Earnings call transcript: Coca-Cola FEMSA Q3 2025 sees revenue growth amid soft volumes

Coca-Cola FEMSA (KOF), with a market capitalization of $18.37 billion, reported its financial results for the third quarter of 2025, showcasing a modest revenue increase amid a slight decline in consolidated volume. The company’s stock price reacted positively, rising 3.65% to $87.45 following the earnings announcement. The market responded to key strategic initiatives and product innovations, as well as the company’s forward-looking guidance. InvestingPro analysis shows the company maintains a "GREAT" overall financial health score of 3.02 out of 4, suggesting strong operational fundamentals.

Key Takeaways

• Coca-Cola FEMSA’s total revenues grew by 3.3% to $71.9 billion pesos.
• Consolidated volume slightly declined by 0.6% to 1.04 billion unit cases.
• The stock price increased by 3.65% after the earnings release.
• Coca-Cola Zero and Santa Clara dairy brands showed significant growth.
• The company is preparing for an 87% increase in soft drink excise tax in Mexico.

Company Performance

Coca-Cola FEMSA’s Q3 2025 results reflected a mixed performance with revenue growth driven by strategic product innovations and operational efficiencies, despite a slight decline in sales volume. The company continues to hold a strong competitive position in various markets, particularly in Mexico and Guatemala, where it is recovering and gaining market share, respectively.

Financial Highlights

• Revenue: 71.9 billion pesos, up 3.3% year-over-year
• Gross profit: 32.4 billion pesos, up 0.9% year-over-year
• Operating income: 10.3 billion pesos, up 6.8% year-over-year
• Adjusted EBITDA: 14.4 billion pesos, up 3.2% year-over-year
• Majority net income: 5.9 billion pesos, slightly increased

Outlook & Guidance

Coca-Cola FEMSA anticipates a low to mid-single-digit volume decline in Mexico in 2026 due to the excise tax increase. However, the company expects a potential 5% volume uplift from the upcoming World Cup. The focus remains on expanding the non-caloric product mix and managing the impact of the excise tax. Notably, the company has maintained dividend payments for 22 consecutive years, currently offering a 4.2% dividend yield, demonstrating its commitment to shareholder returns despite market challenges.

Executive Commentary

Ian Craig, CEO of Coca-Cola FEMSA, emphasized the company’s commitment to its sustainable growth model, stating, "We’re confident that focusing on our sustainable growth model... is the best way to navigate these conditions." He also highlighted the success of Coca-Cola Zero, describing it as "a big silver bullet" for the company.

Risks and Challenges

• The upcoming 87% increase in excise tax on soft drinks in Mexico presents a significant challenge.
• Macroeconomic conditions in Mexico remain soft, potentially impacting consumer spending.
• Election-related consumption slowdown in Argentina may affect sales.
• Softer consumer sentiment in Brazil could impact growth prospects.

Q&A

During the earnings call, analysts inquired about the impact of the excise tax on pricing and product mix. The company explained its strategies for managing volume declines and highlighted its performance in key markets such as Mexico, Brazil, Argentina, and Guatemala.

Full transcript - Coca-Cola Femsa SAB de CV ADR (KOF) Q3 2025:

Sofia, Moderator, Coca-Cola FEMSA: Hello and welcome to the Coca-Cola FEMSA Third Quarter 2025 Conference Call. My name is Sofia, and I’ll be your moderator for today’s event. Please note that this conference is being recorded. For the duration of the call, all participants will be in a listen-only mode. You will have the opportunity to ask questions at the end of the presentation. To do so, please use the ’Raise Hand’ feature in Zoom, and we will open your line. If you experience any technical issues during the call, please use the chat function to request assistance. I would now like to hand the call over to Jorge Collazo, Investor Relations Director at Coca-Cola FEMSA. Jorge, please go ahead.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Good morning and welcome to this webinar to review our Third Quarter 2025 results. Joining me this morning are Ian Craig, our Chief Executive Officer, Gerardo Cruz, our Chief Financial Officer, and the rest of the Investor Relations team. Before I hand the call over to Ian, let me remind all participants that this conference call may include forward-looking statements and should be considered as good-faith estimates made by the company. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties that can materially impact the company’s performance. For more details, please refer to the full disclaimer in the earnings release that went out this morning. As previously mentioned, after our management’s prepared remarks, we will open the call for Q&A. To do so, please signal for questions using the ’Raise Hand’ feature in your Zoom toolbar.

With that, let me turn the call over to our CEO to begin our presentation. Ian, please go ahead.

Ian Craig, Chief Executive Officer, Coca-Cola FEMSA: Thank you, Jorge. Good morning, everyone. Thank you for joining us today. Before reviewing our third quarter results, I would like to take a moment to express our sincere support for all of those affected by the recent storms in Mexico. This year’s Tropical Storm Raymond brought torrential rain during the first weeks of October, impacting Central and Northeast Mexico. In accordance with our principles and protocols, we’re taking action to prioritize the well-being of our teams and their families, while also supporting local communities. We’re working hand in hand with FEMSA and the Coca-Cola Company on several community relief initiatives, as we always do during these unfortunate natural disasters. We’re hopeful that, with everyone’s support, the affected communities may soon be back on their feet. Also, we are deeply saddened by the recent passing of our esteemed board member, Ricardo Guajardo Touchet.

Ricardo was a member of Coca-Cola FEMSA’s board since 1993, sharing his valued insights in its Finance Committee, and was committed to advancing economic, educational, and social development in his community and throughout the country. We offer our condolences and prayers to the Guajardo family. Now, moving on to discuss our results. During the third quarter, Mexico continued facing a soft macro background, impacting consumer preferences and demand. On the other hand, South America enjoyed a more resilient macro and consumer environment, which supported positive volume performance. Despite this environment, our consolidated results improved sequentially as we implemented cost control and productivity initiatives. As we look beyond this year, we will leverage Coca-Cola FEMSA’s ability to adapt to challenging operating conditions, including the impact of the recent beverage excise tax increase in Mexico.

We’re confident that focusing on our sustainable growth model, combined with RGM affordability initiatives, short-term productivity, and cost control measures, and the revised CAPEX investment level is the best way to navigate these conditions while maximizing value for our stakeholders. Now, let me expand on our consolidated results for the third quarter. Our consolidated volume declined 0.6% to reach 1.04 billion unit cases, a sequential improvement versus the second quarter, which is partially explained by a softer comparison base in Mexico than the one we faced during the first half of the year. In particular, the quarterly volume decline was driven by contractions in Mexico and Panama that were partially offset by the growth achieved in the rest of our territories.

