Hello, and welcome to Coca-Cola FEMSA's Fourth Quarter 2023 Earnings Conference Call. My name is Melissa, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I'll now turn the call over to Jorge Collazo, Director of Investor Relations for Coca-Cola FEMSA. Please go ahead, sir..

Good morning, everyone. Welcome to our conference call to review our fourth quarter and full year 2023 results. With me this morning is Ian Craig, our Chief Executive Officer; Gerardo Cruz, our Chief Financial Officer; and the rest of the Investor Relations team. After prepared remarks, we will open up the call to take your questions.

We ask that in the interest of time, you make your most present question first, and then we enter the queue in case you have more than one question. Before we proceed, I'd like to remind all participants to take note of our cautionary statement included in our earnings release.

This conference call may include forward-looking statements and should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations that are based upon currently available data.

Actual results are subject to future events and uncertainties that can materially impact the company's performance. With that, let me turn the call over to our CEO. Please go ahead, Ian..

Thank you, Jorge. Good morning, everyone. We appreciate you joining us today. 2023 was an outstanding year for Coca-Cola FEMSA. We not only achieved positive results but also laid the foundation for our company's sustainable long-term growth model.

As we have discussed in previous calls, we defined and implemented 6 strategic priorities that guide us to capture the many opportunities that are ahead of us. I am confident that we are making important progress across these pillars, from accelerating the growth of our core business to the rollout of our B2B platform, Juntos+.

We are also making significant progress regarding culture as we foster an empowered organization with the necessary customer centricity and the psychological safety that allows our teams to challenge the status quo while passionately serving our customers.

During today's call, I will review our fourth quarter results and recap key highlights of the year across our operations. I will also provide you with a brief outlook of our initiatives for 2024, as we remain confident in our short and long-term positive momentum.

Finally, before taking your questions, I will pass the call on to Gery to expand on our quarterly results across our divisions and provide you with an adequate update on our savings initiatives. With that, let us begin by summarizing our consolidated results for the fourth quarter. Volume grew 6.1% year-on-year, reaching 1.26 billion unit cases.

This increase was driven mainly by the positive performance achieved in our Mexico, Brazil, Guatemala, Colombia, and Central American territories, which offset a slight volume decline in Argentina and Uruguay. Excluding the integration of the Crystal bulk water business in Mexico, consolidated volumes increased 5.1%.

Regarding category performance, we are pleased to report growth across the board. Sparkling beverage volumes grew 4.6%, driven mainly by brand Coca-Cola, which achieved 6.2% growth. Still beverages grew 7.8%, and bottled water grew 10.3%.

As the Coca-Cola Company highlighted during the recent earnings call, we strengthened our value share position during the year, driven by a turnaround in share trends in Mexico, as well as share gains across all of our other operations, except for Panama, as we leverage our growth of core pillar and joint marketing and execution capability.

Total revenues for the quarter grew 8%, reaching MXN 66.1 billion, driven mainly by solid volume growth that offset unfavorable currency translation headwinds related to the appreciation of the Mexican peso. On a currency-neutral basis, our total revenues increased a solid 15.7%.

Gross profit increased 12.6% to MXN 3.5 billion, leading to a gross margin expansion of 190 basis points to reach 46.1%. This increase was driven mainly by our top line performance, declining packaging costs, and the appreciation of most of our operating currencies as compared with the U.S. dollar.

These effects offset headwinds driven by higher sweetener costs across our operations. Our operating income increased 7.3% to MXN 9.7 billion, and operating margin contracted 10 basis points to 14.6%. This performance reflected strong top line growth, partially offset by increases in operating expenses, such as labor, marketing, and maintenance.

We also registered a lower operating foreign exchange gain as compared with the previous year, which was driven by the significant appreciation of the Mexican peso during the previous year.

Importantly, during the quarter, we incurred temporary additional freight and other expenses related to the shipment of finished products into Guerrero, resulting from Hurricane Otis's impact on the region. Excluding these onetime expenses, our consolidated operating margin expanded 30 basis points.

