en es
appendix22
appendix28
appendix26FINANCIAL

Amounts expressed in millions of U.S. dollars and Mexican pesos, except data per share and headcount.

 U.S.*201920184,5,620172,3,4 201612015
INCOME STATEMENT      
Total revenues10,311 194,471 182,342 183,256 177,718 152,360
Cost of goods solds5,671 106,964 98,404 99,748 98,056 80,330
Gross profit4,640 87,507 83,938 83,508 79,662 72,030
Operative expenses3,211 60,537 57,924 58,044 55,462 48,284
Other expenses, net132 2,490 1,881 31,357 3,812 1,748
Comprehensive financing result321 6,071 6,943 5,362 6,080 7,273
Income before income taxes and share of the profit or of associates and joint ventures accounted for using the equity method976 18,409 17,190 (11,255) 14,308 14,725
Income taxes 299 5,648 5,260 4,184 3,928 4,551
Share of the profit of associates and joint ventures accounted for using the equity method, net of taxes (7) (131) (226) 60 147 155
Net income (loss) after tax from discontinued operations - - 3,366 3,725
Consolidated net income670 12,630 15,070 (11,654) 10,527 10,329
Equity holders of the parent for continuing operations 64212,101 10,936 (16,058) 10,070 10,235
Equity holders of the parent for discontinued operations- - 2,975 3,256
Non-controlling interest net income for continuing operations28 529 768 679 457 94
Non-controlling interest net income for discontinued operations- - 391 469
RATIOS TO REVENUES (%)       
Gross margin45.0 45.0 46.0 45.6 44.8 47.3
Net income margin6.5 6.5 8.3 (6.4) 5.9 6.8
CASH FLOW      
Operative cash flow1,660 31,289 29,687 33,236 32,446 23,202
Capital expenditures7608 11,465 11,069 12,917 12,391 11,484
Total cash, cash equivalents1,086 20,491 23,727 18,767 10,476 15,989
BALANCE SHEET      
Current assets3,011 56,796 57,490 55,657 45,453 42,232
Investment in shares517 9,751 10,518 12,540 22,357 17,873
Property, plant and equipment, net3,244 61,187 61,942 75,827 65,288 50,532
Intangible assets, net5,941 112,050 116,804 124,243 123,964 90,754
Deferred charges and other assets, net958 18,055 17,033 17,410 22,194 8,858
Total Assets13,671 257,839 263,787 285,677 279,256 210,249
Liabilities      
Short-term bank loans and notes payable609 11,485 11,604 12,171 3,052 3,470
Interest payable23 439 497 487 520 411
Other current liabilities2,073 39,086 33,423 42,936 36,296 26,599
Long-term bank loans and notes payable3,101 58,492 70,201 71,189 85,857 63,260
Other long-term liabilities989 18,652 16,312 18,184 24,298 7,774
Total Liabilities6,795 128,154 132,037 144,967 150,023 101,514
Equity6,876 129,685 131,750 140,710 129,233 108,735
Non-controlling interest in consolidated subsidiaries358 6,751 6,806 18,141 7,096 3,986
Equity attributable to equity holders of the parent6,518 122,934 124,944 122,569 122,137 104,749
FINANCIAL RATIOS (%)       
Current1.11 1.11 1.26 1.00 1.14 1.39
Leverage0.99 0.99 1.00 1.03 1.16 0.93
Capitalization0.37 0.37 0.41 0.39 0.41 0.39
Coverage5.51 5.51 4.52 4.16 4.80 3.92
DATA PER SHARE      
Book Value80.388 7.315 7.434 7.293 7.365 6.317
Loss (income) attributable to the holders of the parent90.038 0.723 0.831 (0.765) 0.607 0.617
Dividends paid100.023 0.443 0.419 0.422 0.419 0.386
Headcount1182,186 82,186 83,364 79,636 85,140 83,712
  1. Information considers full-year of KOF’s territories and one month of Vonpar Refrescos, S.A. (“Vonpar”).
  2. Income statement information considers full-year of KOF’s territories and full-year of Coca Cola FEMSA Venezuela.
  3. Balance sheet information does not include Coca-Cola FEMSA Venezuela’s balance due to deconsolidation as of December 31, 2017. Venezuela balance is included as investment in shares as of December 31, 2017.
  4. KOF Philippines has been classified as a discontinued operation in our profit and loss statement for the years ended December 31, 2017 and 2018.
  5. Income statement information includes 8 months of the financial results for Abasa and Los Volcanes in Guatemala.
  6. Income statement information includes six months in the financial results for Uruguay.
  7. Includes investments in property, plant and equipment, refrigeration equipment and returnable bottles and cases, net of disposals of property, plant and equipment.
  8. Based on 2,100.83 million ordinary shares as of December 31, 2018 and 2017, and 2,072.92 million ordinary shares as of December 31, 2016, 2015 and 2014.
  9. Computed based on the weighted average number of shares outstanding during the periods presented: 2,100.83 million for 2018, 2,091.35 million on 2017 and 2,072.92 million on 2016, 2015 and 2014.
  10. Dividends paid during the year based on the prior year’s net income, using 2,100.83 millions outstanding ordinary shares for 2018 and 2,072.92 million oustanding ordinary shares for paid on 2017, 2016, 2015 and 2014.
  11. Includes third-party and for 2017 excludes 16,566 employees for our discontinued operation in Philippines.
  12. Exchange rate as of December 31st, 2018, Ps 19.64 per U.S. dollar, solely for the convenience of the reader according to the federal USA reserve.

