Arca Continental, S.A.B. de C.V. (BMV:AC)

Investor Day 2019

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Aug 23, 2019

Good morning, everyone. I'm Melanie Carpenter. I have the honor of being your host today. On behalf of the leadership of the company and of all the associates in Mexico, The U. S, Peru, Ecuador and Argentina, welcome to the twenty nineteen Arca Continental Investor Day. It's really great to have you all here. It's been a few years since we had our event here at The Palace. I think it's four to be exact, right, 2015. The company has certainly grown. The screens have certainly grown. So we really the team has prepared a really robust event for you today that we hope is informative and we hope really helps you in your ongoing decisions about the company. So as we get going today, I'm sure you'll be happy to know there's going to be plenty of information that's going be available on the website following the event. So please go check that out afterwards. And for those who are joining us via webcast, they're connected right now. So thank you for joining us as well. We're sorry we couldn't you couldn't be here in person. So before we begin, we're just going to have a quick safety briefing from Raj, our Head of Security, just so that everyone's informed what to do in case there's an emergency. So Raj, just come up real quick. Hello. Good morning, everyone. My name is Raj. I'm the security supervisor and the safety director of the hotel. In case an emergency, I'll be respond to the fire command station, and I'll send the brigade to investigate the alarm. You just have to list they will let me know what's going on, and you have to I and I will let you know through the PA system what's going on. So there is the the main exit right right out that door. It will lead us to the mezzanine level and will take us out to the courtyard to the courtyard. There is a next exit through that door that will lead you to the kitchen. It will take you to the staircase, which will lead you to the lobby level and it will take you to the loading dock and you will be at the 50 First Street. And there is a next exit right to my left here. It's gonna take you down the A staircase. It's gonna lead you down to the lobby and you'll exit through 50 First Street entrance. So in case of an emergency, hopefully, we don't have one, but just listen carefully through the PA system and I'll inform you what to do. Thank you very much, and have a wonderful event. Thank you, Raj. You're very welcome. All right. Thank you. All right. So we know there's definitely going to be forward looking statements today, so we certainly hope so. Just make sure you remember the disclaimer. It's the same one as in the earnings. Just keep that in mind. All right. And now let me take you through today's agenda. So this is going to be the order of our presenters. So leading the management team is our CEO, Arturo Gutierrez then we'll have Jose Pepe Borda, who's the Chief Commercial and Digital Officer we're going to have Jesus Garcia, who's the Executive VP of AC Ventures followed by Alejandro Alex Molina. There's Alex. He's the Chief Technical and Supply Chain Officer. Then we'll have Guillermo Memo Garza, who's the Chief Public Affairs and Communications Officer. He's going to talk about sustainability. Then Gabriel Menezes, Chief Human Resources Officer. And from The U. S, joining us from the great state of Texas, we have Mark Shortman. He is the President and CEO of Southwest Coca Cola Southwest Beverages. Also with him from The U. S, you may remember him, he was our Chief Marketing Officer last event. He's now the Chief Operating Officer of Southwest, Jean Claude Diesel. And rounding out our presenters, your favorite CFO and mine, Emilio Marcos. And after their presentations, we're to take your questions. All right? Questions from here and questions from webcast. All right. So now let's take a quick peek at how Arca Continental works to stay ahead. Every great journey begins with the first step, a step that takes us closer to our goals. At ARCA Continental, we constantly ask ourselves, how can we do things better? How can we improve faster? What can we do to remain one step ahead? At the turn of the century, we embarked on a journey of profitable growth, geographical and business diversification, and modernization to establish a sound foundation for innovation, continuous improvement, and sustainability. Much has changed in the past twenty years. What has not is our determination to embrace and lead change, to strengthen ARCA Continental's performance for now and for tomorrow. We are Arca Continental, and we are ready to face a new age of challenges with a more sophisticated consumer in a dynamic new world. This is why we aim to be one step ahead of the customers' needs, one step ahead of market demands, one step ahead of digital advances enabling us to be more efficient and competitive, one step ahead improving our culture as we are the best place to work. One step ahead, generating shared values in the communities where we live and work. Being one are world. And building the organization of the future by working on it today. Today, we are entering a new stage in our history, confident that by being one step ahead, we can face the challenges in the five countries in which we are present. We have the people. We have the tools. We have the data. We have the experience, and we have the leadership. Arca Continental, building a stronger future. Okay. And now without further ado, please help me give a warm welcome to the CEO, Arturo Gutierrez. Thank you, Melanie, and welcome to the ARCA Continental Investors Day. It's great to have you here. This is a really privilege for me to share with you the progress we've made in our company. It's been, as Melanie was saying, quite a long time since we had our last Investors Day, almost four years. So this is a fantastic opportunity to share with you some of our plans. And let me tell you first and begin with what you can expect to hear from us today. In the next couple of hours, you'll hear about the tremendous journey that we've been on, since we last met for this presentation. It is important for me that you're going to be hearing directly from key leaders in our organization. They will be talking about our main initiatives and projects and sharing our plans to build a stronger future. So we're going to in the next couple of hours, we're going to be talking about the processes. It's an opportunity to talk about things that we normally don't share, the processes that really sustain our operations, the numbers that we report every quarter. This is kind of what is behind the scenes, and we have time to explain that in a little more detail. We're also going to be sharing some of the key priorities and addressing key priorities of our company. The other thing that we're going to be talking about is about our U. S. Business. We know you want to hear more about what we're doing in The U. S. And the transformation of that business. We have Marc and Jean Claude here talking about that as well. And very importantly, we're going to be sharing our perspective for future growth of the company in coming years and how we are building a stronger company. So let me start by saying what we are all about. What is the essence of our company, Avarca Continental? What we really do is that we bring value to our customers and consumers through capabilities, through investment in the market, through the connection with leading brands, through the investments and innovation that we make continuously. And we do have a distribution operations, and we are about logistics, but we're much more than that. Really, the essence of our business is connecting with our customers and creating shared value with our customers. This is about building true partnerships. And these partnerships are long lasting, and these partnerships are strengthened year over year. So with that in mind and to fulfill that promise, what we do is we enhance our capabilities. We are working on our ACT model, you're familiar with that, which is about segmentation, it's about deployment of our picture of success, it's about our go to market models, it's about revenue management, the fundamentals metrics, the tools and incentives for our sales force, a number of things that we continue to improve and other capabilities that are not part of the model or vending operation capabilities in our supply chain. So as we enhance that, we're also building new capabilities, especially in the digital space. And this is about platforms. This is about advanced analytics. This is about management of data as well. So we are convinced that, we have a tremendous opportunity. We are strengthening our leadership by combining, our robust processes that we have with new technologies, with digital innovation, and that combination really transforms into a competitive advantage for our company. So there is some transformation. And certainly, technology is important, but it's not only about technology. It's about how we put that together with things that we do, and we are in a in the best position to do that. What is our advantage? It can be summarized really in one single word. It is about relationships. So we've built the trust for, many, many years with our almost million customers in the markets where we operate, and, and that really presents an opportunity for us. So think about digital think platforms. We just acquired a start up company last year, and they had been rolling out a digital platform for the small retailers in Mexico for a number of years. And they have a few 100 customers that were part of their network. With the connections and the goodwill with our customers, we acquired the company last year just in a few months. They had a few 100. We ended up last year with 5,000. And that's going to grow exponentially. And same thing with analytics. We you can have good analytics models, and there's obviously advanced mathematics behind it. But it's only relevant if you have the data and the ability to collect the data from the market, which is what we're doing, and you're going to hear more about that. So we're convinced we have this growth potential in our markets, and we also have the opportunity to use those capabilities as we integrate new businesses and as we roll out that business model, especially in the commercial initiatives. And The U. S. Is a good example of that, and we're going to be hearing more about that as well. So let me tell you now what we are focused on. What are the strategic priorities in our company that would lead us into the next stage of growth for Arca Continental. So let me talk first about execution and operational excellence. And this is pretty much what we do every day, and it requires to do it better every day and more consistently. So we're looking to standardize processes and businesses, and this is something that we measure. Let me give you this example. We have our revenue management practice, which is something that is proven that creates a lot of value. We have a tool that lets us know how mature each business unit is in terms of their practice for revenue management. We know that Mexico is probably the most sophisticated. But what do we measure? We measure our strategy for pricing and promotions. We measure the right organization, having the right metrics, the right routines, if we have the right tools. So that's a way to know where we need to focus our efforts. We're also identifying opportunities in our operations. And if you think about a company of this scale, sometimes the averages work against you. And we try to identify, even if we have a good trend, where is the opportunity. So, if we look at the execution index in Mexico, for example, this is something that's been improving over the years, what we call the ISA. And the ISA in Mexico is about 78% now, and it's a good number. And we have territories, and there's one region in Jalisco called Ameka, which is fantastic, and they have 92%. And that means it can be done. You can get to 92%. At the same time, we have other operations that have around 70%. So when you start breaking down, breaking down further those indicators, you identify more and more opportunities that you sometimes believe that you don't have. So avoiding comfort zones is a lot of what we do all the time. Efficiency in our supply chain as well. This year, we have improved freight costs in Mexico of $1,500,000 We continue to find opportunities to improve productivity in our production lines. In the Northeast, we improved five points of productivity, and that translates into avoiding additional CapEx, avoiding actually one additional line, which is $20,000,000 in investment, and also productivity to improve our energy use in our plants. And discipline in operating expenses. This has been one of my personal priorities this year. And if you look at our largest operations, if you look at The U. S, we've improved 130 basis points in our OpEx to sales ratio for the year. And if you look at consolidated numbers year to date, the first half of the year, it's 60 basis points. So it demonstrates that there's a real commitment to be efficient in this in the OpEx of our company. Innovation and digital transformation. Aside of what we do every day, we need to do new things. And again, we are in the best position to do that. So we are upgrading commercial processes. Advanced analytics is great opportunity for us. Our suggested order algorithm in Mexico has proven very successful in the territories where we deployed that initially. We've reduced our out of stocks 75%, which is very significant, and we're rolling out in the rest of the country. Modernizing traditional trade is very important. I spoke about this platform that we have, 5,000 customers at the end of last year. We're going to end up this year at 10,000, and we're moving to 50,000 customers of this network. This is an opportunity not only to strengthen the up and down the street channel, It's an opportunity to further strengthen the loyalty that we have from those customers and also to gather data from the market. Our direct to consumer platforms, we continue to innovate there. We relaunched the direct to home platform in Mexico, specifically in Monterrey this year, and it's a growing channel. It is contributing to grow that channel, 15% revenue this year and 5% in volume, which is pretty remarkable. We're also automating back office functions. We're taking advantage of robotic processes. We have now 12 bots in our operation as shared services center operating, and each one of those represents the efficiency of three to five FTEs full time employees. So we still have a lot of opportunity to do that, not only in shared services, but also in the rest of our operation, even processes that are not centralized. There's the chance of automating that. Sustainability. This is talking about a our long term future. We promote shared value in our communities. We have our AC volunteer program. More than 10,000 people participate in that. We've also been empowering women and training women. 2018, 14,000 women were part of that program. We're leading the use of recycled PET. You know about PetStar. It's the largest food grade PET recycling facility in the world. We're producing 50,000 tons of recycled PET in PETstar, and we're planning to expand that facility. We're using already 24 of recycled PET in our packaging, and we're going to get that to 50% in the near future. Reduction of sugar footprint. This is a strategy of The Coca Cola Company and of us as well. We've been reducing our footprint. In this decade, we've reduced 21 the caloric content in Mexico. And we've reduced 30% the calories in classic Coca Cola in many of the packages in Mexico, Ecuador and Peru. This is a bold move, and it's very important for us. And it's been already there for quite some time. We have reached higher standards in water reuse technology. We reduced 19% water consumption from 2010 in Mexico, and we have now 29% of our energy comes from renewable resources. Our goal there is to get to, 50% by the year 2021. And the scorecard, our long term profitable growth, this is sustained by many things. One is our revenue management expertise. As you know, we've been able to increase prices above inflation in Mexico consistently for the last five years, ever since we had the excise tax in Mexico, and also in The U. S. Ever since we acquired the business. And CapEx, our CapEx is managed in a more much more effective way. We're going to be below our CapEx plans for the year. We're to be more rigorous about management of CapEx. And we've been able to demonstrate that we are good at capturing value through integration of other businesses. We have improved our EBITDA margin, improved, for example, 500 basis points since we acquired that operation a few years ago. And, the culture of the organization, that is, also an important foundation of what we do. It's a consistent culture. It's very important now that we have integrated other companies. We are evolving from a strong heritage of of our company, and the most important thing is that we make it come to life. We have five principles that we have adopted, being customer centric, transparency, change and innovation, focus on results and caring about people. And it's not only what we communicate, but how these principles come to life in our policies, in our behaviors, in the everyday activities of the company. So those are strategic priorities, and we have put the customer here at the center of the diagram. And this is a way of aligning our efforts to create shared value in the marketplace. So what I can tell you is that we are proud of what we have accomplished. We recognize that we have a lot of opportunity. There are many ways in which we could be better, but we are very confident that we are moving in the right direction and that we are making this company stronger. So with that, I'll turn it over to Pepe Borda. He's going to talk about innovation CHALENDAR:] and commercial initiatives. Hello. Thanks, Arturo. Thank you very much, and good morning, everyone. My name is Jose or Pepe Borda, and I am accountable for leading the commercial and digital strategy with an organization. Our let me move this. So our group is accountable for three pretty different topics. First is the developing and standardization of our commercial practices, as Arturo was talking about, through our ACT model, and I'm going to expand that a little bit more. Second is the guaranteeing the accretive growth of our direct to consumer business. And third, the stewardship of our digital strategy and IT operations. I will expand a little bit more about these three topics within the next fifteen minutes. We continue to strengthen ACT commercial model as a competitive advantage. As Arturo said, ACT is a model that puts together all the way we operate in terms of segmentation, revenue growth management, the picture of success, the go to market, auditing the market, enabling our people through digital tools to execute this and measuring through very simple, easy to act variables that we call fundamentals that are the variables that we can control in the market. We know, for example, that weather does affect our business volumes, but there is little we can do to act upon those. So we focus our organization on the variables that we can control, like our customers are being visited, our picture of success is being executed, our products have the right coverage, etcetera. Let me expand a little bit