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 2019 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. 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. 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 to be available on the website following the event.
Please go check that out afterwards. For those who are joining us via webcast, they're connected right now, thank you for joining us as well. We're sorry you couldn't be here in person. 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. 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. They will let me know what's going on, and I will let you know through the PA system what's going on. There is the main exit right out that door. It will lead us to the mezzanine level, and will take us out to the courtyard. There is the next exit through that door that'll lead you to the kitchen. It'll take you to the D staircase, which will lead you to the lobby level, and it will take you to the loading dock, and you will be at the 51st Street. There is the next exit right to my left here.
It's going to take you down the A staircase. It's going to lead you down to the lobby. You'll exit through 51st Street entrance. In case of an emergency, hopefully we don't have one. Just listen carefully to the PA system. I'll inform you what to do. Thank you very much. Have a wonderful event.
Thank you, Raj.
You're very welcome.
All right, thank you. All right. 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. Now, let me take you through today's agenda. This is going to be the order of our presenters. Leading the management team is our CEO, Arturo Gutiérrez. We'll have José Pepe Borda, who's the Chief Commercial and Digital Officer. We're going to have Jesús 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. We'll have Guillermo Memo Garza, who's the Chief Public Affairs and Communications Officer. He's going to talk about sustainability. Gabriel Meneses, Chief Human Resources Officer.
From the U.S., joining us from the great state of Texas, we have Mark Schortman. He's the President and CEO of 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 Tissot. Rounding out our presenters, your favorite CFO and mine, Emilio Marcos. After their presentations, we're going to take your questions. All right? Questions from here and questions from webcast. All right. Now, let's take a quick peek at how Arca Continental works to stay ahead.
Every great journey begins with a 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 20 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 customer's 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 step ahead allows us to adapt our product portfolio to new trends and the needs of our customers. Applying technology to make better and faster choices. 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. Now, without further ado, please help me give a warm welcome to the CEO, Arturo Gutiérrez.
Thank you, Melanie. Welcome to the Arca Continental Investors Day. It's great to have you here. This is really a 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. This is a fantastic opportunity to share with you some of our plans. Let me tell you first, to 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.
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 Mark and Jean Claude here talking about that as well.
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. Let me start by saying what we are all about. What is the essence of our company, of Arca 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. 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.
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. Other capabilities that are not part of the model, vending operation capabilities in our supply chain. As we enhance that, we're also building new capabilities, especially in the digital space. This is about platforms, this is about advanced analytics, this is about management of data as well. 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. That combination really transforms into a competitive advantage for our company. There is some transformation, certainly technology is important, it's not only about technology, it's about how we put that together with things that we do, we are in the best position to do that. What is our advantage? It can be summarized really in one single word. It is about relationships. We've built the trust for many, many years with our almost million customers in the markets where we operate. That really presents an opportunity for us. Think about digital platforms.
We just acquired a startup 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 hundred customers that were part of their network. With the connections and the goodwill with our customers, we acquired that company last year. Just in a few months, they had a few hundred. We ended up last year with 5,000, and that's going to grow exponentially. Same thing with analytics. 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.
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. The U.S. is a good example of that, and we're going to be hearing more about that as well. Let me tell you now what we are focused on. What are the strategic priorities in our company that will lead us into the next stage of growth for Arca Continental? Let me talk first about execution operational excellence, and this is pretty much what we do every day, and it requires to do it better every day and more consistently. 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 has 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. 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. That's a way to know where we need to focus our efforts. We're also identifying opportunities in our operations. If you think about a company of this scale, sometimes the averages work against you. We try to identify, even if we have a good trend, where is the opportunity?
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 ESE. The ESE in Mexico is about 78% now, and it's a good number. We have territories, and there's one region in Jalisco called Ameca, which is fantastic, and they have 92%. That means it can be done. You can get to 92%. At the same time, we have other operations that have around 70%. When you start breaking down further those indicators, you identify more and more opportunities that you sometimes believe that you don't have. Avoiding comfort zones is a lot of what we do all the time. Efficiency in our supply chain as well. This year, we've improved freight costs in Mexico of MXN 1.5 million. We continue to find opportunities to improve productivity in our production lines.