Total revenues for the quarter grew 3.3% to $71.9 billion pesos, led by revenue management initiatives that were partially offset by a volume decline, promotional activity, and unfavorable currency translation effects from the depreciation of the Argentine peso and most currencies in Central America. On a currency-neutral basis, our total revenues increased 4.7%. Gross profit increased 0.9% to $32.4 billion pesos, leading to a margin contraction of 100 basis points to 45.1%. This margin performance was driven mainly by an unfavorable mix, increased promotional activity, and fixed costs such as labor and depreciation, partially offset by a better sweetener and PET cost. Our operating income increased 6.8% to reach $10.3 billion pesos, with operating margin expanding 50 basis points to 14.3%. This operating margin expansion is explained by expense efficiencies such as freight and marketing across our operations, coupled with an operating foreign exchange gain.

These effects were partially offset by higher depreciation, labor, and IT expenses. It is important to consider the recognition of a one-time income of $218 million pesos of insurance claims recovered in Brazil, net of expenses during the third quarter of 2025. Adjusted EBITDA for the quarter increased 3.2% to $14.4 billion pesos, and EBITDA margin remained flat at 20.1%. Finally, our majority net income increased slightly to reach $5.9 billion pesos, driven mainly by operating income growth that was partially offset by an increase in our comprehensive financial results. Now, diving deeper on our key markets’ performance for the quarter. In Mexico, our volumes declined 3.7% as we continued facing a soft macroeconomic backdrop. For instance, consumption drivers such as remittances and formal job creation have declined year on year.

In this environment, consumers are looking for the best value equation, and our strategy remains clear: implement top-line initiatives to incentivize demand by focusing on providing affordability and attractive price points, allowing us to capture share opportunities. To achieve this, we have made adjustments throughout the year to our promotional grid and implementations across formats and channels. As I mentioned during our previous call, these initiatives have led us not only to recover share in the modern channel, but also to surpass previous year’s levels, achieving now more than 6 percentage points of recovery, which positions us at a record level in this important modern channel. In the traditional trade, promotions and execution are also contributing to share recovery, especially by leveraging refillable multi-serve packs.

The adjustments we have made to our price-pack architecture in multi-serve refillable packs from July to September are showing encouraging initial results, reversing volume declines in this segment of the portfolio. Moreover, Coca-Cola Zero continues delivering positive results, growing 23% versus previous year. Degree plans increase connection with consumers with the right communication and execution. Indeed, Coca-Cola Zero has grown more than 40% as compared with 2022. In addition, our flavor sparkling portfolio is also ahead of previous year’s share levels, driven by the recovery achieved in the modern and on-premise channels. To achieve this, we are combining global strategies in core brands such as Fanta and Sprite with local heroes such as Mundet and other heritage regional brands. These top-line initiatives are supported by our ambition to install a new record of 125,000 coolers during the year.

In digital, we are encouraged to share that we are now rolling out our state-of-the-art Salesforce tool, Juntos Plus Advisor in Mexico. This digital tool has been fundamental in supporting share improvements and service levels in Brazil, and we expect to see its positive impact in Mexico in the upcoming quarters as adoption matures. Now, I would like to discuss recent developments in Mexico. As you know, last week, the House of Representatives approved the federal revenue law presented by the Executive Branch, including a significant 87% increase in the excise tax on soft drinks, taking it from $1.64 per liter to $3.08 per liter, and installing a new excise tax on non-caloric formulas of $1.50 per liter. The federal revenue law is currently pending approval by the Senate, and once approved, it will take effect on January 2026.

During the past month, we engaged with the government in conversations regarding the proposed excise taxes. As a result of these interactions, the Coca-Cola system in Mexico reaffirmed its commitment to continue incentivizing low and non-caloric products, as well as to maintain an open and constructive dialogue with the health authorities in Mexico. As we look to 2026, we expect another challenging year for volume performance in Mexico, with our customers and consumers dealing with the impact of the excise tax increase, together with an economy that is expected to grow a modest 1.5%. However, we anticipate a positive impact on brand equity due to the World Cup, as has been the case in host countries for this incredible asset.

Taking all of these factors into consideration, we believe that the best course of action for our business in Mexico is to continue focusing on our sustainable long-term growth model while addressing the short-term headwinds with RGM initiatives, productivity and cost control measures, and a revised CAPEX investment level. Now, moving on to Guatemala, where our volumes increased 3.2% to reach 50.8 million unit cases. In this important market, we continue seeing a higher propensity from consumers to save. Amid this background, we continue outperforming the industry by gaining share in key categories such as sparkling beverages, water, and energy. Notably, Coca-Cola Zero grew 16.9% year on year, while additional capacity is allowing us to strengthen our performance in flavors, with Fanta and Sprite growing 8.8% and 3.8% respectively.

Commercial enablers are another area of focus, and I am encouraged to report that Juntos Plus and Juntos Plus Premio continue growing at a fast pace. During the quarter, we surpassed 100,000 digital monthly active users in Juntos Plus, 25,000 more than the previous year, with more than 73% of these users active on the app. This is 23 percentage points more than in the first quarter of the year, underscoring our customers’ fast adoption. Finally, in Juntos Plus Premio, we have more than 46,000 clients redeeming points, which is more than double what we had in 2024. As we look towards the end of the year, we are adjusting our initiatives to continue optimizing our portfolio, capturing white spaces in key categories, and executing rigorous cost control and productivity initiatives to grow sustainably and profitably. Now, moving on to our South America division.

In Brazil, despite lower average temperatures than the previous year and signs of slower growth, we were able to increase our volumes 2.6% year on year, driven by share gains. As has been the case throughout the year, additional capacity, coupled with the reopening of our plant in Porto Alegre, is supporting share gains in the non-alcoholic ready-to-drink segment. Notably, in the sparkling category, regions like Minas Gerais and São Paulo are more than one percentage point ahead of the previous year, and in Rio Grande do Sul, we have recovered approximately five percentage points of the total eight points that were lost due to the temporary closure of our plant. Another highlight from our operation in Brazil remains the continuous growth from Coca-Cola Zero, which during the quarter grew volumes by 38%, supported by the Star Wars campaign that began last September in both Coca-Cola Original and Coca-Cola Zero.

Regarding still beverages, we saw double-digit growth in juices and energy. In the case of Monster, last month we launched a new flavor with a local Brazilian appeal, Monster Rio Punch, underscoring continuous innovation across the portfolio. On digital enablers, our monthly active user base in Juntos Plus continues expanding, with 18,000 additional customers and a 15.8% increase in average ticket size. Importantly, the Juntos Plus Premio loyalty customer base increased 40% year on year. We remain encouraged by the results we are seeing from the nationwide rollout of Juntos Plus Advisor, which, as I have mentioned in previous calls, is a game changer for our sales force and is supporting Brazil’s positive share performance. Finally, in Brazil, we continue showing strong improvements in the supply chain front, which translate to increased customer satisfaction.

