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

Operator: Hello. And welcome to Coca-Cola FEMSA Second Quarter 2026 Conference Call. My name is Vinicius, I will be your moderator for today's event. Please note that this conference is being recorded. For the duration of the call, all participants will be in listen-only mode. You will have the opportunity to ask questions at the end of the presentation. To do so, please use the raise hand feature in Zoom and we will open your line. If you experience any technical issues during the call, please use the chat function to request assistance. I would now like to hand the call over to Pamela Ortiz, Investor Relations Director at Coca-Cola FEMSA. Pamela, please go ahead. Pamela Ortiz: Good morning, everyone, and welcome to Coca-Cola FEMSA's Second Quarter 2026 Results Conference Call. Today, we are joined by Ian Craig, our CEO Gerardo Cruz, our CFO, and the rest of the investor relations team. Before we begin, let me remind all participants that today's conference call may include forward-looking statements 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. The actual results are subject to future events and uncertainties that can materially impact the company's performance. For additional details, please refer to the full disclaimer in the earnings release that was published earlier today. After the prepared remarks, we will open the call for questions. To ask a question, please use the raise hand feature in your Zoom toolbar. With that, let me turn the call over to Ian, our CEO, to begin our presentation about the second quarter results. Ian, please go ahead. Ian Marcel Craig García: Thank you, Pamela. Good morning, everyone. Before reviewing our second quarter results, I would like to take a moment to address the earthquakes that struck Venezuela on June 24. This unfortunate tragedy resulted in loss of life thousands of injuries, and significant displacement across affected communities. It has impacted many people throughout the region, including employees of Coca-Cola FEMSA Venezuela and their families. We extend our deepest condolences to those who have lost loved ones and express our solidarity with everyone affected by this tragedy. Our immediate priority has been to our employees and their families as well as the impacted communities. With broader support from-- from FEMSA and The Coca-Cola Company, contributing to the humanitarian response. Including the donation of more than 100,000 liters of water and other essential emergency supplies to communities in need. We remain closely engaged with the team on the ground and we will continue supporting our people and the broader community as recovery and rebuilding efforts progress. Now let me walk you through our consolidated results. Our second quarter showed sequential improvement at the consolidated level driven mainly by record second quarter volumes in Brazil, Colombia and Guatemala. Where we continue to drive growth in the industry. At the same time, Mexico continued to face headwinds from the excise tax increase and the softer consumer environment. Against this background, we remained focused on implementing our sustainable long-term growth model. Continuing to gain share across markets and categories, and capitalizing on the FIFA World Cup opportunity. The FIFA World Cup represented a brand-building platform across our territory this quarter, We executed a comprehensive 360-degree plan combining exclusive customer promotions such as panini stickers, special edition cans, FIFA merchandise, and our red tide execution around stadiums, particularly in Mexico City. Fan Fest, and on premise channel. This integrated approach strengthened consumer engage translated into incremental demand and reinforced the positive momentum of our brands throughout the quarter. The final tally of the FIFA World Cup resulted in new highs in key Coca-Cola trademark brand engagement metrics. Such as reputation, positive buzz, purchase consideration, among others. Across our operations, reinforcing the platform's role, as a long-term brand-building invest. Moving on to our quarterly results. Consolidated volume for the second quarter grew 3.5% to reach 1.1 billion unit cases. This growth was driven mainly by volume increases across most of our operations partially offset by a volume contraction in Argentina. Total revenues for the quarter grew 4.7% to Ps. 76.3 billion, This increase is explained mainly by our volume growth and revenue growth management initiatives which were partially offset by unfavorable mix and currency translation effects. On a currency-neutral basis, total revenues increased 6.6%. Gross profit increased 8.8% to MXN 35.9 billion. Leading to a margin expansion of 180 basis points to reach 47.1%. This positive performance was driven mainly by favorable sweetener and PET costs as compared with the previous year. Reflecting the benefits of our disciplined hedging strategy together with the appreciation of most of our operating currencies as applied to our U.S. dollar denominated raw material costs. These effects were partially offset by higher aluminum costs. On a currency-neutral basis, gross profit rose 10.7%. Operating income rose 9.1% to Ps. 10.7 billion. While operating margin expanded 60 basis points to 14%. This positive performance benefited from the recognition of Ps. 265 million in recovered insurance claims in Brazil. Excluding this insurance recovery, operating income would have increased 6.4% with operating margin expanding 20 basis points to 13.6%. Our operating leverage and expense efficiencies particularly in labor and rent, drove this normalized margin expansion. These benefits were partially offset by higher freight, and marketing expenses, as well as a lower operating foreign exchange gain compared with the prior year. Adjusted EBITDA for the quarter grew 12.1% to MXN 15 billion, and EBITDA margin expanded 130 basis points to reach 19.7%. Excluding the effects of insurance claim, adjusted EBITDA grew 10.1% and EBITDA margin expanded 90 basis points to 19.3%. Finally, our majority net income grew 16.9% to Ps. 6.2 billion, mainly reflecting higher operating income and a lower effective tax rate. This growth was partially offset by an increase in our comprehensive financial result which Jerry will discuss in more detail later. Turning now to our key markets. Let me highlight the main operational and strategic developments during the quarter. In Mexico, volumes increased 1% year-over-year. As I mentioned earlier, our quarterly results continue to reflect headwinds from the excise tax increase and softer consumer dynamics. However, our sustainable growth strategy, supported by strong commercial execution, and the FIFA World Cup, continued to deliver share gains. Which will enable us to emerge stronger and return to growing the industry. Being a host country for the FIFA World Cup an important brand engagement opportunity for Mexico specific. Incremental demand was primarily generated in host cities through fan fest activations and other consumer touch points. While non host cities experienced a more limited impact. For its part, Powerade delivered an uplift of a 150 basis points of market share while generating strong positive brand buzz. Supported by its prominent role within the FIFA World Cup activations, and a dedicated 360-degree commercial plan that included the launch of Powerade Zero and limited edition flavors. Perhaps more importantly, the quarter demonstrated the effectiveness of the strategy we implemented following the excise tax increase, designed to deliver sustainable growth strengthen our competitive position and ultimately to return to growing the industry. This strategy was built on 4 complementary pillars. First, we adopted a differentiated revenue management approach improving our relative price positioning in regions with high competitive intensity. As part of this pillar, we continued reinforcing affordability through returnable and multi-serve presentation returnable offerings, including our 2-liter PET returnable presentation, have successfully expanded household penetration without cannibalizing our one-way portfolio. Second, building on the momentum of the Coca-Cola Zero playbook, we continued expanding this segment, which grew 24% year-on-year, while leveraging the FIFA World Cup, as I previously mentioned. Third, we strengthened our core flavors portfolio and heritage brands. Ensuring consumers can access their favorite beverages across multiple price points and consumption occasions. Fourth, we innovated and launched offering in underrepresented segments, such as our recent launch of Ciel Aguas Frescas which has been positively received by consumers. Supported by our state-of-the-art digital initiatives, these 4 pillars have translated into a stronger competitive position across channels. For instance, our