In the Northeast, we improved five points of productivity. That translates into avoiding additional CapEx. Avoiding actually one additional line, which is MXN 20 million in investment. Also productivity to improve our energy use in our plants. Discipline in operating expenses. This has been one of my personal priorities this year. 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. If you look at consolidated numbers year to date, the first half of the year, it's 60 basis points. It demonstrates that there's a real commitment to be efficient in the OpEx of our company. Innovation and digital transformation. Aside from what we do every day, we need to do new things. Again, we are in the best position to do that.
We are upgrading commercial processes. Advanced analytics is a 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.
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 our robotic processes. We have now 12 bots in our operation, our shared services center operating, and each one of those represents the efficiency of three to five FTEs, full-time employees. 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 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% of 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% of 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. 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. Also, in the U.S., ever since we acquired the business. CapEx. Our CapEx is managed in a much more effective way. We're going to be below our CapEx plans for the year. We're going to be more rigorous about management of CapEx. We've been able to demonstrate that we are good at capturing value through integration of other businesses.
We have improved our EBITDA margin, for example, 500 basis points since we acquired that operation a few years ago. 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've integrated other companies. We are evolving from a strong heritage of our company. 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. 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. Those are strategic priorities, and we have put the customer here at the center of the diagram.
This is a way of aligning our efforts, to create shared value in the marketplace. What I can tell you is that we're 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. We are very confident that we are moving in the right direction and that we are making this company stronger. With that, I'll turn it over to Pepe Borda. He's going to talk about innovation and commercial initiatives.
Hello. Thanks, Arturo. Thank you very much. Good morning, everyone. My name is José or Pepe Borda. I am accountable for leading the commercial and digital strategy with an organization. Let me move this. 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. I am going to expand that a little bit more. Second is the guaranteeing the accretive growth of our direct-to-consumer business. Third, the stewardship of our digital strategy and IT operations. I will expand a little bit more about these three topics within the next 15 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. There is little we can do to act upon those. 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, et cetera. 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. On top of this, we overlay a second layer of dynamic segmentation based on specific short-term market opportunities that appear in the market. 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 and our pricing and portfolio architectures to ensure that we get to profitability. 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 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. 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 a market periodically, and always looking for distribution efficiency. 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 all 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 sales force automation tool. As I said, the fundamentals. 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.
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. This is an example from our Mexican operations. In the traditional trade, we have close to 250,000, 248,000 outlets with a share of market of 78.4% and growing 0.8%. Arturo said, well, that looks pretty good. We can open it by our four sales regions, and we see that all four regions are growing. 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. We start segmenting and we use the segmented analysis model on the dynamic segmentation.
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. Out of those, we have 683 where our share of visible inventory or SOV is less than 40%. Out of those, we have 514 customers in which our share of cooler doors is less than 50%. 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 hide these opportunities. We have 514 customers. We can develop a program to improve execution, to increase cooler coverage.
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, a 2 for 23, a meals display rack, another cooler door. Those initiatives are then transferred to the sales representative in their handheld device for market execution. This is how we can make something that is complicated in our offices, but very, very simple for our sales representatives to execute. That's about ACT. I'll talk 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 million 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 for around 2 million customers in their workspaces, and our vending business, in which we have around 350 million transactions per year in vending operations. What are our plans? Our plans are to expand direct to home, we call Coca-Cola en tu Hogar, in other regions in Mexico in which it's not as 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. This is a great opportunity to increase the penetration of new products. In vending, we have been focused.
We are the biggest operation of vending machines in Latin America. Our focus is to using better techniques to find places to put our machines that will guarantee that we have a positive return. At work, we are planning to go from 2 million customers to 3 million customers through different convenience service offerings as micro markets and other vending opportunities. 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. 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 put the leadership team in a series of workshops where we prioritized initiatives. We came up with a digital agenda, a digital framework, digital priorities, and 26 initiatives that are to be implemented within the next five years. We 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 is something that is lived upon by all the organization. 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. 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 talk about some of them within the next minutes. First of all, the enablers. We need to make sure that, 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, or the algorithms that go into the handheld of the sales reps that Arturo Gutierrez talked about with great results, reducing out of stocks from 11% in the pilot region all the way down to 3% and 15% in the rollout. Execution, which are the best execution items that generate the highest return. Human resources, Gabriel is going to talk a little bit about what we're doing in terms of selection and screening of candidates. Supply chain management and manufacturing, digital distribution, Industry 4.0, Alex Molina is going to talk a little more about it. As I said, building the capabilities of these advanced analytics as a key capability for us. Let me talk about some of these buckets. The first, when we talk about optimize our business, first priority, how to better serve our customers.