For instance, order fulfillment during the quarter improved 1.9 percentage points as compared with the previous year to reach 94.5%. Similarly, our delivery service metrics improved 1 percentage point to reach 94.6%, supported by declines in product unavailability. For the remainder of the year, in Brazil, we will continue striving to outperform the industry, leveraging our digital initiatives and our customer-centric culture, as we aim to continue improving our profitability by controlling expenses and increasing productivity. In Colombia, our volumes grew 2.9%, reflecting a gradually recovering economy, driven by improving sectors such as commerce, services, and agriculture. Notably, the consumption basket for fast-moving consumer goods has gradually recovered over the past five months, driven mainly by an increase in the average ticket. Our positive volume performance is supported by share gains in brand Coca-Cola, flavors, and water, with clear opportunities for us to reverse the trend in stills.

Regarding brand Coca-Cola’s category growth, we are leveraging affordability initiatives and managing price gaps in both multi-serve and single serve, while supporting the growth of Coca-Cola Zero. Additionally, in flavors, we’re encouraged that for the first time in our Colombia franchise’s history, Cuatro, our grapefruit flavor brand, is the number one flavored sparkling beverage in the country. On the digital front, we are enhancing adoption, with monthly active buyers growing 27% year on year. We expect to continue leveraging the capabilities of our Premio loyalty plan to drive adoption and generate additional frequency. Finally, we’re encouraged by the fact that the CAPEX investments behind our supply chain have addressed key logistical pain points, allowing us to improve our cost to serve by reductions in primary freight costs and third-party warehouse expenses. Finally, despite facing what is still a complex environment in Argentina, our volumes increased 2.9%.

Our strategy during 2025 can be summarized in four key elements: enhancing the affordability of plans we implemented since 2024 during the sharp macro adjustment, two, accelerating single-serve mix, three, leveraging digital with the rollout of Juntos Plus, and four, maintaining a lean and flexible cost structure. During the quarter, we continued delivering positive results across these elements of the strategy. For instance, we have consolidated the execution of what we call Zona Ahorro sections, or Saving Zones sections, which are attractive promotions and price points for our consumers. Zona Ahorro is now present in more than 87% of our customers and growing. Regarding our single-serve mix, we reached 25.8%, which represents a 1.8 percentage point increase as compared to the previous year, driven by an 11% recovery in the number of on-premise clients.

In digital, we began the rollout of Juntos Plus last June, and thanks to its rapid adoption, more than 40% of our client base are now monthly active buyers. Amid Argentina’s complex context, we have and will continue emphasizing responsiveness in managing a flexible and lean cost and expense structure. As we look to the last chapter of 2025 and adjust our plan for 2026, we feel encouraged to be a part of a resilient beverage industry. We have a clear long-term strategy, supportive shareholders in FEMSA and the Coca-Cola Company, and a committed team focused on continuing to make Coca-Cola FEMSA a stronger and more adaptable organization. With that, I will hand the call over to Gerardo Cruz.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you, Ian, and good morning, everyone. I will begin by summarizing our division’s results for the quarter. In Mexico and Central America, volumes declined 2.7% to 612.1 million unit cases, driven by volume declines in Mexico and Panama that were partially offset by growth in Guatemala, Nicaragua, and Costa Rica. Revenues decreased 0.2% to $42.5 billion pesos, driven mainly by volume decline, unfavorable mix effects, and promotional activity. These effects were partially offset by our revenue management initiatives. On a currency-neutral basis, revenues remained flat. Gross profit decreased 2.6% to reach $20.2 billion pesos, resulting in a gross margin of 47.5%, a 110 basis point contraction year on year. This margin contraction was driven mainly by unfavorable mix effects and promotional activity, coupled with higher fixed costs such as labor.

These effects were partially offset by lower sweetener costs and the appreciation of the Mexican peso as applied to our U.S. dollar denominated raw material costs. Operating income increased 1.1% to $6.8 billion pesos, and our operating margin expanded 20 basis points to 16%. This expansion was driven mainly by a decrease in freight expenses and an operative foreign exchange gain on $159 million pesos as compared to a loss of $298 million pesos during the same period of the previous year. These effects were partially offset by an increase in expenses such as labor, IT, and depreciation. Finally, our adjusted EBITDA in the division declined 1.4% with a 20 basis point margin contraction to reach 21.9%. Moving on to South America, volumes increased 2.6% to 423 million unit cases. This increase was driven by positive volumes across the division.

Our revenues in South America increased 8.7% to $29.4 billion pesos, driven mainly by our revenue management initiatives and favorable mix. These effects were partially offset by unfavorable currency translation effects into Mexican pesos. On a currency-neutral basis, total revenues in South America increased 12.5%. Gross profit in the division increased 7.2% and gross margin contracted by 50 basis points to 41.6%, mainly driven by labor, restructuring, and maintenance costs. On a currency-neutral basis, gross profit increased 10.4%. Operating income in South America rose 19.7% to $3.5 billion pesos, with operating margin up 110 basis points to 11.9%. This improvement was driven by expense efficiencies such as freight, marketing, and the recognition of one-time income net of expenses of $218 million pesos related to insurance claims from the floods that impacted Brazil in May of 2024.

Finally, adjusted EBITDA in the division increased 12.6% to $5.1 billion pesos for a margin expansion of 60 basis points to 17.6%. Now, let me expand on our comprehensive financial results, which recorded an expense of $1.2 billion pesos as compared to an expense of $823 million pesos during the same period of the previous year. This increase was driven mainly by, first, a reduction in interest income as a result of a lower cash position and interest rates in Mexico and Argentina. Second, we recorded a foreign exchange loss of $65 million pesos as compared to a gain of $49 million pesos recorded during the same period of the previous year. Third, a loss in financial instruments of $39 million pesos as compared to a gain of $86 million pesos in the third quarter of 2024.

These effects were partially offset by a higher gain in monetary positions and inflationary subsidiaries. Finally, I would like to take a moment to expand on the cost environment and commodity hedging strategies for the remainder of the year and into 2026. We feel confident about our ability to manage costs effectively. Although the trade environment may continue to generate some ongoing volatility, especially in aluminum prices, we are seeing more stability in the rest of our key commodities than in prior years, especially regarding sweeteners and PET. Additionally, our teams continue to focus on efficiency, productivity, and disciplined procurement, which should continue to help mitigate pressures to our margins. On the hedging side, our approach remains disciplined and proactive.