appendix24MANAGEMENT DISCUSSION &

Results for the Year Ended December 31, 2019

Compared to the Year Ended December 31, 2018

Consolidated Results

The comparability of our financial and operating performance in 2019 as compared to 2018 was affected by the following factors: (1) the ongoing integration of mergers, acquisitions, and divestitures completed in recent years, specifically the acquisitions in Guatemala and Uruguay in April and June 2018, respectively; (2) translation effects from fluctuations in exchange rates; and (3) our results in Argentina, which effective as of January 1, 2018 has been considered a hyperinflationary economy. To translate the full-year results of Argentina, we used the 2019 end-of-period exchange rate of 59.89 Argentine pesos per U.S. dollar and the 2018 end-of-period exchange rate of 37.70 Argentine pesos per U.S. dollar, for the periods ended December 31, 2019 and 2018, respectively. The depreciation of the end-of-period Argentine peso at December 31, 2019, as compared to the end-of-period exchange rate for 2018, was 58.9%. In addition, the average depreciation of currencies used in our main operations relative to the U.S. dollar in 2019, as compared to 2018, were: 14.8% for the Uruguayan peso, 11.0% for the Colombian peso, 7.9% for the Brazilian real, and 0.1% for the Mexican peso.

Total Revenues. Our consolidated total revenues increased by 6.7% to Ps.194,471 million in 2019, mainly as a result of price increases aligned with or above inflation, volume growth in key territories and the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala and Monresa in Uruguay. These effects were partially offset by the depreciation of the Argentine peso, the Brazilian real and the Colombian peso, in each case as compared to the Mexican peso. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. On a comparab+le basis, total revenues would have increased by 10.8%, mainly as a result of an increase in the average price per unit case across our operations and volume growth in Brazil and Central America. Total sales volume increased by 1.4% to 3,368.9 million unit cases in 2019 as compared to 2018. On a comparable basis, total sales volume would have increased by 1.4% in 2019 as compared to 2018.

Consolidated average price per unit case increased by 3.7% to Ps.52.46 in 2019, as compared to Ps.50.57 in 2018, mainly as a result of price increases aligned with or above inflation partially offset by the negative translation effect resulting from the depreciation of most of our operating currencies relative to the Mexican peso. On a comparable basis, average price per unit case would have increased by 7.8% in 2019, driven by average price per unit case increases aligned with or above inflation in key territories.

Gross Profit. Our gross profit increased by 4.3% to Ps.87,507 million in 2019; with a gross margin decline of 100 basis points to reach 45.0% in 2019 as compared to 2018. On a comparable basis, our gross profit would have increased by 8.0% in 2019, as compared to 2018. Our pricing initiatives, together with lower PET resin costs and stable sweetener prices in most of our operations, were offset by higher concentrate costs in Mexico, higher concentrate costs in Brazil due to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone coupled with our temporary decision to suspend such tax creditsand the depreciation in the average exchange rate of most of our operating currencies as applied to U.S. dollar-denominated raw material costs.

The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to our production facilities, wages and other labor costs associated with labor force employed at our production facilities and certain overhead costs. Concentrate prices are determined as a percentage of the retail price of our products in local currency, net of applicable taxes. Packaging materials, mainly PET resin and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars.

Administrative and Selling Expenses. Our administrative and selling expenses increased by 4.5% to Ps.60,537 million in 2019 as compared to 2018. Our administrative and selling expenses as a percentage of total revenues decreased by 70 basis points to 31.1% in 2019 as compared to 2018, mainly as a result of operating expense efficiencies which were partially offset by an increase in labor, freight and maintenance expenses. In 2019, we continued investing across our territories to support marketplace execution, increase our cooler coverage, and bolster our returnable presentation base.

Other Expenses Net. We recorded other expenses net of Ps.2,490 million in 2019 as compared to Ps.1,881 million in 2018, which increased mainly as a result of severance payments related to the implementation of our efficiency program to create a leaner and more agile organization partially offset by the tax actualization effect of tax reclaim proceeds received in Brazil. Our non-operating expenses net in 2019 were mainly comprised of an impairment of Ps. 948 million of our investment in Compañía Panameña de Bebidas, S.A.P.I. de C.V. (Estrella Azul) along with provisions related to contingencies in Brazil.

Comprehensive Financing Result. The term “comprehensive financing result” refers to the combined financial effects of net interest expenses, net financial foreign exchange gains or losses, and net gains or losses on the monetary position of hyperinflationary countries where we operate. Net financial foreign exchange gains or losses represent the impact of changes in foreign exchange rates on financial assets or liabilities denominated in currencies other than local currencies, and gains or losses resulting from derivative financial instruments. A financial foreign exchange loss arises if a liability is denominated in a foreign currency that appreciates relative to the local currency between the date the liability is incurred or the beginning of the period, whichever occurs first, and the date it is repaid or the end of the period, whichever occurs first, as the appreciation of the foreign currency results in an increase in the amount of local currency, which must be exchanged to repay the specified amount of the foreign currency liability.