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. There is a huge opportunity in terms of optimizing our sales promotions.
We know that we have found that around 40% of our sales promotions are not as effective as they can be. It's difficult to understand which ones. We are building tools to really understand which are the promotions that generate most of the effect, then we can either redeploy the funds of the non-value 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 Success 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 non-value 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 300 people audit sales force. With photo recognition, why cannot we do crowdsourcing? Why cannot have the customer do take the pictures for us and do the audit for ourselves at much, much lower cost? Maybe we can transfer some of that money to the customer in the next invoice. 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 4.0. We're moving, actually, 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 24-hour delivery with an expanded portfolio on 340 SKUs through web and mobile and delivering in 24 hours. We are also piloting now another model of express delivery in 15 minutes with which we take advantage of our relationship with the mom-and-pops. 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. Last but not least, we are modernizing the traditional trade through digitalization.
Here, this is not only a potential new revenue stream through commissions, through selling information, or through distributing other products than ours. 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, accept electronic payments. On the top of the pyramid, we are building a complete ecosystem to help the mom-and-pops to compete with other modern trade customers. My colleague, Jesús, is going to talk to you a little more about that. Thank you very much.
Thank you, Pepe. Good morning, everyone. What is Traditional Trade 2.0? 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'll 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?
That will generate more traffic into the store. Third, Pepe was mentioning what we're trying to do with them, online commerce. What if they become available online? They can reach a larger base. Those are great opportunities they have facing their customers. 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. 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 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. Arturo talked about Brío, the 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. That's again, the part facing their own consumers. At the same time, this platform is evolving. In addition to covering the relationship between the traditional store and their customers, we're also covering their relationships with the suppliers. How's that? 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. We have the logistics capabilities to be able to deliver those products. That's what Brío 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, we'll be reaching all of them by 2022. 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, Brío in itself is providing a lot of values for a stronger future for our mom-and-pops. 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 going to be able to send over the platform specific promotions per customer in the traditional trade channel.
Number 2, we're going to be able to deal with digital payments using the balances the Brío platform has. Number 3, we own the information. We're going to be able to analyze different trends and what's going on real-time in the traditional trade channel. 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. We're basically targeting increasing our sales and becoming more efficient in the way we execute at the point of sale. This is how we're building a stronger future for us and for the traditional trade. Now I'll introduce you to Alejandro Molina, who's going to talk about technical and supply chain management. Thank you.
Thank you, Jesús. Morning. If you see, 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. 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. Our main focus is how we are 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 get 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.
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 our businesses. Now we have 50 plants and more than 280 lines productions in our operations. Our strategy is how we are going to be very close with our customers, with more than 370 distribution centers in our market. Certainly, we are now managing more than 1,500 SKUs, and as Pepe mentioned, we are going to explode and increase this portfolio. 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 a medium and low rotation products and different categories that 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 and to win 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 we are going to transform our sales and operation planning process in order to get this forecast and prepare and predict these trends in the market, previews that our commercial team can perceive 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. How we are going to reduce the cycles and 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. Maintain the continuous supply chain optimization cost with the manufacturer and distribution and delivery. How we are going to do it with all the strategic 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 manufacturer to develop the opportunity and how we are going to maintenance and increase the asset management in the manufacturer. We are going to establish the Industry 4.0 initiatives in the lines. In this year, as Arturo mentioned, we focus in Mexico, the northeast 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.
The next year, we are going to digitalize certain items of the manufacturer 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. Also in the quality, safety, and environment culture that we have, our certifications programs, we are going to maintain this continuous program and expanding the future acquisitions that we are going to have in the next years, how we are going to replicate this mindset in our operations. This part of our culture is part of our foundations in the performance and improvements in our business.