For the remainder of the year, we have already locked in a solid portion of our main commodities, including more than 90% for sweeteners, 75% for PET resin, and 65% for aluminum, which gives us good visibility and comfort for the fourth quarter. As we move into 2026, we will keep a flexible stance, protecting against potential volatility while taking advantage of favorable market conditions in raw materials such as sweeteners and PET. For instance, given current market conditions, we have already hedged more than 90% of our needs for the year in sweeteners and 40% for PET. Regarding currencies for 2026, we have hedged approximately 70% in Colombia, 40% in Mexico, and 20% in Brazil at levels that are below 2025.

Finally, I am pleased to report that our supply chain team has reached our savings commitment for the year ahead of time, generating $90 million year to date, approximately $43 million coming from primary distribution, $32.5 million from cost to serve, and $14.5 million from cost to make. With that, operator, we’re ready to take questions.

Sofia, Moderator, Coca-Cola FEMSA: Okay, at this time, we are going to open it up for questions and answers. If you have a question, please click on ’Raise Hand’ for audio questions or write it down in the Q&A section for written questions. Please remember that your company’s name should be visible for your question to be taken. We do ask that when you pose your question, you pick up your headset to provide optimum sound quality. Please hold while we poll for questions. Our first question comes from Ricardo Alves with Morgan Stanley. You can open your microphone.

Hello, Ian, Jerry, Jorge, thanks for the opportunity as always. A couple of questions. I think that on our side, the main surprise of the quarter came on Mexico and Central America profitability. When we try to calculate the adjusted margin, so taking out the insurance gains from last year, we actually see Mexico and Central America margins up about 50, 60 basis points, if I’m not mistaken. Clearly, a big improvement from the 200 basis points decline that we saw in the second quarter. To us, that’s a remarkable improvement, obviously, but when I look forward, I’m interested in, is this something that was mostly driven by a better operational leverage because volumes improved on a sequential basis, or is it much more about internal initiatives and cost-cutting initiatives that you may have put in place to adapt to a new reality of volume?

I just wanted to go a little deeper on eventual efficiencies that you are looking within cost in Mexico and maybe Central America because we don’t have the breakdown exactly. That would be my first question to explore a bit more the improvement on profitability. My second question, I do have another one in South America, but I’ll jump on the line again, but I wanted to explore this time Central America, Argentina, and Colombia because typically we spend a lot of time in Mexico and Brazil, and I think that after a while it would be helpful, Ian, if we could explore again these markets. I remember, for example, a couple of years ago we were talking about per caps in Guatemala, the opportunities that you saw when you took over in improving per caps.

Given that Argentina has surprised us to the upside, I think that Coca-Cola FEMSA is outperforming a couple of other bottlers in the region. Colombia is getting back on track, and it’s been a while that we don’t discuss Guatemala in more details. I wanted to see with you, when you take a step back and you reflect on these past couple of years on the lead of the company, what were the strategies that worked for these three main markets outside of Brazil and Mexico? What are the things that didn’t work that you still see an opportunity? I just wanted to take a step back and take the opportunity to talk to you to see if, you know, it seems that there’s something coming. Things are improving, so I just wanted to revisit the strategy for these, let’s call it secondary markets outside of Brazil and Mexico.

Thanks again, everybody.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you, Ricardo. I’ll jump on the first one, first on profitability on Mexico and Central America, and there’s a few parts to this question. Starting first on gross profit, we are continuing to see pressure on gross profit, even though we see volumes performing better versus last year. That’s mostly related to having a lower base from the third quarter of last year. We are seeing some gross profit pressures coming from a mix that are affecting at the gross profit level. Going further down the P&L, the main reason for us turning around our profitability are savings initiatives. We’re working all across our P&L to identify and execute savings initiatives, starting from raw materials costs and expenses. That has been a tailwind for us this quarter. We’re optimizing marketing spending.

We went through also restructuring in our teams to adapt to our current volume conditions, also preparing for what we’re expecting for next year, and supply chain initiatives and other smaller savings initiatives that we are working on. There’s a virtual effect that you see in EBIT margins also that we are benefiting from. This is related to operating expenses, accounts payable, denominated, and foreign currency, with a strong peso that is providing also relief to our EBIT margin as well.

Ian Craig, Chief Executive Officer, Coca-Cola FEMSA: Jerry gave a very detailed explanation, but in terms of the strategy, it really was bringing our productivity back in line, Ricardo, the main driver. Like I had mentioned, this is such a resilient business that even if you have challenging volumes, you can still deliver on results, positive results, if you have your structure aligned for that sort of environment, which was our big miss in the first and second quarter, where I could say it was tough to read because of the consumer backlash. By the time we got around to having the real sense of what was going on in April, then in May, we started adjusting very quickly. Now our productivity is back in line, and we have a much more lean structure. That is what explains that turnaround in Mexico.

In the three markets that you mentioned outside of Mexico, Argentina, Colombia, and Guatemala, it all follows under the same umbrella, but with different recipes. What do I mean? As I mentioned, our strategy is to have a sustainable long-term growth model. Why? Because this is a scale business, and it is critical that we continue to improve our relative competitive position because when you do not do so, then it becomes very complicated. Price gaps are stickier with competitors. You give them scale, and you end up in a bad place. The way that played out in Argentina, which was the first one you asked about, was knowing that we were going to go into a very deep recession. We did not want to leave Argentine households, so we wanted to maintain household penetration. We did not pass along all of the increase in inflation in the initial shock.

That obviously implied to us a hit on the P&L, but when the bounce, the recovery came, we were in a much better position. That is why when you compare the system, for example, versus two years before the crisis, our volumes and our results are much better. It has been a more resilient strategy to have not lost that relative scale. All strategies are valid, but I think ours played out well in the end. In terms of Colombia, it is a big learning for us in Mexico because in Colombia we faced a large tax increase, such as the one that we are going to have to face in Mexico starting January. What that essentially does is it shifts your volume two years out.

The growth that we had planned for 2026, now instead of that growth in Mexico, we’re going to have, like we had in Colombia, a volume decline to be followed by a recovery in the following year. In essence, it shifts your curve two years out. What we’ve done in Colombia is a full review of our OVPPC, focusing on key price points, focusing on key flavors leverages. In Colombia, you see that year over year, we continue to gain share. Now that we’ve cycled the impact of the tax, we should be continuing to have, I wouldn’t say easier comps, but comparable comps without the effect of a tax. Now we’re on a comparable basis going forward in Colombia, and we entered out of that tax disruption in a more favorable competitive position.

In Guatemala, as we have mentioned, it’s just a jewel of a market with a very young population, becoming more urban, with more disposable income. We hit short-term turbulence there because with all of this risk on remittances, even though it has been more perceived than real because remittances haven’t actually declined, they have slowed there. That anxiety, I would say, has trickled into consumers saving more. We see nothing more in Guatemala other than a short-term adjustment to consumers saving more under the risk of their family members losing their remittance sending capacity. Everything else being said, I would say this was an adjustment year there. We’ve also adjusted our structure, become more lean, and are ready to resume growth there in Guatemala, where, by the way, our elasticities continue to work very favorably because of our share position. There’s still plenty of headroom there.

