Management’s

Results from our operations for the year ended December 31, 2016 compared to the year ended December 31, 2015

The comparability of Coca-Cola FEMSA’s underlying financial and operating performance in 2016 as compared to 2015 was affected by the following factors: (1) the ongoing integration of mergers, acquisitions (“M&A”), and divestitures completed in recent years, (2) translation effects from fluctuations in exchange rates and (3) our results in territories that are considered hyperinflationary economies (currently, our only operation that is considered a hyperinflationary economy is Venezuela). To translate the full-year 2016 reported results of Venezuela, we used the DICOM exchange rate of 673.76 bolivars per U.S. dollar, as compared to 198.70 bolivars per U.S. dollar used to translate our 2015 reported results. In addition, the average depreciation of currencies used in our main operations during 2016, as compared to 2015, was: Argentine peso 59.5%, Mexican peso 17.7%, Colombian peso 11.4% and the Brazilian real 4.8%.

Consolidated results include full year figures of Coca-Cola FEMSA's territories and one month figures of Vonpar Refrescos S.A. (“Vonpar”).

Total Revenues

Our reported consolidated total revenues increased 16.6% to Ps. 177,718 million in 2016 despite the negative translation effect resulting from using the DICOM exchange rate to translate the results of our Venezuelan operation and the depreciation of the Argentine peso, Mexican peso, Colombian peso and the Brazilian real. Excluding the effect of currency fluctuations, M&A transactions and our Venezuelan operation described above, total revenues would have grown 6.6%, driven by the growth of the average price per unit case in most of our operations and volume growth in Mexico and Central America.

Total reported sales volume declined 3.0% to 3,334.0 million unit cases in 2016, as compared to 2015. Excluding M&A transactions and the effect of our Venezuelan operation described above, total volume would have declined 0.9% in 2016, as compared to 2015. Our sparkling beverage portfolio declined 3.4% as compared to 2015. Excluding the effects of M&A and of our Venezuelan operation described above, the sparkling beverage portfolio would have declined 1.0% as a result of positive performance of the brand Coca-Cola in Mexico, Colombia and Central America, and our flavored sparkling beverage portfolio in Mexico and Central America, offset by declines in Brazil and Argentina. The still beverage category declined 0.6% as compared to 2015. Excluding the effect of M&A and our Venezuelan operation described above, our still beverage category would have grown 2.9% driven by the positive performance of ValleFrut orangeade, Del Valle juice and Santa Clara dairy business in Mexico and Fuze in Central America. Bottled water, excluding bulk water declined 1.2% as compared to 2015. Excluding the effect of M&A and our Venezuelan operation described above, this portfolio would have declined 1.1%, driven by growth in Mexico and Argentina offset by declines in Brazil and Colombia. Reported bulk water decreased 2.0% as compared with 2015, while excluding the effects of M&A and our Venezuelan operation, bulk water would have declined 1.9% mainly driven by a contraction of Brisa and Crystal brands in Colombia and Brazil, respectively.

The reported number of transactions declined 2.5% to 19,774.4 million. Excluding the effect of M&A and our Venezuelan operation described above, the number of transactions would have declined 0.3% to 18,902.4 million. Transactions of our sparkling beverage portfolio, excluding M&A and Venezuela, would have declined 0.6% mainly driven by declines in Brazil, Argentina and Colombia offset by the positive performance in Mexico and Central America. Our still beverage category, excluding M&A and Venezuela, would have increased transactions by 2.6%, mainly driven by Mexico and Central America. Transactions of water, including bulk water, and excluding M&A and Venezuela, would have decreased 1.1% driven by a decline in Brazil and offset by a positive performance in Mexico, Central America and Colombia.

Consolidated reported average price per unit case grew 19.9% reaching Ps. 50.75 in 2016, as compared to Ps. 42.34 in 2015, despite the negative translation effect resulting from using the DICOM exchange rate to translate the results of our Venezuelan operation and the depreciation of the Argentine Peso, Colombian peso and the Brazilian real. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation described above, average price per unit case would have grown 6.8% in 2016, driven by average price per unit case increases ahead of inflation in local currency in most of our operations.