on some of these with some examples on how do we operate. In terms of segmentation, we segment our customers through a two step segmented execution process. That means we have a static or basic segmentation based on the channel, based on the geography, based on the volume potential, based on the size of the customer. But on top of this, we overlay a second layer of dynamic segmentation based on specific short term market opportunities that appear in the market. And I'll show this afterwards with an example that will get this pretty clear. RGM is a key capability for Arca Continental. We are strengthening our capabilities and tools, always refining our pricing and portfolio architectures to ensure that we get to profitability. And results speak by themselves because we've been able to increase prices consistently year after year above inflation while increasing our share of value in the markets in which we operate. The third step is a picture of success. For each segment, we generate a portfolio and then a PICOs or picture of success. That means what do we need to execute in the market to have this portfolio come to life. We and we generate prioritized action items to the sales force through their handheld devices to know exactly what do they need to focus to execute our picture of success. Then we have been constantly evolving and refining our go to market strategies where we strive to maximize not only what we call the cost to serve, but the complete profit to serve. We do this having some tailored service models for some specific segments, ensuring customer intimacy, visiting every customer in AdMarkets periodically and always looking for distribution efficiency. Then we audit this to make sure that this is really happening in the market. We audit 100% of our customers periodically, and we are already in the phase of expanding photo recognition to improve efficiency and effectiveness of the market audit process. This is all based on our people that are enabled with digital tools. We have a proprietary sales force automation tool called ARCA Continental Mobile, AC Mobile, and we continuously improve that tool to help our people to execute easily on the time. We aim so that things can be as complicated as they can be within our offices, but we need to make it really simple for the people in the field to know exactly how to execute. And that's how we use our Salesforce automation tool. And as I said, the fundamentals. And one key thing is that we track these basic but very important variables from the sales rep level all the way up to the CEO. So we are exactly focused on the same execution of things across the organization. Let me put this a little more clear with an example. This is a little bit crowded, but I can walk you through this. So this is an example from our Mexican operations. In the traditional trade, we have close to two and fifty thousand to 148,000 outlets with a share of market of 78.4% and growing 0.8%. Arturo said, well, that looks pretty good. We can then open it by our four sales regions, and we see that all four regions are growing. And the best region, the Pacific Region, in terms of market share is the one that is growing the most. We have 80,000 outlets in that region. But then we start segmenting and then we use the segmented analysis model in the dynamic segmentation. And we can see that in terms of share of market, there are 9,000 customers where we have lower than 50% share. Out of those 9,000, we have almost 2,500 customers in which we have less than 60% RED execution index or ICE execution index. And out of those, we have six eighty three, where our share of visible inventory, or SOBI, is less than 40%. And out of those, we have five fourteen customers in which our share of cooler doors is less than 50%. So we have identified a customer segment which we can act upon. Even in a market that is the market that is growing the best, there are definitely opportunities and averages high these opportunities. So we have five fourteen customers. We can develop a program to improve execution, to increase cooler coverage. And here, you can see the same variables for the region, for the segment and for the last customer in the segment, Abarrotes Lauda, that has the lowest scores of those three measures. Once we have identified customers at that level, we can develop specific plans. In this specific case, a specific promotion of 600 ml, two for 23, a MIA's display rack, another cooler door. And those initiatives are then transferred to the sales representative in their handheld device for market execution. So this is how we can make something that is complicated in our offices but very, very simple for our sales representatives to execute. So that's about ACT. And then I'll talk on about the second key priority. The second key priority, as I said, is the accretive growth of our direct to consumer business. Today, we sell around $325,000,000 direct to our consumers through our direct to home business in which we cater to around 300,000 households our at work business in which we cater around 2,000,000 customers in their workspaces and our vending business, in which we have around three fifty million transactions per year in vending operations. Which our what are our plans? Our plans are to expand direct to home, we call Coca Cola and Togar, in other regions in Mexico in which it's not deep as we want and enter other markets to use it to boost new categories. For example, the second category after soft drinks in direct to home is dairy. That is obviously not one of our biggest categories in our whole business. So this is a great opportunity to increase the penetration of new products. In vending, we are we have been focused we are the great the biggest operation of vending machines in Latin America, and our focus is to using better techniques to find place places to put our machines that will guarantee that we have a positive return. And in at work, we are planning to go from 2,000,000 customers to 3,000,000 customers through different convenient service offerings as micro markets and other vending opportunities. And the third part is the digital strategy. In 2018, we embarked on our digital transformation journey. We started with a capability assessment where we identified the gaps. We then the whole leadership team went to Silicon Valley to get a refresh on new technologies and new capabilities and new things that could be done in the market. We then put the leadership team in a series of workshops where we prioritized initiatives, and we came up with a digital agenda, a digital framework, digital priorities and 26 initiatives that were are to be implemented within the next five years. We then put in place a structure to ensure the drumbeat of the transformation and a communication to all of the organization and the change management needed to make sure that this is not something that lives within a few individuals on the top of the organization, but it's something that is leaned upon by all the organization. So we ended up with this digital strategy that is comprised of three big buckets. The first one is how to optimize our current business, where most of the short term returns will come from. The next one is some potential new business engines that will require investment, that will require a little more patience, and I'll detail some of them. And obviously, very important, the capabilities and enablers, the technology, the capabilities and the organization to make sure that this transformation is moving on. I will get into some of these. As I said, this came into nine different projects and 26 different specific initiatives. I will go I will talk about some of them within the next minutes. First of all, the enablers. We need to make sure that we as I said, that we have the technology capabilities and organizational model. And a key capability, Arturo talked about, is advanced analytics. We have put in place a structure with fully dedicated in house and external resources that are dedicated to developing and to expanding the use cases that we already have and to developing new business cases. We are working in some commercial cases, as suggested, order algorithms that go into the handheld of the sales reps that Arturo talked about with great results, reducing out of stocks from 11% in the pilot region all the way down to 315% in the rollout execution, which are the best and the most the best execution items that generate the highest return. Human resources, Abriel is going to talk a little bit about what we do in terms of selection and screening of candidates. Supply chain management and manufacturing, digital distribution, Industry four point zero, Alex Molina is going to talk a little more about it. And as I said, building the capabilities of this advanced analytics is a key capability for us. So let me talk about some of these buckets. The first one, we talk about optimize our business, first priority, how to better serve our customers. So what we're doing is that we are digitizing ACT model using technology and using analytics. In terms of segmentation, we are moving from the static and dynamic segmentation that at the end clusters customers to really being able to do it customer by customer, to really understand the true potential for each category in each customer and then making sure that, that potential is fulfilled. In terms of RGM, we continue increasing prices above inflation. We're moving our tools. We used to use a choice based conjoined model that has worked for us really well in the past, and we're moving to advanced analytic power tools that strive to give us better confidence in our modeling and pricing decisions. We are also looking there's a huge opportunity in terms of optimizing our sales promotions. We know that and we have found that around 40% of our sales promotions are not as effective as they can be. Obviously, it's difficult to understand which ones. So we are building tools to really understand which are the promotions that generate most of the effect. And then we can either redeploy the funds of the nonvalue adding promotions or maybe we can save some of that money also. In the picture of success, we're developing a process to integrate the development and communication of the picture of success, making it easier to the sales rep and most importantly, a process to tailor the picture of this per customer and not per cluster to really guarantee that we have return of our investment in the market. In terms of go to market, I think the biggest disruption is going to be online ordering. We plan to use online ordering together with the different sales figures that we have to enhance our process and to reduce that nonvalue added order taking and to redeploy those assets to execution and account development. In terms of market audit, we want to generate cheaper, faster and more accurate information. Together, we spend around MXN 100 per audit. We have a six a 300 people audit sales force. And with photo recognition, why cannot do we do crowd sourcing? Why cannot have the customer do take the pictures for us and do the audit for ourselves at much, much lower cost? And maybe we can transfer some of that money to the customer in the next invoice. In terms of so we are continuously evolving our sales force automation tools to make it easier for the sales rep using advanced analytics and using machine learning. The second bucket in terms of optimizing core assets is Industry and Supply Chain four point zero. We are working starting to use we're moving actually, we're moving slowly but steadily in this direction. Using analytics or starting to use analytics for predictive maintenance and reducing cost in our operations, improving our planning process to the smallest level, improving our digital distribution and transportation systems and working to prepare our warehouses to a future in which the growth is not going to come from big brands as Coca Cola, but is going to come more from niche brands. The other bucket is the potential business engines, and we are going to talk a little bit about what we'll do in terms of consumer and traditional trade. In terms of consumer, we are focusing on satisfying the consumer needs by expanding current initiatives. On top of our current direct to home conventional business model, we are expanding online ordering with twenty four hour delivery with an expanded portfolio on three forty SKUs through web and mobile and delivering in twenty four hours. And we are also piloting now another model of express delivery in fifteen minutes with which we take advantage of our relationship with the mom and pops, and they can do the last mile delivery. The consumer takes the order, it goes like an Uber to the closest mom and pops. The closest mom and pops takes the order and then delivers directly to the home. We have some challenges, but we're working on that, and that probably is something that can grow a lot in the near future. And last but not least, we are modernizing the traditional trade through digitalization. We are here, this is not only a potential new revenue stream through commissions, through selling information or through distributing other products than ours. But most importantly, what we strive here is to strengthen our relationship and to help mom and pops to thrive and thus protecting our market leadership. We are building a B2B application and system for the base of the pyramid so that they can better interact with our customers and control the whole environment except electronic payments. And on the top of the pyramid, we are building a complete ecosystem to help mom and pops to compete with other modern trade customers. And my colleague, Jesus, is going to talk to you a little more about that. Thank you very much. Thank you, Pepe. Good morning, everyone. So what is traditional trade two point zero? As you know, traditional trade is one of our most important customers or channels. We own the relationship. We know them really well. We have been serving them, for so many years, And we know their opportunities. We know they have a lot of opportunities for a stronger future. Let me give you some examples of what those opportunities are. Today, most of them deal with cash. Imagine being able to accept credit and debit card payments that will give them access to more sophisticated customers on the one hand, but at the same time, they get access to customers who typically spend more money on the same ticket. Second, what if they're able to offer multiple services like payments of utility bills, gas, electricity, or loading their cell phones with airtime, well, that will generate more traffic into the store. And third, and Pepe was mentioning, what we're trying to do with them, online commerce. What if they become available online? Well, they can reach a larger base. Now those are great opportunities they have facing their customers. But we see a lot of opportunities as well operating their own stores and with the relationship they have with their suppliers. Today, about half of the products they get, they get from direct store delivery suppliers. The other half, well, they have to go out, visit different wholesalers in the different formats, being able to supply what they need for their store. Imagine having a platform that can help them have one stop shop for those products. Today, they lack the capacity to negotiate or get better prices because they're very small. What if we're able to aggregate the needs of thousands of those smallest mom and pops? Well, it gives you a different perspective in order to negotiate better prices for them. And if you already have the real time data on what you're selling and you know what your inventory is, imagine being able to create a replenishment order that will tell you what you need and have the have those products in your store to become the better store for your customers. Now if we see those opportunities, how can we help? How do we enable them to get that stronger future? Well, we do that by providing them with a complete digital platform. And Arturo talked about Brio, a company that we acquired last year, and that started as a point of sale. And that was of great value, to our customers. They're able to get payments in, obviously, cash, credit card, debit card. They offer over 80 services to their customers. And that's, again, the part facing their own consumers. But at the same time, this platform is evolving. And in addition to covering the relationship between the traditional store and their customers, we're also covering their relationships with the suppliers. So how's that? Well, we know that, the demand information is there. The inventory information is there. We can generate a suggested order for all the products they need. We then aggregate that with the demand of other, mom and pops and are able to basically provide better prices for them, which means better margins for them. And we have the logistics capabilities to be able to deliver those products. And that's what Brio has become, this digital ecosystem for the traditional trade. This is our five year plan. As Arturo mentioned, we finished with 5,000 stores last year. We currently have 8,000, platforms installed. We're going to hit the 10,000 mark by the end of the year. We're already present in 11 states where ARCA participates, and we'll be reaching all of them by 2022. And we see a lot of growth potential as well in Peru, Argentina and Ecuador, where our customers have the same or very similar opportunities. Now Brio in itself is providing a lot of values for a stronger future for our mom and pops. But it is also going to be able to provide a lot of value for us in our current businesses. And I'd like to share four examples with you. First of all, digital marketing. We're gonna be able to send over the platform specific promotions per customer in the traditional trade channel. Number two, we're going to be able to deal with digital payments using the balances the Brio platform has. Number three, we own the information. So we're going to be able to analyze different trends and what's going on real time in the traditional trade channel. And last but not least, this is going to enable, our customers even perform some of the auditing tasks we do today with our own personnel. So we're basically targeting increasing our sales and becoming more efficient in the way we execute at the point of sale. And this is how we're building a stronger future for us and for the traditional trade. And now I'll introduce you to Alejandro Molina, who's going to talk about technical and supply chain management. Thank you. Thank you, Jesus. If you see, we have Pepe and Jesus have show us how we are going to move and evolve all the commercial side and the strategy and initiatives that we are developing. And certainly, if we maintain our current supply chain processes with the scope that we have, we'll not be able to cover and get these expectations and requirements in the market. And our main focus is how we're going to add value for this business and cover these opportunities that we are going to face in the next years in our markets. One point for forget this evolution in the supply chain is to maintain and continue our strong infrastructure in the operations and maintain a very good discipline in the CapEx plan in the short and long term that we are developing in the group and maintain a very focus in how we are going to allocate this CapEx in our operations in order to comply with the growth and also with efficiencies that we need