Chairman's and CEO's Letter to Stakeholders
This year, in the face of the COVID-19 pandemic, we were able to navigate the storm and come out stronger than before. Above anything, our greatest achievement for the year was the ability to rapidly protect the safety and wellbeing of our people—our most important asset.
Indeed, we want to recognize all of our company’s employees for their unwavering dedication. Our people rose to the challenge and delivered outstanding service to our customers and consumers, ensuring business continuity and product supply, accelerating transformational initiatives, while supporting communities in need through beverage donation, communication of prevention measures, distribution of medical supplies, and expansion of hospital capacity.
Beyond operating continuity, we maintained unmatched market execution, gaining total share of the non-alcoholic-ready-to-drink (NARTD) industry across our key markets. We ensured our cash flow liquidity, enabling us to not only continue with disciplined capital investment in key projects, but also pay increased dividends to our shareholders. We tapped the international capital markets to further strengthen our solid financial position, marked by the issuance of our first ever Green Bond—the largest for a Latin American corporation and a first for the Coca-Cola System.
As we move forward, our company’s strategic growth and leadership is driven by our purpose to refresh the world—always finding the most efficient and sustainable way to put our consumers’ drink of choice in their hands whenever and wherever they want it.
With this in mind, our vision is to become an integrated commercial beverage platform that works seamlessly and in real time to deliver on four strategic priorities that guide our transformation and growth: Build a consumer-centric portfolio for every occasion; Enable an overall digital transformation; Ensure business sustainability; and Foster a collaborative, inclusive, and diverse culture.
Aligned with these priorities, we’re consolidating our industry leadership by developing a winning total beverage portfolio that satisfies consumers’ evolving tastes and lifestyles. Affordability, coupled with our growing low- and no-sugar beverage portfolio, remained an important engine for our sparkling beverage growth. With the universal bottle’s launch, we’re successfully expanding our returnable platform beyond colas to flavored sparkling and still beverages. We also captured market share across emerging still beverage categories—including hydration, nutrition, and energy—while selectively exploring new categories, exemplified by the Coca-Cola system’s entry into the alcoholic ready-to-drink space in Latin America with the successful launch of Topo Chico Hard Seltzer.
To fulfill our vision of becoming a fully digital, interconnected platform, we’re driving a digital transformation across every function. From omnichannel order taking and customer care capabilities to evolving route-to-market and logistics models to automated financial planning and human resources processes. This transformation continued to progress at tremendous speed. To give you a sense, our chatbot-enabled Business WhatsApp platform grew to 270 thousand active customers in one year, with up to 15,000 orders placed daily, and growing.
Importantly, we’re ensuring our business sustainability. Thanks to our efforts, we achieved our key 2020 sustainability goals. We improved our water use ratio to an average of 1.49 liters of water per liter of beverage produced, an industry benchmark. We increased the use of recycled materials in our PET packaging to 29%, exceeding our 2020 goal of 25%. An impressive 80% of our bottling operations’ power came from clean energy sources, up almost nine times since 2014. We collected more than 50% of the bottles that we put into key markets, well positioned to achieve our 2030 commitment of collecting 100%. Furthermore, we became the first Mexican company and the third in Latin America to achieve official validation of our 2030 emissions reduction targets by the Science Based Targets initiative, reflecting our commitment to a low-carbon economy. Our sustainability performance enabled us to be part of the top 15% of public companies included in the S&P Global Sustainability Yearbook 2021.
Underpinned by KOF DNA, we’re building a customer and consumer focused culture, founded on operational excellence, agile decision-making, owners’ mentality, and a people-first mindset with a focus on inclusion and diversity. Indeed, this is the third consecutive year that Coca-Cola FEMSA is part of the Bloomberg Gender-Equality Index. Driven by these core values, we are changing our ways of working and reinforcing the behaviors necessary to emerge a stronger, leaner, and more agile company—empowered to achieve our purpose and vision.