Juntos+ platform maintained strong momentum with digital sales now representing 38% of the traditional trade and 19% of total revenues. We strengthened execution at the point of sale by increasing purchase frequency improving average ticket and expanding cooler coverage. Looking ahead, we expect the consumer environment in Mexico to remain subdued We will continue strengthening our competitive position through affordability accessible price points, innovation and digital execution positioning us well to deliver profitable long-term growth. In Guatemala, volumes grew 3.4% year-over-year, supported by a stronger consumer environment and disciplined execution across our portfolio. Economic activity continued to improve during the quarter. Supported by stronger household consumption, and resilient remittances, which grew 7.5% year-over-year. Looking ahead, GDP growth should remain supported by consumption, remittances and favorable demographics, with the population increasing approximately 1.3% annually which is above the broader Latin America average. In this context, our strategy remains focused on unlocking volume opportunities through market development and consistent execution. We continue to drive per capita consumption by expanding affordable price points and strengthening our one-way and multi-serve portfolio, This approach supported strong momentum in sparkling beverages, where our share increased by 90 basis points year-over-year. We also expanded our favorites portfolio with a more competitive and differentiated portfolio, enabling us to reach more consumers and consumption occasions beyond the strength of brand Coca-Cola. We continued accelerating consumer expansion customer expansion by capturing white space opportunities and investing in coolers. Our customer base grew 5.2% to approximately 156 thousand customers while cooler coverage increased 40 basis points to 78.8%. Overall, Guatemala offers a compelling combination of healthy consumer fundamentals favorable demographics, expanding customer coverage and significant room to increase per capita consumption. We remain confident in our ability to convert these opportunities into sustainable volume growth and profitability over time. time. Turning to Brazil. Where our volumes increased a solid 5.2%. Despite high interest rates, low unemployment, and real income growth continued providing support for consumption. In this environment, our Brazil operation continued to outperform the industry through disciplined commercial execution and digital capabilities. As well as by capitalizing on the FIFA World Cup opportunity. As a result, we continued gaining share across key categories with the non-alcoholic ready-to-drink industry. Our core portfolio delivered growth across our 3 main bets, first, within our zero portfolio Coca-Cola Zero grew 15% and Sprite Zero grew triple digits. Second, flavors reached double-digit growth supported by Sprite and Fanta. And third, Stills delivered 23% growth driven mainly by Monster, teas and sports drinks with Powerade. In sparkling beverages, our single-serve mix was another highlight of the quarter. Improving 2.6 percentage points compared to March 2026. Reaching 28%. We drove this result by capitalizing on the FIFA World Cup and Panini exclusive stickers in our 600 ml Brand Coca-Cola presentations. This not only increased transactions, but also provided a positive tailwind to our profitability. We also continued to strengthen our commercial capabilities through digital transformation, we are leveraging Juntos+ Advisor, our next generation platform to provide supervisors and frontline teams with better insights suggested ordering capabilities, and enhanced commercial execution. These investments are helping to improve assortment quality, increase average ticket, and further strengthen customer relationships. Looking ahead, we expect election-related spending and strong execution to support the second half of the year while we continue to closely monitor regulatory developments that could result in a more challenging backdrop in 2027. However, we remain confident in the long-term growth opportunity of the Brazilian market and in our ability to continue delivering long-term. Turning to Colombia. Volumes increased 17.7% year-over-year supported by minimum wage increase and improving consumer environment and strong execution across our portfolio. Macroeconomic indicators continued to improve during the quarter, Unemployment declined to 8% in May, its lowest level for that month since 2001, while consumer confidence reached the strongest sustained recovery since 2015. Although job creation remains supported in part by the public sector, and labor informality remains structurally high, the overall macroeconomic backdrop points to a gradual improvement in the consumer environment. Our affordability strategy in Colas continued to deliver results supporting further market share gains in the one-way portfolio At the same time, we continued strengthening our position in flavors delivering 27.2% quarterly volume growth supported mostly by Quatro, our grapefruit flavor, and Sprite. We also continued advancing our strategy in still beverages by prioritizing profitable growth in margin accretive categories. Powerade and Monster were among the strongest performing brands during the quarter, allowing us to capture attractive growth opportunities while improving the quality of our portfolio. Our digital capabilities remained another important driver of execution. To our Juntos+ platform, we continued increasing customer engagement, helping us to improve ordering frequency. Strengthen assortment and deepen our relationships with our customers. Overall, Colombia delivered a strong combination of volume growth, share gains and operating leverage underscoring Colombia as 1 of our key growth markets. In Argentina, volume decreased 2.8% year-over-year. Mainly reflecting a truck driver strike that affected the beverage industry within our region together with continued softness in consumer demand. Although macroeconomic conditions have continued to stabilize the recovery in consumption has been lower than anticipated with consumers increasingly prioritizing value and affordability in their purchasing decisions. Against this backdrop, our strategy remains focused on strengthening affordability, while continuing to refine our revenue growth management capabilities ensure consumers have access to the right price pack architecture options across channels and occasions. This approach has enabled us to preserve the affordability of our core sparkling portfolio while strengthening our competitive position, contributing to a 100 basis point increase in our CSD market share. We also continued reinforcing our leadership in flavors, mostly capitalizing on the strong momentum of Sprite. Beyond sparkling beverages, we remained focused on growing profitable NCB categories, which posted year-over-year volume growth. While the competitive environment remains intense, particularly with increased pressure from value-oriented and B-brand offerings. We remain confident that our affordability strategy disciplined commercial execution, and balanced portfolio position, us well to continue strengthening our competitive position as consumer demand gradually recovers. This quarter once again demonstrated the value of our long-term sustainable growth model, while Mexico navigated a more challenging consumer environment we are laying the foundations to emerge stronger and grow our industry. In our South American operations, particularly Brazil and Colombia, we continue to deliver industry growth strong volumes and profitability. This geographic diversification together with our ability to capitalize on markets with stronger momentum while maintaining disciplined execution across the region continue to support our consolidated results. With that, I will hand over the call to Jerry to expand on our division's results. Gerardo Cruz Celaya: Thank you, Ian, and good morning, everyone. Expanding our division's results for the quarter. In Mexico and Central America, our volumes increased 1.4% supported by volume growth across all territories in the division. Revenues were flat at Ps. 45.4 billion, as our volume growth was offset by unfavorable mix and currency translation effects into Mexican pesos. On a currency-neutral basis, revenues increased 2%. For its part, gross profit increased 3.9% to reach Ps. 22.2 billion, resulting in a gross margin expansion of 170 basis points to 48.9%. This margin expansion was driven mainly by lower raw material costs, particularly for sweeteners and PET, reflecting the benefits of our hedging strategy together with the appreciation of the operating currencies in the division as applied to our U.S. dollar denominated raw material costs. Operating income in the division declined 7% to