CORPORATE PRESENTATION - Arca Continental · CORPORATE PRESENTATION. Coca-Cola System pioneers in...

CORPORATE PRESENTATION

Coca-Cola System pioneers in Mexico

Strong partnership with

94YEARS

Serving5 countries across the Americas

2.2BUC

S a l e s

V o l u m e

162MXP$B

R e v e n u e

49

P r o d u c t i o n

F a c i l i t i e s

394

D i s t r i b u t i o n

C e n t e r s

63Thousand

A s s o c i a t e s

+1.4Million

P o i n t s o f

S a l e

USA

MEXICO

ECUADOR

PERU

ARGENTINA

3

Best in class Corporate Governance

• Majority shareholders only at Board level

• Audit Committee comprised of independent members only

• No transactions with related parties

• A professional and independent Management Team 4

11%

8%

3%

5%

33%

40%

99%

1%

A balanced portfolio of markets and business…

Mxp$ 13 billion

EXPORTS AND

VENDING

MEXICO

BEVERAGES

UNITED STATES

PERU

ECUADOR

ARGENTINA

2019Revenues

Mxp$ 163 billion

2002CAGR16%

5

MEXICO

SNACKS &

OTHER BUSINESS

13x

…with a strong organic growth and an excellent M&A track record

2002ARCA

Merger

2007Snacks

Mexico

2008Argentina &

Jugos del Valle

2010Ecuador

2011CONTAL

Merger

2012Snacks &

Santa Clara

2014Tonicorp

2015Peru

2016Sugar Mill

Argentina

2017USA, AdeS

& Snacks

2018Innovation &

Snacks

USA

Great Plains

Our commitment to pursue value creation opportunities for our shareholders

NARTD: Non-alcoholic ready to drink

Emerging still categories + Value added diaryStills

Food & Snacks

CORENARTD

7

New sparking beverage franchisesSSDs

A wide brand portfolio to satisfy every occasion of consumption

+ 28 Brands

+ 128 SKUs

+60 Brands

+1,500 SKUs2006 2019

8

Strong presence in attractive markets…

Start date: 1926

• Sales volume (MUC): 1,260

• % of KO volume: 33%

• Population served (MM): 33

MEXICO

Start date: 2015

• Sales volume (MUC): 282



Start date: 2008




Start date: 2010


• % of KO volume:100%


Start date: 2017




USA

ARGENTINA

ECUADOR

PERU

____________________

MUC –Million Unit Cases

KO – The Coca-Cola Company 9

…with a model that connects the entire organization to reach the perfect execution

10

Fundamentals

Segmentation

RGM

Picture of success

Go to market

Market audit

Digital tools

People

Customer love score

Mexico

Mexico – Better profitability due to pricing

strategy and stable raw materials prices

• We outpaced the complex macro-economic environment prevailing in the country, with our

volume and total revenue growth outperforming the country’s GDP performance

• 2019 was a year of achievements, the great Q3 & Q4 results helped the business unit to achieve

selling the 1 billion-unit cases record during 2019

12

Volume

2.6%2.3%

2.8%

2017 2018 2019

Sales

10.0%

6.7%

9.1%

2017 2018 2019

A flexible price-pack architecture to drive consumption and profitability

66%Retornable

No Retornable

$6 $10 $13 $20$6 $25

600 PET

3.0 NR

2.0 Ref Pet

355 mlVR

Low elasticity SKU´s Protect affordability

(multi-serve &

Returnable)

Leverage on single serve presentations

+25 SKUs only for regular Coke in Mexico

PACKAGE FORMATMXP

$6

MXP

$34

69%

31%

RETURNABLE

54%

46%

NON-RETURNABLE

MULTISERVE

SINGLE SERVE

13

Identifying opportunities from a macro level to a customer level

14

National performanceA

SOM vs PY UC vs

PY

North 79.7 +1.0pp 1.1%

Pacific 85.1 +1.2pp 1.8%

N West 74.2 +0.6pp 0.5%

N East 74.4 +0.5pp 0.5%

Traditional trade

248,320 outlets< 70% 40,146

< 60% 31,084

< 50% 8,945

80,175outlets

Dynamic segmentationB

< 80 3,687

< 70 2,762

< 60 2,496

SOM

Segments # outlets

RED index

SOVI< 60 1,018

< 50 795

< 40 683

Share of

doors> 50 169

< 50 514

Targetcustomers

SOM PY

Colas 78.4 0.8

Identifying opportunities from a macro level to a customer level

15

514

Improve execution

performance- Increase SOVI

- Introduction of cold drink

equipment

Demand generation- Consumer promotions

- Competitive portfolio

Target customers

52.4% 32.5% 46.7%

74.2% 60.4% 85.1%

Segment (514 outlets)