Our resilient business—coupled with our proactive market strategies and comeback plans—enabled us to deliver better than expected results in the face of unprecedented challenges. For the year, our total sales volume declined 2.5% to 3.28 billion unit cases. Total revenues decreased 5.6% to Ps. 183.6 billion. Operating income declined 0.7% to Ps. 25.2 billion. Operating cash flow increased 0.5% to Ps. 37.3 billion, while our operating cash flow margin expanded to 20.3%. Controlling net income reached Ps. 10.3 billion for earnings per share of Ps. 0.61 and per unit of Ps. 4.91 (Ps. 49.06 per ADS). Notably, our net-debt-to-EBITDA ratio closed the year at 1.1 times, while our cash position was more than Ps. 43 billion, reflecting our strong balance sheet.
As we move ahead, one of our key strengths is our mutually beneficial business relationship with The Coca-Cola Company. Working together, we not only reacted rapidly and forcefully to the pandemic, but also remained focused on driving the system and our company forward.
Against the backdrop of a complex, dynamic environment, we’re encouraged by our resilience, our underlying operating trends, and our people’s unwavering devotion in the face of adversity. Guided by our shared purpose of refreshing the world anytime, anywhere, we’re taking the right steps to emerge a stronger company—creating key avenues for growth and value creation for years to come.
On behalf of our employees, we thank you for your continued confidence in our ability to deliver economic value and to generate social and environmental wellbeing for you all.
We focused our actions on five key areas to ensure our business continuity
The unpredictable, uncertain, and complex environment that emerged with the COVID-19 pandemic brought out the best in us and in our collective humanity.
We would like to offer our sincere condolences to everyone who lost a loved one. In particular, we would like to take a moment to remember our colleagues who sadly lost the battle to this virus.
We further express our deepest appreciation and gratitude to all of the healthcare workers, first responders, emergency professionals, and other essential workers on the frontline of this pandemic that allowed us to sustain some sense of normality amid these troubling times.
This pandemic has demanded a great deal from all of us, but as we reflect on this challenging moment in time, we can see the light ahead. Nonetheless, this is not the time to let our guard down, but to remain patient and do what is best for our society.
Coca-Cola FEMSA has overcome crises before, demonstrating the ability to successfully adapt to and capitalize on dynamic environments to emerge a stronger company.
This year, we acted swiftly to develop a comprehensive management framework to guide our COVID-19 prevention actions and comeback plans and to protect our short-term results while fostering our long-term goals. As part of this framework, we focused our actions on five key areas to ensure our business continuity:
distribution & logistics
liters of beverages donated
masks and gowns
medical supplies delivered
Interview With Our CFO
Constantino Spas, our company’s Chief Financial Officer, reflects on our company’s ability to navigate an exceptionally challenging environment and emerge even stronger. He further discusses our business’ resilient performance, significant progress on his five key priorities, steps to strengthen our balance sheet, the Coca-Cola System’s first-ever green bond, our Fuel for Growth program, debt-refinancing strategy, and disciplined capital allocation.
Maintain our solid financial foundation to improve our return on invested capital (ROIC) – Aligned with our comprehensive management framework, we acted rapidly and efficiently to fortify our cash position, protect our cash flow and liquidity, reprioritize CAPEX across our operations, and aggressively target cost savings and efficiencies, while strengthening our balance sheet. This enabled us to finish the year with a very solid financial foundation to improve our ROIC year over year.
Continue evolving our finance function to drive top- and bottom-line results and maximize shareholder value – This year, we proved ourselves to be a true partner to our broader business operations. Among our actions, we supported our operations by taking the lead in driving cost and expense containment; we acted quickly to tap the international al capital markets before, during, and after the pandemic hit; and we maintained our capital investment in priority projects. In this way, we worked to ensure operating continuity and product supply, expand our returnable portfolio, and accelerate the rollout of transformational initiatives—from our omnichannel strategy to our home delivery routes. We further increased our annual dividend, delivering on our commitment to maximize value for our shareholders.