Comprehensive financing result in 2019 recorded an expense of Ps.6,071 million as compared to an expense of Ps.6,943 million in 2018. This 12.6% decrease was mainly driven by a reduction in our interest expense, due to debt reductions during the year, a foreign exchange loss as our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso, and a reduction in other financial expenses.

Income Taxes. In 2019, our effective income tax rate was 30.7%, reaching Ps.5,648 million in 2019, as compared to Ps.5,260 million in 2018. As a result, our effective income tax rate remained stable as compared with 2018, as the non-deductible charge related to the impairment of our investment in Estrella Azul offset by the increase in the relative weight of Mexico operations profits in our consolidated results which have a lower tax rate, coupled with certain tax efficiencies across our operations.

Share of the Profit of Associates and Joint Ventures Accounted for Using the Equity Method, Net of Taxes. In 2019, we recorded a loss of Ps.131 million in the share of the profits of associates and joint ventures accounted for using the equity method, net of taxes, mainly due to a loss in Estrella Azul that was partially offset by gains in our Jugos Del Valle joint venture and our water joint ventures in Brazil.

Net Income (Equity holders of the parent). We reported a net controlling interest income of Ps.12,101 million in 2019, as compared to Ps.13,911 million in 2018. This was mainly driven by a demanding comparable driven by the results of discontinued operations related to the sale of the operation in the Philippines and an impairment of Ps. 948 million in our Estrella Azul dairy joint venture in Panama.

Results by Consolidated Reporting Segment

Mexico and Central America

Total Revenues. Total revenues in our Mexico and Central America consolidated reporting segment increased by 9.1% to Ps.109,249 million in 2019 as compared to 2018, mainly as a result of an increase in the average price per unit case in Mexico, the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala and volume growth in Central America.

Total sales volume in our Mexico and Central America consolidated reporting segment increased by 0.5% to 2,075.3 million unit cases in 2019 as compared to 2018, as a result of the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala, coupled with volume growth in Central America.

Sales volume in Mexico slightly decreased by 0.6% to 1,838.3 million unit cases in 2019, as compared to 1,850.2 million unit cases in 2018.

Sales volume in Central America increased by 10.3% to 236.9 million unit cases in 2019, as compared to 214.8 million unit cases in 2018, mainly as a result of the consolidation of our acquisitions of ABASA and Los Volcanes in Guatemala, coupled with organic volume growth.

Gross Profit. Our gross profit in this consolidated reporting segment increased by 8.8% to Ps.52,384 million in 2019 as compared to 2018; however, gross profit margin decreased by 20 basis points to 47.9% in 2019. Gross profit margin decreased mainly as a result of increases in concentrate prices in Mexico and the depreciation of the average exchange rates of most of our operating currencies of the division, in each case as applied to our U.S. dollar denominated raw material costs, which factors were partially offset by our pricing initiatives coupled with more stable sweetener prices and a decline in our PET resin prices.

Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment decreased by 80 basis points to 32.9% in 2019 as compared with the same period in 2018. Administrative and selling expenses, in absolute terms, increased by 6.5% as compared to 2018 driven mainly by Increases in maintenance and labor costs in Mexico.

South America

Total Revenues. Total revenues in our South America consolidated reporting segment increased by 3.7% to Ps.85,222 million in 2019 as compared to 2018, mainly as a result of volume growth in Brazil together with average price per unit case growth across our territories and the consolidation of the new acquisition in Uruguay. These effects were partially offset by volume declines in the rest of our operations and negative translation effects due to the depreciation of the Argentine peso, the Brazilian real and the Colombian peso in each case as compared to the Mexican peso. Total revenues for beer amounted to Ps.15,619 million in 2019. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. On a comparable basis, total revenues would have increased by 14.8%, driven by volume growth in Brazil and average price per unit case increases in local currencies across our territories.

Total sales volume in our South America consolidated reporting segment increased by 2.9% to 1,293.6 million unit cases in 2019 as compared to 2018, mainly as a result of volume growth in Brazil and the consolidation of Uruguay, effects that were partially offset by declines in Argentina and Colombia. On a comparable basis, total sales volume would have increased by 4.9% in 2019 as compared to 2018, as a result of volume growth in Brazil.

Sales volume in Brazil increased by 7.5% to 846.5 million unit cases in 2019, as compared to 787.4 million unit cases in 2018.

Sales volume in Colombia decreased by 2.2% to 265.5 million unit cases in 2019, as compared to 271.4 million unit cases in 2018.

Sales volume in Argentina decreased by 20.6% to 139.3 million unit cases in 2019, as compared to 175.3 million unit cases in 2018.