to develop in the opportunities in our regions, in businesses. Now we have 50 plants and more than 28 production two eighty lines productions in our operations. And our strategy is how we're going to be very close with our customers with more than three seventy distribution centers in our market. Certainly, we are now managing more than 1,500 SKUs. And as Pepe mentioned, we are going to slow and increase this portfolio. And our main challenge in the supply chain is that it's not going to grow in the high rotation products in our market. We are going to develop medium and low rotation products and different categories that we are now we are commercializing, and we need to prepare our supply chain in order to cover this expansion in the portfolio. There are four key elements that we need to develop in the supply chain end to end supply chain in Arca Continental. The first one is how we are going to reach this visibility with the advanced analytics information that we are going to have and how transform our sales and operation planning process in order to get this forecast and prepare and predict these trends in the market, previous that our commercial team PANKAMPE received these opportunities in the market. The second one is how we are going to increase the flexibility in all the stages in the supply chain, and we are including the main suppliers in this process and how we are going to reduce the cycles in the time to get the opportunity of the market, how we are going to be faster and get the opportunities in the market with these reduction cycles in these stages in the supply chain and maintain the continuous supply chain optimization cost with the manufacturer and distribution and delivery. How we are going to do it? With all the strategy of the digitalized end to end supply chain processes in the business. What we are doing? Pepe mentioned a little bit about this action of the digitalization. We start with the transport and warehouse management system assessment. And we are going to work in this digitalization very close to the commercial team, to the commercial initiatives and then work in the manufacture to develop the opportunity and how we're going to maintenance and increase the asset management in the manufacturer. We are going to establish the industry for initiatives in the lines. And in this year, as Arturo mentioned, we're focusing Mexico, the North East region in the three lines in PET production to increase the capacity of the lines and avoid the CapEx for the requirements for the growth of this year. And the next year, we are going to digitalize certain items of the or the premanufacturer in order to gain more capacity in these lines and replicate this practice in the rest of the lines where we are facing some restrictions for the next requirements of the growth in Mexico and other territories in Arca Continental. In also in the quality, safety and environmental culture that we have our certifications programs, we are going to maintain this continuous program and expand in the future acquisitions that we are going to have in the next years, how we are going to replicate this mindset in our operations and this part of our culture is part of our foundations in the performance and improvements in our business. And in procurement, continues with the collaboration and increase the negotiations with the scale and incorporate more categories with Coca Cola global systems negotiations and also continues with improvements in the reduction or optimization of the packages and incorporate these categories in this scale of the negotiations with the secondary packages in our system. Also, all the platform in the end to end supply chain is very relevant how we are going to increase the frequency in how we deploy our network analysis design, our network design in logistics and manufacture and distribution and identify opportunities in how we're going to maintain this flexibility in the operation. We are going to enhance our process of sales and operation planning with this forecast using the advanced analytics capability that we are developing. All the digitalization in the transport, distribution and manufacture processes and maintain our safety, quality, environment culture in the replication and continuous improvement in our process and ensure that we have the right talent and people capabilities for this evolution in the end to end supply chain digitalization. This is an example of the performance that we have in the operations in our business. This is an example of Mexico and how we have a very strict discipline in daily, weekly and monthly basis in monitoring these kind of metrics and how we are going to identify the best operations in all the regions and how we can share these practices in the main opportunities in the plants or in the sites in the warehouses and deploy these opportunities. Relevant that we have a very good fill rate performance this year and also we increased the capacity, the line utilization in Mexico, focusing this point. And there are many opportunities to gain to add value because we are going to start with the digitalization and get this visibility with many opportunities that we have still in Mexico. Certainly, we have a great, great opportunities and can get this value for the next years. This is another clear example of how the supply chain could add value for the system. And North Point is one clear example in how we're going to do it in The United States. And it's relevant to mention that after fourteen years, is the next the new facility in the Coca Cola system to do a big, big, big investment in the system. The last one was in fourteen years ago in Luciana State. And here, we can show how we incorporate the new technology, the state of the art in technology in the process, how we are going to consolidate for all facilities in one with new technology, with all the strategy to use technology with reduction in energy and water, incorporate a semi automatic warehousing in the process and reduce the process and the increase the productivity in the delivery. And also, we reduced four distribution centers with a new facility here in North Point. It's an investment of around $250,000,000 It's prepared to implement the Industry four in the medium term. And very relevant, we are going to get around $30,000,000 of savings annual basis when we have the running rate performance of the plant. And here is how we are going to do it. And also, we are looking for in ARCA Continental this kind of opportunities, and we are going to get this solution with this evolution that we are going to have in the end to end. By the way, also we incorporate here the blowing line process. We incorporate the supplier in the plant. And also we have a distribution and freight reduction cost in not only manufacturing. And I will share you how is the processing in the plants. You, Alex, and good morning to everyone. Now we're coming to the green part of the morning. Green as protecting the environment, but also green in terms of dollars or creating value. So Emilio is happy and everybody is happy. So and I mentioned value because as a core business strategy, sustainability has two clear orientations. One is to protect value and mitigate risk. That's very clear. But we need to go further than that. We need to create value in terms of savings, in terms of helping the business to be stronger and faster. But the most important part of that orientation is to share value. How we share the value that we create with all the stakeholders that are involved with Arca Continental. And the other main orientation is how are we going to be able to assure that sustainability is embedded in all aspects of their operations. How is an integral part of everything that we do? That in order to accomplish that, in order to have sustainability as an integral part of the company, and not, being just a wishful thinking, we established years ago a four stage process, to assure that. The first part of the process is to define what is real, what is the real orientation, what is material for ARCA Continental. That's the part that us as a team, we are very proud of it because in order to accomplish that, we gather the information for stakeholders. We collect like 5,000 interviews, polls, focus group, etcetera, to know what the or stakeholders need or what are the expectation of the stakeholders of Arca Continental. Then we combine that with our risk assessment. And then we combine that with the business objectives. And that matrix allow us to deliver what is the institutional model. That's the second part. What is the corporate strategy that we're to use in every country? So from that, we have to make it operational. We have to make it real in the operational floor. So we developed a set of metrics, standards, scorecard for every country to use, for every country to measure upon it so we can assure that it is something that everybody, is aiming at in the same direction. And finally, we made a public commitment about it. We have to report and establish our goals in public matter, and we have external assurance. When I talk about sustainability being an integral and an institutional part of the company, this is something that make it real. We are one of the few companies that has a sustainability committee at the Board level. That help us, obviously, make it institutional, but also have their guidance. They're overseeing the initiatives that we have ongoing and the future initiatives. And then we have the operational committee. The operational committee is led by our executive team, but also, and most importantly, it is owned by the functional leader for each one of the corridors that we define in the materiality definition. So for each corridor that you can see here, we have a leader, we have a scorecard, we have the metrics, and they know what is the institutional goal and the specific goal for the country. I'm going to talk about some of the examples. But for each one, as Arturo mentioned, we have a clear focus for each one. For example, portfolio, we have three very specific orientation in terms of portions, options and solutions for the consumer. I'm going to talk about some of the examples. Packaging. Oddly, packaging is one of the most relevant environmental issues that we face today worldwide. But for Arca Continental, it's not something that we are facing because of that current challenge. It has been part of our DNA for years. So that orientation allow us now to be ahead in the game in terms of have a competitive advantage in terms of packaging. And we are expanding our commitment through the worldwide initiative of The Coca Cola Company, World Without Waste, that has three clear paths: design, collect and partner. In terms of design, we see, sustainable packaging, through the eyes of sustainable principles. We don't see PAT as a single use, single life packaging. We want the PAT bottles to be multiuse, multiple life kind of products. And for that, we are ahead in the sorry about that, incorporating 24.3% of recycled or bio PET content in our bottles. That's something that put us ahead in the game in terms of regulation, in terms of possible public policy, that it is around adding more recycled material in our products. We are on track to achieve our goal of having 50% in the future. In coming years, we're very near to 30%. And one of the clear examples, as I mentioned, in terms of why we are ahead on the curve is or water bottles in Mexico and Peru that come 100% of other bottles. So that's the essence of circular economy. Also, we have other initiatives in terms of returnable bottle in Argentina, Peru and Mexico. The other part of the equation is collect. Probably, this is the most challenging aspect for the industry all over the world. And here, we are far ahead on the game, as Arturo mentioned, with PetStar, the largest facility in the world for recycling PAT, and we are aiming to expand it in the future. So we have a collection rate as Arca Continental of 30%. But we have two clear examples that circular economy is possible in Mexico, where the collecting rate is 70. That's unprecedented for an industry to have that kind of collecting of the total of PAT that we put in the market. So the third part that you're going to see in every project of sustainability is the social part of collecting. We are, establishing, and pushing principles in every country to have inclusive picking principles, to dignify collectors and also to help avoid totally child labor in the collective process. But if we want to make it real transformational, real global, we need to partner with several organizations, in order to have that cultural transformation that we need in terms of environmental conscience. One of them is, as I mentioned, World Without Waste, where we are doing several projects around the world in every country which we are. The second one is the Helen MacArthur Foundation. We were one of the first company to sign that pledge in terms of promoting circular economy to establish a public commitment on the amount of recycled PET resin that we are using in our products. And the third one is leading the conversation in the responsible consumption and production of the sustainable development goals of United Nations. That, for us, goes further than our operational responsibility. That, for us, is the responsibility of changing the mindset of the community in terms of avoiding waste and have a closed circle. The next part is water, obviously, one of the most important resources that we have. We approach water from three different aspects: how good we are in terms of efficiency, how much water we are replenishing to the source and the third one that now is becoming more important, how we are participating in assuring that the communities have access to save water at all times. So in each one, we have made progress, very important progress. In water efficiency, we are 1.6 liters of water per liters of beverage that we produce, one of the top in the beverage industry, 20% less than ten years ago. In terms of replenishment, in Mexico, we have planted more than 30,000,000 trees to boost the collecting of rainfall and also to have a full circle in terms of water availability. And since five years ago, we have started access of water in our communities, and we have benefited more than 2,000,000 people in terms of water filters, water accessibility and other projects. In terms of climate change, our approach, as Arturo mentioned, is to move faster to have greener energy sources. We are at 29% of renewable energy sourcing, and we are very fast in moving to 50%. Also, we are keeping our energy use as efficient as possible and also lowering our CO2 emissions. So to end, as we continue our dialogue with the stakeholders and the community, we have three way of continuing or expanding our commitment. First is reporting. If you allow me, I made a commercial for you to visit our new integral report of sustainability where precisely we combine all the business initiative with a sustainability initiative. So we want to fully close the circle on that, and we report under the Carbon Disclosure Project, GRI, obviously, the integrated reporting framework, etcetera. We have that report verified by a third party. And then that has allowed us to have a relevant participation in several indexes. We are named one of the top sustainable companies of the Mexican Stock Exchange. We are the FTSE4Good. We are improving our score in terms of the RobecoSAM, Dow Jones sustainability metrics, etcetera. So to finish, I don't want Arturo to hear this, but I tell to my team that the true success of sustainability is when the sustainability department no longer exists, not in the short term. And that's because it is embedded fully in every department of the company. So it is not needed. It's not a unique responsibility, but a company responsibility. So with that, I'd leave you with, Gabriel. Thank you very much. Good morning, everyone. I am delighted to be here with all of you to share the highlights of the human and people aspects of our company. It was at the beginning of last year of 2018 when we revamped our HR strategy. We wanted to make it more aligned with the business priorities. And what we wanted to accomplish is make sure that we have a future proof company. Future proof meaning that we have the right talent, the right culture, the right capabilities, and that we're providing the right service to our associates. In other words, bring the right people, set the right environment for them to thrive, give them the tools to do the work, and then finally, us as HR provide great service. I'm gonna share with you within each of these strategies examples of the things that we've been doing that we believe are gonna enable our people to strengthen our company. And the first one is the talent corridor. The goal here is basically to have the right people to run the business today and in the future. And I'm gonna talk to you about our talent review strategy, which is basically how do you make sure that you have the succession in the first four layers of the organization, including this gentleman right here. So we started last year with this process where we basically train 500 directors and managers on this new methodology because they're the ones actually running this process. And so in doing so, we've been able to detect or identify successors for 500 roles in the company. So now we know that for those 500 roles, we have 10% of them with no successor identified. So we need to do something about it, either we accelerate the development or bring someone from the market, right? And we've assessed 1,500 associates so far. The measure of success of a program like this is really in the long term, but you need to start delivering results in the very short term. So in the last twelve months, out of 100% of our director level role positions that have become open, 90%, nine-zero, we've been able to fill with internal candidates aligned to whatever we identify in the succession planning process. And only 10% we have to bring for the outset, which is also sometimes a good thing. When you don't have the capability internally, you need to buy it from the market. Not only that, but we've also been able understanding better what are the developmental needs, the aspiration of our associates and how far they can go to have conversations so that we can retain these high potentials. So in the last twelve months, we have a 1.9 turnover. So it's two out of 105 high potentials at this level that have led the organization. Our goal is zero, but that's pretty much impossible. And it's even more difficult as we become a larger company and a more visible company. On the other side of the spectrum of this program, this has also helped us manage poor performers, right? Out of the one hundred percent of poor performers that we identified last year, seventy percent, we've done something with them. Either they left the organization or they've taken the level of performance to an acceptable level. So the other 30% are currently on performance improvement plan. The goal here is for this group of people not to stay there. They either improve or leave, right, always in a very humane way. Culture. I do want talk about culture. We have a strong heritage from our founding families. However, given the acquisitions of Peru and particularly acquisition in 2017 of Coca Cola Southwest Beverages, the reality is that the speed of growth of the company outpaced our ability to integrate culturally, ARCA Continental