POSITIVE BALANCE Investor Luncheon - Arca … Coca-Cola Company •Served at The Coca-Cola Company...

Investor Luncheon

November 13, 2015

P O S I T I V E B A L A N C E

Presentation disclaimer

During this presentation management may discuss certain forward-

looking statements concerning Arca Continental’s future

performance that should be considered as good-faith estimates

made by the Company.

These forward-looking statements reflect management

expectations and are based upon currently available data. Actual

results are subject to future events and uncertainties, which could

materially impact Arca Continental’s actual performance.

2

Investor Luncheon

November 13, 2015


Arturo GutierrezCOO

Chief Operating Officer

• 15 years at Arca Continental

• Served as Secretary of the Board, Director of the

Mexico Beverages Division, Human Resources,

Corporate Planning and Chief Legal Officer

• Bachelor’s Degree in Law from Escuela Libre de

Derecho and a Master’s of Laws/J.D. from

Harvard University

4

Emilio MarcosCFO

Chief Financial Officer


• Served as Director of Operations at Bebidas

Mexico, Complementary Business Division

Director, and Treasury & Procurement

• Bachelor’s Degree in Industrial and Systems

Engineering from Tecnologico de Monterrey and

a Master’s in Business Administration from the

University of Illinois

5

Jaime SanchezGeneral Counsel

General Counsel


• Served as Secretary of the Board of Directors

and Corporate Legal Manager of

Embotelladoras Arca

• Bachelor’s Degree in Law from Universidad de

Monterrey and a Master’s of Laws from The

Michigan University

6

Jean Claude TissotCMO

Chief Marketing Officer


• Served at The Cola Company for more than 15

years in marketing and commercial areas. Last

roles as General Manager of North Region in

Mexico and previously Central America

• Business Administration from Universidad ICESI

and a Master’s in Marketing and a Master’s in

Finance from Colegio de Estudios Superiores de

Administracion in Colombia

7

Alejandro MolinaTechnical and Supply Chain Officer

Technical and Supply Chain Officer


• Global Supply Chain Council Bottlers Chairman at

The Coca-Cola Company

• Served at The Coca-Cola Company for more than

15 years in the areas of Quality, Environmental,

Sustainability and Supply Chain

• Bachelor’s Degree in Chemical Engineering from

Universidad La Salle and a College Diploma in

Supply Chain from ITAM

8

Gabriel MenesesHuman Resources International Director

Human Resources International Director

• Served at The Coca-Cola Company for 17 years

• HR VP for the Europe and the Asia Pacific Group

at The Coca-Cola Company, based in Singapore

• Senior HR roles in North America and Latin

America

• Bachelor´s degree in Business from Tecnológico

de Monterrey

9

Strategic Overview

Rapid and profitable growth to achieve

a well-balanced portfolio…

11

99%

1%

2002

Mxp$13 billionMexico Beverages

Exports and Vending Mxp $85 billion

Mexico Ecuador Argentina ComplementaryPeru

6.4x

12%12%

50%

2015p

16%

Dairy

CAGR15% 10%

USA

Exports

2015p: Pro-forma with 12 months of Corporacion Lindley

2002ARCA

Merger

2007Snacks Mexico

2008Argentina &

Jugos del Valle

2010Ecuador

2011CONTALMerger

2012Snacks

International & Santa Clara

2014Tonicorp

2015Peru

…based on strong organic growth and an excellent M&A track record

12

$16

$48

$170

$12$60 $75

$15 $185

Market CapArca Dec '02


Dividends'02 - '10

Total ValueDec '10

Market CapArca+Contal

Dec '10

Market CapOct '15

Dividends'11 - '15

Total ValueOct'15

$48

MXP$ billion

$27

A

C

$16

$48

$170

$12$60 $75

$15 $185



Dividends'02 - '10

Total ValueDec '10

Market CapArca+Contal

Dec '10

Market CapOct '15

Dividends'11 - '15

Total ValueOct'15

$48

MXP$ billion

$27

A

C

Delivering consistent value creation…

13

Mxp$ billion

• Talent development

• Organizational

capabilities

People &

Organization

• Culture

• Social Responsibility

…supported by our strategic core pillars

Execution (ACT)

• Segmentation

• Price-pack architecture

• Service models

Supply Chain

Management

• Supply network design

• Operational Excellence

• Sustainability

Finance & IT

• Solid financial profile

• Standard and streamlined

business process

• State of the art IT platform

Operational Strengths

Value Creation

14

Operational StrengthsExecution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


