About Coca-Cola FEMSA, S.A.B. de C.V.

Coca-Cola FEMSA, S.A.B. de C.V. operates as a franchise bottler of Coca-Cola trademark beverages worldwide. The company is a subsidiary of Fomento Economico Mexicano, S.A.B. de C.V. The company operates in territories in various countries, such as Mexico—a substantial portion of central Mexico, the southeast and northeast of Mexico; Guatemala; Nicaragua; Costa Rica; Panama; Colombia—most of the country; Brazil—a major part of the states of São Paulo and Minas Gerais, the states of Parana, Santa Catarina, Mato Grosso do Sul and Rio Grande do Sul and part of the states of Rio de Janeiro and Goias; Argentina—Buenos Aires and surrounding areas; and Uruguay. The company also operates in Venezuela through its investment in Coca-Cola FEMSA de Venezuela, S.A., or KOF Venezuela. Products The company produces, markets, sells and distributes mainly The Coca-Cola Company trademark beverages. These sparkling beverages (colas and flavored sparkling beverages), waters and other non-carbonated beverages (including juice drinks, coffee, teas, milk, value-added dairy, sports drinks, energy drinks, plant-based drinks and certain alcoholic beverages, such as Topo Chico hard seltzer). In addition, through certain distribution agreements, the company distributes and sells Monster products in all the countries where the company operates and Heineken-owned brand beer products, Estrella Galicia beer products, Therezópolis beer products, Campari alcoholic beverages and Perfetti confectionary and chewing gum in the company’s Brazilian territories. Since 2021, the company has been testing the distribution of alcoholic beverages and consumer products in some of the company’s territories. From its ongoing tests the company has been learning new shopper and consumption trends, and gathering the necessary insights to strengthen its value proposition for retailers and consumers in the market. This has allowed the company to complement its reach, joint consumer value proposition, and provide its partners with a unique edge to communicate with target consumers. Packaging The company produces, markets, sells and distributes Coca-Cola trademark beverages in each of its territories in containers authorized by The Coca-Cola Company, which consist primarily of a variety of returnable and non-returnable presentations in the form of glass bottles, cans and plastic bottles mainly made of PET resin. The company uses the term presentation to refer to the packaging unit in which the company sells its products. Presentation sizes for its Coca-Cola trademark beverages range from a 6.5-ounce personal size to a 3-liter multiple serving size. For all of the company’s products excluding water, it considers a multiple serving size as equal to, or larger than, 1.0 liter. In addition, the company sells some Coca-Cola trademark beverage syrups in containers designed for soda fountain use, which it refers to as fountain. The company also sells bottled water products in bulk sizes, which refer to presentations equal to or larger than 5.0 liters and up to 20.0 liters, which have a much lower average price per unit case than its other beverage products. Seasonality Sales of the company’s products are seasonal in all of the countries where it operates, as the company’s sales volumes generally increase during the summer months of each country and during the year-end holiday season. In Mexico, Central America and Colombia, the company typically achieves its highest sales during the months of April through August, as well as during the year-end holidays in December. In Brazil, Uruguay and Argentina, the company’s highest sales levels occur during the summer months of October through March, including the year-end holidays in December. Marketing The company, in conjunction with The Coca-Cola Company, has developed a marketing strategy to promote the sale and consumption of its products. The company relies extensively on advertising, sales promotions and retailer support programs to target the particular preferences of its consumers. Retailer Support Programs. Support programs include providing retailers with point-of-sale display materials and consumer sales promotions, such as contests, sweepstakes and the giveaway of product samples. Coolers. Coolers play an integral role in the company’s clients’ plans for success. Increasing both cooler coverage and the number of cooler doors among its retailers is important to ensure that the company’s wide variety of products are properly displayed, while strengthening its merchandising capacity in its distribution channels to significantly improve its point-of-sale execution. Advertising. The company advertises in all major communications media. The company focuses its advertising efforts on increasing brand recognition by consumers and improving its customer relations. National advertising campaigns are designed and proposed by The Coca-Cola Company’s local affiliates in the countries where the company operates, with its input at the local or regional level. Point-of-sale merchandising and advertising efforts are proposed and implemented by the