Guarantee that we will continue attracting and developing our talent base for our finance function – Aligned with our DNA, we continue to attract and develop our growing base of talent—infused with the right behaviors, attributes, and capabilities—across our operations’ diverse finance functions. Indeed, as part of our talent development platform, we continued to move and promote finance leaders around our organization, providing valuable opportunities for professional growth.
Continue our approach of transparency, fair disclosure, and continuous communication with our stakeholders – This year, we doubled down on our engagement with the financial markets, investors, and analysts, proactively gathering feedback from and providing feedback to the market—always maintaining this essential two-way communication with our stakeholders.
Finally, in my role as CFO, I continue to take important steps to support John and our senior leadership team on their journey of cultural transformation, reinforcing our DNA by taking an active role in the implementation of our multi-year Fuel for Growth program and other strategic initiatives that we established together as a team.
Our Fuel for Growth efficiency program enabled us to emerge from the pandemic as an even leaner, more agile organization fully focused on our clients and consumers.
Interview With Our CAO
José Ramón Martínez, Corporate Affairs Officer, discusses our updated sustainability strategy. Among other topics, he talks about our main sustainability achievements, environmental stewardship, and strengthening of our local communities.
Guided by our purpose to refresh the world anytime, anywhere, our experienced management team enables us to rise to the challenges of our times and to emerge from them even stronger. Together, they work to deliver economic and social value while generating environmental wellbeing for our stakeholders year after year.
Underpinned by KOF DNA, they leverage our strengths to not only guide our business transformation and growth, but also achieve our long-term strategic priorities. Empowered by their example, we strive to consolidate our leadership position in the global beverage industry, capturing key avenues for growth and value creation well into the future.
John Santa Maria Otazua
Chief Executive Officer
Mr. Santa Maria joined Coca-Cola FEMSA in 1995 and was appointed to his current position in 2014. With 38 years of experience in the beverage industry, he previously served in several senior management positions in our organization, including Chief Operating Officer of the South America Division, the Mexico Division, and other C-suite roles such as Strategic Planning, Commercial Development, and Mergers & Acquisitions. He is a member of the Boards of Compartamos Banco, the American School Foundation, Coca-Cola FEMSA and FEMSA Foundation. Mr. Santa Maria earned a Bachelor’s degree and an MBA with a major in Finance from Southern Methodist University.
Constantino Spas Montesinos
Chief Financial Officer
Mr. Spas joined Coca-Cola FEMSA in 2018 as Strategic Planning Officer and was appointed to his current position in 2019. He has over 25 years of experience in the food and beverage sector in Latin America with a demonstrated track record in companies such as Bacardi, Kraft Foods, SAB Miller, Grupo Mavesa, and Empresas Polar. Mr. Spas earned a Bachelor’s degree in Business Administration from Universidad Metropolitana in Caracas, Venezuela, and an MBA from Emory University Goizueta Business School in Atlanta, Georgia.
Karina Awad Pérez
Chief Human Resources Officer
Ms. Awad joined Coca-Cola FEMSA in 2018 and was appointed to her current position in the same year. With almost 29 years of experience in the human resources field, she previously served as Senior Vice President of Human Resources for Walmart Mexico and Central America, and Vice President of Human Resources for Walmart Chile. As of 2021, Ms. Awad is partner of the International Women Forum in Mexico and has received multiple recognitions for her female leadership role and her human resources influence in Latin America. Ms. Awad earned a Bachelor’s degree in Psychology from Pontifical Catholic University of Chile and an MBA from the Adolfo Ibáñez School of Management in Miami. She is also a certified Executive Coach from Newfield Co.