In relation to Guerrero, we announced an investment an 8 package worth MXN 575 million to support the region's recovery. As a result of well-established response protocols, we not only provided support to our team and communities in Acapulco, but also our regional production facility in Guerrero is now operating normally.

We're confident that with accordinate support of the private sector, local and federal authorities, Acapulco, will continue its rapid recovery. Adjusted EBITDA for the quarter increased 10% to reach MXN 13.1 billion, and EBITDA margin expanded 40 basis points to reach 19.9%. Finally, our majority net income declined 24.5% to reach MXN 5.4 billion.

This decrease was driven mainly by a base effect of a lower effective tax rate during the same period of the previous year. By normalizing this effect, our majority net income increased 8.6%. In summary, our 2023 results were outstanding.

Full year volumes increased across all of our territories, surpassing the milestone of 4.05 billion NARTD unit cases for the first time in Coca-Cola FEMSA's history. The volume growth achieved this year represented 44% of the Coca-Cola systems worldwide volume growth in 2023.

Our full year top line of MXN 245.1 billion, operating income of MXN 34.2 billion and adjusted EBITDA of MXN 46.4 billion also represented new benchmarks for our company. To support these results, we invested a record CapEx of MXN 21.4 billion, representing 8.7% of revenues.

These investments will enable us to continue adding the necessary capacity to support our growth ambition. Now let me expand on our operations highlights for 2023. In Mexico, we continue to see a resilient consumer environment.

The macroeconomic backdrop for consumption remains favorable as evidenced by the number of jobs registered with the Mexican Social Security Institute reaching a new record of 22.1 million jobs. Additionally, the average base salary registered an annual increase of 10.4%, the second highest in the last 23 years.

Our volumes for the full year in Mexico increased 8.7%, reaching 2.05 billion unit cases, a historic record for our Mexico operation. Our focus on growing the core business, expanding our customer base, mainly drove this growth.

To give you a sense of the magnitude, our team in Mexico added more than 47,000 new customers during the year, expanding our traditional trade customer base by 7% year-on-year to reach more than 720,000 clients.

Consistent with our priorities for Mexico in 2023, we achieved positive share performance across nearly all our nonalcoholic ready-to-drink categories, driven mainly by gains in the sparkling energy and sports drinks categories.

Additionally, aligned with our efforts to measure and standardize customer service KPIs across our operations, Mexico improved both its customer service and delivery service metrics.

Finally, we closed the year serving more than 512,000 monthly active purchasers through Juntos+, our digital B2B platform, reaching 70% of our traditional trade customers in Mexico.

Importantly, we began the rollout of Version 4.0 of Juntos+ during the first quarter of 2024, adding new features and significantly improving customer experience and performance. Moving on to Guatemala. Our volumes for the year grew a solid 18.4%, reaching 174 million unit cases. This marks the sixth consecutive year of double-digit volume growth.

To give you a sense of the magnitude on a comparable basis, volume in Guatemala is 2x the volume of 2017. We see plenty of opportunities for continuous growth in Guatemala, driven by our initiatives to grow the core, expand the customer base, and tap into opportunities in profitable still beverage categories.

Notably, the country remains a fertile ground for these strategies as it enjoys a stable macro environment and favorable demographics, marked by the youngest population in Latin America with a median age of 24.4 years. Moving further down south to South America. In Brazil, our team continues to deliver solid results.

We have consistently grown our volumes and strengthened our competitive position over the past 5 years. Our initiatives to grow the core continue to exceed expectations. For instance, Coca-Cola Zero Sugar grew 28% versus the previous year, while we increased our single-serve mix by 1 percentage point to reach 24.3%.

Our focus on capitalizing on profitable emerging beverage categories led energy to grow 19%, sports drinks 28%, and juices 16% year-on-year. Aligned with our strategic priority of debottlenecking our infrastructure, our supply chain team installed 4 new lines in Brazil, representing an additional 75 million unit cases of capacity per year.