as a single entity. And so what we did is understanding culture as ways of working, the ways we do things, either in the commercial space or the technical space, supply chain, digital space. We brought together the top 100 leaders of ARCA Continental and tasked them with creating what we call the cultural principles. And this is nothing else but guides to dictate or mandate, but guides for how our associates are gonna behave and the things that are acceptable and the things that are not acceptable. And, we wanted these principles to incite action, right, and to be very pragmatic. What you're seeing here is a very, very high level definition. Under each of these principles, there are specific behaviors. Right? And in a very simple way, what we wanna do is if someone asks an associate or someone asks me, how do you interpret these principles? Other than reading the definition, if they ask me, how would I interpret this is everyone in the company, I should know who my customer is, either external customer or internal customer. I should strive to understand his or her needs, and I should also try to build a relationship with them. The next thing is focusing on results. Right? If I wanna build a good relationship with a customer, it's not only about the promises I make, but delivering on those promises. Right? Either internal or external customer. The third element is transparency. I'm expected to speak up, speak my mind, share ideas, share whenever there's great results, but also when things aren't working and doing it with facts. Right? We want the bad stuff to come up as well, the areas of opportunities. That's the only way we'll be able to to improve. Change and innovation. I have two jobs, do my day to day and do a great job, and then see how I can make it better through innovation. And finally, people focus. And this is gonna sound like a cliche, but we're a 63,000 people organization. Everything you've seen, it's done through people. I mean, we have, like, 12 robots or how many? But that's 12 against 63,000. So and really, if I'm an individual contributor, it's just treat others with respect and collaborate well with others. And if I'm a people manager, it's that plus set clear expectations to your team, raise the level of performance, but help them get there through empowerment, feedback. And then once you do that, you can hold them, and you need to hold them accountable, but only once you do that. Right? And so we've communicated this to a 100% of our associates, but communication is just the beginning. As Arturo mentioned, the critical part is how do you align your practices, your processes, your policies to these principles? If you're asking people to be more agile and your processes are a bit slow or bureaucratic, then people become cynic. Right? So we're doing that. We're adjusting our practices to the principles so that we can build an environment where we make it easier for them to behave the way we want them to behave. And then we're gonna measure it. We're gonna measure it in in three different dimensions. The first one is awareness. Do they know the principles? Do they know what they mean? The second one is do they perceive that their colleagues and managers are behaving in line with the principles? Have they seen behavioral change? And then finally, do they perceive that the company is starting to adjust its practices to the principles? And so we're going to launch a survey through a tool called Perceptics. It's all digital. And hopefully, we're going to hit our goal. We're looking for 70% in a scale to four to 70% positive results. So we'll look at the data, then we'll make adjustments as we see fit. The next one is capabilities. So what tools are we giving our people for them to win in the marketplace? And we talked about commercial. We talked about supply chain, digital. I'm going to share with you an example something that we're doing on leadership capabilities. So all the abilities that we're going to need, not only to run the business of today, but as we look into a more complex world affected by technology mainly, is changing very fast in the future. So we've signed an agreement with Harvard, and we're going to have a leadership development program with them, which is going to cover the top 3,000 associates of our company. It's going to be based on four signature programs. The first one is a foundational program, basically supervisors. The content is very much aligned with our business strategies and the cultural principles as well. Then we're going to have a management program, so like entry level managers, teach them how to be managers, if you will. Then we're going to have a program, which is called Hypo Accelerator, which is basically a program for managers that are in the succession planning for directors. And finally, we're going have an executive program, which is basically for the C suite and the L1 and L2 managers. These we're going to complement with in house programs, because training is not everything. So we're going to combine this with solutions like mentoring, coaching, job swaps, so moving people around for them to get the experiences. And and so that's how we're gonna start building the the leadership capabilities so they can lead teams, they can lead departments, they can lead organizations and prepare them. And finally, the HR fundamentals. So all the things that we do on a daily basis in our three seventy nine distribution centers, 50 production facilities, We need to do a great job here. It's complex, right? And so things like labor relations, union relations, we have more than 70 unions across our territories. So that's what we do on a daily basis, like the typical day to day service that we provide to associates, labor cost control. I mean, of those things, hiring people. And I'm going give you an example, which Pepe mentioned briefly, which is about digitizing HR operations, specifically how we are recruiting sales assistance. This is a pilot that we're running in Mexico. And if you think about the current or the analog way of hiring is you put a billboard outside the plant of the distribution center, we're hiring, and then you receive the paper applications, and that's basically how you do it. And then the recruitment specialists start interviewing people, etcetera. So the problem we're trying to solve is high turnover, right? We have high turnover, and so we want to reduce the high turnover to reduce the cost of hiring and obviously so that it doesn't impact our sales. And so we partnered with a couple of startups. One of them is called Apply. What they do is they basically post positions in social media like Instagram and Facebook. And then the other one is Quantum Talent. They have this algorithm based on psychometrics, like five different psychometrics. What they can do is basically they can predict performance for a particular position, if you will, in this case, sales assistant. So what we do is the process is very simple. We post the position, Facebook, Instagram, and then the applicant clicks in, starts show their interest, they click, and they go to a chatbot. And the chatbot is kind of like a filter. It's a binary system that asks questions. And if you pass the filter, then you go to the quantum tool. For them, it's seamless. They don't know that they're in aptly. They don't know that they don't know that they're in quantum. And so what happens is they fill out the psychometric, and they can fall in three different categories: green, yellow, or red. If they fall in green, then they're going to go to the recruitment specialist. They basically do this faster check interview, and that's how we hire them. Right? And so far, through this process, we've been able to reduce significantly in this particular pilot from March to July the comparison, March to July 2018 and then the pilot that's from March to July 2019, we've been able to reduce turnover in this particular geography from 26% to 11%. And we're very happy with it, and we think this has potential to expand across all of our operations, and we're going to do so in the next eighteen months. And this is basically what I wanted to share. If I want you to keep three messages for this particular presentation is what we're doing is beyond payroll. It's truly aligned to the business priorities, right? The second one is we're working to have the bench to grow this business in the future, and we're starting to do things differently and innovate so that we can add value to our operations and reducing cost and increasing sales through technology and innovating. And so that will be it from me. And now I'm going to introduce you to Mark Shortman. He's the President and CEO of Coca Cola Southwest Beverages and then Giancotiso, the CEO of Coca Cola Southwest Beverages. Thank you very much. Good morning, everyone. Delighted to be here today. Both Jean Claude and I have a story to tell. It's been a three year journey since the transition from Coca Cola Southwest into Arca Continental. And I will spend the next ten minutes or so and talk about the journey we had getting to where we are today, and then Jean Claude is going to talk to you about our future. I think it's important to note that this journey started on 06/01/2016, when Arturo sat down with both Jean Claude and myself, and we had a clear brief about our future. We had a very strong Southwest organization in Texas and Oklahoma, a very tenured leadership team. And certainly, Arturo saw that opportunity, coupled with the fact that Jean Claude had led the commercial area of Arca Continental, had operations experience. So he and I came together as one team to find the path forward. And if you think about what Arturo would describe to us, taking the strengths of these two organizations and making it a stronger organization going forward into 2017 and the future. So Jean Claude and I have been working hand in hand, and we have lifting with our leadership team. So I want to share with you a little bit of that journey. So to just level set where we reside in The U. S, it is primarily Texas and a portion of Oklahoma. About 30,000,000 people reside in these territories. But here's the important point on the strength of our brands. We represent over 12% of the Coca Cola business in The U. S, yet only 9% of the population. So that index is a 133. So it really talks to the strength of our brands, the strength of our organization to drive true value in Texas and Oklahoma. So why specifically, was, ARCA coming to Texas and Oklahoma? And I'll clear this slide with just a few key points. A very multicultural state, both Texas and Oklahoma. A lot of good comparisons if you think about Latin America and how we can build on those strengths. Number two, it's a growing marketplace. We're very proud in Texas and Oklahoma to be one of the highest growing states in all of The U. S. We truly believe that over the next few years, we'll continue to grow. Certainly, metrics that you see and report talk about Texas and Oklahoma really being a magnet of growth, whether it's coming from the West, the Midwest or even the Northeast. And we really believe and I've had a chance to work in a lot of markets in The U. S. It's a very positive environment for business. So I think that's what's helping to drive the economic fuel, in the state of Texas and Oklahoma. Pepe shared a point about market share, and he talked about colas in Mexico at about an 80 share. We say this proudly but also humbly, we too have about an 80 share of the cola category in the state of Texas and Oklahoma. We're very proud of that. And in the lemon lime category, we have a 75% share. So there's a lot of, again, comparisons to Latin America where we have a lot of strength in the sparkling, which really gives us strength to grow our entire beverage portfolio. And that's what we believe as you see the future. And just in the last twelve to eighteen months, the introduction of Topo Chico, the introduction of Body Armors, the Coca Cola Company looks for new ways to win with consumers in our marketplace. They certainly lean on us in Oklahoma and Texas as an innovator of these beverages and key package sizes. Again, I speak humbly that having been in the Texas market for ten years, I helped to build and develop the team that is in our organizations today. But we've also then brought in Jean Claude and his organization. And I really feel that what we've done is that one plus one equals three organization and true strength as a leadership team. I think we had a real common thread around synergies. We were a very efficient operation, if I were to look at my peers across The U. S. So when we began to integrate Arca Continental and Southwest, there were a lot of common grounds on how we're going to continue to drive value and remove waste. So there wasn't a lot of people stepping back. There were a lot of people actually stepping forward, wanting to be a part of future solutions. Then finally, I think, again, just to kind of pull it back, great demographics, a growing population, youthful, and we believe this is the path for our future and that Texas, Oklahoma was the right first step. So this is our journey. If you don't mind, I'm going to spend a bit of time. So think of this as a sequence, left to right as far as time. And I want to take you back to T minus nine months of taking ownership to the transition. So it was June 1 when Jean Claude, Arturo and I met, and we began to map out exactly how we were going to lift this $2,700,000,000 business into ARCA Kumpinenetel. And ladies and gentlemen, we changed almost everything. One of the key criteria was moving to a new IT platform. I assume some of you have actually moved platform so you can understand what I'm about to tell you, it's not easy. Not only that, Jean Claude and I found out somewhere about in the eighth month of when we were going to cut this over, someone came up to us and said, do you know you're cutting over on April Fools' Day? 04/01/2017. So on that Saturday morning, anybody lived through the Y2K? Some of us in this room maybe remember that experience when we thought the lights were going to go down. So Jean Clyde, sitting in our war room, wanted to know whether the lights were going to come back up on April 1. They did. The planning worked really well. And we truly delivered our first month and our first quarter plan because of all the hard work of that planning. I'll take you to the bottom left hand side on collaboration. Arturo and Jean Claude and I, again, we agree that probably one of our keys to success was to demonstrate our collaboration with the Coca Cola system. Remember, 68 bottlers in The U. S, about 10 or so are the primary drivers of the business of scale, and it's about how we collaborate. There are senior leadership forums that Arturo and myself sit on. There are commercial platforms that Jean Claude helps to lead. I actually chair the procurement company that helps bring together all the bottlers. We buy $10,000,000,000 worth of raw materials, finished equipment like cooling equipment and trucks to make our system in The U. S. Stronger. And then you think about our supply chain management. We have our senior leader on supply chain and then IT, which is the SAP platform that we are all one organization using. So that in itself was an important part, but it's actually a thread that runs through everything we do. We think about how we collaborate with our bottler partners, how we invite them down to Monterey to see the work that we're doing in our laboratory, whether it's Pepe's group or Alex's group in terms of supply chain management. The idea is that we're going to help set our agenda, which is driving revenue growth, is about driving new technology, it's about driving supply efficiency. But we're going to do it in a way that demonstrates our collaboration. We want to work together to strengthen the entire U. S. Business. Then I'll take you on ACT, synergy and the Oklahoma transition. Those next three, think about ACT as a starting point. So Pepe talked to you and Jean Claude will kind of tell you about the two point zero. But day one, we began to embed it in everything that we do, in the technologies that we have and to ensure that we will be successful. But again, it's baby steps to walking steps before you run. And then the synergies. One, put a PMO in place. We set down key initiatives. We did a lot of cross pollination of leadership teams to make sure we could drive value both at a revenue line but also at an OpEx line. And then along this way, one hundred and eighty days into the transition, we took on Oklahoma. Now it was an additional 10% of the business. But I would say to you, go back to the planning session, we had to do the same number of steps for oneten of the size, but you cannot skip a step. So a tremendous amount of effort was done just to lift that into the organization and now we became Coca Cola Southwest Beverages. Then at the top on supply chain optimization, organizational design in North Point, I'll just say this. Listen to the words that Alex described on supply chain optimization. We're doing everything we can to listen, learn, go and share best practices. So along the way, again, think about change management. We're trying to digest the amount of things that we need to evolve with the KPIs. We had a good organization trying to become a great organization. Same with our organizational design, so think about sales and delivery, working with Pepe's group, working on the solutions that are going to give us the greatest amount of value and accountability to our organization. You can think about the size of our operation. We're across two time zones, 800 miles wide and 600 miles deep. So we can't be in front of our people at all times. So it's how do we build accountability all the way out through the organization than North Point. And Alex talked about North Point, but I'll give you the scale of North Point. 