Ps. 6.4 billion and their operating margin contracted 110 basis points to 14%. This decline is mainly explained by higher expenses such as marketing and freight, coupled with a lower operating foreign exchange gain as compared with the prior year. These factors were partially offset by operating expense efficiencies such as labor. Finally, our adjusted EBITDA margin and EBITDA margin in the division remained flat at Ps. 9 billion and 19.7%, respectively. Moving on to South America. Volumes increased by a solid 6.9% to 426 million unit cases. This increase was driven mainly by volume growth in Brazil and Colombia that was partially offset by a volume contraction in Argentina. Revenues in South America increased 11.8% to Ps. 30 billion, driven mainly by volume growth and revenue management initiatives which more than offset unfavorable currency translation effects into Mexican pesos from most operating currencies in the division. On a currency-neutral basis, total revenues in South America increased 14.1%. Gross profit in the division increased 17.7% to reach MXN 13.7 billion, and gross margin expanded by 220 basis points to 44.4% driven mainly by favorable mix coupled with lower raw material costs and the appreciation of most of our operating currencies as applied to our U.S. dollar denominated raw material costs. These effects were partially offset by higher aluminum and secondary packaging costs. On a currency-neutral basis, gross profit increased 20.1% year-on-year. Operating income in South America rose 46.5% to MXN 4.3 billion, while operating margin expanded 330 basis points to 13.9%. As Ian previously mentioned, this quarter, we recognized insurance claims in Brazil for Ps. 265 million. The improvement in operating income was driven mainly by operating leverage coupled with expense efficiencies such as rentals and labor. These efficiencies were partially offset by higher marketing and freight expenses. Finally, adjusted EBITDA in the division increased 35.6% to Ps. 6.1 billion for a margin expansion of 430 basis points to 19%. Now let me expand on our comprehensive financing results. Which recorded an expense of Ps. 1.3 billion as compared to an expense of MXN 1.2 billion during the same period of the previous year. For the quarter, the increase was driven mainly by the following factors. First, we recognized higher netted interest expense mostly as a result of the issuance of new debt during the first quarter of 2026. Second, we recognized the lower gain in instruments of Ps. 88 million compared to a gain of Ps. 1.154 billion in the prior year. Primarily reflecting the valuation of matured financial instruments and lower rates in Brazil. Finally, these effects were partially offset by a higher foreign exchange gain of Ps. 96 million during the quarter as compared to a gain of Ps. 55 million in the same period of the previous year. This was driven mainly by the appreciation of the Mexican peso as applied to our U.S. dollar denominated net debt. As I mentioned during our previous earnings call, the global commodity environment remains volatile. As such, we continue to lean on well established protocols and governance structures that enable us to plan, respond, and adapt effectively our hedging strategy. Providing an update for this year, we have hedged 65% of our PET requirements 96% of sugar, 98% of HFCS, and 73% of aluminum. In addition, following our policy, we are already taking hedges for 2027, resulting in 80% for sugar, 80% for HFCS, and 54% for aluminum. Allows us to reduce short term volatility and provide visibility for the upcoming year. This disciplined hedging strategy, together with our continued focus on cost and expense optimization, provides greater visibility over our input costs, allowing us to plan ahead with greater confidence while protecting margins over time. Let me briefly address our capital allocation priority. First, we will continue investing behind the business to support long-term profitable growth. While our capital intensity is naturally moderating after several years of expanding our capacity, For 2026, we continue to expect CapEx to be between 7% to 7.5% of revenues. At the same time, we continue to invest selectively where additional capacity is needed. Recent examples include the inauguration of our new PET production line in Costa Rica, and our new aluminum can line in Uruguay. Both of which enhance our manufacturing capabilities and position us to support future growth across those markets. Second, we remain attentive M&A opportunities that meet our strategic and financial criteria. We have a strong track record of disciplined capital deployment, and that approach remains unchanged. Third, returning capital to shareholders continues to be an important component of our capital allocation framework. We have been conducting a comprehensive review to evaluate the alternatives available and we will share updates as this process evolves. Turning to sustainability. The Mexican Stock Exchange recognized Coca-Cola FEMSA with the best total score in Mexico CSA 2025 Award positioning us as the leading sustainability performer among the listed companies evaluated. We also received the highest distinctions in the environmental, governance, and economic categories. These recognitions reflect the consistency the consistent execution of our sustainability strategy and its integration across our operations. Before turning over the call for questions, I would like to share an update regarding our investor relations team. As you may have seen in this morning's earnings release, Pamela Ortiz will become Director of Investor Relations. Pamela brings an extensive experience in capital markets and investor relations including her previous role as investor relations manager at FEMSA. Jorge Collazo, who has been part of the Coca-Cola FEMSA investor relations team since 2016, will take on a new responsibility as planning director for Coca-Cola FEMSA Brazil. In addition, Lorena Martin, currently investor manager, will assume a new role as FP&A manager at our LATAM division, while Natalia Sarinjana will become investor relations manager. The team has been working closely together to ensure a smooth transition and continued support for our investors and analysts. With that, operator, we are ready to open the floor for questions. Operator: Okay. At this time, we are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions, or write it down in the Q&A session for written questions. Please remember that company's name should be visible for your questions to be taken. We do ask that when you pose your question, that you pick it up, your hat to provide optimum sounds quality. Please hold while we pull for questions. Our first questions come from Álvaro García from BTG. Sir, your microphone is open. Álvaro García: Hi, Ian. Jerry. Thanks for the space for questions. I will let other analysts ask about Mexico. I wanted to ask about Monster in Brazil. Was wondering if you could maybe unpack how much of that growth is coming from household penetration versus geographic expansion within your territory. And it is maybe if you could just comment a broader perspective how much it complements your portfolio in Brazil. Thank you. Pamela Ortiz: Hi, Álvaro. This is Pamela. So, basically, the energy drinks category in Brazil has been performing quite strongly. We have the CAGR of the last 4 quarters it is been growing around 25% growth So overall, we believe that we are capturing share versus other competitors. This it is been boosted mainly by portfolio innovation, which we have launched a couple of new flavors. Ian Marcel Craig García: And also complementing a lot our strategy together with sports drinks and CSDs overall Alvaro, in terms of household penetrations versus geographic expansion, coverage does continue to increase. We track it. It continued to increase. So there is not really geographic expansion, but improvement in coverages per se. And improvement in household penetration. You have to it is worthwhile to consider that these categories has a bunch of tailwinds including GOP ones. it is amazing what is happening in energy. Half of its volumes are now in zero sugar or no-cal offerings. So we only expect positive things from Monster, and it is really performing well across all geographies, not only Brazil, but everywhere. Thank you very much. Thank you, Álvaro. Operator: Our next question comes from Benjamin Theurer with Barclays. Sir, your microphone is open. Benjamin Theurer: Yeah. Good morning. Thanks for that, Ian. Jerry, Pam, and, overall, thanks for letting me ask that Mexico question. So on that, would be great if you could help us unpack a little bit the performance throughout the quarter, especially considering we had a couple of easier comps last year from very bad weather, if I remember right. So I wanted to understand a little bit