I hope that was a good overview, Ricardo.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: It was indeed. Thank you so much, Ian. Thanks, Gerardo, as well.

Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Alejandro Fuchs with Itau.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Hello, Alejandro.

Hola, Ian, Gerardo, and Jorge. Thank you for the space for questions. Congratulations on the results. I have just one very brief one related to CAPEX. I saw the comments, Ian, here and on the release about, you know, kind of rethinking CAPEX a little bit for next year. We have seen at least three years of high investments. I wanted to see if you can share a little bit more color. What are the initial thoughts, right? Where would be kind of the savings in CAPEX coming from? Is this just a delaying of the CAPEX, as you were saying, with volume recovery, probably 2027? If you could give us a little bit more details, that would be very helpful. Thank you.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: It’s exactly that, Alex. Let me give you an example. It’s mostly in Mexico, but it’s in a couple of other countries where volumes weren’t as high as we expected. For example, Guatemala. Let me give you the example of Mexico. We were putting in a couple of new lines, three new CDs. The lines are going ahead as planned, but the distribution centers, for example, we’re taking the land side, but we’re not going ahead with that construction. The worst thing that we can do is if we’re going to have a low to mid-single-digit volume decline next year due to the tax, is to put in three new distribution centers and have those distribution centers be unproductive. You just get the extra depreciation, labor costs, and you don’t need it if our volumes are going to be facing that contraction from the tax.

It’s really pushing out Mexico two years out. That’s basically it.

Thank you. That was super clear. Thank you, Ian.

Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Lucas Ferreira with JPMorgan. Lucas, you can open your microphone.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Hello, Lucas. Hope you can hear me now.

Yes. Hi, everybody. Ian, first of all, I’ll follow up on your comment now. You mentioned low single-digits decline in Mexico. Was this just sort of to illustrate, or is this the number you were working with for Mexico next year? That was exactly my question. I’ll follow up on the tax story. First of all, the transition towards that around 30% reduction in the calories for the sugary drinks, how fast you guys are thinking of getting there? If you think there could be any sort of impact on the flavor, on the consumer adoption, anything like this, you can comment on the sort of the race or going towards that 30% reduction. The other question I have is if this adjustment towards a sort of a new, more leaner structure for Mexico right now, how far we are from getting there. You mentioned the CapEx.

Is there anything else to be done still on the expenses side, cost side that can help us understand to better model Mexico next year? If I may, a second point is on Brazil. Another clarification. If you look at your operations, let’s say in regions outside Rio Grande do Sul with the ramp-up of the plants, how the business is working? You mentioned market share gains. Is this like a sort of a better go-to-market strategy, or is there anything related to pricing there, execution? Just to understand a bit how the operations, let’s say, excluding the effect of the ramp-up of Rio Grande do Sul is going, if you’re seeing sort of a better weather, consumer dynamics. I’m asking because we see a lot of other consumer companies complaining about the consumption in Brazil kind of slowing down. Wondering if you also notice this happening in Brazil.

Thank you very much.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Oh, hi. Let me, there were several points there, Lucas, and I’ll ask Jorge to help me on some of those. In general, in Mexico, the big thing was, like I mentioned, starting May, downsizing to what needed to be done in terms of our operational structure. There is some remaining adjustment there to be done in terms of productivity, in line with the volume impact that we expect from the tax increase. When you look at the 2026 numbers, you have to normalize internally what the effect was of the backlash. The effect of the increase in the tax per se is a little worse, but it gets masked or it doesn’t look as large because we no longer have the backlash that we left after the first, you know, that we also ended around May of last year.

Taking all of those effects into account, that’s why we’re saying low to mid-single digits is what we expect. There is a lot of uncertainty on that. We have to see what the impact is in the first quarter to see if we have to do further adjustments and what depth of adjustments. We do have a shock plan in terms of savings in all sorts of instances of that. It’s a large plan to go and accompany this tough excise tax impact. In terms of how we move consumers gradually to low or non-caloric options, that is something that we’ll do with our promotional grill, with adjustments to some of our formulas, always taking care to make sure that we are the best choice out there. Given the consumer’s choice, we don’t expect in that sense really material savings from sweeteners or such as that.

That is not the case. We don’t expect that. We have to be very respectful to consumers’ tastes and what they want and how the mix evolves naturally. We can’t be too forceful on that. It’s just something that we need to be working, and it’ll be gradual. Going back into Brazil, in Brazil, we do see consumption softening. We have the advantage of a really tough base last year with the closure of the plant. When we normalize what’s going on there, that’s why we mentioned the type of share gains that we’re getting outside of the southern region. That’s really what has been the differential for us. That’s what’s been driving our growth there. It’s really share gains because you’re right, we do see softer consumption. That being said, remember that next year we’re going into an election cycle in Brazil.

I don’t think, at least for the remaining of the year and 2026, that we expect anything other, you know, that still a resilient Brazil. I think the big risk in Brazil is more relating to 2027. We have mentioned that at that point in time, the selective tax on soft drinks should be coming into effect. There may be, as historically has been the case in certain elections, a post-election hangover, for example, like what we saw in Mexico. I would say Brazil, you know, we see a softer consumer, but it’s not a contraction for us. We’re not worried of 2026. We have to keep an eye out, though, on 2027. I don’t know, Jorge, if there’s anything you’d like to complement.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Perhaps the only thing I would add, Lucas, the first part of your question, you referred to Ian’s comment on volume outlook for next year. This is a very preliminary early take. We have to put everything into consideration. We have to think about the implications, of course, of the excise tax. This is, I would say, a very early preliminary take on that, where we expect volumes to decline in the low to mid-single digits range.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: For Mexico.

Jorge, Investor Relations Director, Coca-Cola FEMSA: For Mexico, of course, yes.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you very much, guys.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Benjamin Terror with Barclays. You can open your microphone.

Hi, yeah, good morning. Good morning, Ian, Jerry. Thanks for taking my question. Just coming back to that point on the volume outlook, obviously, you tend to have a lot of flexibility as it relates to packaging, mix, and trying to offset and help profitability. I would like to understand, in first place, what has been driving over the last couple of quarters, actually in Mexico, but to a degree as well in Central America, in contrast to South America, transactions being somewhat even weaker than volume. That relationship, would like to dig into there. As we look into next year, the way to offset maybe some of that with different packaging or trying to drive transactions, what strategies can you implement to boost the transactions, at least, into next year, even if volume might be under pressure, as you’ve just said, low to mid-single digits?