20 football fields under roof. Another 40 football fields of concrete outside just so the trucks can operate efficiently and move in and out. Alex talked about pulling this all together, closing two manufacturing facilities, closing four additional DCs. Ladies and gentlemen, we've got a team that's been working on this since day one, and they're proudly wanting to hear that we are on time and we're going to have this thing stood up early in 2020. So we're very proud of Northpointe. The last two points on operational discipline and go to market and customer intimacy, the same message. We're on our journey. So think about every single week you finish you go back and you look at your KPIs and you try to improve. Or once a month, you take a deeper dive. We're doing the same type of conditioning that Pepe described and that Alex described in their presentations, and we're starting to get our sweet spot in terms of building sustainable performance year over year. And that we're really proud, I think Gabriel said it best, we're on our journey with the cultural principles. Jean Claude and I have spent a lot of time in our marketplaces. We do a lot of listening sessions with our frontline associates. We want to hear. We want to listen to the transparency of the things that we're not doing right for them as an organization, tools or processes that need to be fixed. And then the important piece is what are we going to do to make a positive difference in our associates' lives. So that's our journey over the last couple of years. And just a few things that we've had to overcome. We were a fairly functional organization with a lot of things tethered to Atlanta as a corporate ethos. So we actually had to then put additional organizational detail into our business model. Like we didn't have a treasury department. We didn't have an IT department. We didn't have a capabilities department. All of those had to be embedded, if not day one by day 90, if not day 90 by day 180. A lot of hard work to stand this up. I talked about the Kona IT investment, the fact of just changing literally everything you looked at the business. It's been changed. It's been modified and we really are beginning to hit the sweet spot. Along the way, we had a tremendous impact in our raw materials. If you think about the Midwest premium on aluminum, we buy about 40,000 metric tons of aluminum. So it had a very negative impact on our business. And at the same time, PET resin rose over a period of about eighteen months. So those had certainly created headwinds for us. And then Hurricane Harvey. I'm not sure if any of you have ever been in a major hurricane. I've had a chance to be a part of two, unfortunately, Katrina and then Harvey. Ladies and gentlemen, this is one of those opportunities where if your organization is not strong, it can usually get the best of you. I think Jean Claude and I would agree that this was actually an important part of our journey because the team was just standing up the business, just learning the new routines and processes. And then Hurricane Harvey hit. But I can tell you that the leadership team throughout the South Central and the Southeast, from Corpus Christi all the way through Houston, did an incredible job of taking care of their associates, taking care of the consumers and the customers. Our Abilene facility, as an example, went 20 fourseven producing Dasani They produced a million cases of Dasani case pack, with a majority of those cases being shipped into the disaster area, given to the likes of the Red Cross, Salvation Army, to the military, doing whatever was necessary in the time of need. So an amazing journey, albeit a difficult moment as you were standing up the organization, but I think we're stronger because of it. We want to share with you our synergy plan. We've said from day one that we are targeting synergies. We started at 60,000,000 to 80,000,000 and it moved up to 90,000,000 as we saw a path forward. On the revenue synergies, one of the areas Pepe talked in his presentation is around vending. We saw a tremendous opportunity to focus on our vending operation. It hadn't been modernized sufficiently and hadn't been light weighted in terms of go to market models. So we've begun that journey. It's creating a positive impact in our synergy projects. Also, as revenue synergies, we think about the introduction of Topacheco in early twenty eighteen and then Body Arm in the latter part of 2018. The synergy savings are really around vendor negotiations, around our shared services model, some really big savings around in blind blow molding and then our supply chain efficiencies that was talked about by Alex just a few minutes ago. And the North Point, clearly, as Alex talked to you about, is $30,000,000 of this synergy project. My last slide is really around integration and the culture. Again, I think this is the moment that Jean Claude and I are probably the most proud of, of watching this leadership team really stand up the organization, really drive true value in our organization and to think about this. In 2017, we were only nine months old into the new business and made all those changes. And The Coca Cola Company awarded us the Quality Award as the best plant in The U. S. For quality in 2017. It's a remarkable award given all the constraints and all of the issues of transitioning the business, but it speaks to the depth of the organization. One year later, we received the Market Street Challenge Award. That award is for Best Bottler Execution measured not only by our performance but also by our peers. So it's a two way to measure the business. We're very proud of that, humbled that we were able to be the best in 2018. And that gave us a platform to go to Barcelona in May to be a part of the Global Candler Cup award, which, again, we had a chance to stand up. Actually, Jean Claude made the presentation, and we were awarded the best bottler in the globe for 2019. So I say that humbly, but also very proud that the team has made a long journey and a successful road. But clearly, the best is yet to come. So ladies and gentlemen, let me introduce to you Jean Claude Tissot. Marc, thank you. Thank you for the introduction to our business. But Marc, especially, thank you for your partnership during these two years and your leadership. Indeed, during the last two years, we have built a strong foundation with our supply chain optimization, the deployment of the commercial strategy, the ag model and also shaping our diversified portfolio in order to capture growth profitable growth in The U. S. Market with the vision of building a stronger future. Regarding our channel composition, 54% of our volume is with large stores, supermarket. And we have created a strong positive relationship with these critical accounts in order to grow with a win win relationship. At the same time, 95% of the outlets are small store and FSOP customers. That's why we are evolving our go to market in order to capture growth with those customers based on our principle of customer centric. As Pepe was mentioning, we are deploying the ACT model. And let me show you how we are bringing this to life. Segmentation. Segmentation is now a reality in The U. S. Market. And we have the information about our opportunities and our execution by customer, by geography, by channel, by a specific outlet. And we're incorporating demographic and shopper variables to our model. RGM, we have a better pricing coherency, and we have been growing our prices above inflation. And we are growing immediate consumption, transactions and frequency, and we have a better price execution. Our PICOs, Picture of Success, is easy and actionable, and we send clear guidance to our frontline associates throughout their mobile device. And our go to market is evolving. Our new FSOP go to market is about having more customer, new customer, increasing our frequency, expanding the availability of our uncharted portfolio, at the same time, to be able to reduce our cost to serve. And we track our execution at all levels through our automated tools. We created the fundamentals dashboard, which is a tool that give us real time visibility of our execution at all levels. Today, are here in New York. We can go and use our fundamental dashboard, and we can know real time what is happening in terms of opportunities and execution in a specific convenience store in Waco, Texas or Lubbock. Pepe, he was talking about this. We are in the process of the digitalization of the ACT model in The US as well in order to be more efficient. How? Through our advanced analytics use cases, photo recognition, which is key to reduce the level of out of stocks. We continue with the effort of our automated reports. And as our frontline associates, they shared with us, we are receiving new tools, we are receiving right training, but we know that you are already thinking in order what's next. And what we like from the tools, as some of you had the opportunity to be in the trade, is that they are not just using them, but engaged with the training and how the automated tools are making their life simpler and easier. We are expanding our e commerce platform that is very relevant for us in our business in U. S. And to answer a question that has been asked. Here we can see how Dasani has a GP margin of 59%. Small water has a GP margin of 32%. However, the profit per case of small water is higher than the sunny, more than 40%. Following this thought process, we are bringing to life example number two, increasing the profit per case, expanding the more profitable categories despite some margin impact. At the same time, we are in the process of supply optimization. As Molina was sharing, the investment in the new production plant in The U. S. Over a decade. Our state of the art North Point production facility. And we have a high focus in term of making our warehouse and fleet process more efficient at the same time of increasing our CapEx productivity. Building a stronger future? Let us share that we are moving in the right direction with some examples in just two years. After what Mark was explaining, the biggest transition, because it was a big bank and the biggest transition for the system in The US, a successful transition. After that, we won the National Quality Award. And we were recognized by the system, the Coca Cola Company and the bottlers in The US as the best in class bottler in term of execution, winning the Market Challenge. Now winning the Market Street Challenge gave us the opportunity to participate globally. And yes, this year, in the global meeting of the Coca Cola Company in Barcelona, Spain, we had the opportunity to share our case, and we were recognized by the top 70 global voters winning the Candler Cup. And this is the highest recognition that any voter can have within the system in our first two years. And we are moving in the right direction because we have been growing profit since day one. And think about it. Growing value share from the beginning, increasing our prices 9.2%. That's more than four times consumer inflation. Improving our OpEx, at the same time improving our OpEx, and we have been able to reduce by 130 basis points our OpEx. And growing our EBITDA 7.1%. That's more than 3x consumer inflation. We are proud of those achievements, but at the same time, we remain humble and conscious about all the opportunities that we have and that we will capture. Why? Because we have clarity about our strategic initiatives for the next five years. That is about what you saw today and is going to happen in The U. S. Market, our culture principles, our social responsibility to continue the focus on the operational execution and discipline and our great digital transformation. We have the secret formula to secure success. It's about collaboration. Collaboration with the Coca Cola company. As part of the conversations with you, the recommendation about that collaboration is with The US voters. It's about how the system is gonna win. But it's about our people. It's about our frontline associates, what we call in The U. S. Our heroes, our real heroes. And actually, with everything that Mark was sharing, everything that has been happening in two years, we were able to discover that heroes are real. And it's about investing, but also to have the discipline in term of execution about our commercial strategy, the execution of our ACT model. That's why ARCA Continental is building a stronger future in The U. S. Market. And before Emilio's presentation, we would like to share a video that summarizes went through its largest transition ever. We faced challenging situations. Everything was new, and we also went through conditions that tested us as human beings. But we had the secret formula. We learned from the best. And through collaboration, the Coca Cola North America system found that together is strong. We We implemented the Arca Continental total execution model, a strategy grounded in the market street challenge, a game changer RGM and go to market model, a strong certification process, the best tools for the best people, and an automated reporting platform that has given us an unprecedented view of all our execution in the market. We are focused on innovation through major digitalization projects and better analysis of market information such as ecommerce and advanced analytics. We discovered that heroes are real. One team with one dream made this possible. Our 8,400 heroes are devoted to serving our customers with excellence by taking a plus one approach to everything we do. Coca Cola service is now better than ever. They are always on time and full. I have decreased my out of stock, and my displays are always full with the right products for the season. They have been great to listen to what I need in my business business goal. So they are not only my vendor, and they're also my partner. Now we're working we're them. Working able sense what to And that. And been recognized as global champions of bottler execution in the entire Coca Cola system. All of this has been possible through our heroes and our strong partnership with the Coca Cola Company and the North America bottlers who shared best practices and helped us establish and grow our business. Coca Cola Southwest Beverages, creating value with a solid conviction for excellence in execution on every store. Thank you, Inclad. Very nice video. Good morning. Thank you for being here. It's really a challenge to be the last one after eight presentations. So I promise I will be brief, and I will also share valuable information. To wrap up on what Arturo and my colleagues presented, I can conclude that we have a clear path forward, and I will tell you another different formula. We have a formula to continue to create value for our shareholders that is aligned with everything, all the initiatives that my peers already presented and with the way that we operate and consisting four components, very easy ones. First, long term profitable growth that Arturo already talked about, cost and expense efficiencies, disciplined capital allocation and solid and flexible balance sheet. Before I continue with our formula, I want I want to tell you that we have been using these principles for many years. Two good examples are with the merge between Empoteadoras Arca and Grupo Continentale in 2011 and in 2015 on the acquisition of Corporacion Linde in Peru. And of course, we're implementing these principles here in our beverage operation in U. S. Before I continue, I want to talk about a little bit about our industry. As you know, consumer preference are changing. New players are entering the market. More SKUs with different margins, Jean Claude already explained us, different profit per unit case. We're shifting from volume to value and profitability mindset. That's why we're acting and we're thinking different to capture all new opportunities in the market and be a stronger company. These new trends, more products and different capabilities, digital innovation is essential to have the right and accurate information on time to make the right decisions in the market and on investment to maximize our profit. Let me continue with our components. First, focus on long term profitable growth. A fundamental pillar for this is our ACT commercial model. And let me talk a little bit about ACT. No, I'm just kidding. Pepe and Jean Claude already explained us very well. So our goal is to grow an average between 6% to 8% in the next five years, increasing our consolidated revenue by almost 50%. This is organic growth. This growth will come from volume, mainly from our Latin America markets and from mix and price strategy. Some initiatives, again, already explained to achieve this, market segmentations to maximize the profit per customer. Price strategy, Artur mentioned, increased prices above inflation and rationalize our promotions and discounts. Suggested orders to drive more profitable categories and to support our core channel and find new opportunities. The second component, drive cost and g g and a efficiencies and improve productivity. I believe that some of my colleagues could say that this is my favorite one. I don't know why, but you can ask them. With this, there are several initiatives on the cost of goods sold to improve our contribution margin. I will share with you several examples. Light weighting program. In the past seven years, we have reduced the consumption of PET 20,000 tons. That means $25,000,000 savings. On the supply chain, we've been investing in inlay blow molding in several plants. So we reduce freight expenses. And with economies of scale, we have good negotiation with our suppliers. And also we have a hedge program to mitigate the risk on raw material prices and foreign exchange rate that we we have been using this for many years. On the side of SG and A and productivity, we maintain a strict control on expenses. And I'll repeat it for this table, strict control on expenses. We need to keep a ratio, Arturo already said that, a low ratio expenses over sales. Again, some examples. We've been investing in technology for our routes, so we reduce the consumption of fuel and we drive less miles and be able to spend more time with our customers. And also, Arturo, you already explained about RPAs in our shared service center. We've been investing in robotic process automation to execute processes faster with less people and working twenty four seven. The next is consistent and disciplined capital allocation. Well, I think you know us we are very disciplined and conservative on the our use of cash. CapEx must be aligned with our objectives and with a high rate of return. On our cash conversion cycle, good terms with vendors and clients and improved distribution to reduce quotation and inventory days. On M and As, Arturo also explained, continue with our growth strategy. It's simple. Within The Americas, beverages, food, and snack businesses. And very important, our dividend policy. Maintain a dividend policy of of with a payout ratio of at least 3%. In the last five years, we've been paying more than 40% a little bit more than 40%. And the fourth is maintaining solid and flexible balance sheet. Again, we are really conservative on our financial leverage. If we don't do any acquisition, we will reach soon a onetime net debt to EBITDA ratio. With an M and A activity, this level could increase, but we always look to reduce that level to less than two times. So with that and with a a a rating of a single a globally, that reflects that we have a very conservative risk policy and a strong cash flow generation. So that makes it ready for any M and A opportunity. In summary, let me take it back because you're going to start writing. So in summary, I can say that with all these initiatives together with our formula, we will reach in the next five years organically sales growth between 6% to 8%, EBITDA of 8% to 10%, that means that we will be improving our margin, combined with a disciplined CapEx of 5% to 6% of our sales and a low leverage ratio provide us a clear path forward to continue creating value for our shareholders. And with that, I'll turn it back to Arturo for key investment highlights. Thank you. Thank you, Emilio. And well, to finalize our presentation, I will let me go back one here. I will go through a can we go back? Yes. Through a few of our investment highlights, and these are basically the strengths of our company that we believe put us in a very privileged position to continue this path of profitable growth for years to come. We as you can tell, by what you heard today, we all believe, the team believes that we have a very special company. And these are some of the reasons for that. And hopefully, you will agree with us, and we you will think and feel the same way after hearing some of these concepts. First is we have a solid foundation of the company. We say that we have the best of all worlds. We have a company that's family owned. The family knows the business. They've been in the business for generations. But we have a professional management. We have a solid institution. We have the checks and balances. We have an independent