rate o Drive innovation in CSD flavors p Develop capability to accelerate profitable non-carbs growth q Strengthen competitive plan with Segmented Execution & RGM r Continue to drive efficiencies and effectiveness in all areas s Drive KO Syst
Slide 25: Accelerate Coca-Cola's Growth Rate
Accelerate Coca-Cola’s Growth Rate
Slide 26: Our strategies to accelerate Coca-Cola growth rate
Our strategies to accelerate Coca-Cola growth rate • Keep our strong consumer relationship fresh − Across all targets • Grow personal consumption − Cover all relevant choices • Drive incremental consumption in meals at home − Manage competitive inroads 26
Slide 27: Enhance brand relevance across all targets
Enhance brand relevance across all targets Teens…our key target Men…our most loyal Coca-Cola is your Everyday Coca-Cola is The Music Connection Soccer Brand Women...our home allies Family…togetherness Mainthrust Campaign Powerful Reasons to prefer Coca-Cola as part of all Unique & Coca-Cola at famil
Slide 28: Drive personal consumption
Drive personal consumption Create Create Generate Generate Provide Provide Attention Attention Impulse Impulse Value Value • Specific TV • POS messages • Tailored commercials • Additional promotions • Outdoor coolers • Magic price communication points • Pack innovation 28
Slide 29: On-the-go
Offer a complete choice of packs / prices for away-from-home P$ 3 P$ 4 P$ 5 P$ 6 P$ 7 On premise 6.5 oz RGB 12 oz RGB 500 ml RGB On-the-go Mini-Can 8 oz GB Can 450 ml Pet 600 ml Pet 710 ml Pet 29
Slide 30: Powerful reasons to prefer Coca-Cola with family meals
Powerful reasons to prefer Coca-Cola with family meals Leverage Leverage Strengthen Strengthen Provide Provide unique unique emotional emotional Value Value taste taste link link • Favorite brand • Communication • Tailored • POS messages campaign promotions • Displays “Goes well with • Right price/p
Slide 31: Offer a complete choice of packs / prices for meals
Offer a complete choice of packs / prices for meals ENTRY YIELD CONVENIENCE INVENTORY 1 lt Pet 1.5 lt RP 2 lt RP 2.5 lt RP 2 lt Pet 2.5 lt Pet Multi-Pack 31
Slide 32: Drive Innovation in CSD Flavors
Drive Innovation in CSD Flavors
Slide 33: CSD innovation is a key growth driver
CSD innovation is a key growth driver • Innovation has been our growth engine − 75% of incremental volume • Our learnings in managing line extensions − Enhance loyalty to the brand − Broaden the category bringing additional occasions − Fuel personal consumption − Energize the system 33
Slide 34: CSDs innovation initiatives
CSDs innovation initiatives 34
Slide 35: Our latest initiative…Lift Golden
Our latest initiative…Lift Golden The Fresh Taste of the Queen of Apples • Ensure leadership of apple segment − Line extension, incremental to red & green versions • Priority on personal consumption − 600 ml Pet − Can 35
Slide 36: Develop Capability to Accelerate Non-carbs Growth
Develop Capability to Accelerate Non-carbs Growth
Slide 37: Our strategies to develop capability in non-carbs
Our strategies to develop capability in non-carbs • Priority on Ciel, with focus on personal packs • Develop new “go-to-market” approach 37
Slide 38: Consolidate Ciel as #1 water brand in personal packages
Consolidate Ciel as # 1 water brand in personal packages Build a lifestyle brand Gain relevant availability Expand pack portfolio • Mainthrust advertising • Expand geographic • L. Ochoa (LPGA rookie coverage of the year) • Activation in SM endorsement and C-stores • Power-flow cap Entry Frequency Yi
Slide 39: Capitalize on isotonics' category growth
Capitalize on isotonics’ category growth Build as top sports brand Capture unmet category Ensure availability and needs visibility • Leverage on sports’ • Two additional flavors • SM, C-stores and marketing assets “Sweat Points” − A. Guevara (400 m world champion) • Incremental displays endorsement
Slide 40: Developing new non-carb brands for medium term sustainable growth
Developing new non-carb brands for medium term sustainable growth Fully leverage Disney properties with new brand name New flavors / packs 40
Slide 41: Go-to Market Approach
Go-to Market Approach • Significant growth potential of non-carbs beverages in modern retail channel • Specific commercialization requirements for non-carbs in these channels • Distinct operating model to fully exploit growth potential 41
Slide 42: Strengthen Competitive Plan with Segmented Execution & RGM
Strengthen Competitive Plan with Segmented Execution & RGM
Slide 43: Big Cola's model represents a new price segment in the category
Big Cola’s model represents a new price segment in the category Entry Market Puebla (March ’02) Brand Portfolio Focus on colas (96% of volume) Limited availability Over 80% of volume incremental to category Packs High yield packs (2.6 lt Pet, 3.1 lt Pet) Over 20% availability Price Discount ~ 50% ga
Slide 44: Pepsi / PBG prone to price aggressiveness