Solid operational results in Mexico

16

72.9% 74.6%

1,059 1,038 1,065

2013 2014 2015e

Volume(MUC)

The highest Brand

Love score

AC

Consolidating market leadership with profitability

17

Mexico

62% Non

Returnable

38% Returnable48%

Single-serve52%

Multi-serve

Format Package

68%

80%

Mexico

Cooler Coverage

2010 2015

$45.55 $52.34

2013 2014 2015e

Price Per UnitCase

3.7%

2.9%

Tax 12.0%

Successful development of Direct to Consumer

channels

18

163

226

336

500

2012 2013 2014 2015e

DTH Routes

Leading innovation with telecommunications

to increase profitabilityJug Water & DTH currently reach more than

600,000 households

872

1,144 1,171

2012 2013 2014

Net Sales(Mxp million)

MexicoVending Direct to Home

26

31

2012 2015e

Vending Machines

(‘000)

Leveraging our capabilities in adjacent

businesses…

19

• 3rd largest snacks brand in Mexico

• One of Mexico’s largest distribution networks

with more than 1,000 routes

• Market share in Northern Mexico 10%

• Market share in Monterrey 15%

85

160

2007 2015e

Customers(‘000s)

Expanding to new markets with leading brands

20

• #1 regional brand in New York Metro Area*

• 1,800 DSD routes with access to 21 states

(35% of US salty snack market)

• Rapidly expanding brand presence

• New R&D facility in Atlanta

*Source: IRI Consumer Network 52weeks ended 2/9/2015 and same period prior years

21

11

19

2009 Sep-15

48

61

2009 Sep-15

EBITDA/Sales

(%)

Market Share

(%)

Argentina: investing in core capabilities and

increasing profitability

129

145

2009 2015e

Volume

(MUC)

22

139

153

2011 2015e

Volume

(MUC)

1618

2011 Sep-15

60

68

2011 Sep-15

Market Share

(%)EBITDA/Sales

(%)

Ecuador: successful expansion of best practices

23

Argentina

Cooler Coverage (%)

Ecuador

South America: improving execution at the

point of sale

28

47

2011 Sep-15

25

45

2009 Sep-15

• Rolling out Route to Market Initiatives

• Strengthening Revenue Growth

Management Capabilities

Market Share

Yogurt 71%

Flavored milk 81%

24

Tonicorp and Inalecsa: yielding profitable results

Product Mix

Market Share

Pastries 83.7%

Salty Snacks 25.3%

Market leader in every value-added dairy category

43%Yogurt

Category

21%Flavored

Milk

11%Others

8%Gelatin

8%Milk

9%Oatmeal

Product Mix

30% Pastries

70% Salty Snacks

Peru: large market with attractive

macroeconomic and demographic dynamics

25

Main avenues to reach running rate of US$25 million in synergies

1. Raw Materials

Leverage scale with main suppliers

2. Process Innovation and Packaging

More efficient processes to produce PET

packaging

3. Supply Chain and TransportationOptimize primary distribution and third-party

transportation services

4. AdministrationConsolidation of administrative processes

5. Revenue Expansion AlternativesExchange of best commercial practices

• Unique opportunity for franchise integration

• Contiguous territories provides

geographic cohesion and access to 31

million consumers (same as AC Mexico)

• Similar operating philosophy and

complementary business opportunities

Execution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


Total Execution (ACT)

Our Fundamental Growth Algorithm

CONSUMER

DEMAND

GREAT

MARKETING

GREAT

EXECUTION+ +

Disciplined Portfolio Choices

= PROFITABLE

GROWTH

28

Great

Execution

ACT connects our entire organization in order to

reach the perfect execution

29

Sales School Innovation

Collaboration Commitment Innovation Standardization

Segmentation

Revenue Management

Route to Market

Fundamentals

Market Tools

Volume/Pricing

Market Share

Execution Index

EBITDA

ROIC

Volume

Value

Transactions

Metrics

30

Segmentation

Capture the maximum value from our customers and consumers through dynamic segmentation to

apply precise strategies that ensure our leadership in the market profitably

• Customer Classification by channel and activity

• Cluster by industry size

• Competitive Maps

• Unique platform from Sales Office to Sales Force Mobile

Device

México Ecuador Argentina

+ 4.3 + 3.4 + 8.8Share of Value vs Share of Volume

YTD

pts pts pts

31

Revenue Growth Management (RGM)

Secure the future of our business through the profitable management of our portfolio.