audit committee. We don't have, we have a a professional management. Families participate only at the board and committee levels, and we have transparency in our communication towards stakeholders. So that's really important that, you know, it's not necessarily the typical case in some of the, Latin American companies. So it's very important for us, and it aligns us to the basic goals of creating value for shareholders. Second, we have, and we've spoken about this, the trust with our customers that's built over many, many years. And this is something very important that we measure. We have our customer love score, which is a metric that tells us where we are in terms of our relationship with our customers. And you've heard that this is also the basic idea for transformation in some of the businesses that we are integrating, such as The U. S, where you heard about our customer intimacy, transformation in the market. So this is, again, a basic strength that also allows us to leverage more effectively new technologies. Our commercial capabilities, we've spoken about ACT and other capabilities that we have. And one important idea here is that this is main source for creating value as we deploy. We still have the opportunity of being more consistent. But also, very importantly, these capabilities are applicable to businesses that are adjacent to ours, and this is really important to us. Our production and distribution capabilities, you heard about that as well, something that we don't talk a lot about usually, but we're modernizing our infrastructure. We're incorporating digital, also to these processes, and we're finding in our supply chain the best balance of cost and service to our market. And again, this is a solid foundation for our business. Digital platforms and advanced analytics, which is the incorporation of new technologies, but again, in the right combination with our current processes. We believe that the strength and the competitive advantage will come from that combination. We have now the right mindset. We have a model to do this because many times you have a bunch of ideas and you start chasing different projects. We have a very structured model that Pepe presented, and we have the agility to do that. Our culture based on common principles, we also touched on that. And, I think what is the the big strength and probably we should put this first is that this is a company that has a very strong heritage of the the loyalty and the commitment of our associates. If you go to the market and you you visit any of our markets, there's a lot of passion of people that have been, you know, with with the company for for years and have this this connection with with us and and with our brands and that know that it's a great commitment to, be responsible for managing, leading brands in our markets. A strong partnership with The Coca Cola Company. This is a ninety three year old partnership. And, and for a ninety three year old marriage, I I would say that we're doing pretty well. I would I would say that there has not been a better moment in our relationship with the Coca Cola Company. We have the right dialogue at the right level. We have the the the right conversations of the relevant relevant topics. We debate a lot, but I think that's healthy debate. And we believe this is a great opportunity to continue to explore projects for the future for us. And the financial discipline, what Emilio just spoke about that. We have the credit ratings of our company. We have a strong balance sheet that gives us the flexibility and the strength and keeps basically our options open for what we wanna do. And we also are committed to paying dividends. We like to pay dividends. So it's very clear. The only question you might have in this slide is why is that picture there for financial discipline? And I couldn't answer that when I was reviewing it this morning, but we said that it's represents that Emilio pulls the right levers for profitability in our balance sheet. But certainly, this is one of the things that distinguishes our company from others. Our capacity to integrate businesses through M and A. I think we've proven that we've been successful, in doing that. And very importantly, we continue to learn. What you heard from Mark, The US was our biggest challenge, And think we are making a lot of progress, and you're still going to see a lot of the benefits that come from all the efforts that have been made so far. And this learning experience also puts us in better position for future integrations. And finally, making this positive difference in our communities and having this long term view of the business, we're fully committed to have this positive impact in all aspects of the communities, where we operate, and we spoke about sustainability as well. So this, finalizes our presentation. And to conclude, I just wanna say that, you know, we're convinced that we have, as you've seen, a very strong platform for growth, capitalizing on opportunities and leveraging the capabilities that we have, to continue in this path of creating a stronger future. This is a very solid company. Our focus will continue, to be serving our customers with passion and with excellence. And, we think we have the right elements. We have the leading brands. We have the right processes. We have, the experience. We have the relationship of trust we've built with customers over the years. We have the trust of other stakeholders, and we have, the commitment of, our 63,000 associates that are prepared, to take this company into the future. Thank you for listening, and we'll be ready to take your questions. All right. So that concludes the presentations. We're going to just take a few minutes to set up the Q and A. So just so you know, we have some reusable tote bags and there's product everywhere. So we're going to ask you guys to take some home, try some Body Armor. We brought a bunch of Body Armor flavors. Couple other items here. Oh, we have a survey. We would love to get your feedback on the on the event. So there's a survey with the hostesses outside on your way out. If you could answer, that would be awesome. So I'm going to ask Emilio, Pepe and Arturo to come up. Your standard Q and A guys from the earnings call. But the rest of the management team is available for questions. We encourage you to ask questions of the whole team. They're here for you. Take advantage of their presence. And our hostesses are here with microphones. So please just tell us your name and your affiliation, and we'll start taking your question. So right here, we have one. Hang on. We'll get everybody seated. And just one second. Ben Toro from Barclays. Arthur, thank you very much for the detailed presentation. Actually, one part I thought I was missing, and I'd like to elaborate a little bit, is what you've been doing in South America. The strategies, you've talked a lot about what you've been doing in Mexico and the details, what the journey was in The U. S. But could you elaborate a little bit on where you stand currently in South America and the three countries you operate in? And what are the things you have to do to improve there as well? Where are the opportunities to take from South America maybe up to Mexico or to The United States? Just elaborate a little more on that one third of the business we've not heard much about. Sure. Well, what we're doing in South America is deploying the same ACT model that you heard about here today. And it's different slightly different in every market, in all three markets where we operate, but the building blocks would be the same. And that happens every time we go to a different market for Coke. There's some particularities of the markets themselves, but the basic ideas would be the same. We're working in segmentation and deployment of that picture of success and working on revenue management and transforming our go to market models in each of those markets. So but it's slightly different. The challenges change from one market to the other. And, first, you have Peru, where we basically have incorporated into our own sales force this third party distribution that we had. And we're now capitalizing on that effort over the last maybe couple of years, but I guess that we've been doing that. And so now all the sales force is ours. We have third party delivery, but that was a fundamental change of how we operated the business. So we are right now in process of refining some of our capabilities with this new model in Peru. You've seen the results in Peru. They're very good, and we continue to be very optimistic about what we could accomplish there. In Ecuador, we had a bigger opportunity in revenue management. If you look at prices in Ecuador 2018 versus what we're doing now and how we have our price back architecture redesigned, We've made a lot of progress there. So again, it's elements of the ACT model probably with more emphasis in one market versus another. Same thing in Argentina. One of the important things that we're doing in Argentina now with this challenging environment, pricing is always important there. Become a PhD in revenue management pretty quickly Argentina with inflation. So we've been doing that, but also we've been changing our go to market as well with third in some places, we have third party distribution in Argentina. And we've been able to elevate their standards of execution in the market with very good results, especially in those rural areas or outside the typical, urban areas in Argentina where we usually do it on our own. So and that also is part of our execution model. So it's different elements that we roll out and that we strengthen depending or emphasize depending on the situation of the market. I don't Pepe, if you want to add I to think your question was right. We put plenty of Mexican and U. S. Examples. But actually, we are for example, in Peru, I think Peru is catching up. I mean, in many ways, it's already leading in many of the innovations and things we've been doing. Ecuador, on top of the challenge that Arturo said, has the challenge of starting to work and integrate the way we work the three different companies, the snacks business, the dairy business and the soft drink business in the road to market. So we're working there. Argentina, as Arturo said, very much focusing on developing the outskirts and the rural areas. So yes, we are moving in all of the different operations. And the other thing that I might add is that aside from tracking how we perform, the results in terms of volume, prices, profitability, share value, we're also tracking the maturity of those processes. I mentioned before, RGM is the example that I mentioned. But in every single process, we track the maturity, how well are we doing versus this best in class. And that's really important to know where do we need to dedicate our resources and our efforts in our yearly business plan. Okay. And then one last follow-up for me. So you had the leverage chart, and obviously, it looked very good, like going down to under 1x in a very short period of time. So you've done M and A on the beverage side but also on the snacks side. What would be your like preferred operation look like? Would you like to go more into Snacks? Would you like to go more into beverages, more diversification from a geographic point of view out of The Americas into other markets? So what would it be would attract your attention in terms of M and A? Well, I can answer that. We're going to move into what creates value. And we have a defined scope, a geographical scope, and a scope of businesses where we could move into because we believe that our capabilities would be applicable there. But certainly, what we prefer of the options available would be the specifics of the project and the valuation, the structure of the project itself, that will dictate what we where we allocate our resources. Within the the growth strategy that that we all know, no? Within The Americas and the, you know, food and snack space. And beverages is divided really in two areas. One is the Coke franchises themselves and then other beverages, which we could partner with The Coca Cola Company as we've done in dairy. But still, we would be within the partnership of Coke but in a separate model. So there are all those possibilities out there. And now we as I said, we learn more about what works and what doesn't work as well in our capabilities. JEAN Arturo, thanks for the presentation and for the team. Two questions. The first one is when you were talking about The U. S. Operations and being 10 bottlers out of the 68 outperforming or being the really most relevant. And with the experience that you have had in the last two years in terms of execution, with your communication with the system, do you think that there are more opportunities coming in the short term in terms of consolidation on the back of the results within The U. S? And the second question for me in terms of the guidance. When we take a look at CapEx, it seems that you have really take a look in terms of reducing the CapEx in a material way for the 2019, 2024 from what we were expecting slightly above 6%. And just want to understand if this could be sustainable and after that, you could return to more previous levels of above 6% of sales? Or this is more a structural change? And especially trying to understand within the potential requirements in terms of investments in digitalization and the initiatives that could require material investments. Yes. And thanks for the question. Well, with respect to The U. S. System, well, it's hard to predict how this consolidation evolves. But what we can say is that we're much more excited about what we can do in The U. S. Market. As you heard from Mark and Jean Claude, when we started this journey, we still didn't know exactly how we're going to combine what we the processes that we had with the strengths of, the operation in Texas, which was, the best division in Coca Cola Refreshment. So, now, I think we are much more confident. I think the team has figured out what is the best combination of those capabilities and the how we adapt some of the winning practices in Latin America to a market that is certainly different. The U. S. Market is more sophisticated and competitive, but again, the building blocks are the same. So we're we're much more excited about that, and so that we know that that can be, replicated successfully in in The US as it can be in the rest of The Americas. With respect to CapEx, what we are, as we mentioned during the presentations, is much more disciplined in how we manage our CapEx. We know that there are some requirements. And digital is not necessarily a big concern of investments for the future. It's mostly about dedicating internal resources, developing internal capabilities of the team, changing the mindset more than huge CapEx investments. There are other areas of our traditional business that require CapEx. And as we expand returnable formats and obviously the coolers and things that are part of our normal operation. What we need to have is more discipline. And the example is what we've been doing this year versus our initial plan, which means that we're much stricter about how we deploy the CapEx. And this is basically by segmenting the CapEx requirements, things that are replacing current assets versus growth projects. So we are being very rigorous about investments that are for growth or for profitability so that the returns on those investments are very clear. We have follow-up on those projects. And that has, up to now, been successful, and we're satisfied where we are, but we continue to do that. We're still going to look at business in the long term, so we're still going to be placing coolers and doing the introduction of returnable formats, but we're going to make sure that it's strictly what is necessary for the growth of the business. I don't know if you want to add to that, Emilio? Yes. Well, this 5% to 6% is the average for the next five years. This year, since we have the North Point Plan, will be a little bit higher than that for this year. From Credit Suisse. I have two questions. First, on The U. S, would you be able to break down the guidance, I guess, five year guidance that you gave specifically for The U. S. When you gave a lot of detail today on the OpEx to sales improvement that you've seen so far, the pricing improvement that you've seen over the last two years, but yet EBITDA margins, particularly last year, didn't improve because of the aluminum and the PET headwinds that you also described. So I guess the first question is do you expect EBITDA margin to start improving in The U. S. More substantially? Is it a 2019 story or 2020? I think you've made some comments in recent conference calls that you'd rather prioritize more EBITDA in dollar terms per case perhaps in terms of chasing a larger business as opposed to looking at margins specifically. So I guess the first question is how do you frame The U. S. Specifically in the context of this broader guidance? And then I have a second question, but I'll Well, the answer to that is the margin going to improve. The answer to that is yes. But certainly, for EBITDA margins, other elements come into play. We spoke about discipline in OpEx, which is what you've seen this year, and we still have more projects that are going to bring efficiency in our OpEx and the ratio of OpEx to sales. The EBITDA margin has impact from raw material costs, as you mentioned. It also has the effect of what Jean Claude explained, the growth of the stills or the nonproduced categories, because that includes the pacheco, versus the growth of sparkling. And that represents a shift in margins, an increase in profitability, which is, I think, a good thing. And that's why we spoke about just expanding the EBITDA for the business is the target. But margins are going to improve because we have the synergies also, And that's an effect that you'll see more of that in 2019 when our new facility is operational and also with the carryover of some of the synergies that we've been implementing during this year. So but yes, we're going to have better margins in the next few years. Okay. And then secondly, I wanted to in the context of your digital strategy, I wanted to zoom in into Brio specifically, if we can. Obviously, you guys have a head start, I guess, with the relationship that you have with all of the mom and pops in Mexico. Both payments specifically is an area where we're seeing literally billions of dollars, right, of new entrants coming into the market in terms of CapEx. So can you frame a little bit, I guess, your strategic approach? Would you consider partnering with different, I guess, fintech startups that are coming into the business very aggressively? Or how do you or do you envision perhaps, leaving the CapEx guidance aside, a much more aggressive investment behind BRIO to catch up with this fintech open commerce, I guess, in Mexico? Well, Brio has many aspects to that, and that's why I love this project because Brio initially is an evolution of our twenty first century project, I know you're familiar with. And this is basically creating a tighter relationship with the customer, which is what we're all about, investing in the point of sale, increasing traffic. They're going to be doing better, and we all win. That's the original idea and making them modernize their store to compete more effectively in a more dynamic market with convenience stores and other parts of the modern trade. That's the original