Coca-Cola Femsa | One Platform

Success Stories

We are taking advantage of digital technology to transform the way we work and serve our 1.9 million customers and 261 million consumers.

This year, we continued to push forward our Advanced Analytics Platform to improve our market segmentation, revenue growth management, and demand planning capabilities. To fully capitalize on these capabilities, our Dynamic Initiative Management process (DIM) aligns our marketing and commercial teams to prioritize and execute granular initiatives, through the sales force, across both the traditional and modern trade channels.

We are also taking advantage of technology to transform the way we work and serve our 1.9 million customers and 261 million consumers.

This is why we are focused on developing an Omnichannel solution for our customers, connecting diverse contact points in real time—from presale and contact centers to digital technologies such as direct messaging, web portals, mobile apps, and electronic data interchange (EDI)—to improve customer service and engagement, increase sales, and drive productivity.

our omnichannel solution

Our Omnichannel solution connects diverse contact points in real time to improve customer service and engagement, increase sales, and drive productivity. The following pages describe an example of how our customers will benefit from it.

Omnichannel Vision KOF

argentina and brazil

B2B Digital Solutions

During 2019, we rolled out our B2B web portal in Brazil and Argentina, serving up to 50,000 customers in the first stage of its deployment. In Brazil, we also rolled out another B2B solution based on a chatbot by WhatsApp, enabling our customers to reach us for a product anytime while allowing us to capture lost orders and reduce our out of stocks in the market. We are further undertaking pilots in Mexico, Brazil, and Argentina to fine-tune our B2B relationship model and develop tailored Route-to-Market models that address increased complexity, while reengineering our IT infrastructure for real-time connectivity.

mexicocolombiabrazil

Advanced Analytics Platform

We are strengthening our marketing and sales Advanced Analytics Platform in Mexico and Colombia, while rolling it out across our Brazilian operation. Among this platform’s benefits, we have optimized our combined promotional return on investment by over 30% in Mexico and Colombia’s traditional trade channel. In Mexico, we have also increased our average price ahead of inflation while maintaining our market share. We have further constructed a growing library of commercial initiatives—ranked by effectiveness—for each of our operations to choose from according to their commercial strategy.

mexicocolombiabrazil

Artificial Intelligence

Through Victoria, our machine learning prescriptive analytical engine, we improved our sales forecast accuracy across selected operations in Mexico. We are also expanding Victoria’s footprint and running pilot tests in Colombia and Brazil to improve our sales forecast accuracy and generate inventory and transportation savings in these operations.

brazil

Digital Trade

We’re expanding our first mover advantage across Brazil’s digital trade channels, including both digital e-commerce and food aggregators such as iFood and Rappi. Consequently, we enjoy a 78% share of the retail e-commerce home market channel and 16.9% incidence rate among the country’s online food aggregators, resulting in sales of 6.7 million unit cases and volume growth of over 120% for the year.

Coca-Cola Femsa

Dynamic Initiative Management

We operate our Dynamic Initiative Management process in Mexico, Brazil, Colombia, Argentina, Costa Rica, Nicaragua, Panama, and Uruguay. During 2019, we communicated over 5 million targeted initiatives every month across these operations. Moreover, our Mexico operation has shown 8% improvement in its targeted initiatives execution scores.

Juan has been our client for some years. Today, as every Monday, Juan is visited by Mario, his usual pre-seller.

While Juan is busy taking care of his business, he asks Mario to place his weekly order.

Hours later, Juan realizes that he forgot to order a specific product, but it is too late. Mario will visit him again in a few days.

Juan then uses KOF’s WhatsApp chatbot to place an additional order, including the specific product he had forgotten.

Mario instantly receives a notification in his hand held: “Juan has placed an additional order”.

Mario decides to call Juan to confirm his new request.

Overnight, Juan’s cooler malfunctioned.

Using his cellphone, Juan accesses KOF’s mobile app and creates a service order to evaluate and repair his cooler.

