CORPORATE PRESENTATION - Arca Continental

C O R P O R AT E

P R E S E N TAT I O N

Coca-Cola pioneers in Mexico

125 YEARS

2

95 YEARSStrong partnership with

3

Serving 5 countries across the Americas

2.2BUC

S a l e s

V o l u m e

2 0 2 0

169MXP$ billion

R e v e n u e

2 0 2 0

46

P r o d u c t i o n

F a c i l i t i e s

379

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

C e n t e r s

62thousand

A s s o c i a t e s

+1.5million

P o i n t s o f

S a l e s

USA

MEXICO

ECUADOR

PERU

ARGENTINA

4

One of the largest bottlers in the Coca-Cola System globally ...

Unit Case = Measure of volume used in the Coca-Cola System, equivalent to 24 bottles of 8 oz or 5.69 liters.

Volumes reported as of December 2020

BUC = Billion Unit Cases

3.3

2.3 2.22.1

1.8

1.2

Fitch:

A-

Fitch:

BBB+

Fitch:

BBBFitch: A-Fitch: A

Moody’s / S&P:

Baa1 / BBB+

Volume (BUC)

5

A balanced portfolio of markets and business…

MXP$ 13 billion

EXPORTS & VENDING

1%

MEXICO BEVERAGES

99%

2002CAGR15%

13x

REVENUES

2002 - 2020

6

MXP$ 169 billion

7%

9%

40%

36%

5%3%

2020

USA

MEXICO

PERU

ECUADORARGENTINA

SNACKS

… with a diversified portfolio of countries and

businesses…

13%

7%4%

1%

26%

49%

PERU

ECUADOR

ARGENTINA

MXP$ 7,681 thousand

MEXICO

SNACKS &

OTHER

BUSINESSES

USA

MXP$ 40,475 thousand

EBITDA

1Q21

7

7%

10%

38%

35%

6%4%

USA

MEXICO

PERU

ECUADORARGENTINA

SNACKS & OTHER

BUSINESSES

REVENUES

1Q21

…and a strong presence in attractive markets

MEXICOStart date: 1926

Sales volume (MUC): 1,239

% of KO volume: 34%

Population served (MM): 33

PERUStart date: 2015

Sales volume (MUC): 242

% of KO volume: 100%


ECUADORStart date: 2010


% of KO volume:100%


USAStart date: 2017


% of KO volume: 12%


ARGENTINAStart date: 2008


% of KO volume: 25%

Population served (MM): 9____________________

Sales volume as of FY2020

MUC –Million Unit Cases

KO – The Coca-Cola Company 8

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

Pursuing value creation via consistent organic growth and an excellent M&A track record

9

1

0

AC growth strategy based on four axis

StillsYOMP! /New own

retail models

(Vending)

Food & Snacks

Sugar-sweetened

Soft Drinks

10

A wide brand portfolio to satisfy every occasion of consumption…

+ 28 Brands

+ 128 SKUs

+60 Brands

+1,500 SKUs

2006 2021

11

…with a commercial model that connects the entire organization

Fundamentals

Segmentation

RGM

Picture of success

Go to market

Market audit

Digital tools

People

Customer love score

12

Taking actions, adapting to the current situation

13

Strategic actions being takenFocus areas

Crisis

management

efforts

• Savings and efficiency initiatives

• Reassessed Capex investments

• Prioritize liquidity, profitability and

protect business for the long term

Special focus

in the

traditional

channel

RGM • B2B platforms and e-commerce • Accelerate digital initiatives to better serve our

customers

• Support its recovery and

continuing to modernize this

channel

COVID-19 has changed the way our customers need to be served and has helped

us quickly adapt to a new operating model based on the ACT model with a more

digital approach.

• Supporting customers to comply with sanitary

measures

• Fine tune the optimal portfolio of products

• Promote returnable packages and affordability

The initiatives yielded a sequential recovery of volumes, better than expected ...

FY20201Q20

+0.2%Accumulated

Volume Var (%)