the dynamics throughout the quarter. And in line with that, what your expectations are for the back half just considering that relatively soft consumer and probably continued headwinds from those tax increases that we got with the beginning of the year. Thank you very much. Ian Marcel Craig García: So, Benjamin, you are right. The volumes improved sequentially So if we look within the quarter, the first 2 months were negative, slightly negative. Around the 3.5% range. And then June, it ticked up to a growth of over 12%. But that, like you rightly pointed out, is was mostly due because of the comps. We have seen trends continue to improve, so that is good. For Mexico. And I think we have, you know, quite bit of shared cushion in Mexico. So going forward, I think this leaves us room to consider starting to catch up the what we had of the gap left in pricing with inflation. So things are looking slightly improved in Mexico, but I would say the environment competitive wise and consumption wise is still challenging. So you are right. You know, the comps get easier. We have built a shared cushion. But I would not say we are off to the races in Mexico there is still, you know, a sluggish consumer environment overall. K. Perfect. Thank you very much. Thank you. Operator: Our next question comes from Henrique Brustolin from Bradesco. Sir, your microphone is open. Henrique Brustolin: Hello, everyone. Thank you for taking my question. I would like to follow-up precisely on the point of pricing in Mexico. We saw another quarter of realized prices slightly down on year on year. So if you could help qualify the impact that mix had here from the impact, you know, that actual price increases have or not have taken. And if you could just expand on the comment of catching up pricing with inflation going forward on how you are thinking about that would also be really helpful when you think in the second half of the year. Thank you. Ian Marcel Craig García: So hi, Enrique. So I will I will give a broader context on the on the strategy. Which we have touched upon in prior calls. And then I will I will let Jerry go through the impacts, which were mostly mixed. So what we did this year going through the tax increase and knowing that we had a really challenging consumption environment as well, is we ended up passing about 85% of the total impact that we had between tax and inflation. We did not pass through everything. And the rationale with that was, using our models and what we had learned from prior exercises believe this model is a better outcome. Alright. So just to give context, in the last time we had such a large EEPS price increase, was 2013-2014. In that year, we transferred a lot of price cost plus the tax and that resulted in 190 basis points of share loss. Which then rolled over into 500 basis points of share loss for continued share loss for over 8 years, which we finally in 2023, when we started to grow again share. So this time, we were more a little bit more conservative. I think it played out perfectly because it was a big increase nonetheless for our consumers. So it was very tough but we did not want to lose household penetration and consumer preference. And I think we have managed to do that Shared responded, So now we have enough of a share cushion built that we can continue to pass through in price and catch up with inflation, which we had not done. So we should be able to finalize that in August And with the caution that we have, we should end up the year positively. it is always an uncertainty because you do not know how things are going to react. But I think our what our models tells us is we should be able to do it and end up the year improving our relative competitive position. that is overall as a strategy. And maybe, Jerry, if you can help expand on, you know, the price mix effects, which were the main culprit, I believe. Gerardo Cruz Celaya: Yeah. You, Ian, and thank you all for the question, Enrique. As Ian mentioned, I think even though we usually expect when we see a tough disposable income situation like the 1 we are facing this year in Mexico, given the increase in the excise tax we usually see mix shifting significantly towards more affordable packaging alternatives. But this year has been especially, strong. Mix has been shifting significantly towards one-way, multi-serve presentations, especially the 3-liter. And I would say, that it is kind of a positive and negative situation. The impact that we see in mix flows through our p and l but I think it is positive that we, continue seeing consumers, deciding for purchases within our portfolio of alternatives. So we maintain our positioning with consumers within households which should position us well, for the recovery year after the excise tax gets cycled. So as Ian mentioned, given the share that we have built the share cushion that we have built during these, past few months, we expect to close, the inflation gap that we still have for the remainder of the year, which should, give us a little bit of a tailwind for our p and l as the year progresses. that is really helpful. Thank you. Operator: Our next question comes from Fernando Ferreira with Bank of America. Sir, your microphone is open. Fernando Ferreira: Hi. Good morning. Thanks for the space for questions. I have 2 follow ups regarding Mexico and just 1 more question. The fur the first 1 is the related to volumes. If do you still see the minus 2% to minus 4% for the year? You know, based on year to date volume and consumers' behavior. And the other 1 is, I remember that, in the first quarter, no competition was aggressive. So if you can comment on that of how competition behaved during this quarter, would be great. And the last question is regarding your margins. In Mexico. We saw gross margin expanding 170 basis points and then operating margin contracting 110. So can you give us more color about that contraction of how much came from freight expenses and how much from marketing. And in the case of marketing, I also want to check with you if the increase was mostly related to the soccer World Cup. Thank you. Ian Marcel Craig García: Hi, Fernando. So in terms of you asked about volumes, competitive intensity, and then with that, I will hand it over to you, Jerry. I will take the first 2. So in terms of in terms of volume, I think like I mentioned in Benjamin's question, so trends have started to improve partially because of the base effect. But with this improvement, I would say we should be able to move our guidance from the slightly negative to flattish. So for us, it now should be flattish volumes. Right? Plus, minus. So that is what we should expect for full year. I would like to see the how volumes respond once we finish the August adjustment to recover inflation. So that is why I am still keeping flattish. Okay, Okay. For in terms of competitive intensity, it remains very high in Mexico. But like I mentioned, we were quite conservative We leveraged our models to the fullest, all of our intelligence. And it worked very well. So, I mean, we are gaining, like, half a point of share of NARTDs in So it is a lot of share gains almost point 7 in CSDs, So everything in Mexico is green in share. Everything. Every single segment steels, fruit drinks, teas, water, energy, sports drinks, ARTDs. So we built a cushion. And like I said, now we can move. It be too early to say if we can adjust the guidance to above flattish because precisely we need to adjust in August and see how consumers digest this completion of the inflation pass through. Jerry? Gerardo Cruz Celaya: So for your second part of the question, Fernando, regarding operating margin, we did see impacts mainly coming from 3 factors. First 1, freight, we saw a 20% increase in freight expense versus a previous year. Then we had, and I mentioned it during the prepared remarks, we had a smaller f operating, FX gain as compared to the same period of last year, which accounted for a significant portion of, that margin deterioration in this quarter. And third, and connecting it to your, last part of question, marketing expense was 9% higher This was the, biggest fact impacting, operating margin. And as you well point out, our budget for marketing this year was front loaded to the first part of the year, to support the World Cup initiatives that we I think, executed quite well during the first half of the year. Okay. So in that case, it is fair to assume that it will normalize in the second half? We expect for the second half of the year, a better comps in terms of marketing expense. But that should be the case. The factor that we cannot foresee quite, in the in the same way is, the FX impact that we had during the second quarter. Great. Thank you, Ian and Jerry. Thank you, Phil. Operator: Our next question comes from Froylan Mendes with JPMorgan. Sir, your microphone is open. Froylan