Juan receives a call from the Contact Center: “A technician will visit you in the next few hours”.

Next, he confirms that his most recent orders will be delivered in the afternoon, using the order tracking functionality.

As the delivery truck approaches Juan’s business, he receives a WhatsApp notification: “Your order is about to be delivered. You will be the next customer in our route to be served”.

The delivery truck arrives, and Juan receives both of his orders. He uses the built in e-payment system in KOF’s mobile app to create a QR Code.

Juan validates his payment was successful and verifies his total balance. Juan is a satisfied customer.

Develop Customer-Centric Route-to-Market Models

We are capitalizing on our growing knowledge and evolving our tailored direct and indirect Route-to-Market (RTM) models to maximize our customer value creation and optimize our cost to serve. Through the right combination of direct and indirect RTM models, we will flexibly and effectively achieve greater productivity.

Success Stories

Overall, we are leveraging our Advanced Analytics Platform, DIM, Omnichannel solution, and flexible Route-to-Market models to create a more agile and flexible organization, enabled with the right commercial capabilities to drive our competitiveness, proactively address evolving industry challenges, and capitalize on business opportunities.

guatemala

Transformed Operating Model

In our Los Altos territory, which includes Guatemala’s second-largest city, we transformed the operating model to upgrade market execution, significantly improve customer service, and considerably expand our portfolio’s availability. As a result, sales volume across this territory rose 32.3% year over year.

brazil

KOF Edge Strategy

In Brazil, our KOF EDGE strategy aims to literally and figuratively connect all of the dots—from Omnichannel order taking to increased customer engagement, real-time routing and delivery traceability to alternative payment solutions—to build a sustainable competitive advantage by becoming our customers’ preferred sales and delivery partner.

costa rica

Distributors Model

In 2019, we successfully rolled out our sustainable Distributors Model in Costa Rica, optimizing the productivity of our secondary distribution fleet through an approved network of distributors. Aligned with our market execution standards, this model is enabling us to not only increase our Costa Rica operation’s ICE score by 10%, but also reduce our Costa Rica operation’s cost to serve while improving our client service, volume growth, and return on invested capital.

mexico

“Saturation” RTM Model

In Mexico, we piloted our saturation RTM model to better serve the needs of our smaller and specialized clients in urban areas. Complementing our existing pre-sale model, we’re selectively working with wholesalers and distributors to expand our market reach and to improve the level of service for small clients, including specific routes for new categories. Consequently, we’re enlarging our client and consumer base, while expanding portfolio availability to foster volume growth.

This year, we functionalized our key supply chain area to advance, optimize, and standardize our supply chain operating models, platforms, systems, and processes. To this end, we centralized the organization’s reporting structure, with each of the heads of our countries’ supply chain operations now reporting directly to our company’s Supply Chain Director. Recognizing those operations with the best practices, we also decentralized our distribution and manufacturing centers of excellence to our Brazil and Mexico operations, respectively. Consequently, Brazil and Mexico are now responsible for evolving our distribution and manufacturing models and ensuring the rest of our operations adoption of those models. Furthermore, we defined a clear vision for our supply chain, focused on six main pillars:

Define and maintain high standards of quality, safety, and environment.
Actively embrace and advance our demand-driven customer-centric supply chain model.
Continuously improve our end-to-end operational excellence.
Maximize our return on invested capital through robust capital and operational expense allocation and management.
Support our operations’ growth as a reliable business partner, consistently meeting our business’ key performance indicators and enabling our marketing and commercial strategies.
Ensure we enjoy the best talent, culture, and behavior, aligned with KOF DNA.

Success Stories

Our Brazil and Mexico operations are the most advanced in distribution and manufacturing, respectively. For this reason, we decentralized our distribution and manufacturing centers of excellence to each of those operations for them to lead our best practices across our organization.