Rafael Suárez Olaguíbel
Chief Transformation, IT and Commercial Development Officer
Mr. Suárez began his career in the beverage industry in 1981 with The Coca-Cola Company. In 1986, he joined Coca-Cola FEMSA and was appointed to his current position in 2018. With almost 40 years of experience in the beverage industry, he previously served in several senior management positions, including head of our Argentina, Colombia, Costa Rica, Guatemala, Nicaragua, Panama, and Venezuela operations, New Business Director of Coca-Cola FEMSA, Chief Operating Officer of Latin Centro Region, Commercial Planning and Strategic Development Director of Coca-Cola FEMSA, and Chief Operating Officer of Mexico. Mr. Suárez earned a Bachelor’s degree in Economics from ITESM and an MBA from the EGADE Business School of ITESM.1
1As of January 1, 2021, Mr. Ignacio Echevarria assumed the position of Chief Information Officer, reporting directly to our CEO. Mr. Echevarria assumed the IT responsibilities that were previously overseen by Mr. Suárez, who will continue to focus his role in transformation and commercial development.
Rafael Ramos Casas
Chief Supply Chain & Engineering Officer
Mr. Ramos joined Coca-Cola FEMSA in 1999 and was appointed to his current position in 2018. With over 30 years of experience in the beverage industry, he previously served in several senior management positions, including Manufacturing Director for the Southeast of Mexico, Manufacturing and Logistics Director, Supply Chain Director for Mexico and Central America, and Supply Chain Director of FEMSA Comercio. Mr. Ramos earned a Bachelor’s degree in Biochemical Engineering and an MBA in Agribusiness from the EGADE Business School of ITESM.
José Ramón Martínez Alonso
Corporate Affairs Officer
Mr. Martínez joined Coca-Cola FEMSA in 2012 and was appointed to his current position in 2016. With 34 years of experience in the Coca-Cola system, he previously served in several senior management positions, including Chief Operating Officer of Brazil Division, Strategic Planning Director of South America Division, and Corporate Affairs Director of the Mexico and Central America Division. Mr. Martínez earned a Bachelor’s degree in Chemical Engineering from Universidad La Salle and completed postgraduate studies in Production Administration at Georgia Institute of Technology, Strategic Planning at Stanford University, Finance at the John E. Anderson Graduate School of Management at UCLA, and Business Management at the Instituto Panamericano de Alta Dirección de Empresas (IPADE).
Fabricio Ponce Garcia
Chief Operating Officer
Mr. Ponce joined Coca-Cola FEMSA in 1998 and was appointed to his current position in 2019. With over 22 years of experience in the beverage industry, he previously served in several senior management positions, including Chief Operating Officer of the Philippines, Managing Director of Central America, Argentina, and Colombia, and Director of Planning for Latin America Region. Before joining Coca-Cola FEMSA, he served as Managing Director for Heineken in Brazil and Senior Consultant in Bain & Company. An agricultural engineer, Mr. Ponce earned a Master’s degree in Economics from INCAE Business School in Costa Rica.
Ian M. Craig Garcia
Chief Operating Officer
Mr. Craig joined Coca-Cola FEMSA in 2003 and was appointed to his current position in 2016. With over 26 years of experience in the beverage industry, he previously served in several senior management positions, including Chief Operating Officer of Argentina, CFO and Strategic Planning Director of South America Division, CFO, Planning and Corporate Affairs Director of Mercosur Region, and Corporate Finance and Treasury Director of Coca-Cola FEMSA. Mr. Craig earned a Bachelor’s degree in Industrial Engineering from ITESM, an MBA from the University of Chicago Booth School of Business, and a Master’s degree in International Commercial Law from ITESM.
Eduardo G. Hernández Peña
Chief Operating Officer
Mr. Hernández joined Coca-Cola FEMSA in 2015 and was appointed to his current position in 2018. With over 31 years of experience in the beverage industry, he previously served in several senior management positions, including Strategic Planning Director and New Business Director of Coca-Cola FEMSA. Before joining Coca-Cola FEMSA, he served as CEO of Gloria Alimentos and Beer Business Director in Empresas Polar in Venezuela. Mr. Hernandez earned a Bachelor’s degree in Business Administration from Universidad Metropilitana in Caracas, Venezuela, and an MBA from the Kellogg School of Management at Northwestern University.