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: I’ll let Jorge dive into the details on that, Ben, but I would say the main point is whenever you see a more challenging economic environment or disposable income for consumers and things get tight, usually a single-serve mix suffers and you move into multi-serve. Within multi-serve, you move into multi-serve returnables. That’s just a natural mathematical result of looking for lower price per liter, okay? That correlates a lot with transactions. That’s the main directional point. What we do then is focus a lot on the magic price points. If you take a dive, I mean, I think transactions, like you said, is important, but really the biggest, biggest thing is maintaining our volume base and our household penetration. For us, the main focus that we have now in Mexico, when we look at our relative competitive position, the biggest gap is in traditional channel refillables.

That’s what we are addressing. What we’re addressing that is with the liter and a quarter glass at the $20 price points, which competes with Pepsi liter 75 and two liter Red Cola at that same price point. We didn’t have anything there. Now we’re having the liter 25 glass there. That’s a very big and important price point. It also drives transactions when you look at multi-serve per se. Then upsizing our two and a half liters Red Pet to three liters, and that’s around the $33, $34 price point, which competes with three liters one way of Pepsi and Red Cola. Obviously, we have a very good brand that commands a brand equity lead. That allows us to be able to inconvenience the consumers with a returnable presentation that they have to carry to and from the point of sale.

That really is the way that we’re able to have, you know, that revenue management initiative there. That’s our big focus per se. You see all of the transaction growth. For example, the biggest example is Argentina. We’ll recover naturally with single-serve mix and as the economy improves. I would say the biggest and most important question for us with the excise tax increase looming is maintaining our household penetration and volume base, really, more than the transactions.

Real quick on pricing, I mean, obviously, you need to pass through the tax. Are you planning to anticipate some of the pricing already in the fourth quarter to kind of like get the consumer kind of like used to a new price point because of that? Are you simply just going to wait and do the regular pricing as we move into next year, coupled with the tax as it might have to be applied?

The base plan basically is maybe at the very end of the curve, but it’s really preparing and passing through the excise tax that will commence in January. There are certain times that you have to give, especially the modern trade, to process the change in the pricing lists. It’s basically going to be that. It’s the pass-through of the excise tax, getting ready by giving the modern channel enough time to have that ready to start in January.

Perfect. Thank you very much.

Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Ulises Argote with Santander. You can open your microphone.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Hello, Ulises.

Hi. How are you? Sorry, I was having some technical issues here. This is kind of a follow-up question that I had on the pricing side of the equation. Given those changes in taxes and the differentiation there between sugar and non-sugar products, we wanted to get some color on how you’re thinking about the price gaps on the two going forward, right? Any color there on how you’re thinking on the strategy? If there’s any major shift there happening on pricing on one versus the other, that would be really helpful. Thank you.

One of the things that we’ve committed to is to incentivize a move towards non-calorics. In that sense, be it through differentials in baseline prices on the aisle or through a more intense promotional grid or both, a combination of both, we expect in the end to have that sort of differential above the size of the tax between those two to try to incentivize a move in the mix. That being said, like I said, we’re very respectful of being pro-choice, offering the consumers what they want. We’ll always have, you know, the full original formulas and the zero-calorie formulas, and we’ll let the consumer choose. It’s just how do we nudge them with either increased promotional grids or different baseline prices, okay? We do expect, you know, in the end, a lower effective price by either of those two measures.

Okay, no, that’s super clear. Yeah, thanks for that, Ian. Maybe a quick follow-up, if I may, just looking there a little bit on the capital structure side of things. I mean, net debt to EBITDA is below 0.8 times. Obviously, you made those comments on lowering the CAPEX. You don’t have any major debt commitments in the short term. How should we think about the capital allocation priorities kind of for the next couple of years?

Ulises, as we’ve been talking to the market throughout the past few quarters, we certainly are aware of our inefficient capital structure and are looking to address it in 2026. Obviously, with the excise tax coming to play, we will evaluate how we start the year and what implications it has. As Ian mentioned regarding our previous question, this results in a delay of a couple of years to cycle the impact of the tax in Mexico, which in turn will have some impact in our cash flow projections for the year. We’ll evaluate that further and let you know of any news starting the next year.

Gracias, Jerry. Thank you. Thank you both very much.

Thank you, Ulises.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Tiago Bertolucci with Goldman Sachs. You can open your microphone.

Yes, hi. Good morning, everyone. Thanks for the space of taking questions. I have also two, right? Those are follow-ups in Mexico. The first one, and I think this is for Ian, just to understand, Ian, how you see your company position versus the state of the consumers, right? If I can summarize what we saw in the quarter, you obviously declined volumes a little bit more than apparently were the industry’s, while you know you keep pricing growing with inflation, but accelerating the pace versus the first six months of the year, right? In your comments, you alluded to the need of promotional activity to keep demand somehow healthy.

Going forward and imagining that, you know, macro shouldn’t improve that much in the near term, at least, how you think about the fit of your pricing on a like-for-like basis versus, you know, the demand sentiment that you’re getting from consumers? How you’re seeing your average price list and effective pricing to accommodate the current situation? I think this is the first question. The second one related to this topic, but now on the excise tax, to the extent that you can comment, how much or how at all would the new rate fit in your discussions with Coca-Cola Corporation for the concentrate prices going forward? Thank you very much.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you, Terro. Let me put things into perspective. Remember that this year, January started strong, and then in February, we had the backlash, which we exited by the end of May, June. Mexico is a very big country, not as big as Brazil or the U.S., but it’s a very big country. It has different economic performance in different regions. By the remittances impact and different depth in the backlash that we faced was different among the regions, mostly impacting our region, which is where most migrants have family members in the U.S. I think when you look at and break out that effect, you see our share, you know, if you look at a monthly chart, taking a big hit in February and then recovering month over month over month.

If you look at September, for example, the point data in share of value versus September of last year, in flavors, stills, fruit drinks, teas, water, energy, sports drinks, ARTDs, we’re above last year. We had a value and we’re above last year. In colas, we still have about 0.6 points to recover. That is really what explains the increased promotional grid. The point that we have missing is, like I said, traditional trade, multi-serve refillables. That’s the share point that we have left. With the latest adjustments that we’ve done, eventually, we’re hoping or thinking that we should get to cover that gap and we’ll be above last year and having cycled everything. I would caution that we are doing well versus the industry, but like I said, we took a big impact that other competitors didn’t take in February, right, Terro? You have to normalize with that.

We took that impact, but we’re every month getting back to where we need to be. We’re back in every single segment and only missing 0.6 points in colas still. That’s the context. I think your question is very pertinent going forward because when you have a region that is, you know, with soft macros and now we have a large excise tax increase, obviously, our pricing power, we believe, is going to be limited. We’re not expecting anything above inflation because our customers, it’s also a big impact for customers, and consumers are going to be dealing with that excise tax. To assume that we’re going to have real pricing on both of that, I don’t think it is very realistic. It’s already going to be a lot for customers and consumers to digest just with the excise tax impact. Okay? Does that help?