Consistent with our vision, we launched our Supply Chain Reinvention initiative to collaboratively and systemically share, adopt, and devise our best practices and processes, bolster our talent pool, and capture productivity opportunities across our company’s supply chain throughout our 9 operations. As part of this four-year reinvention, we are undertaking end-to-end portfolio analysis and network optimization; maximizing our asset utilization and direct material allocation; optimizing our primary transportation and load sharing; and designing our manufacturing, warehouse, and distribution operations of tomorrow—catering to our business’ future needs.

Aligned with our strategic priorities, we accelerated our development and deployment of our demand-driven, customer-centric supply chain model. This year, we finalized the implementation of our KOF Logistics Services’ (KLS) Supply Chain Planning platform across all of our operations. After deployment of our Digital Distribution 1.0 platform, including a web-based app, mobile delivery devices, and vehicle telemetry equipment, across our Mexican and Brazilian operations, we implemented our Digital Distribution 2.0 platform throughout our Brazilian operation’s secondary distribution fleet during 2019. Moving forward, we will begin our evolving digital distribution journey throughout the rest of our operations, while deploying Digital Distribution 2.0 across our Mexico operation next year.

Coca-Cola Femsa

KOF Logistics Services (KLS) Supply Chain Plannining Platform

During 2019, we completed the implementation of our KOF Logistics Services (KLS) Supply Chain Planning platform across 100% of our operations. We also began deployment of this platform throughout our new Uruguay and Guatemala operations. Using advanced analytics, we are now able to track, adjust, and optimize our routes’ performance and our overall customer service. Consequently, the level of service that we provide to our commercial markets rose to 99.7 for 2019, from 99.4 last year. We have also generated production, warehousing, and transportation cost savings of US$ 39.2 million over the past three years.

mexico and brazil

Customer Driven Distribution Planning

To support our KLS Supply Chain Planning platform, we implemented our new customer-driven distribution planning process in Brazil and Mexico during 2019. This more agile demand-driven process enables us to proactively adapt our distribution system to fulfill our customer requirements, while optimizing our cost to serve. As a result of this process, we opened multiple cross-docks and distribution centers to draw our supply closer to demand over the course of the year.

brazil

Digital Distribution 2.0

We deployed our Digital Distribution 2.0 platform, utilizing our Monitoring Tower 2.0, throughout our Brazilian operation during 2019. Addressing the entire strategic and tactical planning cycle of our secondary distribution process—from analytics to delivery route planning and execution—this enhanced platform features route traceability, a new web-based app for supervisors, end-to-end supply chain network analysis, and digital real-time control of our distribution operation.

Coca-Cola Femsa

Supply Chain Control Tower

This year, we developed and deployed our centralized Supply Chain Control Tower housing all of our capabilities while providing visibility across all of our supply chain activities. The tower utilizes a data lake to store our growing quantity of business intelligence data.

We are ensuring that we boast the right talent pipeline at the operational level, including a growing pool of plant, distribution, and logistics managers.

On the manufacturing front, we made specific advances while undergoing a thorough assessment of our best practices across our operations. Among our initiatives, we continued development of our end-to-end Digital Manufacturing 2.0 platform. Within this platform, we are evolving our Centralized Plant Maintenance Planning model into our integrated Asset Management System. This system will encompass our whole supply chain, from our manufacturing assets to our buildings, distribution fleet, and coolers. Through this comprehensive Asset Management System, we expect to improve our company’s return on invested capital through more robust capital and operational expense allocation and management.

Furthermore, we are ensuring that we boast the right talent pipeline at the operational level, including a growing pool of plant, distribution, and logistics managers. With this in mind, we worked closely with our human resources function to develop KLS University, a standardized learning platform designed to assure we possess the right competencies and capabilities across our operations. For example, our Leaders 1 and 2 programs focus on the advancement of our middle managers’ capabilities. To complement KLS University, we are also creating our own Distribution University and Manufacturing University to build not only our technical, but also our managerial capabilities throughout our organization for years to come.

