MULTI-CATEGORY LEADERSHIP

To connect more closely with our consumers, we are building a winning multi-category product portfolio, including a wider array of sparkling beverages, juices and nectars, fruit-based beverages, water and flavored water, dairy, coffee, fortified beverages, teas, sports and energy drinks, and plant-based products. In this way, we are accelerating our quest for leadership across each beverage segment and category.

REVITALIZE SPARKLING BEVERAGES

Throughout the year, we revitalized our sparkling beverage growth through product innovation and affordability. In June 2017, we successfully launched Fanta Guaraná in 350-ml cans and 2-liter PET presentations across our Brazilian territories. This national launch—our operation’s largest in years—capitalized on Brazilian consumers’ most popular flavor. As we broadened Fanta Guaraná’s portfolio to meet demand, we expanded our share of the flavored sparkling beverage market, while generating sales of at least 1.0 million unit cases per month.

We satisfied and stimulated consumer demand for our non-caloric portfolio of Coca-Cola beverages. In 2017, we successfully launched Coca-Cola Sin Azúcar across our territories in Argentina, Colombia, Costa Rica, Guatemala, Mexico, and Panama. Coca-Cola Sin Azúcar offers consumers a sugar- and calorie-free alternative for one of the world’s most beloved brands. Launched throughout our Mexican sales channels in February, we more than doubled the volume of Coca-Cola Zero versus the previous year in the second half of 2017, while revitalizing the Coca-Cola brand among consumers. Correspondingly, we reignited demand for Coke Zero in Brazil. Thanks to our expanding coverage and promotions, we achieved 8% volume growth for the second half of the year—making Coke Zero our top-performing non-caloric beverage brand in Brazil.

We continued to satisfy our cost-conscious consumers through our strong platform of affordable, returnable packaging alternatives. In Mexico, we reinforced the coverage of our convenient 500-ml returnable glass presentation for Coca-Cola across all of our territories. In Brazil, we expanded coverage of our 1-liter multi-serve returnable glass presentation for Coca-Cola, enabling more consumers to share the magic of Coke. In Mexico, we reinforced the coverage of our 2.0-liter multi-serve returnable PET presentation for Coca-Cola, an attractive value proposition for our consumers to enjoy. In Nicaragua, we launched our 2-liter multi-serve returnable PET presentation for Fresca, expanding the opportunity to share this popular brand. Similarly, in the southern states of Brazil, we launched our 2-liter multi-serve returnable PET presentation for Coca-Cola—rapidly achieving 60% coverage across those territories. Through our returnable presentations, we look to provide the right package at the right price for every consumer.

Fostering Consumer Engagement

In 2017, we launched a successful national promotion to reinforce Brazilians’ consumption of our returnable beverages. With our Promo Tapas campaign, consumers collected and redeemed five bottle caps for one bottle of Coke at approximately 10,000 points of sale throughout the country. Notably, we achieved a record high redemption rate of 52%—fostering consumer engagement with our products.

Furthermore, we continued our Magic Price Points strategy to intensify our connection with consumers. At the end of 2016, we launched our affordable single-serve 220-ml mini-can in Brazil, capturing transactions at the magic price point of R$0.99. In 2017, we continued to expand our popular single-serve PET presentations in the Philippines, launching our 200-ml presentation at the magic price point of PHP8 to develop our product mix in the Visayas and Mindanao regions. In August 2017, we launched our appealing single-serve 250-ml PET presentation in Nicaragua, generating transactions at the magic price point of C$8. Similarly, in 2017, we launched our affordable single-serve 250-ml mini-can in Argentina—along with our returnable 1.25-liter glass and 2-liter PET presentations—capturing transactions at the magic price points of ARS$10, ARS$20, and ARS$30, respectively. We also expanded the coverage of our convenient single-serve 250-ml PET presentation in Mexico, driving consumer transactions at the Ps. 5 price point. Correspondingly, in Costa Rica and Guatemala, we launched our attractive single-serve 450-ml PET presentation, fostering transactions at the magic price points of ¢500 and Q5, respectively. Thanks to this strategy, we bolstered our Coca-Cola beverage transactions with the right portfolio at the magic price for our consumers.

IMPROVE COMPETITIVE POSITION IN STILL BEVERAGES

As the fastest growing category in our industry, we focus on improving our competitive position and capturing the most value from our still beverage segments. To quench active consumers’ thirst for energy drinks, we reinforced our distribution of Monster energy drink across our traditional and modern trade channels in Brazil, Colombia, Central America, and Mexico. Monster is proving to be one of the fastest growing, most attractive energy drinks for consumers in the region. Leveraging our robust distribution platform, Monster is outperforming expectations, especially in Mexico where it now enjoys a more than 25% share of sales in the energy drink category. We more than doubled the volume growth of Monster in the country, achieving sales of close to 2 million unit cases. Moreover, in Brazil—where we began from a very low brand base—we significantly increased coverage across our sales channels, closing the year with triple-digit volume growth in December 2017.

Re-launched FUZE Tea Reigniting Demand In Mexico

In September 2017, we re-launched FUZE Tea, a fusion of green and black tea with refreshing fruit flavors, across all of our sales channels in Mexico. Our newly formulated FUZE Tea features all natural sweeteners, a significantly lower sugar content, and a reinvigorating mix of antioxidants and theine. Consequently, we reignited demand and reinforced our leadership position in the dynamic tea segment.