In procurement, continuous with the collaboration and increase the negotiations with the scale and incorporate more categories with Coca-Cola global systems negotiations, and also continuous with improvements in the reduction or optimization of the packages. Incorporate these categories in these scales of the negotiations with the secondary packages in our system. 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, in manufacture and distribution, and identify opportunities in how we are 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. 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 a 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 increase the capacity, the line utilization in Mexico. Focus in this point, and there are many opportunity 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 opportunities and can get this value for the next years. This is another clear example on how the supply chain could add value for the system. Northpoint is one clear example in how we are going to do it in the U.S. It's relevant to mention that after 14 years, is the new facility in the Coca-Cola system to do a big investment in the system. The last one was 14 years ago in Louisiana.
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 4 old facilities in 1 with new technology, with all the strategy to use technology with reduction in energy and water, incorporate a semiautomatic warehousing in the process, and reduce the process and increase the productivity in the delivery. Also we reduce 4 distribution centers with the new facility here in Northpoint. It's an investment of around $250 million. It's prepared to implement the Industry 4.0 in the medium term. Very relevant. We are going to get around $30 million of savings annual basis when we have the running rate performance of the plant. Here is how we are going to do it.
Also we are looking for, in Arca Continental, these kind of opportunities, and we are going to get the 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. Also we have a distribution and freight reduction cost not only in manufacturing. I will show you how is the processing in the plants. Yeah. I'm going to leave you with Guillermo. Thank you very much.
Thank you, Alex. Good morning to everyone. Now we come into the green part of the morning. Green as protecting the environment, also green in terms of dollars or creating value. Emilio is happy and everybody's happy. I mention value because as a core business strategy, sustainability has two clear orientations. One is to protect value and mitigate risk. That's very clear. 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. 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. The other main orientation is how are we going to be able to assure that sustainability is embedded in all aspects of the operations.
How is an integral part of everything that we do. 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 4-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 gathered information for our stakeholders. We collect like 5,000 interviews, polls, focus group, et cetera, to know what our stakeholders need or what are the expectation of the stakeholders about Arca Continental. Then we combine that with our risk assessment. Then we combine that with the business objectives. That matrix allow us to deliver what is the institutional model.
That's the second part. What is the corporate strategy that we're going to use in every country? From that, we have to make it operational. We have to make it real in the operational floor. 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 in the same direction. Finally, we made a public commitment about it. We have to report and establish our goals in a public manner, and we add 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. 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. 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. Obviously, packaging is one of the most relevant environmental issues that we face today worldwide. For Arca Continental, it's not something that we are facing because that current challenge. It has been part of our DNA for years. That orientation allow us now to be ahead in the game in terms of have a competitive advantage in terms of packaging. 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 our sustainable principles. We don't see PET as a single-use, single-life packaging. We want the PET bottles to be multi-use, multiple-life kind of products. For that, we are ahead in the curve. 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%. One of the clear examples, as I mentioned, in terms of why we are ahead in the curve is our water bottles in Mexico and Peru that come 100% of other bottles. That's the essence of circular economy. Also, we have other initiatives in terms of return of our 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.
Here we are far ahead on the game, as Arturo mentioned, with PetStar, the largest facility in the world to recycling PET, and we are aiming to expand it in the future. We have a collection rate as Arca Continental of 30%. We have two clear examples that circular economy is possible in Mexico, where the collecting rate is 70%. That's impressive for an industry to have that kind of collecting of the total of PET that we put in the market. 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 collecting process.
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 in which we are. The second one is the Ellen 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 going to use in our products. 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 change the mindset of the community in terms of avoiding waste and have a close 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 ensuring that the communities have access to safe water at all times. 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 10 years ago.
In terms of replenishment, in Mexico, we have planted more than 30 million trees to boost the collecting of rainfall and also to have a full circle in terms of water availability. Since five years ago, we have started access of water in our communities, and we have benefited more than two million people in terms of water filters, water accessibility and on 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% for renewable energy sourcing, and we are very fastly moving to 50%. While we are keeping our energy use as efficient as possible and also lowering our CO2 emissions. To end, as we continue our dialogue with the stakeholders and the community, we have a three-way of continuing or expanding our commitment. First is our reporting.