Fuel for Growth will help us become a leaner, more agile, and digital Coca-Cola FEMSA.

Over the course of the year, we brought KOF DNA to life through multiple initiatives across our 9 countries of operation:

Moments of Truth (MoT) workshops – We conducted 10 MoT workshops with the participation of more than 400 employees to identify cultural pain points and to develop action plans to help us bridge any identified gaps between our current culture and the culture we look to achieve across our company.

Culture Dynamics forums- We organized six forums that enabled our leaders to reflect on different cultural dynamics that we aim to establish and to subsequently implement these behaviors throughout our organization, reinforcing our desired culture.

All-Hands Meetings - We held three companywide meetings to provide all of our employees with visibility about our business strategy and results, as well as to promote opportunities for interaction with our company’s leaders and to recognize our business heroes.

We further undertook initiatives, including visits across our traditional and modern trade channels, to expand our knowledge of our operational processes, while developing the operational sensibility to design more assertive strategies.

To support our launch of KOF DNA, our company embarked on a major organizational model change under our Fuel for Growth program in order to achieve our goal of becoming more:

LEAN to get closer to our markets, clients, and consumers

AGILE and less bureaucratic to respond to our customers and consumers’ needs

DIGITAL to optimize our platforms and processes

To create one collaborative culture throughout our company, we complemented our deployment of KOF DNA across all of our operations and organizational levels with our focus on necessary leadership behaviors and capabilities. Our senior leadership team is committed to serve as role models for these capabilities and behaviors, and they are expected of everyone around our organization:

Collaboration Mentality

Work together effectively and solve problems as a team

We Before Me

Constantly put our organization and team’s results above your own to benefit our company as a whole

Accountability

Always let your actions reflect a sense of responsibility not only for what you must deliver, but also for what our organization must deliver

Trust

Continually put our trust in our colleagues.

Furthermore, we are in the process of changing our way of working. As part of the change management process, we have already conducted 10 town hall meetings, 62 cross-functional workshops, five change management workshops, 21 leadership workshops, and 20 enabling workshops.

66% of our company’s talent requirements were filled by internal candidates.

Performance, Succession & Mobility

During the year, we improved our performance management methodology by including a DNA evaluation, equivalent to 30% of our employees’ annual results. Thus, we underscore the importance of our employees’ living and acting upon our company’s desired behaviors.

We further deployed our annual 9-Box Talent Assessment and Management Methodology, enhancing our talent quality, succession, mobility, and execution metrics while focusing on our high potential talent. During 2019, 95.8% of our employees from executive, senior, and middle management, as well as individual contributors, were evaluated throughout our operations in order to identify and take actions to develop our talent pipeline within our company.

To ensure our development of high potential talent, we expanded our Global Accelerated Development Programs to provide our organization’s directors, managers, and team leaders with the necessary capabilities to guarantee our successful business strategy. Based on tailor-made 360º gaps in leadership competencies and global business needs, these nine-month programs employ a mixed methodology of face-to-face and virtual

sessions throughout the year. For 2019, we are proud to report that our second class of directors and managers and our first class of junior managers and team leaders graduated from these four programs, comprising 68 high potential executives from different levels of our organization. Importantly, 54% of our first graduating class of directors and managers achieved appointments to new roles during the year.

Moreover, we launched our Global Talent Visibility program for our high potential talent across all of our operations.

Our Path to Digital

During 2019, we began deployment of SAP SuccessFactors® Platform throughout all of our operations. Ultimately impacting 70,000 employees, this platform will integrate, improve, and simplify our leaders and employees’ experience with our Human Resources processes:

Implementing Succession & Development, Performance & 360º Assessment, Employee Profile, and Compensation modules.
Migrating FEMSA University to a new platform, integrating all of our Human Resources processes while generating self-learning and development.
Currently standardizing and migrating our Human Resources Administration backbone to a cloud-based solution in order to meet market trends and set the foundation for our path to digital.

