Main risk

Strategic shareholder relationships

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 growth and profitability and create value for all of our shareholders

Main risk

Consumer preferences

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

Potential impacts

• Reduction 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

Main risk

Coca-Cola trademarks

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

Main risk

Competition

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

Main risk

Cyber attacks

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
• Provide training for information protection

Main risk

Economic, political and social conditions

Adverse 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

Main risk

Regulations

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

Main risk

Legal proceedings

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

Main risk

Acquisitions

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

Main risk

Foreign exchange

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

Main risk

Climate change

Unfavorable 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, and points of sale

Key mitigation actions

• 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

Main risk

Social media

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

Potential impacts

• Damage to Coca-Cola’s trademark reputation without affording us an opportunity for correction

Key mitigation actions

• Effective brand protection
• Proactive external communication

Main risk

Water

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
• Implement a water risk assessment methodology 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

Main risk

Raw materials

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 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