Region(80,175 outlets)

44.8% 28.7% 42.0% Laura

RED SOVISOM

46.0%

84.0%

33.0%

SoD

BasicPicOS+

Dynamic PicOS basedon the opportunities

1 Promo 600ml 2 x $23

2

+1 cooler door3

Meals display rack

Action

item

SOM= Share of Market, RED= Right execution daily, SOVI=Share of visible display, SoD= Share of doors, PicOS= Picture of success

USA – Improving profitability through the synergy and top line plan

17

• Our disciplined revenue management initiatives, as well as a continuous focus on improving execution in

every point of sale, enabled us to maintain value share growth during 2019

• Full year 2019, net price reached $6.39 per case, a +5.5% growth vs prior year. This is the second year

where price grew above consumer inflation, with a 2.4 ratio vs consumer inflation of 2.3%

Volume

0.1%

0.8%

-0.4%

2017 2018 2019

Sales

1.0%

4.1%

5.0%

2017 2018 2019

Detailed work plans for short and mid-term identified synergies

Revenue:

• Vending

• Topo Chico

• Mexican Coke

Strategic:

• New facility in Houston

• Shared Services

USD$ 32 MM

Synergies captured in 2019

18

Savings:

• In-line blow molding (ILBM)

• Direct Procurement

• Improvement in production lines

• Lightening of the PET bottles

• Reduction in freight costs

54% 5%Volume Outlets

Large Stores


2% 2%Volume Outlets

8% 7%Volume Outlets

FSOP


Convenience

retail

Drug

stores

Value

stores

Small Stores

19

Improving execution at POS and capitalizing synergies

Revolutionizing our commercial capabilities together with market tools digitalization

Segmentation journey RGM acceleration Evolving our GTM

HH SizeSkews

Urban:48%(302 Index)

This cluster is diverse and growing fast—

emerging as a major generator of volume for

large stores. This is the cluster withthe strongest presence of

Hispanicshoppers.

SHOPPER INSIGHTS

28%

Hispanic(343

Index)

Caucasian

Index)

48%

1 EMERGING

Person HHs

4-5+

Asian Index

10%

Average Annual HH Income

Mid/Low Income

(120

Index)

34%

(103

Index)

37%

10%

African American

(83 Index)

*How to Read: On average, 8% of stores’

potential shoppers are Hispanic

of Large Stores

%33

(Larger

Households with Kids)

WHICH BRANDS REPRESENT THE MOST VOLUME?

+ Imports + Flavor SSD: 2 liters

WHICH BRANDS OFTEN OVER INDEX?

Ethnicity Mix*

7%

44%African

American (367 Index)Caucasian

(65 Index)

HH SizeSkews

Secondary Metro:

29% (119 Index)

Urban: 17% (111 Index)

This diverse cluster includes working-class

shoppers with strong beverage preferences.

African Americans represent44% of potential shoppers

for an average store in thiscluster.

SHOPPER INSIGHTS

of Large Stores

7%

1-3Person HHs

2 MIDSCALE

(134 Index)

Hispanic (50 Index)

Ethnicity Mix


Mid/Low Income

+ Flavor SSD: 2 liters, 12 pack, 20 oz.

44%

(134

Index)

37%

(102

Index)

37%



This cluster is often the largest segment of

shoppers and drives the greatest share of

beverage sales for a given retailer/geography.