SAP SuccessFactors

Inclusion & Diversity

At Coca-Cola FEMSA, we aim to create an environment in which every individual can feel included and valued for his or her own knowledge, behavior, competencies, and results, with opportunities for development and recognition based on his or her own talent. To this end, our strategic goals are to:

01 Train and install inclusive leadership skills in all of our leaders

Train to identify unconscious biases that exist in the way our company functions.
Install best practices that allow us to consciously manage such biases.
Have a companywide Inclusion & Diversity Board to advise our CEO and Operation Heads.

02 Create an open and flexible work environment

Update flexible work program policies.
Promote flexible work programs through a communications campaign focused on providing education on their use and benefits.
Undertake Inclusion & Diversity Week.
Continuously sensitize our company to new ways of working.
Migrate towards open and collaborative workplaces across all of our operations.

03 Develop a diverse talent pipeline

Increase representation of women in leadership roles.
Provide visibility, sponsorship, and mentoring to female talent.
Review laws regarding equality and non-discrimination and their requirements.
Increase representation of people with different abilities.
Develop guidelines and key performance indicators to evaluate diversity and inclusion.

Inclusion & Diversity Mindset

To accelerate our development of a truly inclusive and diverse organizational culture, we are raising awareness and enabling Leadership teams to embed an Inclusion & Diversity Mindset by opening a space in our Annual KOF Leaders’ Summit to discuss and reflect on unintentional bias and intolerance, how “hard-wired” patterns and social rejection impact performance negatively, and how to create an open and mindful culture that can leverage the power of human differences.

We will continue to boost our transformation by empowering our leaders to:

Create and mature our company’s inclusion and diversity capability development.
Improve our employee experience and sense of belonging by fostering a collaborative and flexible work environment.
Ensure our employees reflect the communities and consumers we serve.

Inclusion & Diversity Week

To reinforce that our company’s diversity makes us stronger, we created a space to enable our employees to reflect on the importance of inclusion and diversity for our organization, encourage our company’s development of inclusive leadership, and leverage the experience and commitment of our senior leadership team to strengthen our culture of inclusion and diversity. Throughout the week, we undertook talks and activities designed to encourage diverse thinking by questioning how:

We speak about minorities within our organization
We raise our collective consciousness to use our team’s talent to solve obstacles
We speak inside and outside of our company, ensuring our message is properly understood
We realize what an enriching experience it is to take advantage of our differences
We prevent sexual and labor harassment
We approach diversity in a different way given the impact that change has on the human body

Compensation And Benefits

Our people’s compensation recognizes their effort, and it’s equal for both men and women.

Our people’s compensation and benefits scheme recognizes their effort and commitment to their jobs, along with their contribution to creating value for our company.

At all levels of our organization, we ensure that our employees’ remuneration is competitive and that their conditions are equal for both men and women. To ensure the competitiveness of our benefit packages in all of our operations, consistent with our talent acquisition and retention strategy, performance-based bonus practices for middle management were reviewed against the market. Moreover, to ensure our management team’s competitive compensation and to prevent a loss of talent in recovering economies, an analysis was developed together with Mercer, a world leader in the health and benefits marketplace.

Additionally, based on studies performed by international consulting firms that enable us to make comparisons between countries, we can determine that our employees are receiving an integrated salary that is greater than or equal to the market average.

We comply with all labor rights and obligations stipulated by law, surpassing the conditions and benefits established in the laws of each of the countries where we operate. Our collective bargaining agreements cover approximately 66% of our workers. These labor contracts are reviewed and agreed on with all of our union representatives, respecting the established validity times, as well as complying with all notification periods.

KOF Volunteers Program

We encourage the development of our employees and their families as responsible citizens, committed to their community, society, and environment. Through the KOF Volunteers program, we promote initiatives that enable us to beneficially impact the quality of life and wellbeing of the communities where we operate, strengthening our relationships with them, while positively affecting our corporate position and reputation.