Sales volume in Uruguay amounted to 42.4 million unit cases in 2019. Our sparkling beverage category represented 91.1% of our total sales volume. Our still beverage category represented 0.9% of our total sales volume. Our water portfolio represented 8.0% of our total sales volume.

Gross Profit. Gross profit in this consolidated reporting segment amounted to Ps.35,123 million, a decrease of 1.8% in 2019 as compared to 2018, with a 230 basis point margin contraction to 41.2%. This decrease in gross profit was mainly driven by higher concentrate costs in Brazil related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, coupled with our temporary decision to suspend such tax credits and the depreciation of the average exchange rate of all our local currencies in the division as applied to our U.S. dollar denominated raw material costs. These factors were partially offset by our revenue management initiatives, a favorable currency hedging position, combined with lower PET prices in the division and lower sweetener prices mainly in Brazil.

Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in this consolidated reporting segment decreased by 60 basis points to 28.9% in 2019 as compared to 2018 , driven mainly by operating expense efficiencies in Brazil. Administrative and selling expenses, in absolute terms, increased by 1.8% as compared to 2018.

CAPITALS & COMPANY

human

natural

social

financial

intellectual

manufactured

human

Our people and the way they work together are our company’s most valuable assets. Accordingly, we encourage their comprehensive professional and personal development, while creating an inclusive, diverse, and safe work environment. Through our continuous talent management and development, we promote trust, transparency, and teamwork, prepare our next generation of leaders, advance meritocracy, recognize and celebrate our teams’ success, while providing them with honest, regular feedback. In this way, we look to attract, retain, and develop the best multicultural talent to ensure our sustainable success.

natural

Our business is committed to the responsible use of our natural resources. As the main ingredient in our beverages, our comprehensive water strategy focuses on ensuring efficient water management in our operations, facilitating access to safe water and sanitation in our communities, and implementing water conservation and replenishment projects to protect the environment. We also work to increase energy efficiency across our value chain, while integrating clean and renewable energy to reduce our carbon emissions. Aligned with The Coca-Cola Company’s “World Without Waste” global initiative, we continue to focus on comprehensive and responsible waste management, increase our use of recycled materials in our packaging, and participate in schemes and models that support post-consumption collection and recycling.

social

Our communities and other stakeholders are key enablers of our business success. Accordingly, we are committed to creating economic, environmental, and social value by encouraging dialogue and continuous interaction with our neighbors and stakeholders in order to develop and implement programs and initiatives that address their particular needs and guarantee the continuity of our social license to operate.

financial

Our financial and operating discipline, strong capital structure and financial flexibility, transformational digital initiatives, and adaptability to changing market dynamics enable us to capture organic and inorganic growth opportunities in our industry, while creating sustainable value for our investors.

intellectual

We are accelerating our digitally driven business transformation throughout our value chain. We are further capturing the insights from our powerful analytical platform to develop tailored business models. By building our critical capabilities, we are creating a stronger, more agile, and flexible organization to drive our competitiveness, proactively address industry challenges, capitalize on market opportunities, and foster intellectual development across our organization.

manufactured

Our highly experienced team of specialists operate 49 bottling plants and 268 distribution centers across 9 countries, deliver over 3.3 billion unit cases of beverages through a primary and secondary fleet of more than 11,000 trucks to more than 1.9 million points of sale and serve a population of 261 million people.

COMPREHENSIVE RISK

Our company is present in different countries and regions. Consequently, we are continually exposed to an environment that presents challenges and risks. Our ability to manage the risks that may arise in the global environment where we operate is vital for our business’ value creation. Accordingly, our strategy includes a Comprehensive Risk Management Process through which we are able to identify, measure, register, assess, prevent, and/or mitigate risks.

  • Strategic shareholder relationships

    Consumer preferences

    Coca-Cola Trademarks

    Competition

    Cyber attacks

    Economic, political, and social conditions

  • Regulations

    Legal proceedings

    Acquisitions

    Foreign exchange

    Climate change

    Social media

  • Water

    Raw materials

    Strategic shareholder relationships

    Main Risks

    Our business depends on our relationship with The Coca-Cola Company and FEMSA, and changes in this relationship may adversely affect us.

    Potential Impacts

    • Termination of the bottler agreements.
    • Actions contrary to the interests of our shareholders other than The Coca-Cola Company and FEMSA.

    Key Mitigation Actions

    • Comply with our bottler agreements.
    • Work together and promote effective interaction between our strategic shareholders in order to maximize value creation.

    Consumer preferences

    Main Risks

    Changes in consumer preferences, purchase drivers, and consumption habits might generate variability in the demand for some of our products.

    Potential Impacts

    Variability in the demand for our products.

    Key Mitigation Actions

    • Transform into a total beverage company aligned with consumers’ changing tastes and lifestyles.
    • Build a winning total portfolio of products and presentations.
    • Drive our low- and no-sugar portfolio ahead of consumer trends.
    • Promote healthy habits.
    • Offer sustainable packaging options for our beverages.

    Coca-Cola Trademarks

    Main Risks

    Coca-Cola’s brand reputation or brand violations could adversely affect our business.

    Potential Impacts

    Damage to Coca-Cola’s trademark reputation.