idea of Rio, and it works like that. It does increase traffic, and we do sell more in the store. And it has the additional effect that it creates strong loyalty with the customer. The customer are grateful for what we're doing, and that allows us to have better conversations for many other things that we're doing with the store owners. That's one part of Rio. The beauty of Rio versus Century twenty one is that it has immediate returns. I mean you collect from commissions, you have a business that is independent from our operation and has a business itself like a start up, like it was because we acquired. But then there are other aspects here. One is about information. So BRIO is a way of knowing what is going on in the market, information that we did not have before. We never knew, and nobody knows really the sellout of the traditional trade customer in Mexico, Latin America. We don't know about inventories of those customers. And that, is a way of perfecting our routes to market in the traditional trade. We can we can evolve our route to market. Now we are, as Pepe has mentioned, implementing ideas for a B2B platform, which is not necessarily the concept the original concept of Brio, but it evolves into that. And then you have other opportunities that, Jesus mentioned today, how you partner further with the store. And that kind of branches out into possibilities of partnering with fintech companies or with traditional banks. I don't know if you've seen what some of the banks are doing for digital payments in Mexico. I think that's a big opportunity for us that connects a lot with information and access to information and data about the consumer. I don't know, Pepe, if you want to add to that or Chuy, jump in if you want Yes. About the payments, in the enablers part of the digital model that I explained, I didn't touch payments because of time, but I talked a lot about analytics. But the second most important ability that we're building and we're working on is precisely payments because of, as Arturo said, the information you can get from that. We have around 10 different pilots running now with banks and the startups for our direct to home business, for our vending business and also for BRIO on different so we're starting to partner with Banco de Mexico and CODI looking for different ways in which we can benefit from the payments ecosystem focusing on capturing the information that we can to reuse it and deploy it for growth. I'll just add one more thing, which is your question related to start up. We continuously evaluate start ups not only in fintech, which is a logical given what Brio does, but also in loyalty program and analytics. So we typically see 30 to 40 start ups per month is what they're doing, if they're able to partner with us. We're looking into that. Thank Thank you very much for the event. I a couple of questions also. First, can you give more color on the Snacks and the Dairy business? How excited are you about those businesses? And then maybe if you can address on M and A, are you potentially interested in other areas, original areas like at the beginning of Maybe, I don't know, food, baby food, whatever you can put in your tracks or whatever you think makes sense? Or you think that this is it, basically, snacks and dairy as far as original or new businesses? And then I'll ask a second question later. Well, let me talk about snacks first. And we have, as you know, a separate snack business, and they have very different challenges. And so we are addressing those in each of the markets. Ecuador is the smallest of the three, but it's the one that is more consolidated in terms of leadership in the market, in terms of national presence and even the portfolio of products that we have in that country. So the opportunity there is continue to expand our portfolio and to also connect with the rest of our operation in Ecuador. If you look at that, Ecuador is the country where we have the most integrated system of all. We have leading dairy brand. We have the leading some of the leading snacks brands. We have, obviously, Coca Cola and Coca Cola brands. And we have a joint approach to the market in some of the channels. So it's good way of experimentation for us to see what we can do in collaboration with the different categories of products. So we're there. We are innovating. We just launched products in new categories where we did not participate in the past. So that's a different opportunity. In Mexico, the challenge is to turn our business into a a more national business and have a presence, especially in in the center of the country and ideally in every region of Mexico, which we are mostly in the regions where we operate as a coker, which is almost half of the country in size. But there are some parts of the country, especially Mexico City, where we need to expand to. We're doing that. So we need to give more relevance to our brands. I think that would be the name of the game for Mexico. There's not a lot of M and A, unfortunately, for us to do in those markets, but still we have the capacity to grow. If you look at the system that we have in Mexico, the number of routes that we have for Vocados, for our operation, they're very valuable because direct delivery routes, DSD, for these products are very high. Actually, we are approached in Mexico by leading brands, multinational companies that don't have DSD operation to see if they can partner with us because they know that we can reach a large number of customers and that we've achieved the right drop size for those routes, which is very difficult to have. You can start IST, but that system usually collapses because then you don't sell enough and you start optimizing routes, it's like that downward spiral. So we're beyond that. We're trying to figure out how to do it in territories where we're not we don't have strong brands, and that's been the challenge. How do we grow? We have to obviously sacrifice some of our profitability, but that is the path for growing, new routes, new distribution centers in Mexico. And then if we move into The U. S, that's probably the biggest challenge. You know, we have issues with our infrastructure that we need to evolve. We've we've made some assembly to improve our margins in that operation. And I think it's not the question of whether we wanna stay the way we are. I think we need to do something in The U. S. To have more scale. And we're also thinking about that and about expansion. So that's pretty much in the picture. Great. And in terms of the green strategy, how much more expensive are the green raw materials, recycled PET in particular? I know that this is something that the Coca Cola Company is an initiative that they're pursuing, and think more and more consumers are demanding that. But is this going to hedge? Is for most for most people. It is more expensive for most. What what we've been doing is, precisely because we've been anticipating this for a long time. We've owned Petstar now for, what, eight eight years, I guess. We've been able to maintain very competitive prices for recycled resin versus virgin resin in our operation. And if we increase the scale of Petstar, that's still gonna improve. It all depends on obviously, the price of resin and price of oil fluctuates over time, but we are very competitive in collecting, and that makes a big difference. So if you look at the prices of Petstar versus virgin resin, they've been marginally higher in average, and there have been some even some periods of time where it's been lower resin. So we're very satisfied with that, and we are, again, exploring how to expand that, which will have the double benefit. We're to increase the percentage of resin that we incorporate into our packaging, and we're going to do it more effectively because we're going to leverage the scale. So we know that technology works really well, and we have, very importantly, the process for collection, which is something that is very hard to structure. Arturo, I would like to Add to that. Include that we have a similar strategy in South America, replicate the practices that we have we have in Mexico. It's not necessarily the same model because we don't have the enough scale, but we are looking for alliances with our top players in model and make this analysis and get the same advantage in the cost of the of the in United States. Now we are making an assessment in how we are going to deploy this strategy and maintain our benefit in the price of the material versus very interesting in all the regions. Thank you, Alex. Who has the mic? Okay. Where's the mic? Ladies first. Ladies first. Ladies first. Yes. Sorry. Thank you. I'll take it. I have two questions. Thanks. One on the direct to consumer model. I wonder if can give us how quickly you see it growing, how big it can get as a portion of your revenue. Do you see it right now as Mexico centric? Or might you expand it to other parts of South America or The U. S? And is it profitable now? Or does it do you see a view to it becoming as profitable as the rest of your business? And I have one more in Yes. Well, it's mostly it's Mexico now, and it's a model that's certainly very profitable, again, because we have the drop size. And this is something that culturally, it's worked in Mexico for quite a long time. So we're actually leveraging this for other products as once you have the Coke system having the right drop size there. Something that excites us, and it's not only the growth but also the connection directly with the consumer and learning more about the habits of the consumer, their preferences. It's a way to introduce new categories. This is where we're selling we're growing more in dairy, for example, in our Santa Clara, very well known. This is a great channel to make it more relevant for consumers. So I'll turn it over to Pepe to talk about future growth. Yes. And we think there's a huge opportunity even in Mexico. We think we can double the business within some years. And exploring different models, as I said, we have this model in which we take the advantage of our mom and pop customers for the last mile delivery, and that's something that can we can probably expand to our other operations in Latin America faster. So there is there are plenty of ways in which we business. And I would say that also with the digital payments, we will increase the drop size because now cash is an issue. Sometimes they don't have money As of now, a pay a customer that pays digitally consumes 30% more on an average than a co pays cash? So we already reached a fair number of homes. It's we can increase the ticket, let's say, for those transactions. We can increase the frequency as well, and we can expand the model further. So we have, you know, all, every single way to, improve what we're doing there. So it's really important for us. And and also, I talked about the vending business. We have 350,000,000 transactions. Now we don't know who these guys are. Digital payments, if we put a name on those three fifty million transactions, what we can do that information in terms of using that to grow our business is huge. That's really interesting. Thank you. Just one more on Mexico generally. There's an increasing talk about Mexico potentially falling maybe in the second half. Certainly, inflation starting to come down a bit. How do you see that? Is it a big concern of yours at this point? And how do you see the business faring if growth does begin to slow more measurably? Well, our business in Mexico is still growing and heard about all these possible scenarios and possibilities. And what we know is that we are very well prepared for those situations and worse. We don't think it's gonna be catastrophic. I think the good news a year ago is that we know the country is not, really going in the direction that some thought with the new government. So so, but still, we can have, the impact of even global slower growth, and that's only natural, especially with our connection and exposure to the. And so we're used to that, and we know how to adapt to those circumstances. We know which of channels of the packages and the price packs strategy will be flexible to adapt to that situation. But we are incorporating that into our just to have all the different scenarios. But the business is still growing, and it's still growing, you know, now versus, previous year, even though we had last year the, you know, World Cup and a fantastic, summer season. So it continues to grow. And, and look at our pricing. So that also gives you an idea that consumers are still spending in Mexico. Thank you very much for the presentation. It's Pedro Ceballos with Dalton Investments. Just a simple question. Is doubling the size of the company every five years, is that a relevant Board? It used to be at least before. Yes. Well, actually, if you think about that pledge, we're pretty much on our way to double it from what we said in, what, '27 I mean, twenty twenty twenty twenty we had this huge acquisition. So I think it's a and and we spoke with the Board about this just this week. We had our the presentation for strategic plan and last year with our planning committee, and we were discussing how this becomes very much an internal target. But there are so many other things that we need to do, especially in the ability and growth of the EBITDA for the business and how we have the strategic view of acquisitions that I think the scorecard gets a little more complicated than that. But we're going to get to that doubling size that we projected when when we spoke about that initially about or three year because we had, you know, the The US business now. Yeah. If if you keep the base of 50 in 02/2012, we got higher than 100 in 02/2017. So with the growth that we're expecting in the next five years in 02/2022. Will reach more than We're gonna be on the 200,000,000,000 peso mark. With organic growth. But we're not satisfied with that now, so we really need to think about growing as a our profitability at a higher rate. So my real question, where I was trying to get to is, you've spoken about margins improving. You also have spoken about CapEx as a percentage of sales at a lower level than historically. The U. S. Has a higher EBITDA per unit K terms than Mexico, but it's very profitable. So you're going to be building a lot of cash on the balance sheet very quickly. Should I expect, as a shareholder, to see special dividends like 11 or 13? I mean, otherwise, it's gonna build up there, or is that doubling of the size relevant? Right. But, you know, dividends are a decision from our shareholders. What we wanna have is, as I said before, the options open and to find the best use for our cash. Our work as management is to present the projects that could be a good use for, that cash that we're generating. And that's what we're working on. And even though we've had acquisitions in the last four years, as we said today, we think we built the platform to capitalize as we search for those opportunities. So that is what we continue to do, and we're not yet prepared to do something. But that is kind of the decision that we need to make balancing all those opportunities versus another use for cash. But certainly, you can be assured that our controlling shareholders, like dividends. There's no doubt about that. Carlos? Carlos? He has the microphone. Hi. Good morning. Thanks for the event. Going back to Argentina, I got the feeling that after second Q results, you were a bit more positive regarding the situation there. Things got complicated again. Just would like to get your general feeling for that region and if this new scenario could trigger some m and a activity. And more specifically, do you think that players like Andina will be more open to talk? And the and the second one, regarding Mexico, there's been a lot of noise, on a possible tax increase on carbonated drinks among other. So the question here is if you see this happening in the first part of the administration, And what have you learned from previous experiences in Peru, Ecuador and also Mexico to possibly face the situation in a different way this time? Yes, thanks. Well, in Argentina, certainly, the scenario changed, and it changed at once. And so we it was funny because we were to present our plan for the next five years. And just two days before that, we had this primary election, we called the Basel election in in Argentina. It kind of changed the scenario. It surprised the markets, as we all know. We are revising our projections. We still receive the impact of lower consumption and lower real wages in Argentina, and that's continues to be a problem. We don't we believe that, you know, some of these public policies of this possible is bad for us in the short term, though, because, you know, government spending is always something that benefits consumer goods companies. So we are concerned mostly about devaluation. We think the market is gonna be better, and we're also doing the right things. One of the things that we're doing in Argentina, and it's a strength of our system, is precisely returnable presentations. We've been working on that for some time. We have now the standard bottle but it's the same bottle that we call in other brands. And it gives us a lot of flexibility to be more aggressive in our pricing, but at the same time, maintain our profitability and our margins at a good level. And other companies, I don't know what they wanna do. Our companies that operate in the South part of the continent, you know, what I'd be, again, interested in in looking at possibilities in in The Americas for our business, and it depends on, structure of deals, valuation, and how we can bring value for shareholders. There's certainly a lot of synergies still in the Coke system. We all know that. It's still a very fragmented system in The Americas, So the opportunity is there. Eventually, it will be captured. Is what I think. And as you mentioned, in the past, the government provided several subsidies so that could help, you know. And on the other hand, we have zero debt in Argentina, so that's also a good point. Yeah. That's important. And moving on to Mexico, as you say, well, we don't expect the tax, because there's a pledge from the president. I've even said that to me personally. Expect that not to happen in the next, two and a half years, which is, what they've been saying. But, you you still need to be prepared for any eventuality. And the the learnings and probably, Memo, you can expand on that. But the learnings from us have been, I would say, in two aspects, how to communicate better what we do with the authorities. And I've been talking to, you know, congressmen about how the tax that we have right now is not a good idea because it does not create the right incentives. This, I I told the president personally. It doesn't create and mostly, it imposes the taxes on the poor, which is something that they particularly don't like. So the way we we communicate our message is one of the learnings. And the other part is how do we react to a tax that is imposed in the market with our pricing, and we have a lot of learnings. And you can see how we've reacted in Mexico in 2014 and then obviously, in Peru and in Ecuador more recently. And look at the Peruvian market. I think we've the team has done a very good job of the taxes that was imposed just last year. And, I don't know, Mike Memo, do you wanna Yes. Elaborate on And, also, there there's a common knowledge that, there is no that's not the way to go, and there's a lot of more information