Mendes: Hello, guys. Can you hear me well? Yes. Hi, Froy. Thank you. Hi. Hi. Hi. So I just wanted to understand your thoughts and maybe the lessons learned from the growth in Brazil regarding the zero portfolio translated into Mexico. We are seeing obviously very strong growth But how are you able to distinguish between how much of the growth of zero is, let's say, incremental to the category, versus, you know, customer switching from the full sugar to the zero And at what point do you think zero becomes, like, the true growth driver for Mexico to grow beyond, let's say, the run rate that we have seen the past couple of years. Ian Marcel Craig García: Alright. Froy, so look, I think your question is very, very important. So what we have seen across markets when we start to implement the Brazil playbook for Coca-Cola Zero, Is this cons consistent either high single digit or double d, digit growth year-over-year. And it is very important that we follow all of those elements in the playbook. The first years of that playbook usually Coke Zero sources growth from competitors, juices and even waters. It does not, cannibalize in a major way. At least at first. So for example, in Mexico, we are around a 4% mix. So it is very, very small mix. In Brazil, we are at a 30% mix. When we do start to see cannibalization, and like you said, switch from a 20% mix. Of course, every market is different, but this is more or less the experience that we have had. So we do have markets above that 20% mix, such as Argentina, Uruguay, I think Costa Rica is there as well. But, those markets there is incremental growth, but there is also a large cannibalization. All of the rest, Mexico at 4%, Guatemala is I do not even think, gets to 2%. The rest are around, you know, Colombia at 9%. there is plenty, plenty of incremental volume to come And that is what we are seeing in Coke Zero. We are also starting to experiment and learn with Sprite. Sprite is a jewel that the system has that we did not exploit connects very well with Gen Zers and it is something that, you know, should also follow that type of trend. So we are betting a lot on Sprite leveraging Sprite Zero, and I hope to start bringing good news on Sprite going forward. But it is the same sort of playbook there. I do not know if that is helpful. It is very, very helpful, Ian. Froylan Mendes: And if I could add a second question just on Brazil and Colombia, very strong results in the first half. Second quarter. What could be different in second half? Or should we assume this run rate into the second half? Given what you are seeing on the ground? Gerardo Cruz Celaya: Yeah. Do you wanna take I can I can start with that question? Froy, We expect Brazil to continue performing well in line to what we have seen. Colombia you will see an effect in the base, even though we do expect average daily sales to continue growing at the same pace that they have been growing during the first half of the year. Last year and during the second half of last year, we already saw Colombia recovering, performance trends. So the comps are a little bit tougher in the third quarter and fourth quarter, for that operation. But we will continue to see a healthy pace of growth coming from Colombia. Thank you very much. Operator: Our next question comes from Renata Cabral with Citi. Ma'am, your microphone is open. Renata Cabral: Hi. Yeah. Jerry, Pam. Thanks so much for the space for questions. I first want a follow-up on Mexico. On the first quarter, you mentioned that consumers traded more aggressively than expected into large returnable-style packs. So my question is if that behavior stabilized during the second quarter and if you are seeing consumers gradually returning to single-serve packages or it is still mix it is still under pressured? And my second is a follow-up regarding Brazil. You just said that it continue expecting good performance in the second half of the year, but my question is more related to what happened on the second quarter related to if this 5.2% of volume growth is more related to market share gains, how the is going in terms of growth. And if it is possible to have some idea of how much the World Cup contributed to that would be really great. Thank you so much. Gerardo Cruz Celaya: Thank you, Renata. I will I will kick it off. As you well point out, the first quarter, we did see significant impact coming from mix. That carried on into the second quarter. Even a little bit, more than what we had budgeted for at the start of the year. And we do expect that trend continues, for the remainder of the year. With significant higher, mix of multi-serve presentations, especially one-way. Having said that, we are, being, very prudent in terms of measures that we are taking to support single-serve performance. We have seen a bit of an improvement, weather, coming on in Mexico. That usually helps single-serve presentations, and we are also investing in, single-serve dedicated coolers in Mexico, which should also, help performance in single-serve as we move ahead. Ian Marcel Craig García: You asked, also, Renata, about the industry. So NARTD in and this is Brazil. NARTD industry In Brazil has been growing, I would say, the last 3 months. It started out the year I think it was growing in January, then it declined in February, March, and then renew April, May, June growth. This is the industry overall, CSDs moved from I think, negative the first trimester to flattish. We are talking volumes. And what is really driving that growth mostly was NCVs. Energy, teas, juices, sports drinks, water. That was what is really growing. So that is the industry overall. So when you see our volumes, growing 5.2% We are way and we are gaining, you know, way above the industry. So a lot is coming from share But like I mentioned, the industry is positive. And but not at the level that we are and that is why it is translating into share. Thank you so much. Very good, Pam. Thank you very much. Operator: Our next question comes from Henrique Morello with Morgan Stanley. Your microphone is open. Henrique Morello: Hi, everyone. Thank you so much for taking my question. So my question is on the margin dynamics in South America. So really strong performance there even excluding the insurance gain. So if you could just explore a bit more details on the main underlying drivers behind the margin expansion and how you are seeing those drivers progressing throughout the year in the second half and in 2027 as well. So for instance, if you could comment if Colombia with the big volume increase was an important driver, or if it was more related to the hedges of raw materials effects that you are cycling? Or maybe some SG and A efficiencies or other COGS components that maybe we do not have much visibility. And also looking at your current hedge positions for the second half for next year, thinking about Brazilian Colombia and doing very strongly and Argentina struggling a little bit. When balancing those things out, how sustainable or how should we think about those margin expansion rates for the remainder of the year and for 2027 as well? Thank you very much. Gerardo Cruz Celaya: Thank you, Henrique. So for us, I think we are very with what we are seeing in terms of margin performance from South America. And we have talked about this for a while. Our strategic playbook for improving profitability is aimed specifically at Brazil and Colombia. Which are the 2 main sources of improvement in margins in South America. And what we are most happy about is that we are seeing structural improvement in margin performance in both operations in line with that playbook. Ian Marcel Craig García: So the main source of that improvement is operating leverage as we continue to grow, and create efficiencies in both of our operations. it is very well translating into improvement in margins. So we do expect that trend continues as we move forward. I think in Brazil, we are getting, to a moment, it becomes competitive to the rest of our operations. In Colombia, we think we still have a lot of headspace of improvement in profitability. That will continue to flow as time progresses. We worked very hard that we get to do this. Like I said, under our sustainable growth model. So it is always, you know, leveraging our RGM expertise to the fullest to make sure we continue to lead industry growth and improve our relative competitive position. And it is a year-over-year process You get into this virtuous circle when you improve your relative scale, your size, your efficiencies, you get a more orderly market. that is what is happening there. that is super clear. Thank you very much. Thank you, Henrique. Operator: Thank you. Our next question comes from Thiago Bortoluci with Goldman Sachs. Please go ahead, sir. Thiago Bortoluci: Hey, guys. Good morning. Thank you thank you very much for taking my question. I