It certainly does. Anything you could share on the relation between Coca-Cola FEMSA and under the new excise tax?

Yes. You know, the way our model works, like I said, is we look at how the system profits behave and then divide those profits. Obviously, when you have an impact such as a tax, it’s going to have an impact in our profitability. That’s taken into account in the model. It remains to be seen because you have to look at both companies’ relative performance on what that trickles to, on whether it’s some sort of support or cost avoidance. We don’t have enough visibility on that yet, but what I can say is that that is included as well as, you know, when we do very well, that’s also included in the model. Yes, that effect will be captured, but it’s too early to tell to see if there’s going to be really an impact for us on that. We don’t know yet.

We’ll have to see in the first quarter how customers and consumers, you know, deal with this excise tax pass-through.

Both comments are amazingly helpful. Thank you very much.

Thank you, Terro.

Sofia, Moderator, Coca-Cola FEMSA: Next question from Rodrigo Alcantara with UBS.

Hi, hello. Ian, Gerardo, Jorge, thanks for the space for questions. As a means of just staying a bit out of the tax discussion, I would like to explore on some interesting commentary we heard a couple of days ago in KOS conference call regarding the dairy category, right? They’re already mentioning the Coke system already market share leader in terms of value, right? Volume is growing 13% in the third quarter, right? My question would be here, how these figures or how this category is shaping for you guys specifically, right? What is really driving this good performance and the relevance of overall the Santa Clara brand and the dairy category for you guys? That would be one question. The other one very quickly. Unfortunately, right, we saw what’s happening in Costa Rica, Veracruz, right?

In addition to that, weather is not improving and a macro is still weak, right? Any preliminary risk on Mexico volumes ahead of the fourth quarter? Kind of like a similar question would say to Brazil, right? Where you somehow mentioned about the share gain momentum, et cetera, but also some commentary on volumes on the fourth Q would be also very, very helpful. Those would be my two questions. Thank you very much.

Hi, Rodrigo. Thank you very much for your question. I’ll start with the dairy question. Indeed, Coke mentioned that we’re now leaders in value-added dairy, which is great news. This is the main focus for us with Santa Clara. As you know, this is a great brand, a brand that we’re very proud of, that has grown amazingly when it was brought into the system. This year, as you mentioned, dairy has been an outperformer for us in the still business. Stills business is growing at a rate of 20% for the year, year to date. This is great growth, especially when you look at it in the context of macro weakness overall. We expect dairy to continue to be an outperformer.

This is something that we’re very excited about and that we can leverage the umbrella of the brand of Santa Clara to bring innovation and do all sorts of interesting things in this space. That’s good news for us. In terms of our fourth quarter, I think a good thing that we are seeing is we see patterns of improvement in weather that certainly we expect to continue to help. We expect to see a little bit of an uptrend in volume performance for the remainder of the year as compared to what we’ve seen in the year to date. This is Max. Yes.

Hi, Rodrigo. This is Jorge. On the comments about the fourth quarter and weather as well, expectations for Brazil, I think something that we certainly saw in the early weeks of October in parts of the South Cone and especially Brazil was a little bit of unfavorable weather. That seems also, as Gerardo mentioned, it seems that it’s going finally to end. It seems that weather is finally improving. Throughout the third quarter in Brazil, we saw about one degree Celsius on average below the previous year. I think the good part is that that seems to be out of the road for us. You mentioned about the unfortunate events also going back to Mexico in Veracruz. That’s definitely very, as Ian mentioned during the preparing marks, we are working hand in hand with FEMSA and with the Coca-Cola Company on several community support and relief efforts.

Specifically for the business, we have taken into consideration also support to our teams on the ground. I wouldn’t say that the region represents a big material part of the big Coca-Cola FEMSA Mexico volumes. We think in terms of, if you are asking about a specific impact about that, you can think maybe around 350,000 unit cases over the first eight days of the disaster there. Not material. As I said, I think the most important part is that we’re working on community and support relief efforts there.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Yeah. This is different to last year, or the year before last, where we had either lost a plant or equipment. In this case, our infrastructure was not impacted, other than a couple of vehicles and routes, but not really large infrastructure. Our clients, however, were very impacted. We have around 1,600 to 2,000 clients that we’re sensing to see if our coolers still work. If they, you know, got damaged, we’ll replace them. Unfortunately for us, for the first time, we did have some loss of life in our collaborators’ families. That was the worst part. Obviously, we’re supporting our collaborators that were impacted in these unfortunate floods.

Ian Craig, Chief Executive Officer, Coca-Cola FEMSA: No, that’s for sure. That’s great to hear you’re supporting the community. Thanks, Ian. Thanks, Gerardo and Jorge. Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Thank you, Rodrigo.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Next question from Renata Cabral with Citibank.

Hi. Good morning, everyone. Thank you so much for taking my question. I have two quick follow-ups here. The first one on Mexico. You were discussing right now about the weather. It’s going better. Is it possible to try to have an evaluation on how much of the current performance, I mean, from the year, is more related to weather and/or the economic situation? I know it’s super difficult to make the assumptions, but a best guess. If you also could give some color of the performance per month so we can try to make here some correlations related to the weather, it would be really helpful. Another follow-up is related to Argentina because we saw an improvement for the company in terms of volumes and margins, I mean, compared to last year, naturally.

For now on, we know that stability is great, but at the same time, we are seeing also a slowdown in terms of overall consumption in Argentina. The outlook for to conserve the current improvement or even continue to improve in the country. Thank you.

Sofia, Moderator, Coca-Cola FEMSA: Definitely. Thank you, Renata, for your question. I’ll start with weather patterns in Mexico. I think in this third quarter, weather was significantly less relevant as a comp effect versus last year. Even though we didn’t have good weather, it wasn’t consumption-promoting weather. We had bad weather during the third quarter of last year as well. When you see weather compared to this same period last year, it seems to be less of a factor. What has been playing out to be an important impact for consumption certainly has been overall macro development. I think for the first time this quarter, we saw the whole Nielsen basket underperforming or decreasing altogether. We had in previous moments seen consumption in certain industries underperforming versus others. This quarter, we did see an outright underperformance in all consumption products. Macro has been, I think, the main driver of underperformance during the third quarter.