company, with a focus on increasing its connection with customers and consumers. Marketing in its Distribution Channels. In order to provide more dynamic and specialized marketing of the company’s products, its strategy is to classify its markets and develop targeted efforts for each consumer segment or distribution channel. The company’s principal channels are small retailers, ‘on-premise’ accounts, such as restaurants and bars, supermarkets and third party distributors. Presence in these channels entails a comprehensive and detailed analysis of the purchasing patterns and preferences of various groups of beverage consumers in each of the different types of locations or distribution channels. In response to this analysis, the company tailors its product, price, packaging and distribution strategies to meet the particular needs of and exploit the potential of each channel. Multi-Segmentation. The company has implemented a multi-segmentation strategy in all of its markets. These strategies consist of the definition of a strategic market cluster or group and the implementation and assignment of different product/price/package portfolios and service models to such market cluster or group. These clusters are defined based on consumption occasion, competitive environment, income level, and types of distribution channels. Product Sales and Distribution Mexico: The company contracts with a subsidiary of FEMSA (Fomento Económico Mexicano, S.A.B. de C.V.), Solistica, S.A. de C.V., for the transportation of finished products from its bottling plants to its distribution centers in Mexico. From the distribution centers, the company distributes its finished products to retailers mainly through its own fleet of trucks. In designated areas in Mexico, third-party distributors deliver its products to retailers and consumers. In Mexico, the company sells a majority of its beverages through its traditional distribution channel, which consists of sales at small retail stores to consumers who may take the beverages for consumption at home or elsewhere. The company also sells products through modern distribution channels, the ‘on-premise’ consumption segment, home delivery routes, supermarkets and other locations. Modern distribution channels include large and organized chain retail outlets, such as wholesale supermarkets, discount stores, and convenience stores that sell fast-moving consumer goods, where retailers can buy large volumes of products from various producers. The ‘on-premise’ consumption segment consists of sales through points-of-sale where products are consumed at the establishment from which they were purchased. This includes retailers, such as restaurants and bars, as well as stadiums, auditoriums and theaters. Brazil: In Brazil, the company distributes its finished products to retailers through a combination of its own fleet of trucks and third party distributors, while maintaining control over the selling activities. In designated zones in Brazil, third-party distributors purchase its products and resell them to retailers. In Brazil, the company sells a majority of its beverages at small retail stores. The company also sells products through modern distribution channels and ‘on- premise’ consumption. Modern distribution channels in Brazil include large and organized chain retail outlets, such as wholesale supermarkets and discount stores that sell fast- moving consumer goods. Territories other than Mexico and Brazil: The company distributes its finished products to retailers through a combination of its own fleet of trucks and third party distributors. In most of its territories, an important part of its total sales volume is sold through small retailers. Competition Mexico and Central America The company’s principal competitor in Mexico is Grupo GEPP, S.A.P.I. de C.V., the exclusive bottler of Pepsi beverage products and subsidiary of Organización Cultiba, S.A.B. de C.V., a joint venture formed by Grupo Embotelladoras Unidas, S.A.B. de C.V., the former Pepsi bottler in central and southeast Mexico, a subsidiary of PepsiCo and Empresas Polar, S.A., a beer distributor and Pepsi bottler. The company’s main competition in the juice category in Mexico is Grupo Jumex. In the water category, the company’s main competitor is Bonafont, a water brand owned by Danone. In addition, the company competes with Keurig Dr Pepper in sparkling beverages and with other local brands in its Mexican territories, as well as ‘B brand’ producers, such as Embotelladora Aga de Mexico, S.A. de C.V. (Red Cola bottler), that offer various presentations of sparkling and still beverages. In the countries that comprise the company’s Central America region, its main competitors are Pepsi and Big Cola bottlers. In Guatemala, the company competes with a joint venture between The Central American Bottler Corporation and AmBev, and the company competes with Cervecería Centroamericana S.A. In Nicaragua, the company’s principal competitor is AJE Group. The company also competes with the joint venture between The Central American Bottler Corporation and AmBev. In Costa Rica, the company’s principal competitor is