Gross Profit

Our reported gross profit increased 10.6% to Ps. 79,662 million in 2016 with a gross margin contraction of 250 basis points. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation described above, gross profit would have grown 4.5% with a gross margin contraction of 90 basis points. Higher sugar prices, plus the depreciation of the average exchange rate of the Argentine peso, the Colombian Peso, the Brazilian Real and the Mexican peso as applied to our U.S. dollar-denominated raw material costs; and an unfavorable currency hedging position in Brazil, were not fully offset by the benefit of lower PET prices, and our ongoing currency hedging strategy.

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 employment 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 the local currency, net of applicable taxes. Packaging materials, mainly PET and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars.

Administrative and Selling Expenses

Reported administrative and selling expenses as a percentage of total revenues decreased 50 basis points to 31.2% in 2016 as compared to 2015. Reported administrative and selling expenses in absolute terms increased 14.9% as compared to 2015. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation described above, administrative and selling expenses as a percentage of total revenues would have decreased 20 basis points and absolute administrative and selling expenses would have grown 5.9% as compared to 2015. In local currency, operating expenses decreased as a percentage of revenues in Brazil, Colombia and Mexico. In 2016, we continued investing across our territories to support marketplace execution, increase our cooler coverage and bolster returnable presentation base.

During 2016, other net operative expenses recorded an expense of Ps. 323 million. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation described above, the other net operative expenses line would have recorded an expense of Ps. 339 million, due to the negative currency fluctuation effects mainly from our Mexican operation.

The reported share of the profits of associates and joint ventures line recorded a gain of Ps. 147 million in 2016, mainly due to an equity-method gain from our participation in associated companies, gains from the Coca-Cola FEMSA’s participation in Coca-Cola FEMSA Philippines, Inc., and the improvement of the results of our participation in Estrella Azul.

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 monetary position from the hyperinflationary countries in which 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 comes first, and the date it is repaid or the end of the period, whichever comes 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.

Our reported comprehensive financing result in 2016 recorded an expense of Ps. 6,080 million as compared to an expense of Ps. 7,273 million in 2015. The difference was mainly driven by a foreign exchange loss as a result of the depreciation of the end-of-period exchange rate of the Mexican peso during the year, as applied to our U.S. dollar-denominated net debt position, which offset a gain on monetary position in our hyperinflationary operation in Venezuela.

Income Taxes

During 2016, reported income tax, as a percentage of income before taxes, was 27.2% as compared to 30.6% in 2015. The lower effective tax rate registered during 2016 is mainly related to certain tax efficiencies across our operations, a lower effective tax rate in Colombia and ongoing efforts to reduce non-deductible items across our operations.

Controlling Interest Net Income

Our reported consolidated controlling interest net income reached Ps. 10,070 million in 2016 as compared to Ps. 10,235 million in 2015. Earnings per share (“EPS”) in the full year of 2016 were 4.86 (Ps. 48.58 per ADS) computed on the basis of 2,072.9 million shares outstanding (each ADS represents 10 local shares). Excluding the effect of currency fluctuations, M&A and our Venezuelan operation described above, the consolidated controlling interest net income would have reached Ps. 9,290 million in 2016 as compared to Ps. 9,239 million in 2015. On the same basis, earnings per share would have been 4.48 (Ps. 44.82 per ADS).

Mexico and Central America

Total Revenues. Reported total revenues from our Mexico & Central America division increased 11.2% to Ps. 87,557 million in 2016. Excluding the effect of currency fluctuations, total revenues from our Mexico & Central America division would have increased 8.8%, driven by positive volume performance and average price increases in both Mexico and Central America.

Reported total sales volume increased 3.7% to 2,025.6 million unit cases in 2016, as compared to 2015. The sparkling beverage portfolio grew 3.9% driven by 2.8% growth of brand Coca-Cola and 8.3% growth of flavored sparkling beverages. Our water portfolio, including bulk water, grew 0.7% driven by a growth of Ciel flavored water in Mexico. The still beverage category grew 11.8%.

The reported number of transactions for the Mexico and Central America division grew 4.6% to 11,382.1 million. Transactions of our sparkling beverage portfolio grew 4.3% driven by the positive performance in both colas and flavored sparkling beverages. Our still beverage category increased transactions by 8.3%. Transactions of water, including bulk water, grew 3.2% driven by growth in both Mexico and Central America.