That will enable our operation to reduce fixed costs, minimize on availability, and optimize service levels. Additionally, in 2023, Coca-Cola FEMSA Brazil was awarded first place in the Advantage survey as a top modern trade supplier to ABRAS, the Brazilian Supermarket Association.

This award reflects the unwavering commitment of our team to service our customers with excellence. Finally, our team in Brazil did an outstanding job in scaling version 4.0 the Juntos+ app. As we mentioned in our previous call, this enhanced version significantly improves customer experience and performance.

In Colombia, our customer centricity enabled us to successfully navigate a dynamic environment. During the year, our volume increased 5.3% year-on-year to reach 347 million unit cases, a new record for this operation. Notably, our team expanded our customer base by 17,000 customers, a 4% increase versus the previous year, reaching 480,000 clients.

We also improved service and availability to record levels and accelerate the rollout of our digital platform. Today, Juntos+ serves more than 223,000 active monthly purchases in Colombia with 20% of total orders now being done digitally. Finally, despite the uncertain environment, our volumes in Argentina increased 2.7% during 2023.

Aligned with our expectations, we saw a challenging consumer environment during the fourth quarter that ultimately led to a 1% volume decline in said period.

However, throughout the year, our team in Argentina was able to leverage our single-serve mix and affordability to achieve 2.6% growth in single-serve mix and a 2 percentage point increase in household penetration of returnable presentations.

We remain confident that we have the right team, joint capabilities with a Coca-Cola Company, and a resilient business model to manage our operation in Argentina under difficult conditions.

As we move on to 2024, we remain confident in our team's ability to continue executing our strategy, leveraging growth drivers across our rights to win in our footprint. In particular, we expect to focus on 3 key drivers in 2024. First, build on the growth momentum of our core business.

Second, take Juntos+ version 4.0 to the next level with the deployment of advanced AI capabilities, and third, continue fostering a customer-centric and psychologically safe culture for Coca-Cola FEMSA.

For instance, regarding the momentum in our core business, we have laid out robust plans across our operations to continue strengthening our competitive position, tapping into per capita opportunities, and continue exploring white spaces in profitable noncarbonated beverages.

Regarding Juntos+, we are very encouraged by the early results that our tests have shown leveraging cutting-edge AI engines for recommendation systems, personalized promos, and dynamic pricing among others. We expect to deploy these capabilities in Mexico and Brazil during this first quarter and scale them throughout the year.

Moreover, we expect to finish the rollout of version 4.0 of our app in Mexico, Central America, Colombia, and Guatemala, all during this year.

Finally, regarding culture, we have refreshed our vision and established the leadership principles that will guide that culture, and we are working in our organization, which we are deploying across the company this year. With that, I will hand the call over to Gery..

Thank you, Ian, and good morning to you all. Expanding on our division's results for the quarter. In Mexico and Central America, volumes increased 6%, reaching 581 million unit cases as we continue to see solid volume performance across the division. Excluding the integration of Crystal's bulk water business, our volume in the division grew 4.2%.

Revenues in Mexico and Central America increased 11.3% to MXN 37.6 billion, driven mainly by volume growth and partially offset by an unfavorable translation effects from most Central American currencies into Mexican pesos.

Our gross profit increased 17.5% to reach MXN 18.4 billion, resulting in a gross margin of 49%, a 260 basis point expansion year-on-year.

We continue to see sequential improvement in profitability as our top line growth, the appreciation of the Mexican peso, and declining packaging costs were partially offset by higher sugar prices in most territories in the division. Operating income increased 7.8% to MXN 5.6 billion, driven mainly by solid gross profit performance.

Our operating margin had a 50 basis point margin contraction to 14.9%, driven mainly by an increase in operating expenses, such as labor and maintenance, and marketing. This quarter, we also incurred temporary freight expenses to deliver finished product to Guerrero as a result of the impact of Hurricane Otis, as Ian previously mentioned.

Excluding these effects, our operating margin would have expanded 10 basis points. Finally, our adjusted EBITDA in the division grew 11.6% with margin expanding 10 basis points to reach 20.5%. Now moving on to South America. Volumes for the quarter increased 6.2% to 475 million unit cases.