    Key Mitigation Actions

    • Maintain the reputation and intellectual property rights of Coca-Cola trademarks.
    • Effective brand protection.
    • Strictly comply with Responsible Marketing Policy.

    Competition

    Main Risks

    Our competition could adversely affect our business, financial performance, and results of operations.

    Potential Impacts

    • Changes in consumer preferences.
    • Lower pricing by our competitors.

    Key Mitigation Actions

    • Offer affordable prices, returnable packaging, effective promotions, access to retail outlets and sufficient shelf space, enhanced customer service, and innovative products.
    • Identify, stimulate, and satisfy consumer preferences.

    Cyber attacks

    Main Risks

    Service interruption, misappropriation of data or breaches of security could adversely affect our business.

    Potential Impacts

    • Financial loss.
    • Interruption of operations.
    • Unauthorized disclosure of material confidential information.

    Key Mitigation Actions

    • Identify and address cyber threats.
    • Strengthening strategic and technical capabilities for mitigation and recovery.
    • Increase awareness and provide training for incident resolution.

    Economic, political, and social conditions

    Main Risks

    economic conditions, political and social events in the countries where we operate and elsewhere, and changes in governmental policies may adversely affect our business, financial condition, results of operations, and prospects.

    Potential Impacts

    • Affect and reduce consumer per capita income, which could result in decreased consumer purchasing power.
    • Lower demand for our products, lower real pricing of our products or a shift to lower margin products.
    • Negatively affect our company and materially affect our financial condition, results of operations, and prospects.

    Key Mitigation Actions

  • Through a risk management strategy, hedge our exposure to interest rates, exchange rates, and raw material costs.
  • Annually or more frequently evaluate, when the circumstances require, the possible financial effects of these. conditions and, to the extent possible, anticipate mitigation measures.
  • Regulations

    Main Risks

    Taxes and changes in regulations in the regions where we operate could adversely affect our business.

    Potential Impacts

    • Increase in operating and compliance costs.
    • Restrictions imposed on our operations.

    Key Mitigation Actions

    • Map regulatory risks and proposals of changes to regulations that directly affect our operation or financial condition.
    • Advocacy work to provide advice on legislators’ proposed regulatory changes.

    Legal proceedings

    Main Risks

    Unfavorable results of legal proceedings could adversely impact our business.

    Potential Impacts

    Investigations and proceedings on tax, consumer protection, environmental, and labor matters.

    Key Mitigation Actions

    Comply with applicable laws and regulations and comply with workplace rights policy.

    Acquisitions

    Main Risks

    Inability to successfully integrate acquisitions or achieve expected synergies could adversely affect our operations.

    Potential Impacts

    Difficulties and unforeseen liabilities or additional costs in restructuring and integrating bottling operations.

    Key Mitigation Actions

    Integrate acquired or merged businesses’ operations in a timely and effective way, retaining key qualified and experienced professionals.

    Foreign exchange

    Main Risks

    Depreciation of the local currencies of the countries where we operate relative to the U.S. dollar could adversely affect our financial condition and results.

    Potential Impacts

    • Financial loss.
    • Increase cost of some raw materials.
    • Adversely affect our results, financial condition, and cash flows in future periods.

    Key Mitigation Actions

    • Closely monitor developments that may affect exchanges rates.
    • Hedge our exposure to the U.S. dollar with respect to certain local currencies, our U.S. dollar-denominated debt obligations, and the purchase of certain U.S. dollar-denominated raw materials.

    Climate change

    Main Risks

    Adverse weather conditions could adversely affect our business and results of operations.

    Potential Impacts

  • Negatively affect consumer patterns and reduce sales.
  • Affect plants’ installed capacity, road infrastructure, raw material supply and points of sale.
  • Key Mitigation Actions

    • Identify sources of our operations’ CO2 emissions.
    • Support and comply with climate change measures for adaptation and mitigation.
    • Identify and reduce our environmental footprint through efficient use of water, energy, and materials.

    Social Media

    Main Risks

    Negative or inaccurate information on social media could adversely affect our reputation.

    Potential Impacts

    Damage to our brands or corporate reputation without affording us an opportunity for correction.

    Key Mitigation Actions

    • Effective brand protection.
    • Proactive external communication.

    Water

    Main Risks

    Water shortages or failure to maintain our current water concessions could adversely affect our business.

    Potential Impacts

    • Water supply may be insufficient to meet our future production needs.
    • Water supply may be adversely affected due to shortages or changes in governmental regulations or environmental changes.
    • Water concessions or contracts may be terminated or not renewed.

    Key Mitigation Actions

    • Efficient water usage.
    • Execute water conservation and replenishment projects.
    • Maintain 100% legal compliance.
    • Develop Water Risk Index, including four issues that need to be assessed: Community and Public Perception Risks, Scarcity of Water and other Inputs, Regulatory Risks, and Legal Risks for each of our bottling plants.
    • Update water risk assessment tool and work plans that contemplate aspects such as climate change, resilience to hydrological stress, media and social vulnerabilities, as well as regulations and production volumes for each of our bottling plants.
    • Secure water concessions for our production facilities.