Florida Bebidas S.A., subsidiary of Florida Ice and Farm Co and Cooperativa de Productores de Leche Dos Pinos R.L. in juices. In Panama, the company’s main competitor is Cervecería Nacional, S.A., followed by AJE Group. The company also faces competition from ‘B brands’ offering multiple serving size presentations in some Central American countries. South America The company’s principal competitor in Colombia is Postobón, a local bottler that sells and distributes sparkling beverages (Manzana Postobón, Uva Postobón and Colombiana), still beverages (Hit Juice) and water (Crystal). Postobón also sells Pepsi products and is a vertically integrated producer, the owners of which hold other significant commercial and industrial interests in Colombia. The company also competes with low-price producers, such as Ajecolombia S.A., the producers of Big Cola, which principally offer multiple serving size presentations in the sparkling and still beverage industry. In Brazil, the company competes against AmBev, a company that distributes Pepsi brands, local brands with flavors such as guarana, and proprietary beer brands. The company also competes against ‘B brands’ or ‘Tubainas’, which are small, local producers of low-cost sparkling beverages that represent a significant portion of the sparkling beverage market. In Argentina, the company’s main competitor is Buenos Aires Embotellador S.A. (BAESA), a Pepsi bottler, which is owned by Argentina’s principal brewery, Quilmes Industrial S.A., and indirectly controlled by AmBev. In the water category, Levité, Villavicencio and Villa del Sur are water brands owned by Danone, which is the company’s main competition. Manaos, a brand owned by Refres Now S.A. is the company’s main competitor in this segment. In Uruguay, the company’s main competitor is Salus, a water brand owned by Danone. The company also competes against Fábricas Nacionales de Cerveza S.A. (FNC), a Pepsi bottler and distributor that is partially owned by Argentina’s principal brewery, Quilmes Industrial S.A., and indirectly controlled by AmBev. In addition, the company competes with CCU Inversiones II Ltda, a water, soft drinks and brewery company and finally with some low-priced regional producers. Suppliers Mexico and Central America In Mexico, the company mainly purchases PET resin from Indorama Ventures Polymers México, S. de R.L. de C.V. and DAK Resinas Americas Mexico, S.A. de C.V., which Alpla México, S.A. de C.V., known as Alpla, and Envases Universales de México, S.A.P.I. de C.V. manufacture into non-returnable plastic bottles for the company. Also, the company has introduced into the company’s business Asian global suppliers, such as Far Eastern New Century Corp., known as FENC, SFX – Jiangyin Xingyu New Material Co. Ltd. and Hainan Yisheng Petrochemical Co. Ltd., which support the company’s PET resin strategy and are known as the top PET global suppliers. The company purchases all of its cans from Crown Envases México, S.A. de C.V., formerly known as Fábricas de Monterrey, S.A. de C.V., and Envases Universales de México, S.A.P.I. de C.V. The company mainly purchases its glass bottles from Owens America, S. de R.L. de C.V., FEVISA Industrial, S.A. de C.V., known as FEVISA, and Glass & Silice, S.A. de C.V., and in 2021 the company introduced glass bottles from Middle East suppliers, such as Saudi Arabian Glass Co. Ltd known as SAGCO. The company purchases sugar from, among other suppliers, PIASA, Beta San Miguel, S.A. de C.V. or Beta San Miguel and Ingenio La Gloria, S.A., all of them sugar cane producers. As of December 31, 2022, the company held a 36.4% and 2.7% equity interest in PIASA and Beta San Miguel, respectively. The company purchases HFCS from Ingredion México, S.A. de C.V., Cargill de Mexico S.A. de C.V. and Almidones Mexicanos, S.A. de C.V., known as Almex. The company purchases its cans from Envases Universales Ball de Centroamérica, S.A. and Envases Universales de México, S.A.P.I. de C.V. Sugar is available from suppliers that represent several local producers. In Costa Rica, the company acquires plastic non-returnable bottles from Alpla C.R. S.A., and in Nicaragua the company acquires such plastic bottles from Alpla Nicaragua, S.A. South America The company purchases non-returnable plastic bottles from Amcor Rigid Plastics de Colombia, S.A. and Envases de Tocancipa S.A.S. (affiliate of Envases Universales de México, S.A.P.I. de C.V.). The company purchases all of its cans from Crown Envases México, S.A. de C.V. and Crown Colombiana, S.A. Grupo Ardila Lulle (owners of the company’s competitor Postobón) owns a minority equity interest in certain of the company’s suppliers, including O-I Peldar and Crown Colombiana, S.A. The company mainly purchases PET resin from local suppliers such as Indorama Ventures Polímeros S.A. The company purchases plastic preforms at competitive prices from Andina Empaques S.A., a local subsidiary of Embotelladora Andina, S.A., a Coca-Cola bottler with operations in Chile, Argentina, Brazil and Paraguay, Alpla Avellaneda, S.A., AMCOR Argentina, and other local suppliers. The company’s main supplier of sugar is Nardini