We continue to fulfill consumers’ growing demand for natural, juice-based beverages through the innovative expansion of our popular Del Valle Fresh brand. In Colombia, we launched our new presentation of Del Valle Fresh Tropical Fruit with just five calories and no added sugar. In Costa Rica, we launched our convenient single-serve 500-ml PET presentation of Del Valle Fresh Apple. Similarly, in Nicaragua, we launched our affordable single-serve 12-ounce returnable glass bottle of Del Valle Fresh Citrus in Managua, Masaya, and León. With the contribution of these new packages and flavors, we continued to strengthen our Del Valle portfolio across our territories.

Juices Driving Argentina’s Still Beverage Growth

Bolstered by our launch of Cepita 0% added sugars, our Cepita and Carioca del Valle juice brands helped drive double-digit volume growth in our Argentine still beverage category for 2017.

We offer an innovative portfolio of still, sparkling, and flavored bottled water to rehydrate our consumers throughout their day. As part of our water strategy in Brazil, we undertook three main initiatives in 2017.

Thanks to these initiatives, we steadily regained our market share throughout the year.

Wilkins Water Delighting Philippine Consumers

Capitalizing on the strong brand equity of Wilkins Distilled water, we launched Wilkins Delight fruit-infused water in 250-ml and 425-ml bottles in three flavors, apple, pomelo and orange. Thanks to such initiatives, we achieved accelerated volume growth of 16% in our Philippine water portfolio for the year.

ACCELERATE GROWTH IN STILL BEVERAGE CATEGORY

In 2017, we continued to accelerate our growth across the dairy category—while entering the new plant-based beverage category through the acquisition and integration of AdeS. Under our joint venture with The Coca-Cola Company, we capitalized on Santa Clara’s expanding position in Mexico’s premium UHT milk and value-added dairy category. In September 2017, we completed a new state-of-the-art dairy plant to keep up with demand for our growing portfolio of wholesome UHT white milk, flavored milk, yogurt, and ice cream products. Located in Lagos de Moreno, Mexico—close to our milk supply—this integrated still beverage facility will at least double our dairy capacity; optimize our cost to serve some of Mexico’s larger markets; and provide us with the capability to innovate and grow our offering of nutritious, delicious dairy products.

Together with our partner The Coca-Cola Company, we closed the acquisition of Unilever’s AdeS plant-based beverage business in March 2017. Strategically, AdeS complements and expands our still beverage portfolio’s value offer by providing our consumers with an even wider array of nutritious, delicious choices. As the leading plant-based beverage brand in Latin America—the second-largest plant-based beverage market globally—AdeS not only enjoys a strong position in our key markets of Argentina, Brazil, and Mexico, but also offers a very high potential to extend the business to our other countries where the brand is not currently present.

With the integration of AdeS in Argentina, Brazil, Colombia, and Mexico in the second half of the year, we have only begun to tap the potential of this new beverage category. In addition to expanding its footprint to our other operations, AdeS enables us to leverage our robust route-to-market model to extend its position in the modern trade channel throughout our traditional trade network. Additionally, AdeS is particularly well positioned to benefit from favorable dynamics in the broader dairy-alternative beverage segment, developing our total beverage portfolio through an appealing mix of high-protein, low-fat, and cholesterol-free products for our consumers’ enjoyment.

HEALTHY HABITS

As leaders in the beverage industry, we recognize that we promote healthy habits in our communities—encouraging people to combine proper nutrition with physical activity and education at all stages of their lives.

MULTI-SECTOR INITIATIVES

To improve health issues that can affect the life quality of our communities, we must generate comprehensive solutions in collaboration with governments, the private sector, and civil society through multi-sector partnerships.

For the second year we have been participating in the Latin American Commitment for a Healthy Future, a multi-sector coalition with the Healthy Weight Commitment Foundation and other companies in the beverage industry. The coalition’s goal is to promote the execution of national initiatives that empower school-aged children and their families to make appropriate decisions about their dietary practices and physical activity to generate healthy habits through different educational tools. The coalition also works with local allies to expand its scope and impact.

To implement the Latin American Commitment for a Healthy Future initiative, we also collaborated with Discovery Education to deploy the Together Counts™ online educational platform. This platform offers a study plan based on health and wellbeing adapted to each stage of development, as well as interactive tools that consider the standards recommended by professional institutions to stimulate and build healthy habits.

The Latin American Commitment for a Healthy Future initiative and the Together Counts™ platform are currently active in Colombia, Mexico and Brazil where 2,672 teachers have been trained through the platform.

• benefit 5 million people with our nutrition and physical activation programs and initiatives.

FOSTERING HEALTHY habits IN OUR COMMUNITIES

We strive to foster healthy habits in our communities through local initiatives focused on nutrition and physical activity.

Among our goals, we aim to benefit 5 million people through our healthy habits and nutrition programs from 2015 to 2020. In 2017, approximately 1.6 million people had been benefited in our programs, with an investment of US$6 million. To date our progress on this goal is 62%.

To achieve this goal and complement our healthy habits programs, over the past nine years, we have also worked with the FEMSA Foundation to make strategic social investments in projects—with a strong education component—focused on solving food-related issues and creating healthy environments for children. Complementary investments in nutritional research are further made through the FEMSA Biotechnology Center at Tecnológico de Monterrey. The Coca-Cola Company and The Coca-Cola Foundation are also strategic partners to develop healthy habits programs.