2Q20

-9.2% -5.6%

3Q20

+0.1%

4Q20

-3.8%

3.9

-4.2 -4.4 -3.2 -2.2 -1.6

1.9

-4.0 -4.2

0.5

-1.7

1.4

-5.5

-28.0

-10.8

1.5

-10.0

0

• Impact of

mobility

restrictions

• Reduction of

restrictions

and initiatives

for reopening

• Better than

expected

sequential

recovery in the

quarter

USA

MEX

South America

14

1Q21

+0.4%

… and a solid operating flow expansion

15

+5.8%Accumulated

EBITDA Var (%)+1.8% +7.7% +7.7% +5.7%

21.2 26.2 22.9

11.2

20.3 23.0

9.2 8.9 4.5

8.0 7.4

23.6

-8.7

-48.5

-2.8

3.9

-12.4

-3.4

• Impact of

mobility

restrictions

• Reduction of

restrictions

and initiatives

for reopening

• Better than

expected

sequential

recovery in the

quarter

USA

MEX

South America

FY20201Q20 2Q20 3Q20 4Q20

+15.7%

1Q21

Strong financial performance in a challenging year

MXN$ Million 16

162,728 169,314

38,893 40,475

2019 2020 1Q20 1Q21

30,404 32,147

6,637 7,681

2019 2020 1Q20 1Q21

18.7% 19.0%

17.1%19.0%

2019 2020 1Q20 1Q21

Revenues EBITDA EBITDA Margin

+4.0%

+5.7%

30

bps

+4.1%

+15.7%

190

bps

Long-term growth opportunity in other categories

• Growth potential in other categories where we are

not yet leaders.

• Developing emerging categories through portfolio

diversification and optimization

• Focus on capturing value market share

• Leveraging new categories with the strength of the

Coca-Cola brand

• Total NARTD value market share in Mexico 67.3%

Colas 54%

Jug 11%

Flavors 18%

Stills 8%

Water 9%

Value Share

(Mexico)

40.1%

51.8%

58.3%

42.3%

85.2%

17

Mix

New avenues for growth

18

Topo Chico Hard Seltzer Mexico y Peru

• New channels and customers

• Massive media plan, focus on social networks

Costa Coffee Mexico• Integral proposal: espresso machines,

coffee shops and ready-to-drink products.

Alcoholic Beverages Argentina

• Strengthen relationship with CCU, to be

the best beer distributor

• Grow as a multi-category company

United States

19

Setting the base for the new normal

20

• Immediate consumption focused on RGM

affordability in small packages

• Continuous investment in our segmentation

platform

• Best in class product innovation launches

• Focusing on accelerating digital initiatives such as

MyCoke.com as primary order method for FS/OP

channel and convenience stores, where 51% of

our eligible FSOP customers have been reached

• Enhanced the features of myCoke.com with new

payment methods and rolling-out new mobile

application

• E-retailer channel further development, with

significant growth of >100%

• Deployed adjusted Go To Market service model for

the Direct to Home Channel

• Strengthened OPEX and labor discipline

Adaptation strategies Reinforcing strategies

Northpoint Houston plant:The newest member of the family

• First plant built in the last 10 years in the

KO system in the USA

• US$250 million investment

• Close to US$30 million in cost savings

and operating efficiencies, optimizing the

cost of production and logistics

• State-of-the-art technology in production

and warehouses

• It operates with 100% renewable energy

Started operating on

March 202021

22

South America

Slower recovery amid second wave

23

• Ecuador was affected by the second

wave of the pandemic and along

South America, restrictions and

curfew were reinstated by local

governments.

• On-premise channel continues to be

the most impacted showing a slow

recovery due to reinstatement of

restrictions and decrease in mobility,

however by the end of the quarter

volumes show a gradual recovery.

• During 1Q21, the On-Premise channels

were still affected by capacity restrictions

and consumer sentiment, however, March

saw a strong recovery in these channels.

• A significant increase of cases by the end

of March could lead to a new set of

restrictions during Q2 2021.

• In terms of mix, multi-serve packs

continue to grow their share of the

sales mix as a result of the changes

in consumer patterns while single-

serve packs continue to be affected

by the drop-in consumption of the

on-premise channel.

• Digital strategy and new service

models have been consolidated at

different channels.

ArgentinaEcuadorPeru

Opportunity in the recovery of South America

24

Volume

• Positive, low-single digit

growth

• Expected GDP:

• Peru 8.5%, Ecuador 2.5%, and Argentina 5.8%

Price

• In line with inflation

• Expected inflation:

• Peru 2.0%, Ecuador 0.5%, and Argentina 48.3%¹

Commercial Initiatives

• Increase the coverage of the

Home Channel in Peru and

Ecuador

• Focus on affordability with

returnable packaging and

expanding Universal Bottle

coverage

• Increase AC Digital adoption

among customers

• Expand the portfolio of low-

calorie products with

reformulations

• GDP and Inflation source: imf.org

• ¹ Argentina price inflation retrieved from El Economista data as of June 2021

Recovery drivers

20.5%

19.8%

20.5%

21.0%

2019 2020 1Q20 1Q21

-70

bps

Opportunity to recover

margins in the region

+50

bps

25

Food & Snacks

High potential growth opportunity based on strategic adjacencies

Mejorar constantemente el uso y el abastecimiento de agua mientras se promueve el