If you allow me, I made a commercial for you to visit our new Integrated Report of Sustainability, where precisely we combine all the business initiative with a sustainability initiative. We want to fully close the circle in that. We report under the Carbon Disclosure Project, GRI, obviously the integrated reporting framework, et cetera. 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 at the FTSE4Good. We are improving our score in terms of the RobecoSAM Dow Jones Sustainability metrics, et cetera. 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. That's because it is embedded fully in every department of the company. It is not needed, it's not a unique responsibility, but a company responsibility. With that, I 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. 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 going to share with you within each of these strategies, examples of the things that we've been doing that we believe are going to enable our people to strengthen our company. 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. I'm going to 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. We started last year with this process, where we basically trained 500 directors and managers on this new methodology because they're the ones actually running this process. In doing so, we've been able to detect or identify successors for 500 roles in the company.
Now we know that for those 500 roles, we have 10% of them with no successor identified. We need to do something about it. Either we accelerate the development or bring someone from the market, right? 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. In the last 12 months, out of 100% of our director-level role positions that have become open, 90%, we've been able to fill with internal candidates aligned to whatever we identify in the succession planning process. Only 10% we have to bring from the outside, which is also sometimes a good thing. When you don't have the capability internally, you need to buy it from the market.
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. In the last 12 months, we have a 1.9 turnover. It's two out of 105 high potentials at this level that have left the organization. Our goal is zero, but that's pretty much impossible. 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 100% of poor performers that we identified last year, 70%, we've done something with them. Either they left the organization or they've taken the level of performance to an acceptable level. Okay?
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. Arturo talked about culture. We have a strong heritage from our founding families. However, given the acquisitions of Peru, and particularly the 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. 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.
This is nothing else but guides to dictate or not mandate, but guides for how our associates are going to behave on the things that are acceptable and the things that are not acceptable. We wanted these principles to incite action, right, and to be very pragmatic. What you're seeing here is a very high-level definition. Under each of these principles, there are specific behaviors. Right. In a very simple way, what we want to 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 want to 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 improve. Change and innovation. I have two jobs, do my day-to-day and do a great job, then see how I can make it better through innovation. Finally, people focus. This is going to sound like a cliché, but we're a 63,000 people organization. Everything you've seen, it's done through people.
We have 12 robots or how many? That's 12 against 63,000. Really, if I'm an individual contributor, it's just treat others with respect and collaborate well with others. 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. Once you do that, you can hold them and you need to hold them accountable, but only once you do that. Right? We've communicated this to 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 cynical. Right? 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. We're going to measure it. We're going to measure it 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? Finally, do they perceive that the company is starting to adjust its practices to the principles? We're going to launch a survey through a tool called Perceptyx. It's all digital. Hopefully, we're going to hit our goal. We're looking for 70% in the scale to four to five, 70% positive results.
We'll look at the data, and then we'll make adjustments as we see fit. The next one is capabilities. What tools are we giving our people for them to win in the marketplace? We talked about commercial, we talked about supply chain, digital. I'm going to share with you an example of something that we're doing on leadership capability. 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, it's changing very fast in the future. 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. We're going to have a management program for entry-level managers. We'll teach them how to be managers, if you will. We're going to have a program which is called Hyper Accelerator, which is basically a program for managers that are in the succession planning for directors. Finally, we're going to 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. We're going to combine this with solutions like mentoring, coaching, job swaps, so moving people around for them to get the experiences. That's how we're going to start building the leadership capabilities, so they can lead teams, they can lead departments, they can lead organizations, and prepare them.
Finally, the HR fundamentals. All the things that we do on a daily basis in our 379 distribution centers, 50 production facilities, we need to do a great job here. It's complex. Things like labor relations, union relations. We have more than 70 unions across our territories. 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, all of those things. Hiring people. I'm going to give you an example, which Pepe mentioned briefly, which is about digitizing HR operations, specifically how we are recruiting sales assistants. This is a pilot that we're running in Mexico.