Looking a little bit forward, I think we do see a little bit of better macro performance next year, although nothing exciting, but certainly a marginal improvement from the base that we have in 2025.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Moving to Argentina, Renata, I think there it’s very clear that things have started to slow down, especially since the Buenos Aires province election. Remember, we have very important legislative elections this weekend. Consumption really took a slowdown going into these elections. What we’re seeing from our advisors in Argentina is there’s a lot riding on the outcome of this weekend’s legislative elections in the sense of whether the government’s position, how much will it be strengthened, and will they be able to avoid logjams in the legislative branch regarding reforms. Argentina, I would say, let’s wait and see what happens this weekend. That will give us a guide. That doesn’t mean we expect a recession next year. That’s not in the cards, at least from what our advisors tell us. There could be a case of sluggish growth next year instead of continuous recovery.

That’s really what we’re going to look at. Will it be a scenario of sluggish growth next year, or will we continue and reaccelerate as the government has a more favorable position that will allow it to push through reforms? It’s a bit early to tell, Renata, but like I said, we think this slowdown has a lot to do with the elections this weekend, and we’ll see what happens.

No, super helpful. Thank you so much for the color.

Sofia, Moderator, Coca-Cola FEMSA: Thank you, Renata.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Next question from Antonio Hernandez with Actinver. You can open your microphone.

Hi, can you hear me? Hi, this is Antonio Hernandez.

Ian Craig, Chief Executive Officer, Coca-Cola FEMSA: Yes, hello, Antonio.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thanks for the special questions. Just following up on those beverages sweetened with non-caloric sweeteners. I mean, you’ve already mentioned a couple of times during the call that there’s not going to be a specific push from you towards the consumer. Just wanted to get a sense if you have a type of a target going forward of maybe how much they can represent as a % of total sales. Also, how do you see competition specifically in that segment? Thanks.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Hello, Antonio. We don’t have a specific target per se, but like I said, even before the excise tax, to us, Coca-Cola Zero is a big, big silver bullet. It’s great for the health of the category. It does fantastic for the Coca-Cola trademark brand umbrella. We were already focused on growing Coca-Cola Zero and this type of alternative. When you think of what we’ve been able to do in Brazil, where we’ve taken the mix of Coca-Cola Zero all the way to 28%, and it’s still growing high double digits, there’s plenty, plenty of headroom in Mexico. We don’t have a target yet, but we’re around 4% mix in Mexico. There’s plenty to grow our Coca-Cola Zero, another non-caloric alternative, Sprite Zero, and other fantastic products.

We don’t have a target per se, Antonio, but that more or less gives you a sense of the difference on a market that has already developed Coca-Cola Zero, getting to 28%, versus a market where we’re starting to crack the code, such as in Mexico, where we’re around 4%. There’s plenty of headroom there.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Okay, thanks. In terms of competition in that space?

Jorge, Investor Relations Director, Coca-Cola FEMSA: We have a leadership position there. It’s not that much that will come out of share gains there. Really, it’s more a portion of growing the mix and growing the total category. There are some share gains opportunities there, but that’s not the big driver at all.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Understood. Thanks. Have a nice day.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Thank you, Antonio.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Next question from Felipe Ucros with Scotiabank. You can open your microphone.

Thanks, operator. Good morning, Ian, Jerry, and team. Thanks for the space. Most of my questions were asked, but I had a few smaller ones. Ian, you talked about Coca-Cola Zero in recent quarters, and you talk about being able to break the code finally in Mexico. Just wondering how your perception has changed, if at all, since obviously there’s an expectation that it’s going to accelerate from the trend that it already had. Still feeling very confident about cracking that code. The other two questions, one on the World Cup. What kind of historical impacts have you guys seen in the portfolio when the World Cup’s going on and obviously the occasions increase? Just to get a sense of what we expect for 2026 when it comes to Coca-Cola FEMSA. In Brazil, obviously, your plants back up and running and back up at capacity.

Wanted to see if you could give us a sense of where the competition stands with regards to their capacity in that region. Are they also back up and running or did they not have disruptions? Any color you can give us on that side would be great. Thank you.

Jorge, Investor Relations Director, Coca-Cola FEMSA: Thank you, Felipe. I would say on Coca-Cola Zero, we’re very confident that we’re on the right track. I think the biggest measure of that was that during the consumer backlash in the beginning of the year, Coca-Cola Zero grew double digits and continued to grow double digits. It’s even under this softer macro environment, it’s still growing double digits. Coca-Cola Zero is doing nicely. It’s going to get a boost also from the World Cup. It’s going to be a hero product there. It’s going to be highlighted in all of our publicity and marketing campaigns. I think our confidence on Coca-Cola Zero and our care towards making sure we keep that ball rolling and we keep all of the five elements from the Brazil playbook that we call for Coca-Cola Zero being there is a huge source of focus.

Like I said, we think of Coca-Cola Zero as a silver bullet for us, and we’re taking great care with that. Regarding the World Cup, when you look at historical effects, I think it’s like a 5% uplift in relative volumes during the World Cup months. It’s not a big volume thing per se, but it’s huge in terms of brand equity. I was there in Brazil during the World Cup, and I remember clearly that the most recalled and remembered favorable brand post the World Cup was Coca-Cola. It’s an incredible asset, and we’re going to leverage it fully for both Coke brands, including Coca-Cola Zero, and for Powerade. Finally, your final point on Brazil capacity in the South, I would say that during the floods, only Coca-Cola FEMSA was impacted. We were the only ones to lose a production facility, which was also our biggest distribution center.

That’s why we lost eight points of share, Felipe. It was only a Coca-Cola FEMSA impact thing. We’re back on track, like I said, since mid-year. We’re producing at full capacity now, and we’ve recovered 500 basis points of those 800 basis points that we lost. Obviously, the last remaining points of share are going to be the hardest, but we have plans to recover them fully. The rest of the competitors did not receive the impact. We’re starting also, by the way, on the remediation plan, meaning the containment walls and pumps to be ready to face any future natural disaster. We’re back on track producing. We are not yet finished with the remediation to face a future flood, and that should be done by next year.

Great caller. If I can do a very small follow-up on the World Cup. When we talked about the low single-digit, low to mid-single-digit volume decline expectation in Mexico due to the tax, is that purely containing the effect of the tax, or is that net of everything else that you have going on? For example, is the World Cup impact included in that number?

It’s net of everything else. Just the tax, it’s a higher impact. We’re cycling a backlash that we no longer have, and we’re including the World Cup. That includes everything.

Perfect. Just wanted to clarify that. Thanks a lot for all the color.

Thank you, Felipe.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you. This concludes the question and answer section. I would now like to hand the floor back to Coca-Cola FEMSA’s team for closing remarks.

Sofia, Moderator, Coca-Cola FEMSA: Thank you very much for your interest in Coca-Cola FEMSA and for joining us on today’s call. As always, we are available to answer any of your remaining questions. Thank you, and we wish you a great weekend.

Gerardo Cruz, Chief Financial Officer, Coca-Cola FEMSA: Thank you. This does conclude today’s presentation. You may disconnect now and have a nice day.

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