have a follow-up on of the latest comments from Jerry on his opening remarks. Regarding capital allocation and the potential usages for the balance sheet. Right? We understand this is still work in progress. No decision was defined. And certainly this is not a guidance. But when you sit with the board to discuss what are the best usages for excess cash, Any color on how to think about dividends, ordinary, extraordinary, buybacks, the potential comfortable leverage you would be, willing, to get into and anytime to start deploying, this potential, you know. Balance sheet releveraging, that would be greatly appreciated. Thank you very much. Thank you, Thiago. Gerardo Cruz Celaya: Yes, that is where we are. I think regarding and I mentioned it in the prepared remarks, regarding returning capital to shareholders We are we are very aware of the situation that we are facing. We think we have clear picture of, the alternatives we have. We just have to take care of the timing issue of, making the decision and taking it to the board. But we are in that process And as mentioned in the remarks, we will let you know as this process evolves during the year. that is fair. Thank you very much. Thank you, Thiago. Operator: Our next question comes from Rodrigo Alcantara with UBS. Sir, your microphone is open. Rodrigo Alcantara: Hello? Good morning, afternoon, guys. Ian, Jerry, congrats, Pam and Jorge, for your appointments. I guess my question would be for Ian in Brazil. Right? As you correctly said, the growth mainly driven by share momentum it is been a while since we have seen this strong performance when we compare to your largest competitor. Right? Been a while, not just a thing of 1 quarter or 2. So my question would be here, Ian, how far is KOF from, let's say, its first share of the of the Brazilian market just to understand, like, the room for momentum to continue And more importantly, right, I mean, your view what is been driving these share gains? Are we talking of price competitiveness go to market execution, You see just like consumers liking more the products, the liquids that you that you that you sell. Right? I mean, you just do not understand these massive share gains that we have seen within the non-alcoholic system there in Brazil, And my second question would be perhaps not very fair to ask you these perhaps more a question to the Coke company. Is in relation to innovation. You know? Your comp saw recently 1 of your competitors launching a non-alcoholic protein beer, right, in Brazil. And so far, you know, aside from the Coke Zero concept, which has been a success, right, We have not seen the know, such a big thing in innovation mean, you can correct me if I am wrong here, but for from you guys, from the Coke system and all that. So my question would be here, I mean, what is next for Coke in LatAm for this year? I mean, any big launches that you may be planning, any new categories that you may be interesting to explore that would be very helpful, Ian. Thank you very much. Ian Marcel Craig García: Hi, Rodrigo. So I will talk first about, you mentioned the headroom or the possible headroom in Brazil. And then about innovation in general. So Yes. I think in terms of headroom in Brazil, there is plenty still first from per capita per se, for the industry. So there is still a lot of space to continue to grow the industry and expand the industry. And that is what we are doing. When you look by segment, then there is also headroom in terms of share. In the case of Brazil, I would say, in CSDs, the main headroom is in flavors. What we have done there is amazing with the zero portfolio. So in Brazil, we are gaining 400 basis points of share in flavors. it is wild what is happening in Brazil, and this is due to Sprite Zero. So we made sure we were very well positioned with excellent flavor profiles in the cereals category for flavors, and that is translating into very large shear again seed flavors. We never seen that and that is doing well. And we are moving the segment towards where we have better positions. When you look at NCVs, I think we have we have made the smart choice of focusing on the on the profitable NCVs And I would say, you know, energy, there is plenty of hedge We are around 50% share, so we still have plenty to go there. This, it depends on innovation. And there, I agree with you that we have been a little bit behind the ball, and I will talk about innovation a little bit in a general context So I will I will say we have that work to be done in this. Sports drinks, we are innovating well. We need to lead the industry there on oral enhanced hydration, so that is something that we are we are lagging. And in waters, it is really being capacity. that is the that we have been missing, and we are investing behind that. We have a lot of a lot of stocks in water. So I would say for Brazil, I there is there is still plenty of headroom, like I mentioned, within those categories. When we talk about innovation in general, the first message that I would like to give is I think I am I am very confident that we have mapped out in every country let's say, the top 3 value buckets in terms of innovations that we need to address. And Coke, company is working very closely with us on addressing those top 3 buckets. They vary by country, so but they are working very hard on that. Are we as fast as we could be? No. But what we have done or what the company is doing is they have, reorganized themselves into 3 different marketing and development units in LatAm. So 1 is Mexico, 1 is Brazil, and the rest and those are decentralized. So we do expect to see an increase in the pace of delivery of these products So it is still to be seen because but the team is now in place, and we should start to see more speed in the in the pipeline. The way these buckets of value have been you know, it is clear and perfectly aligned with both companies. And I am I am pretty confident. So in Mexico, you know, we had volume opportunities in Aguas Frescas, oranges, and orangeades generation. We just started delivering on Aguas Frescas, It went so well that we ran out of concentrate. So now we are going, fixing that And the other 2 buckets, should be coming in the fourth quarter and first quarter. So it is not as fast as we would like, but they will be addressed and they will be addressed with fantastic formulas and brands. So I am confident that when that starts to flow through in the fourth and first quarter for Mexico, we should start to see some really good results. For the other countries, the big issues are mostly I would say, still in profitable NCVs where it would be isotonics, oral enhanced hydration, and, of course, energy. Moving to local production. So everything I believe that is large and relevant has been mapped. And should be addressed you know, between the fourth quarter and, and I would say, the first half of next year. So I think the pipeline is pretty robust, Rodrigo. It could be faster. Yes. But it is pretty robust, and it should, start to gather speed as a team, you know, is in place and starting to deliver without having to go through internal, LATAM or corporate Atlanta, you know, product. So they have been empowered and should be going faster. So I am pretty confident, you know, that this should continue with what we are getting ready to launch Jerry, you wanted to say something? Gerardo Cruz Celaya: I wanted to add on your first part of the question. Regarding share performance. You asked about the drivers of share performance in Brazil. And you mentioned a few I would say all of those factors are contributing to that share performance. Obviously, the quality of our portfolio, maintaining our focus on affordability and, being present, at in the consumer's consumption occasions. But I would like to stress our execution capabilities, especially when it relates to our digital capabilities. As you remember, we completed our omnichannel digital ecosystem in Brazil as our first market. That, from there, rolled out to Mexico, and this year is finishing in the rest of our operations. And this is a very important fact because it allows us, to a much better understand the dynamics at the point of sale. And much more effectively execute on those opportunities using our digital capabilities. With guided missions and, our loyalty program an incentive, mechanism to our, customers to help us with execution of the point of sale. This has resulted in improving combined coverages in our stores and we already see the benefits of that platform, translating into the performance that we are also seeing in share in Mexico. Ian mentioned all our board looks green and share performance in Mexico. And we expect to see those tails win tailwinds coming, also in the rest of our operations as this year progresses. Excellent. Excellent. Thank you, Ian, Jerry. Also, regards to Maria Dila there. Thank