Total sales volume in Mexico grew 3.7% to 1,850.7 million unit cases, as compared to 1,784.6 million unit cases in 2015. Volume of our sparkling beverage portfolio grew 3.8% driven by 2.7% growth of brand Coca-Cola and 9.1% growth in flavored sparkling beverages, mainly supported by the performance of Naranja & Nada, Limon & Nada, our sparkling orangeade and lemonade, and Sidral Mundet. The still beverage portfolio grew 14.2% favored by Vallefrut, the Del Valle juice portfolio, and our Santa Clara dairy business. Our bottled water portfolio, including bulk water, grew 0.7% driven by Ciel Exprim flavored water.

The reported number of transactions for the Mexico operation grew 4.8% to 9,884.1 million. Transactions of our sparkling beverage portfolio grew 4.5%. Our still beverage category increased transactions by 9.2%. Transactions of water, including bulk water, increased 3.1%.

Total sales volume in Central America increased 4.2% to 174.9 million unit cases, as compared to 167.8 million unit cases in 2015. The sales volume of our sparkling beverage portfolio grew 5.0% supported by the strong performance of the Coca-Cola brand and flavored sparkling beverages in Guatemala, Nicaragua and Costa Rica. Sales volume in the still beverage category decreased 0.3%. The bottled water business, including bulk water, grew 1.7% across the region.

The reported number of transactions for the Central America operation grew 3.4% to 1,498.0 million. Transactions of our sparkling beverage portfolio grew 3.1%. Our still beverage category increased transactions by 4.9%. Transactions of water, including bulk water, increased 3.8%.

Gross Profit. Our reported gross profit increased 8.6% to Ps. 43,569 million in 2016 as compared to 2015, and reported gross margin contracted 120 basis points to reach 49.8% in 2016. Excluding the effect of currency fluctuations, gross profit would have grown 6.5% in 2016 with a margin contraction of 100 basis points. Lower PET prices in the division, in combination with our currency hedging strategy, were offset by higher prices of sugar and the depreciation of the average exchange rate of the Mexican peso as applied to our U.S. dollar-denominated raw material costs.

Administrative and Selling Expenses. Reported administrative and selling expenses as a percentage of total revenues decreased 60 basis points to 32.6% in 2016, as compared with the same period in 2015. Reported administrative and selling expenses in absolute terms increased 9.4%, as compared to 2015. Excluding the effect of currency fluctuations, administrative and selling expenses in absolute terms would have grown 7.2% during the year, decreasing 50 basis points as a percentage of total revenues.

South America

Total Revenues. Reported total revenues increased 22.4% to Ps. 90,160 million in 2016, as compared to 2015, mainly driven by average price per unit case growth across our territories, and positive translation effects due to the appreciation of the Brazilian real and the Colombian peso as referenced to Mexican peso. Revenues of beer accounted for Ps. 7,887.0 million. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation, total revenues would have increased 4.1% driven by average price per unit case increases in local currency in each of the operations.

Total sales volume in our South America division, excluding M&A and Venezuela, decreased 8.2% to 1,145.7 million unit cases in 2016, as compared to 2015, as a result of a volume contraction in all of our South American operations. The still beverage portfolio declined 8.9%, mainly driven by decline in the Jugos del Valle line of business in Colombia, Kapo and Del Valle Mais in Brazil. Our bottled water portfolio, including bulk water, decreased 8.7%, mainly driven by Brisa in Colombia, and Crystal in Brazil. The sparkling beverage portfolio decreased 8.0%, as compared to 2015.

The reported number of transactions for the South America division, excluding M&A and Venezuela, decreased 7.0% to 7,520.3 million. Transactions of our sparkling beverage portfolio decreased 7.5%, driven by contractions in Brazil, Argentina and Colombia. Our still beverage category transactions declined by 4.8%. Transactions of water, including bulk water, decreased 5.0%.