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. Then you receive the paper applications, and that's basically how you do it. Then the recruitment specialists start interviewing people, et cetera. The problem we're trying to solve is high turnover. We have high turnover, we want to reduce the high turnover to reduce the cost of hiring and obviously, so that it doesn't impact our sales. We partnered with a couple of startups. One of them is called Apli. What they do is they basically post positions in social media like Instagram and Facebook. The other one is Quantum Talent. They have this algorithm based on psychometric, 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 assistants. What we do is the process is very simple. We post the position, Facebook, Instagram, the applicant clicks in, show their interest, they click, and they go to a chatbot. The chatbot is kind of like a filter. It's a binary system that asks questions. If you pass the filter, you go to the Quantum tool. For them, it's seamless. They don't know that they're in Appli, they don't know that they're in Quantum. What happens is they fill out the psychometric, and they can fall in three different categories, green, yellow, or red. If they're falling green, they're going to go to the recruitment specialist. They basically do a disaster check interview, and that's how we hire them.
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 is from March to July of 2019. We've been able to reduce turnover in this particular geography from 26% to 11%. 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 18 months. 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.
The second one is we're working to have the bench to grow this business in the future. We're starting to do things differently and innovate so that we can add value to our operations in reducing cost and increasing sales through technology and innovating. That'll be it from me. Now I'm going to introduce you to Mark Schortman. He's the President and CEO of Coca-Cola Southwest Beverages. Then Jean Claude Tissot, 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. I will spend the next 10 minutes or so and talk about the journey we had getting to where we are today, and then Jean Claude's going to talk to you about our future. I think it's important to note that this journey started on June the 1st, 2016, when Arturo sat down with both Jean Claude and myself. We had a clear brief about our future. We had a very strong Southwest organization in Texas and Oklahoma, a very tenured leadership team. Certainly, Arturo saw that opportunity coupled with the fact that Jean Claude had led the commercial area of Arca Continental, had operations experience. He and I came together as one team to find the path forward.
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. Jean Claude and I have been working hand in hand, and we have done a tremendous amount of lifting with our leadership team. I want to share with you a little bit of that journey. To just level set where we reside in the U.S., it is primarily Texas and a portion of Oklahoma. About 30 million people reside in these territories. 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. That index is a 133.
It really talks to the strength of our brands, the strength of our organization to drive true value in Texas and Oklahoma. Why specifically was Arca coming to Texas and Oklahoma? 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 2, 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, the 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.
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. 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. In the lemon-lime category, we have a 75% share. 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. That's what we believe as you see the future.
Just in the last 12 to 18 months, the introduction of Topo Chico, the introduction of BODYARMOR, as 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 10 years, I helped to build and develop the team that is in our organizations today. We've also then brought in Jean Claude and his organization, and I really feel that what we have 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.
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. 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. 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. This is our journey. If you don't mind, I'm going to spend a bit of time. Think of this as a sequence left to right, and far as time. I want to take you back to T-minus nine months of taking ownership to the transition.
It was June 1st when Jean Claude, Arturo, and I met, and we began to map out exactly how we were going to lift this MXN 2.7 billion business into Arca Continental. 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 your IT 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 Fool's Day?" April the 1st, 2017. 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.
Jean Claude, sitting in our war room, wanted to know whether the lights were going to come back up on April the 1st. They did. The planning worked really well, and we truly delivered our first month and our first quarter business 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's 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 MXN 10 billion worth of raw materials, finished equipment, like cooling equipment and trucks to make our system in the U.S. stronger. 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. 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 Monterrey 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. It's about driving new technology. It's about driving supply chain operations efficiency.
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. I'll take you on ACT, synergy, and the Oklahoma transition. Those next three, think about ACT as a starting point. Pepe talked to you, and Jean Claude will kind of tell you about the 2.0. 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. Again, it's baby steps to walking steps before you run. The synergies day 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, also at an OpEx line.