During the quarter, we continued to see a solid performance in Brazil and Colombia with volume increasing 7.5% and 7.6%, respectively. This growth was partially offset by a 1% volume decline in Argentina and a 2.1% decline in Uruguay.

Our revenues for South America division increased 3.8% to MXN 28.5 billion as our volumes and revenue management initiatives were partially offset by unfavorable currency translation effects into Mexican pesos.

To give you a sense of the magnitude of this currency headwind, when excluding currency translation, our total revenues in South America increased 19.5%. Gross profit in the division increased 5.8% or 24.3% on a currency-neutral basis, leading to a margin expansion of 90 basis points.

Volume growth, favorable mix, and easing raw material costs mainly drove this increase, which was partially offset by increased sugar costs and the depreciation of the Argentine peso as applied to our U.S. dollar-denominated raw materials. Operating income for the division increased 6.7% to MXN 4.1 billion.

On a currency-neutral basis, operating income increased 23.6%, and operating margin expanded 40 basis points to 14.3%. This increase was driven mainly by our gross profit growth and operating expense efficiency. Finally, adjusted EBITDA in South America increased 7.8% to MXN 5.4 billion or 28.3% on a currency-neutral basis. Moving on.

Our comprehensive financial results recorded an increase during the quarter. This was mainly driven by a lower gain in monetary position in inflationary subsidiaries and the decrease in our interest income. These 2 factors were mainly related to the significant depreciation of the Argentine peso during the quarter.

Additionally, we recorded a higher foreign exchange loss as our net debt exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso and the other operating currencies during the quarter.

These effects were partially offset by a higher gain in financial instruments and the decrease in our interest expense mainly related to the maturity of a MEX 7.5 billion denominated bond.

Finally, aligned with the financial priorities that we announced at the beginning of 2023, throughout the year, we continue to focus on reinvesting in the business to support our long-term strategic vision to deliver sustainable growth. Aligned with this strategy, during 2023, we invested 8.7% of CapEx as a percentage of sales.

As we previously mentioned, we expect to increase our production capacity by 15% and warehouse capacity by 30% over the next 3 years. Beyond these investments, we will continue to focus on increasing productivity and achieving significant savings across our supply chain.

These initiatives were fundamental during 2023 as our team exceeded supply chain savings to reach $80 million, significantly mitigating margin pressures that helped us achieve our target resilient margins for the year. For 2024, our teams targets at least an additional $60 million in cost to make cost-to-serve and primary freight efficiencies.

With that, operator, we are ready to open the call for questions..

Thank you very much. [Operator Instructions]. Our first question is from Felipe Ucros of Scotiabank..

Gery and team, thanks for the space. First on digital, pretty impressive growth this year again. I think you're still growing monthly active users above 30% and digital sales doubled. So clearly, a higher ticket per client, which is exactly what you want to see.

Just wondering how all this journey has changed your initial assumptions about where the B2B effort could go if you compare what you thought in early 2020 versus what you think now, how has the strategy evolved..

Thank you for your question. Like you mentioned, the results have been very good. And I think if I compare it to our initial assessment, what's really going to change is probably what we'll do this year. I think, in our initial assessment, when we were looking at this in 2019 and 2020, we really weren't focused on using cutting-edge AI.

And the team has been working in the growth office and developing 3 cutting-edge engines. And those we are deploying this quarter in Mexico and Brazil, and we'll see how that scale. And I would say that the one part that we didn't have in our original road map.

Otherwise, we went into this knowing that it was something that we needed to do, that it was how the business was going to evolve, but we didn't have that much clarity on the adoption rate of this solution. But so far, so good. There's been a lot of learnings.

It's been a very nice journey, but I think the one part that we did not have -- that we hadn't foreseen at the beginning was this AI push that we're now going to put in for personalization, for pricing and promotions, images, and other aspects that we're very excited about it, and we'll see how it scales this year..