We have the privilege to serve more than 265 million people
through 1.9 million points of sale in 9 markets of Latin America
with a wide portfolio of leading brands in 10 beverage categories.
Water and bulk water
¹ Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage.
* As of December 31, 2017, Venezuela is reported as an investment in shares, as a non-consolidated operation.
Product mix by category
Excludes still bottled water in presentations of 5.0 Lt. or larger. Includes flavored water.
Bulk water - still water in presentations of 5.0 Lt. or larger. Includes flavored water.
As certain figures in this integrated annual report are rounded, totals may not precisely equal the sum of the numbers presented.
Despite the significant challenges posed by the COVID-19 pandemic, 2020 was a year of resilience and continuous transformation for Coca-Cola FEMSA. We addressed the pandemic with operating excellence and continued to move aggressively on all strategic and digital fronts.
Millions of Mexican pesos and U.S. dollars as of December 31, 2020 (except volume and per share data). Results under International Financial Reporting Standards.
U.S. dollar figures are converted from Mexican pesos using the exchange rate for Mexican pesos published by the U.S. Federal Reserve Board on December 31, 2020, which exchange rate was Ps. 19.89 to U.S.$1.00.
As of December 31, 2017, the Company changed the method for reporting Coca‑Cola FEMSA Venezuela to Fair Value. Due to this change, a recorded foreign currency translation charge in equity has been reclassified as a noncash one-time item to the other non-operative expenses line of the Income Statement in accordance with IFRS.
Based on 16,806.7 million outstanding ordinary shares as of December 31, 2020 and 2019.
(million unit cases)
|Income from Operations||
|Controlling Interest Net Income2||
|Long-Term Bank Loans and Notes Payable||
|Book value per share3||
million unit cases1
Income from operations
billion Mexican Ps.
billion Mexican Ps.
dividend per share
Unit case is a unit of measurement that equals 24 eight-ounce servings of finished beverage.
2017 is re-presented without the Philippines.
As of December 31, 2017, as a non-consolidated operation, Venezuela is reported as an investment in shares.
At Coca-Cola FEMSA, we are convinced that to create sustainable economic value, we need to simultaneously generate social value in collaboration with all of our stakeholders.
In 2020, we distributed to the economies in which we do business over US $7.2 billion in payments to suppliers, wages and benefits for our employees, capital investments in long-term assets, dividends paid to shareholders, income taxes paid to governments, and community investment and donations.
KOF ISSUES LARGEST GREEN BOND BY A LATIN AMERICAN CORPORATION
Our sustainability strategy and environmental commitments are the cornerstone of the way we conduct business. Issuing a Green bond is consistent with our drive to maximize the impact of our Green initiatives, to achieve our sustainability goals and to contribute to the achievement of he United Nations Sustainable Development Goals (UN SDGs).
In September 2020, we successfully isued our first-ever Green Bond to finance our transition towards low-carbon operations, strengthen our resilience and minimize our exposure to environmental risks while being environmentally conscious and restorative, through investments and expenditures that ensure the sustainability of our business model in 3 main strategic areas where we can make the most positive environmental impact:
Mitigating its risks and adaptating our operations to climate-related impacts
Promoting the efficient use of water resources and fostering hydrological safety in the territories where we operate
To “close the loop” of PET plastic bottles lifecycle
For further information, please review:
Our Green Bond Framework Sustainalytics’ Second-Party Opinion (SPO)
Our First Green Bond Report. Available in 2Q21
A Transaction of many “Firsts”
KOF’s first-ever Green Bond issuance
Largest-ever Green Bond issued by a Latin American corporate
A first for the Coca-Cola System
First Mexican corporate to issue a Green Bond
Lowest 10+ year coupon for any Latin American issuer