HH SizeSkews

AgeSkews

Town/Rural:58%

(135 Index)

Boomer

Senior

SHOPPER INSIGHTS

of Large Stores

36%

Caucasian (121 Index)

Hispanic

(50 Index)

1-2Person HHs

Mid38%

(106 Index)

Ethnicity Mix


Mid Income

3 CONVENTIONAL

+ Multi-Pack PET

82%

6%7%

African American

(50 Index)

(106

Index)

38%



HH SizeSkews

Suburban: 39%

(227 Index)

SHOPPER INSIGHTS

Asian

(175 Index)

75%


10%

African American (50 Index)

Hispanic

(71 Index)

3-4Person HHs

These shoppers tend to be established in their

careers and comfortably suburban. They are more

likely to drive purchasesof zero/light beverages as well

as a wider variety of packages & sti l l brands.

of Large Stores

24%

Ethnicity Mix Average Annual HH

Income

High Income

4 COMFORTABLE

+ Multi-Pack PET + Mini-Can + 8 oz. Glass

7% 6%

(156

Index)

56%



HH SizeSkews





Hispanicshoppers.

SHOPPER INSIGHTS

28%

Hispanic(343

Index)

Caucasian

Index)

48%

1 EMERGING

Person HHs

4-5+

Asian Index

10%


Mid/Low Income

(120

Index)

34%

(103

Index)

37%

10%

African American

(83 Index)



of Large Stores

%33

(Larger





Ethnicity Mix*

7%

44%African


(65 Index)

HH SizeSkews

Secondary Metro:

29% (119 Index)






SHOPPER INSIGHTS

of Large Stores

7%

1-3Person HHs

2 MIDSCALE

(134 Index)

Hispanic (50 Index)

Ethnicity Mix


Mid/Low Income


44%

(134

Index)

37%

(102

Index)

37%






HH SizeSkews

AgeSkews

Town/Rural:58%

(135 Index)

Boomer

Senior

SHOPPER INSIGHTS

of Large Stores

36%


Hispanic

(50 Index)

1-2Person HHs

Mid38%

(106 Index)

Ethnicity Mix


Mid Income

3 CONVENTIONAL

+ Multi-Pack PET

82%

6%7%

African American

(50 Index)

(106

Index)

38%



HH SizeSkews

Suburban: 39%

(227 Index)

SHOPPER INSIGHTS

Asian

(175 Index)

75%


10%


Hispanic

(71 Index)

3-4Person HHs





of Large Stores

24%


Income

High Income

4 COMFORTABLE


7% 6%

(156

Index)

56%



HH SizeSkews





Hispanicshoppers.

SHOPPER INSIGHTS

28%

Hispanic(343

Index)

Caucasian

Index)

48%

1 EMERGING

Person HHs

4-5+

Asian Index

10%


Mid/Low Income

(120

Index)

34%

(103

Index)

37%

10%

African American

(83 Index)



of Large Stores

%33

(Larger





Ethnicity Mix*

7%

44%African


(65 Index)

HH SizeSkews

Secondary Metro:

29% (119 Index)






SHOPPER INSIGHTS

of Large Stores

7%

1-3Person HHs

2 MIDSCALE

(134 Index)

Hispanic (50 Index)

Ethnicity Mix


Mid/Low Income


44%

(134

Index)

37%

(102

Index)

37%






HH SizeSkews

AgeSkews

Town/Rural:58%

(135 Index)

Boomer

Senior

SHOPPER INSIGHTS

of Large Stores

36%


Hispanic

(50 Index)

1-2Person HHs

Mid38%

(106 Index)

Ethnicity Mix


Mid Income

3 CONVENTIONAL

+ Multi-Pack PET

82%

6%7%

African American

(50 Index)

(106

Index)

38%



HH SizeSkews

Suburban: 39%

(227 Index)

SHOPPER INSIGHTS

Asian

(175 Index)

75%


10%


Hispanic

(71 Index)

3-4Person HHs





of Large Stores

24%


Income

High Income

4 COMFORTABLE


7% 6%

(156

Index)

56%



HH SizeSkews





Hispanicshoppers.