Very clear, if I could give a very short follow-up on pricing discipline and pressure across markets. We saw what happened with PepsiCo and Carrefour in Europe. So just wondering on the tone of negotiations for price increases is progressing across the regions as you talk to modern retailers.

And I guess also the reaction from the competition on pricing. If you can comment on those fronts, that would be great..

Well, I think, Felipe, we've been very clear that we're focusing on a sustainable growth model, and we're moving away from the practices of pushing pricing. And really, here, we're looking for sustainable growth in a relative competitive position. And that brings us to reasonable pricing dynamics. And so far, we haven't had any issues in that regard.

And we're improving how our average price looks basically through RGM strategies and price/mix adjustments. But the pricing that we're pushing through, we always make sure that it keeps improving our relative competitive position in all of our operations. So it hasn't been an issue..

Thank you very much. Our next question is from Ãlvaro García of BTG Pactual..

Congrats on results. Two questions. The first on channel breakdown in Mexico. We've seen a lot of CPG companies talking about a very strong modern trade. And I'm just curious if you're seeing some weakness out of the traditional trade or maybe that's not the case for you? And then my second question is on returnable presentations.

I was just wondering if you can comment on sort of the longer-term dynamics of glass returnable versus PET returnables, and how much PET has grown in that mix, and how much you expect it to represent in the future?.

Thank you for the question. Regarding channel mix, we are seeing more aggressive growth from the modern channel in Mexico, but -- which was, I would say, under -- was and is underpenetrated by the modern trade as compared to other countries. So I think it's very reasonable to continue to expect outperformance in modern trading in Mexico.

That being said, we are not seeing weakness in the traditional trend. Our traditional channel is doing very well. It's growing 5.3% versus prior year in this -- around those figures, if I remember correctly. So it's not an instance of weakness in the traditional channel, but rather outperformance from modern trade.

And I don't recall the last question, Jorge, if you can take it, please. I don't remember what is was..

Yes, sure. Sure, Ian. Regarding returnable, this is something that, of course, is very important for revenue management strategies, Ãlvaro, across our territories.

In particular, for example, Ian highlighted in Argentina, how we have been able to increase household penetration of returnables recently, which, of course, in the current environment, is very, very important. Having said that, we have a very balanced strategy regarding the mix of returnables.

We continue to see the multiserve returnables in larger formats, PET formats like the 2.5 liters, 3-liter presentations in Mexico being very important as part of our turnaround strategy in share in Mexico as well.

But we do that as well, segmenting our customers, the returnable glass that you mentioned is very important for the cola channel in Brazil, for example, is very important for the on-premise channel in Mexico. So all in all, it's part of a, I would say, an overall strategy that helps us segment our consumers.

I don't know, Ian, if you want to add on something with you here..

I think you explained correct. Thank you..

Our next question is from Fernando Olvera of Bank of America..

Sorry if I missed it, but can you comment what is your outlook on volume mainly on markets like Mexico and Brazil.

And very quickly, in Mexico, what is your outlook on cost this year considering the strength of the peso?.

It's Jorge. Regarding our outlook, I would say, in general terms, we are, as Ian mentioned, building on these comments. We are very optimistic on the short-term momentum that we have across our markets. Mexico, of course, had a very positive 2023. And with the start of the year, actually, has continued in those positive trends.

So we are ambitioning something for the company for volumes that should be close to the mid-single-digit range for growth in volumes. In Mexico, I would say, it's pretty much in that regard for the outlook. Brazil, also, we continue to be very optimistic about the outlook. We also had a very strong finish of 2023.

Similar to Mexico, obviously favored by very favorable weather. We're seeing strong demand in Brazil. So the outlook, I would say, is positive. That's the big picture of the plan that we have. Obviously, on the other hand, we have to recognize that it's a dynamic environment.

It will always come with different challenges, in particular, Argentina, as is expected. And as Ian mentioned in the prepared remarks, we started to see a deceleration in volume performance during the fourth quarter, and we continue to see that during the start of the year. But it's in line with the expectations currently.