    Raw materials

    Main Risks

    • Increases in the price of raw materials we use to manufacture our products could adversely affect our production costs.
    • Insufficient availability of raw materials could limit the production of our beverages.

    Potential Impacts

    • Increase in our cost of goods sold.
    • Shortage or insufficient availability of raw materials may adversely affect our capacity to ensure production continuity.
    • Adjustments to our product portfolio according to availability.

    Key Mitigation Actions

    • Implement measures to mitigate the negative effect of product pricing on our margins, such as hedging via derivative instruments.
    • Proactively address risk of supply on our value chain.
    • Strictly comply with our Supplier Guiding Principles.
    • Strategically adjust our product portfolio to enable us to minimize the impact of certain operating disruptions.
    appendix4EXECUTIVE

    John Santa Maria Otazua

    Chief Executive Officer

    Constantino Spas Motesinos

    Chief Financial Officer

    Rafael Ramos Casas

    Supply Chain and Engineering Officer

    Xiemar Zarazua López

    Commercial Development Officer

    Karina Paola Awad Pérez

    Human Resources Officer

    José Ramon Martínez

    Corporate Affairs Officer

    Rafael Alberto Suárez Olaguibel

    Information Technology and Transformation Officer

    Fabricio Ponce García

    Chief Operating Officer – mexico

    Ian Marcel Craig Garcia

    Chief Operating Officer - Brazil

    Eduardo Guillermo Hernández Peña

    Chief Operating Officer - LATAM

    appendix5BOARD OF

    Directors Appointed by Series A Shareholders

    José Antonio Fernández Carbajal

    Executive Chairman of the Board of Directors of Coca-Cola FEMSA

    27 years as a Board Member

    José Luis Cutrale

    Chairman of the board of directors of Sucocítrico Cutrale, Ltda

    16 years as a Board Member

    Alternate: José Henrique Cutrale

    Luis Alfonso Nicolau Gutiérrez1

    Partner at Ritch, Mueller, Heather y Nicolau, S.C. and member of the firm’s executive committee.

    2 years as a Board Member

    Enrique F. Senior Hernández1

    Managing Director of Allen & Company, LLC.

    16 años como Consejero

    Ricardo Guajardo Touché

    Chairman of the board of directors of Solfi, S.A. de C.V.

    27 years as a Board Member

    Federico José Reyes García

    Independent consultant

    27 years as a Board Member

    Alternate: Javier Gerardo Astaburuaga Sanjines

    Alfonso González Migoya1

    Chairman of the board of directors of Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (Volaris) and managing partner of Acumen Empresarial, S.A. de C.V.

    14 years as a Board Member

    Daniel Servitje Montull1

    Chief Executive Officer and Chairman of the board of directors of Grupo Bimbo, S.A.B. de C.V. (Bimbo)

    22 years as a Board Member

    Luis Rubio Freidberg1

    President of México Evalúa, A.C. and Centro de Investigación para el Desarrollo.

    6 years as a Board Member

    Alternate: Jaime A. El Koury

    John Anthony Santa Maria Otazua

    Chief Executive Officer of Coca-Cola FEMSA

    6 years as a Board Member

    Alternate: Héctor Treviño Gutiérrez

    Eduardo Padilla Silva

    Chief Executive Officer of FEMSA

    4 years as a Board Member

    Directors Appointed by Series D Shareholders

    John Murphy

    Executive vice president and chief financial officer of The Coca-Cola Company.

    2 year as a Board Member

    Alternate: Sunil Krishna Ghatnekar

    José Octavio Reyes Lagunes

    Retired.

    4 year as a Board Member

    Alternate: T.Robin Rodgers Moore

    Charles H. McTier1

    Retired.

    22 years as a Board Member

    Alternate: Franz Alscher

    Brian Smith

    President of The Coca-Cola Company Europe, Middle East and Africa Group.

    3 years as a Board Member

    Alternate: Marie Quintero-Johnson

    Directors Appointed by Series L Shareholders

    Herman Fleishman Cahn1

    President of Grupo Tampico, S.A.P.I de C.V.

    8 years as a Board Member

    Alternate: Robert Alan Fleishman Cahn

    Victor Tiburcio Celorio1

    Independent consultant

    2 years as a Board Member

    Francisco Zambrano Rodríguez1

    Managing Partner of FORTE Estate Planning S.C.

    17 years as a Board Member

    Secretary

    Carlos Eduardo Aldrete Ancira

    General Counsel, FEMSA

    27 years as Secretary

    Alternate: Carlos Luis Díaz Sáenz

    1 Independent

    appendix6BOARD

    Finance and Planning Committee

    The Finance and Planning Committee works with management to set our annual and long-term strategic and financial plans and monitors adherence to these plans. It is responsible for setting our optimal capital structure and recommends the appropriate level of borrowing as well as the issuance of securities. Financial risk management is another responsibility of the Finance and Planning Committee. Ricardo Guajardo Touché is the chairman of the Finance and Planning Committee. The other members include: Federico Reyes García, John Murphy, Enrique F. Senior Hernández and Miguel Eduardo Padilla Silva. The secretary non-member of the Finance and Planning Committee is Héctor Treviño Gutiérrez, our former Chief Financial Officer.