SHOPPER INSIGHTS

28%

Hispanic(343

Index)

Caucasian

Index)

48%

1 EMERGING

Person HHs

4-5+

Asian Index

10%


Mid/Low Income

(120

Index)

34%

(103

Index)

37%

10%

African American

(83 Index)



of Large Stores

%33

(Larger





Ethnicity Mix*

7%

44%African


(65 Index)

HH SizeSkews

Secondary Metro:

29% (119 Index)






SHOPPER INSIGHTS

of Large Stores

7%

1-3Person HHs

2 MIDSCALE

(134 Index)

Hispanic (50 Index)

Ethnicity Mix


Mid/Low Income


44%

(134

Index)

37%

(102

Index)

37%






HH SizeSkews

AgeSkews

Town/Rural:58%

(135 Index)

Boomer

Senior

SHOPPER INSIGHTS

of Large Stores

36%


Hispanic

(50 Index)

1-2Person HHs

Mid38%

(106 Index)

Ethnicity Mix


Mid Income

3 CONVENTIONAL

+ Multi-Pack PET

82%

6%7%

African American

(50 Index)

(106

Index)

38%



HH SizeSkews

Suburban: 39%

(227 Index)

SHOPPER INSIGHTS

Asian

(175 Index)

75%


10%


Hispanic

(71 Index)

3-4Person HHs





of Large Stores

24%


Income

High Income

4 COMFORTABLE


7% 6%

(156

Index)

56%



Rate above inflation

Channel & package coherency

Increase frequency

Price parity above competitors

Improve price execution

New FSOP, home market

and delivery service

models

Build customer intimacy

Efficient operational

standards

Labor management process

20

Advanced analytics use cases

Vending space & service

optimization

SKU upsell recommendations

National & local trade promotion

managementHigh impact

fundamentals

Picture of success (PicOS)

PicOS translated

into action Items

go to Spring

Automated

Fundamentals

dashboard to

track

performance

Each category plays a different role and we have a winning strategy for each one of them

21

Profit per package Ex. 1 Ex. 2

GP per case

GP margin

$1.82 $2.53

59.3% 32.1%

$6.16

44.0%

$6.87

36.6%

South America

Volume

-1.1%

-6.0%

1.3%

2017 2018 2019

Sales

5.0%

-1.7%

4.1%

2017 2018 2019

Peru – Working on recover volume trends and maintain profitability

23

• With an inflation of 1.8%, we were able to grow our price in 2.1% leveraging on our portfolio

and pricing strategy

• The effective implementation of the market initiatives had allowed us to maintain NARTD SOV

stability during 2019

Ecuador – Maintain positive volume and pricing momentum

24

Sales

-3.9%

2.6% 2.9%

2017 2018 2019

Volume

-3.4%

3.7%

0.2%

2017 2018 2019

• Our RTM models were adjusted as we invest in additional routes, this allowed us to grow our

customer base by 15,000

• We maintain our leadership in NARTD as well as in sparkling beverages with an accumulated

value share of value of 55.1% and 70.7%, respectively

Argentina – Focus on affordability prices and increase returnable mix

25

Sales

26.0%21.0%

56.8%

2017 2018 2019

Volume

-1.1%

0.1%

-12.4%

2017 2018 2019

• During the last quarter, we continued developing customers in the provinces generating

significant volume growth of +3.8%

• In 2019, we maintained market investments to continue developing our returnability platform

and expansion of the Universal Bottle growing returnable mix +3pp to 44%

Food and Snacks

Around USD$ 394 MM Sales

A relevant player in the snack industry…

Complementary to our core business

60 new routes in Bokados territory

Expand business coverage in Mexico and Ecuador

27

28

…with high potential growth opportunity

• Grow organically in traditional

channel and increasing distribution

to new territories

• Product portfolio innovation

• Maximize productivity in Queretaro’s

facility

• Improve Deep River distribution in

Northeast US in Grocery, Food

Service & Convenience channels

• Rationalize our portfolio to improve

margins

• Maximize productivity in Berwick’s

facility

• Continue direct distribution

expansion to new territories

• Portfolio innovation in baked

products

• Consolidate presence in

extruded category with new

brands “Locachos”

3rd mostImportant Brand

in Mexico

#2 BrandMetropolitanarea of NY

#1 Brandin Ecuador*#2 Salty Snacks

* Baked goods

Innovation at Arca

Continental

Advanced analytics use cases

30

Suggested

order

Progress update Next steps

Full Mexico rollout; 15% OOS

reduction

Predictive recommendation model for

all products in collaboration with MIT

Extend development to Peru and Ecuador

+ complementary business units

Execution

Human

resources

Supply chain &

manufacturing

Analytics

capabilities

Work order prioritization in f(x) of

revenue impact Next Best Action model development

Initial results: 30% staff turnover

reduction in West Mexico and Peru

Mexico, CCSWB and complementary

business units model extension

Talent Analytics team implementation to

recruit, retain and develop talent

Production lines’ digitalization & info

standardization

Preventive maintenance on T2 vehicles

+ component mapping

Maintenance costs reduction through

Predictive Failure model

Analytic tools training program

deployment

Data lake (Mexico & Peru)