Total sales volume in Colombia decreased 4.1% to 307.0 million unit cases in 2016, as compared to 320.0 million unit cases in 2015. The sales volume in the sparkling beverage category declined 0.7%, mainly driven by a 1.9% growth of the Coca-Cola brand and a 9.4% decrease of flavored sparkling beverages. Sales volume in the still beverage category decreased 13.6%, mainly driven by del Valle and Valle Frut. The bottled water business, including bulk water, decreased 11.8% driven by Brisa Bulk water presentations.

The reported number of transactions for the Colombian operation decreased 0.4% to 2,400.9 million. Transactions of our sparkling beverage portfolio declined 1.2%. Our still beverage category increased transactions by 0.5%. Transactions of water, including bulk water, increased 2.7%.

Total sales volume in Argentina decreased 10.6% to 209.1 million unit cases in 2016, as compared to 233.9 million unit cases in 2015. The sales volume in the sparkling beverage category decreased 13.6%, a decrease in both brand Coca-Cola and our flavored sparkling beverage portfolio. Sales volume in the still beverage category decreased 0.6%, mainly driven by Cepita and Powerade. The bottled water business, including bulk water, increased 6.9% driven by Kin and Bonaqua.

The reported number of transactions for the Argentine operation decreased 7.5% to 1,012.6 million. Transactions of our sparkling beverage portfolio declined 9.2%. Our still beverage category decreased transactions by 0.5%. Transactions of water, including bulk water, decreased 1.1%.

Reported total sales volume in Brazil, not including M&A decreased 9.2% to 629.7 million unit cases in 2016, as compared to 693.6 million unit cases in 2015. Volume in the bottled water business, including bulk water, decreased 13.1% driven by Crystal. The volume of our sparkling beverage portfolio contracted 9.0%. The sales volume in the still beverages category decreased 7.2%.

The reported number of transactions for our Brazilian operation, excluding M&A, decreased 10.3% to 4,106.7 million. Transactions of our sparkling beverage portfolio decreased 10.0%. Our still beverage category decreased transactions by 10.3%. Transactions of water, including bulk water, decreased 13.6%.

Gross Profit. Reported gross profit reached Ps. 36,093 million, an increase of 13.1% in 2016, as compared to 2015, with a contraction of 330 basis points to 40.0%. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation, gross profit would have grown 1.6% during the year, contracting gross margin by 100 basis points. This contraction is given by higher sugar prices and the depreciation of the average exchange rate of our division’s currencies as applied to our U.S. dollar-denominated raw material costs, in combination with an unfavorable currency hedging position in Brazil, as a result of the appreciation of the Brazilian real; all of which offset lower PET prices.

Administrative and Selling Expenses. Reported administrative and selling expenses as a percentage of total revenues decreased 30 basis points to 29.8% in 2016, as compared to 2015. Reported administrative and selling expenses in absolute terms increased 21.4%, as compared to 2015, mainly driven by Venezuela and the negative translation effect resulting from the appreciation of the Brazilian real and the Colombian peso. Excluding the effect of currency fluctuations, M&A and our Venezuelan operation, administrative and selling expenses in absolute terms would have grown 4.1% remaining flat as a percentage of revenues.

Venezuela

Total Revenues. Reported total revenues in Venezuela increased 112.0% to reach Ps. 18,868 million in 2016 as compared to 2015, driven by average price per unit case increase.

Total sales volume decreased 39.3% to 143.1 million unit cases in 2016, as compared to 235.6 million unit cases in 2015. The sales volume in the sparkling beverage category decreased 41.0%, driven by a contraction in brand Coca-Cola and our flavored sparkling beverage portfolio. The still beverage category decreased 46.4%. Our bottled water business, including bulk water, declined 10.1% driven by Nevada.

The reported number of transactions for the Venezuela operation decreased 41.4% to 772.6 million. Transactions of our sparkling beverage portfolio decreased 44.4%, driven by contractions in brand Coca-Cola and our flavored sparkling beverage portfolio. Our still beverage category decreased transactions by 49.6%. Transactions of water, including bulk water, decreased 7.2%.

Gross Profit. Reported gross profit was Ps. 6,830 million in 2016, an increase of 56.4% as compared to 2015.

Administrative and Selling Expenses. Reported administrative and selling expenses as a percentage of total revenues remained flat at 31.0% in 2016, as compared to 2015. Reported administrative and selling expenses in absolute terms increased 112.0%, as compared to 2015.