    Audit Committee

    The Audit Committee is responsible for reviewing the accuracy and integrity of quarterly and annual financial statements in accordance with accounting, internal control and auditing requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditor, who reports directly to the Audit Committee, such appointment and compensation being subject to the approval of our Board of Directors; the internal auditing function also reports to the Audit Committee. The Audit Committee has implemented procedures for receiving, retaining and addressing complaints regarding accounting, internal control and auditing matters, including the submission of confidential, anonymous complaints from employees regarding questionable accounting or auditing matters. To carry out its duties, the Audit Committee may hire independent counsel and other advisors. As necessary, we compensate the independent auditor and any outside advisor hired by the Audit Committee and provide funding for ordinary administrative expenses incurred by the Audit Committee in the course of its duties. José Manuel Canal Hernando is the chairman and financial expert of the Audit Committee. Pursuant to the Mexican Securities Market Law, the chairman of the Audit Committee is elected at our shareholders meeting. The other members are: Alfonso González Migoya, Charles H. McTier, Francisco Zambrano Rodríguez, Victor Alberto Tiburcio Celario and Ernesto Cruz Velázquez de León. Each member of the Audit Committee is an independent director, as required by the Mexican Securities Market Law and applicable New York Stock Exchange listing standards. The secretary nonmember of the Audit Committee is José González Ornelas, vice-president of FEMSA’s internal corporate control department.

    Corporate Practices Committee

    The Corporate Practices Committee, which consists exclusively of independent directors, is responsible for preventing or reducing the risk of performing operations that could damage the value of our company or that benefit a particular group of shareholders. The committee may call a shareholders meeting and include matters on the agenda for that meeting that it deems appropriate, approve policies on related party transactions, approve the compensation plan of the chief executive officer and relevant officers, and support our board of directors in the elaboration of related reports. The chairman of the Corporate Practices Committee is Daniel Servitje Montull. Pursuant to the Mexican Securities Market Law, the chairman of the Corporate Practices Committee is elected at our shareholders meeting. The other members include: Jaime A. El Koury, Luis Rubio Freidberg and Luis A. Nicolau Gutiérrez. The secretary non-member of the Corporate Practices Committee is Karina Awad Pérez.

    Advisory Board

    The Advisory’s Board main role is to advise and propose initiatives to our board of directors through the Chief Executive Officer. This committee is mainly comprised of former shareholders of the various bottling businesses that merged with us, whose experience constitute an important contribution to our operations.

    appendix19INTEGRAL

    Through our ethical culture, we manage under schemes that must be adopted as a way of life that inspires the acts and actions of all those who are part of the organization through the establishment of an Ethical System.

    Our ethical management is based on:

    • Prevent illicit behaviors that may affect our human capital and our heritage.
    • Detect improper acts through open communication channels.
    • Respond and provide feedback to our organization to build trust.
    • Therefore, our system is comprised of three fundamental elements: the Code of Ethics, an Ethics Committee and the whistleblowing system known as KOF Ethics Line.

    Our Code of Ethics

    It is the basis of our organizational culture, communicates our values, contemplates our main behaviors, promotes good behavior inside and outside our organization and guides our correct decision-making based on ethical principles. Our Code, recently updated, includes important topics such as Human Rights, Inclusion and Diversity, Discrimination, Violence and Harassment, Conflicts of interests, Misuse of information and Anti-corruption.

    Our Ethics Committee

    It is the oversight and control body, which guarantees compliance with the Code of Ethics and attends to the most relevant ethical situations of the company. In each of our territories, there is an Ethics Committee and each Committee reports to the Corporate Ethics Committee.

    Our KOF Ethics Line whistleblowing system

    Complaints about noncompliance with the Code of Ethics are received through the KOF Ethics Line, which is managed by a third-party. Employees, customers, suppliers, third parties or anyone who has a relationship with Coca-Cola FEMSA can use the system anonymously.

    A group of investigators analyzes the complaints impartially and confidentially and, if a violation of the Code is found, corrective measures are applied.

    In 2019, we received 1,190 complaints; of these, none were related to child labor, forced labor or freedom of association.

    To strengthen our culture, our workers sign a Letter of Compliance to our Code of Ethics. Its purpose is to ensure that our employees are aware of the Code of Ethics, understand the main acts or omissions that may be incurred and can put at risk to our organization and that they must report any violation of the Code that they know.

    appendix21 1% 20% 79%FinancialInformationOper ational Human Resources Complaints b y t opic
    appendix7SHAREHOLDERS & ANALYST

    Investor Relations

    Jorge Collazo

    Bryan Carlson

    Maite Vilchis

    [email protected]

    Sustainabiity & Corporate Communication

    Juan Carlos Cortés

    Carlos Valle

    Pedro Incháustegui

    [email protected]

    Coca-Cola FEMSA, S.A.B. de C.V

    Mario Pani N° 100

    Col. Santa Fe Cuajimalpa 05348,

    Ciudad de Mexico, México

    (5255) 1519 5000

    www.coca-colafemsa.com

    Legal Counsel of the Company

    Carlos L. Díaz Sáenz

    Marío Pani N° 100

    Col. Santa Fe Cuajimalpa 05348,

    Ciudad de Mexico, México

    Phone: (5255) 1519 5000

    Independent Accountants

    Mancera, S.C.