Pepsi / PBG prone to price aggressiveness • Repositioning price-value between KO and B-brands − Price reductions in Mexico City and center regions • New PBG management to turn- around results • PBG consolidation − Acquired Ramirez territories − In process of acquiring Bepusa PBG • Limited pack portf
Slide 45: Continuous optimization of price X volume equation
Continuous optimization of price X volume equation to achieve superior revenue growth Cover all Differentiate from consumption competitors needs Capitalize on Strong Brand Equity Multiple packs, multiple price points 45
Slide 46: Broad price / pack portfolio is a competitive advantage
Broad price / pack portfolio is a competitive advantage Personal Packs Family Packs 46
Slide 47: Segmented execution is critical to ensure competitive price / pack architecture
Segmented execution is critical to ensure competitive price / pack architecture, while maximizing revenues From To National Group Franchise Territory Customer Mass Segmented Execution Execution Execution Levels Levels Execution Solution focus determined by local market context and bottler capabiliti
Slide 48: Continue to Drive Efficiencies and Effectiveness in All Areas
Continue to Drive Efficiencies and Effectiveness in All Areas
Slide 49: Sponsor System efforts to drive synergy & cost efficiencies
Sponsor System efforts to drive synergy & cost efficiencies • Steward successful KOF / PB and Arca integration • Support cooperation across bottling system • Sponsor cost saving initiatives 49
Slide 50: Efficient KOF / Panamco consolidation
Efficient KOF / Panamco consolidation 2002 2003 • No disruptions in market-level activity • Expansion of pack portfolio to all territories • Enhanced sales capabilities, at KOF benchmarks • Production and distribution efficiencies 50
Slide 51: Arca now achieving benefits from consolidation
Arca now achieving benefits from consolidation 2001 2003 Dec ’01 Procor, Argos and Arma merge into ARCA 2002 Minimum organizational changes, still three cultures “living together” 2003 Francisco Garza appointed COO Currently realigning organization and business vision Enhanced alignment with KO Prof
Slide 52: Pepsi's performance explained by our past execution disadvantages
Pepsi’s performance explained by our past execution disadvantages PROCOR • Under-developed pack portfolio − 12 oz / 500 ml RGB at 58% of mix − One way packages less than 10% of mix • Conventional distribution system (0% Pre-sell) • Focus only on M&P channel Pepsi captured market opportunity • OW pac
Slide 53: ARCA: Reinforced Market Leadership
Strengthening our position in the critical market of Monterrey ARCA: Reinforced Market Leadership • New, independent management team focused on results • Rapidly building pack portfolio − Launch of 500 ml Pet, 2 / 2.5 lt Pet − One way packs at 29% of mix • Pre-sell coverage at + 77% • Model market f
Slide 54: Other bottlers cooperating to generate synergies
Other bottlers cooperating to generate synergies 23% of volume mix 38% of plants 31% of DCs • Seek efficiencies from coordination and collaboration − Share best practices − Joint procurement − Production and distribution synergies 54
Slide 55: Sponsoring System's cost savings initiatives
Sponsoring System’s cost savings initiatives Value Chain Process Key Initiatives Supply Management • Strategic procurement • Plant and DCs consolidation Infrastructure • Production sharing Optimization • Flexible manufacturing • Packaging Cost Reductions • Logistic efficiencies (planning, distributi
Slide 56: Drive KO System Leadership as Model Citizen
Drive KO System Leadership as Model Citizen
Slide 57: The Coca-Cola System is engaged with our community
The Coca-Cola System is engaged with our community • 88,000 direct and 500,000 indirect jobs • Annual investment of + U$ 500 MM • Provide training and sales assets to more than 410,000 small entrepreneurs annually • Sponsor and promote more than 5,300 events, reaching more than 35 MM people 57
Slide 58: Across a series of Social Responsibility Programs
Across a series of Social Responsibility Programs Program Key Initiatives • eKOsystem • First Pet recycling plant in Latin America • 92% of our coolers are free of CFCs • 39 water treatment plants • Coca-Cola Foundation rebuilt 24 rural schools and 38 shelters and fully equipped them, benefiting mor
Slide 59: Key strategic imperatives
Key strategic imperatives n Accelerate Coca-Cola’s growth rate o Drive innovation in CSD flavors p Develop capability to accelerate profitable non-carbs growth q Strengthen competitive plan with Segmented Execution & RGM r Continue to drive efficiencies and effectiveness in all areas s Drive KO Syst
Slide 60: Summary
Summary • KO System in Mexico continues to deliver strong results • Good balance in our volume + value model • We have distinctive competitive advantages − Highly valuable Coca-Cola brand franchise − Diverse brand, pack, price, channel portfolio − Segmented execution and Revenue Growth Management ca
Slide 61: Business Overview
Business Overview Meeting with Investors and Analysts May 12, 2004 Mexico City, Mexico