Data enrichment (Mexico)

Data ecosystem (company-wide)

Center of Excellence development

Industry & supply chain 4.0

31

Digital warehouse: increase capacity to

manage an extended number of SKUs

and to serve new distribution channels

Predictive maintenance

Advanced analytics to optimize costs

Planning

S&OP advanced tool to improve fill rate

Network design: reduce freight cost by

optimizing our production network

Warehouse management

Transport management system

Digital platform that standardizes the

process and connects other digital

initiatives (telemetry, S&OP 2.0)

Digital distribution

Dynamic route planning

Real-time visibility of fleet, personnel and

orders to optimize cost to serve

1Sales and operations planning

Directly satisfy consumer needs at highest service levels by expanding current initiatives

32

Direct to home

Portfolio with +340 SKUs

Web & mobile site

Online orders + delivery in 24 hrs

Online orders

24 hrs

Express delivery

CustomersDelivery

Taking advantage of traditional

channel customers

Multi-category portfolio

15 min delivery

Consumer

order app

Modernizing the traditional trade through digitalization

33

1

Large & X-large

customers

Micro, small and

medium customers

B2B+

20%

80%

POS software +

tablet/scanner to improve

operations in store

Transactional services and

e-payments

B2B app + dongle for

credit card & service

transactions

Mexico 2018

Financial

Performance

Consistent and disciplined capital allocation

35

Focus on

acquisitions

with high

opportunities

for value

creation

Annual

dividend with

a payout ratio

of at least 30%

of net income

CAPEX

focused on

growth and

productivity

to improve

ROIC

Improve cash

conversion

cycle through

better

negotiations

with suppliers

and customers

Prioritization of our capital allocation to higher-return opportunities

Conservative debt profile & diversified

maturity schedule…

• 96% debt is in local currency

• Projected debt profile with average maturity of 6.1 years

AC Debt Maturity Profile

Total Debt: MXP$ 53,261 million

____________________

*Using an exchange rate as of Dec 2019 of MXP $18.87

By

Interest Rate

By

Currency

USD

22%

78%Fixed

36

13%

48%

39%MXP

PEN

Variable

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

USPP Bonds Bank loans

6,715 6,665

5,6625,775

3,217

1,467

2,291

6,371

7,549 7,549

…with the highest credit rating among Mexican issuers

Financial flexibility and low leverage ratio

“A2”

Global Investment Grade above Mexico’s

sovereign rating

“AAA(mex)”

“A”

“mxAAA”

Global Scale

National Scale

Net Debt / EBITDA

37* Without considering M&A

1.85

1.281.16

1.45

1.03

2015 2016 2017 2018 2019

Social

Responsibility

*2019 data for AC consolidated

of resin produced by PetStar

30% of PCR

50,186 Tons

1.6Water Lts. /

Beverage Lts.

20% improvement

22.1 g CO2/

Beverage Lts.

30% energy reductionvs 2010vs 2010

32% from renewable

sources

Leader in water reuse

technology Mexico is the global leader in

recycled resin use

Strong commitment towards our environment

WATER* ENERGY*RECYCLINGMexico 2019

39

Strong public commitment and external assessment

40

Transparent, permanent and constructive dialogue with stakeholders

Public Commitment Evaluations and

indexes

Third-party verification

Key investment highlightsKey investment highlights

41

Mid-term targets 2024

42(1)Organic compounded annual Growth rate 2019-2024 for consolidated results

Investor Relations Contact Information:

Ulises Fernandez [email protected]

Felipe Barquin [email protected]

Pamela Ortiz [email protected]

Francisco Leyva [email protected]

THANK YOU!

CORPORATE PRESENTATION - Arca Continental · CORPORATE PRESENTATION. Coca-Cola System pioneers in...

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Transcript of CORPORATE PRESENTATION - Arca Continental · CORPORATE PRESENTATION. Coca-Cola System pioneers in...