Agroindustrial Ltda., which is based in Brazil. The company purchases PET resin from several Asian suppliers, such as SFX – Jiangyin Xingyu New Material Co. Ltd. and India Reliance Industry (a joint venture with DAK Resinas Americas Mexico, S.A. de C.V.), and the company purchases non-returnable plastic bottles from global PET converters, such as Cristalpet S.A. (affiliate of Envases Universales de México, S.A.P.I. de C.V.). Environmental Regulations In all of the company’s territories, its Argentine operations are subject to federal and municipal laws and regulations relating to the protection of the environment. The most significant of these are regulations concerning waste management, which is regulated by federal Law 24.051 and Law 9111/78, and waste water discharge. Such regulations are enforced by the Ministry of Natural Resources and Sustainable Development (Secretaría de Ambiente y Desarrollo Sustentable) and the Provincial Organization for Sustainable Development (Organismo Provincial para el Desarrollo Sostenible) for the province of Buenos Aires. Other Regulations In August 2018, the Uruguayan government enacted Decree No. 272/018, which imposes an obligation to label certain food and beverage products that contain sodium, sugar, fats or saturated fats with health warnings. In September 2020, the Uruguayan government enacted a subsequent decree, Decree No. 246/020, changing the parameters to measure if any product is required to have health warnings. The company is in compliance with this decree. Sustainability Initiatives In the company’s Mexican operations, it established a partnership with The Coca-Cola Company and Alpla, the company’s supplier of plastic bottles in Mexico, to create Industria Mexicana de Reciclaje (IMER), a PET recycling facility located in Toluca, Mexico. In 2021, this facility recycled 19,252 tons of PET resin. In addition, in 2022, the company, together with Alpla, started the construction of a recycling plant located in Tabasco, Mexico, Planta Nueva Ecología de Tabasco (PLANETA), which is expected to start operations during the first quarter of 2023. This new plant will operate with state-of-the-art technology to process up to 50,000 tons of post-consumption PET bottles per year and to produce up to 35,000 tons of food grade recycled material, ready to be reused. The company has also continued contributing funds to ECOCE, A.C., a nationwide collector of containers and packaging materials. In 2021, ECOCE, A.C. collected 59.0% of the total PET resin waste in Mexico. All of the company’s bottling plants located in Mexico have received certain environmental certificates by federal and/or local authorities, which are annually renewed. The company’s Costa Rican operations participate in a joint local recycling effort with The Coca-Cola Company at the recycling plant Misión Planeta, located in Alajuela, Costa Rica. This plant collects and recycles non-returnable plastic bottles, Tetrapak and cans. Additionally, the company’s Costa Rican operations recycle, reuse and co-process 99.7% of their waste from its bottling plants, leverage certified suppliers and are in compliance with applicable legislation. The company’s bottling plants in Costa Rica are certified for ISO 50001. In Guatemala, the company’s Guatemalan subsidiary and the FEMSA Foundation, participate in FUNCAGUA (Fundación para la conservación del agua de la región metropolitana de Guatemala), as founding partners. In addition to FUNCAGUA, the company participates in environmental protection efforts in partnership with The Nature Conservancy, with respect to the replenishment of water in the regions of Chimaltango and Guatemala. All of the company’s bottling plants in Central America are ISO 14001, ISO 9001:2015, and ISO 45001:2018 certified. The company has also obtained and maintained the ISO 9001, ISO 14001, OHSAS 18001, FSSC 22000 and PAS 220 certifications for its bottling plants located in Medellin, Cali, Bogota, Barranquilla, Bucaramanga and La Calera, as recognition for the highest quality and food harmlessness in the company’s production processes, which is evidence of the company’s strict level of compliance with relevant Colombian regulations. The company’s bottling plant located in Tocancipa obtained the Leadership in Energy and Environmental Design (LEED 2009) certification in April 2017, as well as the ISO 9001, ISO 14001, ISO 45001, ISO 22000:2018, ISO/TS 22000-1, NTC 5830:2019, and FSSC 22000 certifications. Additionally, the company’s bottling plants in Colombia received the Zero Waste Certification (Certificación de Sistemas Basura Cero), granted by Icontec and the organization Basura Cero Global. The company’s bottling plants and operative units in Buenos Aires, Argentina are certified for ISO 14001:2004. The company’s bottling plant in Montevideo, Uruguay is certified for ISO 14001:2015. History Coca-Cola FEMSA, S.A.B. de C.V. was founded in 1979. The company was incorporated in 1991, as a stock corporation with variable capital (sociedad anónima de capital variable) in accordance with the Mexican General Corporations Law (Ley General de Sociedades Mercantiles).