Our 2020 Goal: To generate 1 million hours of volunteer work

Our overall volunteer activity is committed to six different causes:

Community Development

Environment

Natural Disasters

Health

Education

Human Rights

In 2019, 83,076 participants, including our employees and their families, devoted 421,021 hours to 858 volunteer initiatives, supported by an investment of more than US$243,000. From 2015 through 2019, we accumulated 1,443,246 hours of volunteer work.

Health & Wellbeing Policies

At Coca-Cola FEMSA, our Corporate Occupational Health area is responsible for proposing relevant revisions and updates to our three Health and Wellbeing Policies:

Occupational Health
Personnel with Healthy Habits
Healthy Culture

As well as this annual corporate review, which is sent for approval to our Director of Social and Labor Development and Global Director of Human Resources, our company’s internal audit area will later review these policies for dissemination and implementation across our operations.

Employee Support Program

In 2019, we continued with our Employee Support Program in Mexico. This emotional containment service is designed to assist our employees and their families to resolve situations that may generate emotional disturbances such as stress, anxiety, and depression, among others, which may affect their development in either their daily life or their work environment.

This program is part of our Comprehensive Wellbeing Strategy to reduce psychosocial risk factors inside and outside of work through the attention and advice of psychologists and other health professionals according to the different situations that affect our employees.

During 2019, we functionalized and consolidated our key finance area into a leaner, more agile, more collaborative, and digitally driven operating model that takes advantage of our company’s size, scale, and value opportunities to enable the success of our front-line operations. With this in mind, the ambition of our new Finance Operating Model is to serve as a business partner to our operations by delivering valuable insights for better and faster decision-making to maximize shareholder value, while ensuring compliance and transactional efficiency. To achieve this ambition, our priorities are to:

Maximize our return on invested capital (ROIC) and shareholder value creation through disciplined capital allocation, working capital optimization, and profitability insights.
Co-design business strategies and support our operations by delivering valuable insights for better and faster decision-making to maximize shareholder value, while ensuring compliance and transactional efficiency.
Proactively manage risks by designing our internal control system and actively address financial, legal, and cyber-security risks.
Prioritize efficiency for all of our transactional activities by boosting penetration and adoption of shared services and digital solutions.
Ensure accuracy of our financial information and compliance with statutory obligations.

Through our functionalization process, we centralized, streamlined, and de-layered our Financial Structure, with each of our operations’ finance directors and managers now reporting directly to our company’s Chief Financial Officer. Consequently, we enjoy a leaner, more agile, efficient, and collaborative Finance Operating Model, better positioned to capitalize on our company’s scale, capture greater value, share best practices and processes, and, ultimately, enable our front-line operations to transform current and future challenges into opportunities—fueling our profitable business growth.

Moreover, over the second half of the year, we centralized and standardized our governance, policies, procedures, and metrics to ensure compliance and efficiency. We further deployed our shared financial services strategy, centralizing and consolidating our operations’ transactional activities, such as data processing and reporting, within our KOF Global Business Services platform—thereby enabling our operations to focus on our customer and consumer-centric capabilities and initiatives. Moving forward, we aim to further develop our digitally driven Finance Operating Model in order to strengthen and streamline our organization, maximize our return on capital, optimize our capital allocation, and importantly, free up resources to support our operations’ sustainable business growth and overall stakeholder value creation.

KOF Global Business Services:
Fueling Front-Line Business Growth

KOF Global Business Services model is designed to better support and enable our business’ global and local strategic growth. Consistent with our business strategy, objectives, guidelines, and requisite financial results, three specialized Finance entities—our Corporate Experts team, KOF Financial Services (KFS), and Region/Country Finance team—work collaboratively to provide on-field support focused on providing the rules of engagement and financial services to serve our internal and external clients and ensure our strategic objectives. Through our Transformation Framework, we enable an efficient, digitally driven, and harmonious Administrative & Financial (A&F) Shared Service Model.