    A member firm of Ernst & Young Global

    Antara Polanco

    Av. Ejército Nacional Torre Paseo 843-B Piso 4

    Colonia Granada 11520

    Ciudad de Mexico, México

    Phone:(5255) 5283 1400

    Stock Exchange Information

    Coca-Cola FEMSA’s common stock is traded on

    the Bolsa Mexicana de Valores,

    (the Mexican Stock Exchange) under the

    symbol KOFUBL L and on the New York Stock

    Exchange, Inc. (NYSE)

    under the symbol KOF.

    Transfer Agent and Registrar

    Bank of New York

    101 Barclay Street 22W

    New York, New York 10286, U.S.A

    appendix8ABOUT OUR

    From our headquarters in Mexico City, we present our Integrated Report 2019 edition. Developed by the guidelines of the International Integrated Reporting Council (IIRC) and in accordance with the GRI (Global Reporting Initiative) Standards: Core option. Similarly reporting the indicators of the Sector Supplement for Food Processing Companies of the same guide in its G4 version. Furthermore, this Report complements our Communications on Progress (COP) to the United Nations Global Compact included by FEMSA in its 2019 report.

    The information contained corresponds to the period from January 1st to December 31st, 2019. It includes data from all the countries where Coca-Cola FEMSA, S.A.B. of C.V. has operations or a majority share. Its operations encompass franchise territories Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama and Uruguay.

    Chief Financial and Administrative Officer

    Constantino Spas Montesinos

    Corporate Affairs Officer

    José Ramón Martínez Alonso

    Stock listing information: Mexican Stock Exchange, Ticker: KOFUBL | NYSE (ADS), Ticker: KOF | Ratio of KOFUBL to KOF = 10:1

    Coca-Cola FEMSA files reports, including annual reports and other information with the U.S. Securities and Exchange Commission, or the “SEC,” and the Mexican Stock Exchange (Bolsa Mexicana de Valores, or the “BMV”) pursuant to the rules and regulations of the SEC (that apply to foreign private issuers) and of the BMV. Filings we make electronically with the SEC and the BMV are available to the public on the Internet at the SEC’s website at www.sec.gov, the BMV’s website at www.bmv.com.mx, and our website at www.coca-colafemsa.com. Coca-Cola FEMSA, S.A.B. de C.V. is the largest Coca-Cola franchise bottler in the world by sales volume. The Company produces and distributes trademark beverages of The Coca-Cola Company, offering a wide portfolio of 129 brands to a population of more than 261 million. With over 80 thousand employees, the Company markets and sells approximately 3.4 billion unit cases through close to 2 million points of sale a year. Operating 49 manufacturing plants and 268 distribution centers, Coca-Cola FEMSA is committed to generating economic, social, and environmental value for all of its stakeholders across the value chain. The Company is a member of the Dow Jones Sustainability Emerging Markets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Sustainability Indices, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela through its investment in KOF Venezuela. For further information, please visit www.coca-colafemsa.com

    appendix12

    We maintain a permanent and open communication with stakeholders, identified based on the materiality assessment we carried out in 2012. This communication helps us understand the interests and concerns of the people who are related, directly or indirectly, to our business activities. We select the stakeholders based on their relationship with each aspect of our value chain, impacts to our operations, and the relevance they hold as part of our purpose of creating shared value.

     

    Whistleblower
    System

    01-800
    Number

    e-mail /
    website

    Working
    environment
    survey

    Community
    studies

    Dialogue
    meetings

    Participation
    in forums

    Area responsible
    for responding

    Main issues
    identified

    Associates and their Families Human ResourcesBusiness philosophy, work culture, labor relations.
    Community Corporate Affairs, Commercial, Human ResourcesCommunity development programs, portfolio of products, job openings, safety at the work centers.
    Clients and Consumers  Commercial, MarketingDifferent information requests, portfolio of products, job openings, sponsorships, technical assistance, and sales.
    Suppliers  ProcurementCommercial relationships.
    Shareholders and Investors  Investor RelationsFinancial results, company strategy, investment plans, economic prospects.
    Authorities and Business Associations   Corporate AffairsCollaboration in community development initiatives and environmental stewardship.
    Unions  Human ResourcesNegotiations for collective bargaining contracts, labor relations.
    Civil Society Organizations  Corporate AffairsJoint projects.
    Communications Media  Corporate AffairsBusiness strategy, financial results, community development programs and environmental stewardship, institutional positioning.
    Education Institutes   Human Resources, Corporate AffairsJoint projects, academic advice, research, training.
    appendix13BUSINESS

    We are interested in promoting and exchanging best practices in Sustainability, and we actively participate in associations and organisms of the countries where we are present.

    appendix29EXTERNAL
    appendix14GRI CONTENT