acceso al agua segura 26

Around USD$ 394 MM Sales in 2020

Complementary to our core

business

Strengthening our presence in Mexico and the United States

Participating in the industry with leading brands and gaining scale

Innovation at Arca Continental

27

AC digital transformation agenda

28

Digital enablers

Traditional trade 2.0Consumer

Potential business engines

• Modernize &

expand direct-to-

consumer

• Digitalize &

expand vending

• “Modernize” TT

• Become the

integrator/ distributor

for TT

Optimize core assetsCustomer

Optimize business

• Digitalize ACT

• Become the preferred

partner for MT &

digital channels

• Optimize manufacturing

efficiency and flexibility

• Create fully automated

logistics network

• Support functions

digitalization

Enablers that are critical to reach the potential of the digital agenda

Governance

Technology & systems Capabilities Organizational model

Modernizing the traditional trade through digitalization

29

1

Large & X-large

customers

Micro, small and

medium customers

B2B+

20%

80%

• Credit card & service

transactions

• Supply consolidation

• Automated

replenishment

B2C• Payment options

• Variety of services

• Online commerce

+10,500

Customers

Advanced analytics use cases

30

Next stepsProgress update

Suggested

order

• 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

eCommerce and Digital Transformation

Food Aggregators

• Visibility and opportunity detection

– Automated audit tools.

– Data sharing alliances/agreements and

• FDE Digital execution guidelines

• Local Routines and Monitoring Processes

Groceries OnlinePure Players /

Direct to Home

• Approach these customers as

key accounts

• Seeking to work as a Seller

and not as a Vendor

B2B

• Integrating digital tools into

service models• AC Digital, myCoke.com, Coke Net

• Integrating key functionalities to

ensure platform adherence• Loyalty, digital payments, WhatsApp,

- Diversification (beverages, snacks,

groceries)

• OBPPC - protect profitability

and control cannibalization

Leadership in digital platforms Food Aggregators and Groceries Online

31

Financial Performance

32

Debt profile & maturity scheduleAC

• 96% debt is in local currency

• Projected debt profile with average maturity of 5.4 years

AC Debt Maturity Profile

Total Debt: MXP$ 55,812 million

____________________

*Using an exchange rate as of March 2021 of MXP $20.60

Cash Position

By Currency

By

CurrencyMXP

USD

USD

MXP

PEN

MXP$ 35,430 millones

PEN ARP

USPP Bancos Bonos

11%

52%

38%

24%

69%

5%2%

33

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

6,960

12,762

5,919

3,518

1,5542,256

6,361

8,241 8,241

…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

* Without considering M&A

1.3

1.2

1.5

1.0

0.70.6

2016 2017 2018 2019 2020 1Q21

34

Consistent and disciplined capital allocation

35

CAPEX focused on

growth and

productivity to

improve ROIC

Annual dividend

with a payout ratio

of at least 30% of

net income

Improve cash

conversion cycle

through better

negotiations with

suppliers and

customers

Focus on

acquisitions with

high opportunities

for value creation

Prioritization of our capital allocation to higher-return opportunities

Positive volume

across the operations

Volume

Profitability

In line or above

inflation

Price

Higher than 2020,

mainly PET and

sweeteners with lower

aluminum prices

COGS SG&AThe opportunity to

maintain or expand

margins will depend on

our ability to maintain

the discipline

Our goal for 2021 is to protect margins and

profitability through a continued recovery in

the top-line.

36

Sustainability

37

Making sustainability a core business strategy

Human Capital and Sustainability Committee

Operational Committees

Portfolio Water Packaging Well-being Value Chain Operations

Institutional commitment to achieve higher standards

and build a culture of social responsibility

38

PetStar Facility

• The largest PET recycling plant in the world, with the

capacity to recycle 4,000 million bottles each year

• PetStar has an effective business model that drives a

sustainable circular economy

• It is also one of the main promoters of inclusive recycling

in Mexico.

39

Integral approach for sustainable packaging

40

Recycled and

BioPET

Content

26.9%

Strong commitment towards our environment

41*2020 data for AC consolidated

of resin produced by PetStar

27% of PCR

52,157 tons

1.55 Water Lts. /

Beverage Lts.

100% treated

0.25 MJ /

Beverage Lts.

26% energy reductionvs 2010

33% from renewable

sources

Leader in water reuse

technology Mexico is the global leader in

recycled resin use

WATER* ENERGY*RECYCLINGMexico 2020

Key Investment Highlights

42

Investor Relations Contact Information

Ulises Fernandez [email protected]

Felipe Barquin [email protected]

Pamela Ortiz [email protected]

Diego Alvarez [email protected]

WEBSITE

www.arcacontal.com

THANK YOU!

43

CORPORATE PRESENTATION - Arca Continental

Documents

Transcript of CORPORATE PRESENTATION - Arca Continental