you, guys. Congrats on the results. Thank you. Ian Marcel Craig García: Thank you. Operator: The next question comes from Alejandro Fuchs with Itaú. Sir, your microphone is open. Alejandro Fuchs: Thank you, operator. All Hola, Ian, Gerardo, Pamela and team, thank you for the space for questions. First of all, congratulations to Pamela, Jorge, and Lorena on the new responsibilities. I had 2 quick ones, if I may, in Brazil. The first 1 is, you know, after the strong quarter of volumes in the last couple of quarters that we have seen Maybe, Ian, I wanted to see if you could elaborate a little bit more how Juntos+ Advisor is helping the team on his execution and driving also part of this strong growth. That will be the first 1 And then the second 1, I want to touch on your comment on regulatory changes potentially coming to Brazil next year. Wanted to see if that ends up happening if the strategy would be similar to the implementation in right, in terms of price that I thought it was very interesting what you explained. So those will be the 2 ones. Thank you. Ian Marcel Craig García: Thank you. I will I will I will start at the end and then let Pamela and Lorena and Jerry to complement me on the on the adviser figure. So you know, it is it is still early to say how we would address a potential selective tax increase in Brazil. it is too early. We do not know whether that tax will be at a level that keeps us whole versus the taxes that we have this year. So remember, the amount of federal taxes in Brazil are being reduced and consolidated. So if that tax is set at a certain threshold, then it would be a wash, and there would not be a tax increase. If they set it up at a higher threshold, then there would be a tax increase, and we would have to really analyze Alejandro what is the magnitude of that potential increase. So in Mexico, the magnitude was very, very large. So it did not really make sense for us like I said, based on prior learnings to pass all of that together with inflation in 1 shot. It was it would have been just too much. So it depends on that magnitude. So I cannot I can tell you this. If it would be a very large magnitude, then probably, we might do something like the Mexico 1. If it was a wash or there was not it was not, you know, a large increase, then I think you could be a lot more comfortable in passing all of it through together with the tax. So, it is still a little bit early, Alejandro, to determine that because we have no visibility whatsoever yet on what it is going to be. Okay? And at the same time, there is the potential in Brazil to change the labor journey. From 6 by 1 days to 5 by 2 and that also has an impact on costs and employment And that is also, you know, something that I believe a lot of people are starting to realize how inflationary it is gonna be and how disruptive it could be given that Brazil is at absolute full employment and very tight labor markets. So you also have that to deal with whether it does or does not go through, more and more, I am hearing that it might not go through because it is it is it is disruptive. So my main comment is there are too many variables either on the cost side with this labeled potential labor journey adjustment or on the magnitude or not of the tax increase to really give you a description of what we plan to do, yet at Gary, Regarding You can go through the figures on adviser, please. Gerardo Cruz Celaya: Yep. Regarding adviser, Alejandro, a few data points, that I think are helpful. We have adviser rolled out in our Brazil and Mexico operation. We started out at Brazil. And we see consistent performance numbers in both operations, in both positive numbers coming from, the use and the of Advisor. We see improvement in geo efficiency and the visitation of our customers. We see and this is a very important part of the results that we are seeing and share in both opt operations. We see improvements in combined coverages, both for CSDs and stills. Larger in Brazil that were coming from more headroom in improvement in both CSDs as in stills. In Mexico, even though we do have high combined coverages already, we still see improvements of about 3 percentage points in combined coverages for our whole portfolio. We see, improvements, and the quality of guided missions that we are, executing at the point of sale, both from our resellers when they visit the store as well as from our customers that we recruit as, part of our execution team using our loyalty program. 1 hundred percent of our of our presellers are using Advisor as their as their sales tool, when they visit the store. Which achieves the omnichannel experience, commercial experience, and tactics for each of our of our customers. Which is very, very, personalized by customer looking to, maximize value generated for the customer as well as for the company. So those are a few of the data points that we are following. We are expecting to launch Advisor and the rest of our operations through this year. We are working on this. So, by next year, we will be able to share performance improvements in the rest of Coca-Cola FEMSA with advisory rolled out. That was super clear. Thank you very much, Ian and Gerardo. Thank you. Thanks. Operator: Our next question comes from Carlos Alberto Laboy with HSBC. The microphone is open. Carlos? We go. Sorry about that. There you go. There we are. Carlos Alberto Laboy: In addition to zero, have you reformulated brand Coca-Cola this year for lower caloric content in Mexico? And if so, can you share with us maybe some of the benefit that this is having in terms of lower sugar costs for your gross margins? And then second, to what do you attribute the growth in one-way mix while the consumer remains really banged up here in Mexico? Is the refillable proposition price gap you know, working well enough, or is there something else at play here that is not giving you the refillable lift at a time like this? Ian Marcel Craig García: Hi. Hi, Carlos. So the first point of your question, we have not reformulated to reduce caloric content in the original soft drink formulas of Coca-Cola or flavors in Mexico. So we have not done that. So there is there is nothing there of uplift in by reducing, you know, full calorie sweeteners v these or to increase artificial sweeteners mix, that is not something that we are doing there. In terms of why I would say, why multi-serve one-way is performing better than refillables. there is you know, it is not that refillables are performing poorly. It has to be, looked at through more through the lens of the price points. So we are analyzing so we are doing well with refillable just single-serve sorry. Not single-serve. one-way multi-serve is performing better. And what we are analyzing is we moved away in the refillables from the from a price point that we need to get to. The formula where it gets is it is exactly parity price over our main competitors. And for that, we would need a 2-liter returnable PET But it is a it is a relevant investment, and what we are looking at there is first a pilot to see if it makes sense before we go down that route. So we are off of the price point where we need to be. And we would need to have a 2-liter returnable PET. So if that works, Mexico would be the only market where we would have 3 different multi-serve returnable presentations. So all markets have one glass and one PET multi-serve returnable. That no longer gets us to the price point where we need to be in Mexico. Carlos. So we will need to have a third one, a third PET one. So before we go down that route, the pilots need to show us what was the metrics are accretive. Well, that is that is very helpful. Thank you so much, Ian. Thank you, Carlos. Operator: The next question comes from Emiliano Hernandez with GBM. Your microphone is open. Hi, Ian, Jerry, Pame, Congrats on the results, and thanks for the space for your question. Emiliano Hernandez: Maybe just a quick follow-up in Mexico. Could you comment on the regional performance? How did the Southeast perform relative to the central region? Are you seeing meaningful difference in consumer demand across these geographies. You putting aside the World Cup boost, which fair to assume had more benefits in the in the central region. Thank you very much. Gerardo Cruz Celaya: So we saw thank you, Emiliano, for the question. We saw a uniform performance across all our regions. We had seen South underperforming in the first quarter, so we are happy to see Southeast Mexico now, performing, significantly better. But I would say, performance during the quarter was uniformly positive, across all of our operations. The World Cup, as Ian mentioned in prepared remarks, I think, was a very successful event in terms of the way that, consumer and market in general interacts with the brand, especially the Coke brand as well as Powerade, which were the