Actually, we do expect to see in Argentina tougher first half of the year. And then towards the second half of the year, we expect to start seeing a gradual sequential improvement. I don't know for the outlook, that answers your question before passing it out to Gery for costs..

Yes..

Passing it out to Gery..

Regarding costs, Fernando, we're certainly seeing a more benign scenario in terms of commodities prices, specifically packaging. What is still something that will -- we expect to continue having as a pressure for our P&L as we move forward is sugar.

Sugar, although it's come down slightly during the start of the year, we certainly see an impact as compared to the previous year, a significant impact. So that will continue to be a focus for us to see how we can mitigate the impact of sugar prices.

Having said that, we have a pretty healthy hedge position for our P&L for '24 on most of our hedgeable raw materials. So we feel very confident that we will be able to deliver good performance throughout the year..

Our next question is from Luis Willard of GBM..

So seeing that -- I mean -- and thank you for your comments about the acceleration of Juntos+.

So I was wondering if you could comment perhaps at a conceptual level, how does this acceleration place in the context of the long-term cooperation agreement with Coca-Cola Company? And in particular, if I understand correctly, digital was a relevant part of the discussions.

So [indiscernible] in the context of this frame and going forward, do you see any potential adjustments to the negotiations to the agreement? Is it working better than what you discussed with Coca-Cola at the time? Any comment would be helpful..

Hello, Luis. I think the long-term relationship framework that we have with Coca-Cola has given us the visibility that we need to have great confidence in investing behind the business. And as you've seen, as we've done in capacity, and also part of those investments are what we're doing in digital.

So I would put the investments that we're doing in digital and Juntos+ as part of the larger context of having a framework that gives us the adequate visibility on the estimated returns that we can generate on our investments in the business.

So it's nothing specific to digital, but it's much wider than the digital piece, but it helps us get the same visibility that we need, that the investments on digital are going to give us the adequate returns.

So there's -- I wouldn't say it's particular to digital or that there is any adjustment there, but rather that as with the investments in capacity, it also gives us confidence to invest behind digital, which is a key with our second pillar in our business strategy. So I would put it more as part of the general context.

It helps us have that same confidence in investing behind digital risk.

Okay?.

All right. So if I may, in particular, -- so if you see better results in Juntos+ and that's given a certain level of investment. So we would say that the rate of return on that investment is, at this point, let's say, better than what you previously thought of.

So I mean, if that is correct, do you see Coca-Cola approaching yourselves to adjust something in terms of the level of investments or in terms of the level of investments or the prices or anything else that might effect or that might need to be renegotiated?.

No, not really, Luis. I don't see that being a trigger. As usually has been the case, our relationship with the Coca-Cola Company is great.

They're always seeking to co-invest when it helps accelerate the business or give us support when they see practices that can help accelerate results, but nothing in structural terms, really on case-by-case basis, and I would put this as positive contributions from their side when they want to accelerate certain capabilities, and we jointly co-invest behind them.

I don't see changes in the long-term relationship framework due to adjustments in the mix of our channel structure between physical and digital. I don't foresee that, Luis..

Our next question is from Camila Azevedo of UBS..

Congrats on the results. My question is regarding Brazil beer. So news and data shows that Eisenbahn sales decreased high single digits in 2023, while we reported growth in local currency. Maybe could you give us more color on the performance by brand? And just curious to understand what is driving this difference. Thank you..

Camila, it's Jorge. First, let me first start with a disclaimer that we are very limited on what we can comment by brand. Obviously, that's part of the relationship that we have agreed upon with Heineken. And also, as you may understand, from a competitive position, we're very limited.

Having said that, Camila, I would link your question to the beer question that happened in the previous earnings call. And I think that explains overall the kind of performance that we saw in Brazil beer during all of 2023. As you can see on the revenues that we disclosed, in reality due to the calculations.

And as we have mentioned, our portfolio has been relatively stable during 2023 with regards to volume and with regards to share, more or less. There are certain brands definitely that are performing better within their own segment. So the economy brands, for example, are the ones that are gaining share.