• Platform to support strategic decisionsProfit Seeker – Price elasticity – Conjoints Analysis

• Dedicated and Specialized Team

• Routines with Senior Management Price Room

• Price GuidelinesAffordability – Price Points – Price Gaps – Trade discounts

+ 0.8 -1.3Price above inflation Discount efficiency

% pts

2015 YTD 2015 YTD

32

Route to Market (RTM)

Ensure an excellent execution at the point of sale, serving our customers in a efficient

and profitable way, through our different service models

• Dedicated service models & figures by Channel\Category

• Ensure Picture of Success Implementation

• Optimize Cost to Serve

• Increase level of Customer Satisfaction

+ 5.0-0.3Customer Satisfaction IndexCost to Serve

%

2014

%

2014

33

Fundamentals

Ensuring our sales force priorities; macroeconomic and climatic changes should not be

their main concern, it should be the right execution of the fundamentals

• Key Packages Coverage

• Out-of-Stock Reduction

• Cooler Placement

• Execution Index

• Sales Effectiveness

+ 3.9 + 59Execution Index Key Packages Coverage

pts

2015 YTD

%

2015 YTD

34

Market Tools

Allocate the necessary resources to our collaborators assuring efficiency and profitability

• Loyalty Programs

• Technology Development

• AC Report Efficiency

• Compensation System

AC Reports Loyalty Programs

Volume Increase

55 4.8 15 %

2015 YTD35

Innovation and Sales School

An innovation platform to ensure future viability with a certified sales force

• Specific Training

• Unique Sales Force Certification

• Selling Dialogues

• Big Data Analytics

• Traditional Channel Modernization

• E-Commerce

INNOVATION SALES SCHOOL

36

Sales School Innovation

Collaboration Commitment Innovation Standardization

Segmentation

Revenue Management

Route to Market

Fundamentals

Market Tools

Volume/Pricing

Market Share

Execution Index

EBITDA

ROIC

Volume

Value

Transactions

Metrics

37

Supply Chain &

Operational Excellence

Execution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


A larger scale with stronger infrastructure

capabilities

39

40Plants

1.2MPoints of Sale

600,000Direct to Home

Customers

47,000Collaborators

308Distribution

Centers

8,900Routes

600SKUs

14,000Vehicles and Trucks

31,000Vending Machines

Supply Chain

Customer Driven Supply Chain

Process / Organization / IT

Harmonized

Supply

Chain

Strategy

System alignment:Customers Service models

Service & Responsiveness:Market changesFlexibility

Routine:Planning and Execution

Lean & Green:Operational Excellence

People:Capabilities

2010-2015 results

• Distribution route fill rate from 98% to 99.5%

• More than Mxp$600 MM savings in logistics, packaging and infrastructure

• Product Quality Index 99.2%

• Inventory reduction: 10%

ACT

40

Operational Excellence (OE)

Best practices and process improvement

Operational

Excellence

Process

Excellence

Exceed

Customer

Expectations

Strategic

Direction

and Focus

Employee

Involvement

Leadership

Engagement

Superior

Safety

Commitment

to Quality

Innovative

Products

• AC is the reference for OE in the

Global Coca-Cola System

• OE Transformation Category

award winner among The Coca-

Cola Global System

• Consistent cost savings ratio of

more than Mxp$100 million per

year

• 10,000 certified associates and

more than 400 activated

initiatives

41

299

452

2013 2014

OE projects

93

128

2013 2014

Savings(Mxp Million)

Our Commitment to Sustainability

WATERRECYCLING

of resin consumed

30% Of PCR

29,000 Tons

1.65 Water Lts. /

Beverage Lts.

20 % Improvement

ENERGY

22.4 G CO2/

Beverage Lts.