in many countries that and they keep open to explore, the obesity or health issues for a different way. So for the reasons that Arturo just mentioned, even in Mexico, there is more openness to explore with the industry other ways to lower the, you know, sugar footprint or solve the the health issue and not affecting the the poorest part of the study. Thank you. Carlos? Yes. Two questions. One on The U. S, one on Mexico. On Mexico, what do you do with all of this sellout data across so many CPG categories that you're going to be collecting? And are you tempted to perhaps test the waters on the logistics businesses in Mexico? So now or do you want to answer the Well, the second question, perhaps it's a Jean Claude question, really. On foodservice on premise in The U. S, when you look at the small independent clients, how do you rank them in terms of your list of priorities and your list of underdeveloped are these channels? And how much growth can you really get out of that going forward? Okay. Thank you. Let me talk briefly about maybe both points. First, in Mexico, we are we'll start to collect that data, as I said, and this is certainly valuable to understand dynamics of our own customers for our current business. So to where you're going and will this present an opportunity for doing something else? This is part of what, Jesus referred to in his presentation. The situation with a typical Mamamtiko is that they would have part of their business, let's say, roughly half, I don't know, maybe a significant part of their business would be DSD, which is what we do and companies like us would be delivering. And, even though they don't know about sellout either, but it's at least they they have a a more direct relation. Have, the other part, which is products that are sold not on a DSD basis by a wholesaler or even the store owner has to go and buy it somewhere at a club or at a cash and carry. There are all kinds of formats. It's not a well organized system. I tell people many times in Coca Cola, you know, it's it's you don't have to bring the model of a developed country how that operates. That non DSD here in The U. S. Is very effective because you have companies that do that very effectively. Here, it doesn't work like that. It's really a pain point to her. So what we're trying to do is figure out, you know, how can that be solved, again, combining technology with solutions that are the typical logistics push that you've seen by wholesalers in Mexico either. So that's kind of the exploration that we have right now. We don't have a pick your business plan for that possibility, but we're trying to understand as we help our customer and we're a better partner, we're understanding that this is the situation for them. And imagine a guy or a lady, usually, it's a it's a she that owns the store and has to leave to buy things that shut the store because she doesn't have reliable delivery. So that that's a true pain point. So we're addressing how that could be solved, how we can, you know, incorporate into our order the order of other things and then connect the different building blocks, which would be the procurement and the last mile delivery. And it could be one single unit does that or it could be broken down into different parties. We've been exploring the last mile delivery with startups. So we're doing all kinds of experimentation there, and that's what Chuy explained a while ago. With respect to on premise in The U. S, I'll let Jean Claude respond to that. Just to let you know that we we think there's a lot of opportunity. As you know, on premise, the first way of segmenting it is customers that we serve with the red truck, actually, are, you know, the white truck system. And we think there's opportunity actually in both of those business segments, but I'll I'll let Jean Claude elaborate more on that. Thank you, Arturo. Carlos, thank you for the question. Question is, FSOP, at what level of the priority business about the future in The U. S? Is, as we had the opportunity to be in the trade, a top priority? Well, there's a reason why it's a top priority. It's not just about our principle of customer centric. It's that the FSOP should send 37% of our outlets, but at the same time, when we capture those customers, they are the more profitable customers. Why? Because the consumption in the FSOP channel is about immediate consumption. And it's to be sure that in the FSOP channel, we are going to ensure that our availability of our portfolio is going to expand something that was not happening at the beginning. We saw that opportunity. Why when you go to a restaurant? Why you when you go to a channel? There's an opportunity to have here in a taqueria in San Antonio. Why does not a Coca Cola from Mexico? Why is not a Coca Cola in immediate consumption with glass? Why does not Atopo Chico? And that's an opportunity to capture each with all transparency. When we talk about, okay, let's rethink our go to market model. The strategic decision that we made with Mark is yes, but we are not going to rethink the entire model. We're going to focus where the main opportunity is. And also, can think, okay, increasing the level of visit. Therefore, you are going to increase your cost of service. As I shared, it has been the other way around because also we have the opportunity to have different levels of go to markets in terms of service. Let me give you an example, what we were saying about the expansion of our e commerce platform. We represent in The U. S. Around 12% of the business, national platform. We represent more than 20%. And let's connect the same example that Pepe Huerta was sharing, where the people are ordering online, they're ordering more profitable SKUs. Then everything is connected. The same vision. How is our profit year over year expanded the most profitable categories that we manage. You so much for And the thank you for the question. I mean my first question is about your CapEx. If you can give us a breakout by country. I mean, in which countries are you going to invest more in the next five years? And also, how should we think about it, specifically the economy slowing down? That's the first question. The second one is about I would like to hear your opinion about the possibility of this new labeling on the high calorie products like it happened in Chile and how this could be implemented also in Mexico? And how could this impact your results? Thanks very much. Well, let me talk about CapEx and briefly about labeling, then probably Emilio and Nemo would expand. The variations in CapEx, it's normally specific investment projects and infrastructure. So what you'll see is mostly in The U. S, obviously, as you saw the construction of the facility that is the part of the CapEx for that business unit. And we also might be investing in our Ecuador business in the short term, and that creates mainly the variation. Probably Emilio would expand on that. And then labeling, we've known what the effects of those are those regulations are in South America as well. Have labels in our South American countries. And normally, it doesn't have as much impact in our business as in other industries. And certainly, other people are more concerned. It's not that we're not really paying attention to it, but we know how that would work for our products, and it's not really something that is has would have a huge impact. But maybe Memo can talk more about that. So why don't you explain a little bit just want to add a component that will have part of our CapEx is the digital. I don't know if you want to explain some some of the concept, but digital is gonna be very important on CapEx. It's gonna be around 20% of CapEx in different countries, but it's it's an advantage on CapEx. But it's mostly In Mexico first and and and in some other countries. But in all the initiatives, we've been we we are going to be investing in digital, and that's part of CapEx. That's mostly IT CapEx? Yes. It's in the IT and in the enablers and initiatives, but the IT enablers are the biggest part. It's mostly the foundational structure for any of the projects requires some IT platforms that will require investment. I would say in Peru is where we need to evolve the Mao sector and maybe in Mexico, so the basic structure for that. So, Memo, can you talk about labeling in Mexico and what is Yes. Going first, to tell that we are all about transparency and that the consumer to have the right information to make to make their decisions. And and we are participating along with the authorities in the analysis of, if the labeling needs to be changed. And we are very open to make the adjustment when they are, on the scientific basis to better inform. So as Coca Cola, participated very often in if there is the need of a modification, we will be part of that conversation. And for us, if there is a better label, whether way to label our products, will cooperate in all means. Hi. Thank you for taking the question. Earlier, you talked about building out your technology and organizational infrastructure to support growth from niche brands as opposed to always depending on brand Coca Cola. I was wondering, on the niche brands, what categories are you looking at? Is that at the level of a seltzer or a sports drink like Topo Chico or Body Armor or something much smaller in the Coca Cola world such as dairy or coffee? And then also just where would you source those brands? Is that mostly internal? Or if you're looking for something niche outside of the Coca Cola wheelhouse, are those looking for a partnership with Coca Cola to bring something new in? First, we need to say that we look at ourselves as a total beverage company. So every nonalcoholic beverage category we would be pursuing if there's an opportunity in the market. And that's what we try to do. And this is something that I tried to explain to me with Coca Cola because many people would like to have, like, this huge new idea. And it's it's probably not gonna happen. It's probably gonna be much more granular as we grow. So I think the complexity is not something that we, that we would like, but it's it's what the market wants. So the growth categories and subcategories of of, you know, the the the brands and how the market is evolving in the last few years. So we have to be prepared for that, and we have to be prepared in our supply chain, but mostly in our commercial. Was explaining today, it's super important for building a platform that can, you know, work for every single category. And, you know, dairy is important because it already exists, but we are small or categories that are starting to appear, you know, with stronger presence in which is very important in The US, not as important in Latin America, but growing. We're gonna have Coke Energy, as you know now, as a as a huge opportunity. And then you have in The US categories like, you know, sports beverages, but then you have subcategories like body armor is within that space. So, but we needed a role like that, that, you know, long tail of SKUs and at the same time, be able to obviously, eliminate things that, should not be part of portfolio. So I believe that's where we're going to focus. I don't know, Pepe, if you want to elaborate on which of the categories would be more important. It depends on the market, obviously. Yes. We will look for opportunities in any beverage category. To the other part of your question, we see ourselves partners of the Coca Cola Company. As Arturo said, we might not agree sometimes, but we always find ways to get an agreement and work together. So hand on hand with them, we look for niches everywhere. Over the examples that Arturo gave, for example, you can see the great results we've had with coal in The U. S. Or smart water antioxidants, smart water alkaline or isolite in Mexico. So we'll try variations of different categories, and we'll keep on growing, as Arturo said, the long tail. And with respect to the sourcing, finding element of success for the category, I think we can have different models for sourcing in these new categories, of course. I think, Jean Claude, you wanted to add something to that? Yes. Because I think it's a great question. Once again, that is the to reinforce this strategy. That's the kind of products and innovation that we like to have more and more. Why? The profitability per case, one of the best that we can have in terms of the steels. And if you can see both the armor together, we are growing more than four points in value share in that category, something that was quite impossible to think that it was going to be feasible, especially here against our competitors. But we have been growing a product and a rebrand that is premium, that is improving not just our revenues, but also our profitability per case. And also it's bringing value to the category and it's bringing value to the customer. The customer is safe, great, and it's how you protect both having both players, how that equation has been very successful. I think we have time for one more question. So go ahead, Felipe. Felipe Brugros from Scotiabank. One is a little bit around distribution. And you discussed a little bit about the pain points in solving a distribution system that has some issues in Latin America and how many of can play on that. So I wanted to take it to the other side of the equation, which is the Coca Cola Company's side of the equation. And it seems that at time, the Coca Cola Company has become more and more open to the distribution of products within the Coca Cola network. Right? We've seen it with the announcement that Andina has doubled high again, and, obviously, there are more distributed products today. The breadth is is is much wider on the products that are distributed. So what's the opportunity there? And well, first, how is the perspective of Coca Cola Company changing and why it's changing? And what's the opportunity for you guys around this? And then if I can do a follow-up. Yes. Well, you are right. The Coca Cola Company has been changing in its mindset. They've become much more flexible about it, as you say. You see the example of Andina. We've been distributing other products in a red truck for a long time. As we distribute beer, obviously, the approval of the Coca Cola Company for ever since we've operated in Argentina for more than ten years. So the difference, to your question, I think their approach is much more pragmatic now. I think top leadership in the Coca Cola Company has a different vision in that respect. And I think that is the system also. So we can get rid of some of the old paradigms in the system, which you naturally have in company with such a strong legacy, And then you try to work on things that make sense for the market. So the answer is, what are you going to do? Well, it depends. It depends on what we believe might work and how opportunities you might have. Argentina now presents that opportunity for us because precisely we have a system that is very robust and has the chance to bring more categories into the platform, and that is what we are exploring now in that particular market. We want to do something in Mexico, as I said before, it has to be through a different model in the future, which we're exploring. But, the good thing here is that the relationship with, The Coca Cola Company is very open, very transparent about it. And again, their approach is much more pragmatic about that. And Yes. Definitely. And we're exploring together with them. For example, in Ecuador, we do have a distributor in which we distribute a whole range of products. So there's no one specific way to go with that. We're only jointly with the That's Coca right. Dairy business, yes. So you had a second question? Yeah. Great. And and the second one was about Pepe, you you evolve on all the great things about Brio. Right? You're accumulating data and business intelligence on your competitors. You're exploring payments. Obviously, you're you're building a stronger alliance with the mom and pops. Can you talk a little bit about the points you've had while implementing the system? So one of the things that I can think of is how do you get to be incentivized to scan everything? And how do you get to how do you how do you get to deal with the fact that probably your competitors don't love that you're getting all this information on them and probably try to fight or incentivize the mom and pop to not scan their products? How how do you think the additional granularity on even categories that you don't play in? So for example, you're getting great visibility in terms of what maybe La la and Ampura are doing versus Santa Clara and then exact. Then you're also gaining a lot of information on categories where you don't even participate. Right. I think it's a great point, and you're spot on on what are the issues with the traditional trade, you know, the scanning. Jesus and I had this meeting with a start up that it's one of those that he continues to see every every month. And that we met with them, and they had a project. And I was asking, you know, what is what what issues or challenges have you found? And because, you know, they they were already engaging a number of customers. They said, yeah. Well, everything is working really well, and we're very excited. The only issue that we have is that customers don't like the issue for this specific project. So the difference is that we are in a much better position to create incentives for that, certainly one of the big challenges, because we have this relationship that I've talked about and how we can make them have the right let me tell you some of the techniques that people use. So you own the store. If you need to leave because you do you want personal time or you need to buy things, If you're not if you don't have a system, you will not be able to leave here your nephew or someone else to take care of the store because every single price you need to have in your mind. If you start scanning, then you can delegate work easier. And those are the kind of things that, you know, this this new possibility, and, obviously, we affiliate more people more effectively. So but, certainly, I think that would be the biggest pain pain point. I don't know if this was gonna add to that. Just a couple of things. It there are two variables that one is identifying the, owner profile. I mean, it's amazing the the differences between them and how, somebody will be ready to scan every single transaction. And you got from that to somebody who doesn't really care about scanning anything. So, that, when you tell them that that the system is gonna be able to recommend, what they need to buy across the different products, then they start scanning more because they know the more they scan, the more accurate the recommendation is going to be. So those two things are helping us in that. Retention rate with your partners? The churn. Retention. Churn. The the opposite of the churn. With the mom and pops? Yes. Right. It was between two to three percent. So very low. Sure. Sure. I think that wraps it up. If there's any other question, you can always reach WediSys and the IR team, as you know. If you fill out the survey, they'll answer you really quick. The hostesses have the tote bags, please take product home. I really think we need to give a round of applause to the IR team and to management for coming. Thank you all so much for spending your morning with us, and we really look forward to the next one. Thank you. Thanks, Steve.

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