However, they are participating in a part of the Brazil beer segment that is getting smaller, so it's shrinking. Eisenbahn, in particular, it's a brand that we, of course, received with the new agreement we have with Heineken. And we are focusing on expanding coverage. It's not easy, as competitive as Brazil is within the beer segment.

It's not an easy fit. However, Camila, we do expect to see an improvement next year. We have a robust plan to working together with Heineken, and our team in Brazil has a plan in place to start turning that around. I don't know if that gives you a little bit of color.

But in reality, a summarizing is that Eisenbahn, we are repositioning it as a more premium brand within our portfolio. However, premium is highly competitive. It's very competitive. It's tough and takes time. So that's a little bit of the performance, Camila. I don't know if that answers your question..

Yes, it surely helps. Thank you very much, Jorge..

Thank you, Camilla..

Thank you very much. [Operator Instructions]. Our next question is from Ulises Argote of JPMorgan..

So just a couple of quick ones here. Related to CapEx expectations for 2024.

Can you comment there a little bit on how that is kind of shaping up and maybe over the next couple of years as well and how those investments in projects look like across for the different regions for [indiscernible]? And then the second one just related a little bit to competition in Mexico.

So obviously, you've been gaining back some of the market share here.

Have you seen any reaction from competitors? Is there anything kind of worth flagging on that [indiscernible]?.

This is Gery. Regarding investments, as we have been talking to you guys about during the last year, and this is one of our biggest focus is sustainable growth. Ian mentioned it. And for that, we are requiring capacity.

And basically, for the next 3 years, we are expecting to increase our manufacturing capacity by 15% and distribution capacity by around 30%. This is just investing in lines throughout our markets with big focus on our biggest 4, Mexico, Brazil, Colombia, and Guatemala, but throughout the company, we're investing heavily.

We expect that our CapEx as a percentage of sales remains between 8% to 9% until 2026, and then it starts coming back to our usual investment levels. That's our projection right now. And this is to support what we've been seeing in growth, not only growth that we're expecting going forward but also underserved markets that we're seeing currently.

So where we have out of stocks due to capacity limitations. So we are investing to solve that and support the growth that we're seeing across the operations..

Just to give you a little bit more color. In terms of new lines, our plan for this year was to put in 5 new lines and a 6 line that's a line that we moved from one plant to another that wasn't in production last year. So our plan was to put in 6 new lines that would go -- start working this year.

The response that we're seeing so far, we're thinking of probably investing in another 3 lines and bringing those investments that were in our long-term plan for next year, bringing those forward to this year.

So the growth model and the growth algorithm that we co-developed with the Coca-Cola Company is working, and we should be investing as well in additional distribution centers, probably around 1 to 3 -- around 6 new distribution centers as well. So the investment releases is going to be there precisely to support our growth model.

And the interesting part is the way our operating leverage is working, this is coming together with increased return on investment capital. So it increased last year, and we expect ROIC, and we expect it to continue to increase this year.

So these are accretive investments that are helping our company become more profitable in terms of return on investment capital. And regarding your second question, we switched Mexico's model to a growth model. So Mexico had been in yearly sheerly cline in Colas in each year of the last 10 years.

And we completely switched that around last year, and we returned to share of growth -- share of sales for Cola. And in the case of flavors in Mexico, we have been in 5 years of decline, we really declining share of sales in flavors. And again, we had a very positive year last year in share of sales in flavors, and that's the idea.

We don't intend to deviate from this growth model. We intend to seek a balanced sustainable growth where we improve our relative competitive position in terms of share of value year-over-year.

Does that help, Ulises?.

Yes. That's perfect. Thanks so much for the color there. Congrats on the results..

As we have no further questions in the queue, I would like to turn it back over to Mr. Collazo for any closing remarks..

Thank you very much, everyone, for your interest in Coca-Cola FEMSA for joining us on today's call. As always, myself, the rest of the IR team, Lorena, Marene, Emilio, we are available to answer any of your remaining questions. And we look forward to speaking to all of you again very soon. Thank you very much..

That concludes today's conference. You may now disconnect. Jorge, you may stay on the line..