13% energy reductionVs 2010vs 2010

37% from renewable

sources

Leader in water reuse

technology Mexico is the global leader in

recycled resin use42

Finance & ITExecution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


Standardize and replicate key processes

supported by our modern IT platform

• Corporate Program “Enlace” encompasses a set

of projects to integrate a common set of

operational and administrative processes that are

consistently replicated across our geographies

• Deploying a new Beverage Operating Model

incorporating best-in-class standards, and an

enhanced Sales and Operations Planning Model

• Supported by solid back-office capabilities

provided by our Shared Service Center and

enabled by our robust SAP technology platform

44

Delivering sustainable growth in a

challenging environment…

$10

$11

$13 $14

$18

2011 2012 2013 2014 2015p

EBITDA

EBITDA

Margin 18.9% 20.1% 21.3% 22.0% 21.5%

+16.6% CAGR

$51 $56

$60 $62

$85

2011 2012 2013 2014 2015p

Sales

+13.7% CAGR

MXP$ billion

2015p: Pro-forma with 12 months of Corporacion Lindley

• Maintaining one of the highest

profitability levels among the

Global KO System

• Ongoing initiatives to protect

margins via RGM, operating

efficiencies and synergies

• Strong capabilities to mitigate

pressures from volatility

45

…supported by a solid Balance Sheet and

strong credit profile

• Solid financial profile characterized

by strong free cash flow generation

• Financial flexibility and low leverage

ratios

• Committed to maintain profitable

growth and continue creating value

“A2”Stable outlook

July 2015

“A”Stable outlookOctober 2015

Global Investment Grade above Mexico’s sovereign rating

46

Maintaining financial discipline

• Leverage Ratio among the best in the Mexican

IPC Index

• Investing CAPEX prudently

• M&A opportunities and return cash to

shareholders

• Drive consistent long-term profitable growth

0.5

1.7

1.0

Dec-14 Sep-15 Dec-16

Net Debt/EBITDA

47

People & OrganizationExecution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


Our Key Internal Opportunity

Build a Future Proof

Organization

A 50K employee organization

fully capable of executing its

growth strategies

49

Our Key Internal Opportunity

A 50K employee organization

fully capable of executing its

growth strategies

Bringing our culture to life

Focusing on Organizational Capabilities for Competitive Advantage

Developing our talent to match our growth

Making sustainability and corporate social responsibility an integral part of our business

1

2

3

4

50

Bringing our culture to life1

Balance business growth with speed in decision making

Meritocracy and people development

Flat & non-hierarchical organization

Standardizing how we get work done

26,000

7 layers* from

CEO

Relentless customer focus

*Bain & Co Best in class

55% Promotion

rate

Mission, Vision

& Values

mom & pop owners trained since 2011

51

Focusing on Organizational Capabilities for

Competitive Advantage2

training investment aligned with core capabilities

training hours per year

Commercial

70%Supply Chain

880,000

30% training investment to support other key training needs

Leadership & Management Development Personal effectiveness Other Functional Skills (Finance, HR, PAC)

52

Developing our talent to match our growth

3

7 of 10 Executiveswith Master’sdegree

Well prepared managerial and executive roster…

…with the right experiences…

…yielding solid succession results

100+ employees

assigned per year

92%

Targeted “cross fertilization” and stretch assignments to build the right experiences

Succession planning hit rate

# of Executives with Masters degree

53

Making sustainability and CSR an integral part of our business

4

• Standardized CSR model

• Comprehensive stakeholders dialogue

• CEO and Board Level commitment

• World Class CSR Reporting (GRI)

• Sustainability Indexes

Sustainability and CSR are embedded in our culture and business strategy

54

Making sustainability and CSR an integral part of our business

4

Focusing on associates well-being…

…promoting active lifestyles

…and community development

Top 20 Companies to work for

Leading Mexican KO System physical activation

commitment

+2,400 events

+4.4 million participants

• Named Best Practice by Mexican Philanthropic

Center

55

Our 2017 strategic revenue growth target

1325

56

100

2002 2008 2012 2017

SalesMXP billion

Strategic pillars support goal to reach

Mxp$100 billion in sales by 2017 and sustain

our profitable growth momentum beyond

2x

2x

2x

57

Core Pillars

Future

Execution (ACT)

• Segmentation


• Service models

Supply Chain

Management



• Sustainability

Finance & IT



business process




• Organizational

capabilities

People &

Organization

• Culture


Value Creation

Thank you!

Investor LuncheonNovember 13, 2015


POSITIVE BALANCE Investor Luncheon - Arca … Coca-Cola Company •Served at The Coca-Cola Company...

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Transcript of POSITIVE BALANCE Investor Luncheon - Arca … Coca-Cola Company •Served at The Coca-Cola Company...