brands that, were flagship for the world Cup. So that was a very positive development. But we are happy, to see the regional performance across our territories, being, uniformly strong. Thanks. that is great. Appreciate the time. Thank you. Ian Marcel Craig García: Thank you. Operator: The next question comes from Antonio Hernandez with Actinver. Your mic is open. Antonio Hernandez: Hi. Good morning. Congrats on your results. Just a quick 1 regarding raw materials. You already mentioned hedging strategy and how far you are in terms of hedges for this year and next year. But wanted to get a sense if these raw materials are maybe you know, if you are facing higher prices, or how do you see overall raw materials for the next year even with hedges? Thanks. Gerardo Cruz Celaya: So for this year as compared to last year, we up to now have seen this benefiting our performance As you well mentioned, and I mentioned in the prepared remarks, we have a significant, portion of our exposure hedged for this year. So, that certainly has helped. I would say that the spot prices for raw materials are very volatile and very dependent on developments in Middle East We do see that volatility, especially on energy related raw materials. But given that we have this hedging process in place that allows us to have or reduce volatility significantly on our results, we continue benefiting from that reduction in volatility. And it is especially helpful in years like this 1 where the you see pressure to the upside in prices. But it works well any scenario because it allows us to, provide more certainty to our operators for them to focus on market decisions and pricing decisions related to market dynamics rather than volatility coming from outside factors. So that is a little bit of where we are in terms of our of our hedging strategy and raw material, environment expecting to see, or continue seeing that volatility as the year progresses, but we are we are, we are okay with our with our hedging positions that allow us to reduce that volatility. Okay. And these hedges for next year, are they how do they compare versus this year's hedges? Yeah. For next year, we already started, positioning our hedges all with a very attractive, positioning, especially on sweeteners, both HFCS, as well as sugar. On packaging, we are also we also already have a pretty high position in hedging for 27 in aluminum. What we still have or are lagging a little bit behind is on PET hedges for next year. We are looking for, alternatives to start hedging, for next year. And, you may imagine that with volatility and uncertainty coming from The Middle East, suppliers are waiting a little bit to see how this evolves. So that we can start positioning our hedges for next year. So that is I think, the packaging exposure that we have for 2027. Okay. Perfect. Thanks a lot. Have a nice day. Thank you. Operator: Next question comes from Felipe Ucros with Scotiabank. Your microphone is open. Felipe Ucros Núñez: Great. Thanks, operator. Good morning, Ian. Jerry, and team. Thanks for the space, and congrats, Pame. I think most of my strategic questions were asked, but I have a quick 1 on the possibility of a stronger than usual El Niño. Looks like you are pretty much covered on the hedging of raw materials that could move because of El Niño. So I think the risks are probably down to the top line at this point whether you have a lot of precipitation or cold conditions versus whether dry or hot. Just wondering how you see that mix across your regions. Is this a phenomenon that makes things better? I know, for example, in Colombia where I grew up, it does get drier and hotter. But just wondering how that mix comes out across the entire region that you cover. Thank you. Ian Marcel Craig García: Hi, Felipe. So it obviously, it is very dangerous to go into trying to forecast this type of events. So like you said, what we can mention is what is happened in the past. So it what is happened in the past for KOF, it is it is been positive. Except for Southern Brazil, and Argentina, Uruguay. So overall, it is it is very positive, let's say, from Paraná up north, it is in Brazil, it is possible. And it tends to be more precipitation for from Southern Brazil, Uruguay, and Argentina. So that is, like, the overall mix effect for KOF. it is still, you know, it is always a challenge to forecast the weather. But like you said, that is what we have seen in Colombia, Venezuela, Central America, in most of our territories in Mexico, but and it is more rainy for South Brazil, Argentina, and Uruguay. Gerardo Cruz Celaya: So now, Felipe up to now, Felipe, we have not seen significant disruptions in weather patterns. So even though we do expect that the phenomenon materializes, as the year progresses. Up to now, I think it is been fairly in line with the with the typical weather patterns, across the board. Very, very, very helpful comments. Thanks a lot, guys. Ian Marcel Craig García: Thanks. Operator: The next question comes from Ricardo Alves with Morgan Stanley. Your microphone is open. Ricardo Alves: Hey, Ian. Jerry, nice chatting with you. Thanks for the follow-up. We thought that this quarter was remarkable, and it made us think about the last few years when guess that this question is more to Ian, but when you assess the strategy you have implemented over the past 3 years or so, I think that there are multiple clear successes. Right? The penetration of Juntos+ was quite impressive. Expansion of no sugar that we discussed today, no sugar beverages, the share gains in Mexico. I would be curious, however, on you know, the areas that are still concerning you. What are you thinking about when you are looking at the next couple of years if we are assessing again the Because I think that this was a long conference call when we talked about many, many different things. Right? Shorter term issues like the soft Mexican consumer and how you are tackling the affordability in Mexico, discussions of how challenging or not Brazil could be next year with the changes You talked about innovation. So there is still a lot It seems that there is a lot to be, working with and be excited about, but what would be I guess, the top priorities what is on the top of your mind for the next couple of years? Thanks again, and congrats, guys. Ian Marcel Craig García: Thank you, Ricardo. I believe that you asked in terms of risks. And I think we covered those. So in terms of risks, really, we would be, you know, continuing below potential growth in Mexico would be something that would be a concern for us. there is plenty of potential in Mexico, and finding a way to unlock that and translating into consumption. And specifically, the main concern, although I think there could be a silver lining and a and a positive outcome here, would be the potential for the Brazil tax and the labor reform. So I would see those would be the major risks out there. Everything else, you know, we happen to be in a vibrant industry, in a part of the world where we have positive demographics and disposable income trends over the next 10 to 15 years. So there is a lot of tailwinds to us. And I think we have gotten into a very positive flywheel in every country. Where we are expanding relative scale, which gives us a more rational industry, and we can focus on growing the pie. I think, I do not remember who made that question on the innovation piece. We could do a little bit a little better there. But I am also pretty confident on how that goes. So you know, I would not say that anything is taking over my sleep. it is except, like I said, whether we continue with a slower than potential growth in Mexico although we would be on outperforming there. And if in Brazil, things get to an adjustment year in 2027, because of a tax and potential labor journey. But that is that is basically it. I we are very fortunate to be in the industry we are in. We have a great partner, great formulas, great brands. I would not substitute my portfolio for anyone else's. And with the introductions that we that we should be doing, you know, and the digital enablers, Ricardo, think it is just giving us an edge and making it I would not say easy, but making it every day a little bit more targeted, approach with our sales team. So the we are we are pretty confident on how things are moving with those 2 risks that I highlighted. Perfect. that is very clear, Ian. Thank you so much. Thank you, Ricardo. Operator: This concludes the question and answer section. At this time, I would like to turn the floor back to Pamela for any closing remarks. Pamela Ortiz: Thank you all for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, the IR team, we are available to answer any of your remaining questions. Thank you. Have a great week. Operator: Thank you. This concludes today's presentation. You may disconnect now and have a nice day.