Along this way, 180 days into the transition, we took on Oklahoma. It was an additional 10% of the business, I would say to you, go back to the planning session. We had to do the same number of steps for one-tenth of the size, you could not skip a step. A tremendous amount of effort was done just to lift that into the organization, and now we became Coca-Cola Southwest Beverages. At the top on supply chain optimization, organizational design, and Northpoint, 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. 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. 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. Again, you think about the size of our operation, we're across two time zones, 800 miles wide and 600 miles deep. 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. Northpoint. Alex talked about Northpoint, but I'll give you the scale of Northpoint. 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're on time, and we're going to have this thing stood up early in 2020. We're very proud of Northpoint. The last two points on operational discipline and go-to-market, and customer intimacy, the same message. We're on our journey. Think about every single week you finish, you go back and you look at your KPIs, and you try to improve. 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. 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, the things that we're not doing right for them as an organization, tools or processes that need to be fixed. The important piece is what are we going to do to make a positive difference in our associates' lives? 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. 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 CONA IT investment and 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. 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. At the same time, the PET resin rose over a period of about 18 months. Those had certainly created headwinds for us. 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's 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, then Hurricane Harvey hit. 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 24/7 producing Dasani case pack.
They produced 1 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, The Salvation Army, to the military, doing whatever was necessary in the time of need. An amazing journey, albeit a difficult moment as you were standing up the organization. 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 MXN 60-MXN 80, and it moved up to MXN 90 as we saw a path forward. On the revenue synergies, one of the areas that Pepe talked in his presentation is around vending. We saw a tremendous opportunity to focus on our vending operation that hadn't been modernized sufficiently and hadn't been light-weighted in terms of go-to-market models. We've begun that journey.
It's creating a positive impact in our synergy projects. As revenue synergies, we think about the introduction of Topo Chico in early 2018 and then BODYARMOR 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-line blow molding, and then our supply chain efficiencies that was talked about by Alex just a few minutes ago. Northpoint, clearly, as Alex talked to you about, is $30 million of this synergy project. My last slide is really around integration of the culture. I think this is the moment that Jean Claude and I are probably the most proud of watching this leadership team really stand up the organization, really drive true value in our organization.
To think about this, in 2017, we were only nine months old into the new business and made all those changes, 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, 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. 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. 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. We were awarded the best bottler in the globe for 2019. I say that humbly. Also very proud that the team has made a long journey and a successful road. Clearly, the best is yet to come. Ladies and gentlemen, let me introduce to you Jean Claude Tissot.
Mark, thank you. Thank you for the introduction to our business. Mark, especially thank you for your partnership during these 2 years and your leadership. Indeed, during the last 2 years, we have built a strong foundation with our supply chain optimization, the deployment of the commercial strategy, the ACT 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. 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. 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. 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. 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 through their mobile device. 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. 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, we are here in New York. We can go and use our fundamental dashboard, and we can know real-time what is happening in term of opportunities and execution in an 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 U.S. 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, as our frontline associates, they share with us. We are receiving new tools, we are receiving the right training, we know that you are already thinking in order what's next. What we like from the tools, and 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 the U.S. To answer a question that has been asked. Here we can see how Dasani has a GP margin of 59%. smartwater has a GP margin of 32%. However, the profit per case of smartwater is higher than Dasani, more than 40%.
Following this thought process, we are bringing to life example number 2, 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. Investment in the new production plant in the U.S. over a decade, our state-of-the-art Northpoint production facility. 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 bang and the biggest transition for the system in the U.S., 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 U.S., as the best-in-class bottler in term of execution, winning the Market Street Challenge. Now, winning the Market Street Challenge gave us the opportunity to participate globally. 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 bottlers, winning the Candler Cup. This is the highest recognition that any bottler can have within the system in our first two years. We are moving in the right direction because we have been growing profits since day one. 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. Growing our EBITDA 7.1%. That's more than three times 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 cultural 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, and it's about collaboration. Collaboration with The Coca-Cola Company as part of the conversation with you, the recommendation about that collaboration is with the U.S. bottlers.
It's about how the system is going to win. It's about our people, and it's about our frontline associates, what we call in the U.S. our heroes, our real heroes. Actually, with everything that Mark was sharing, everything that has been happening in 2 years, we were able to discover that heroes are real. 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. Before Emilio's presentation, we would like to share a video that summarize what Mark and I have said.
Every journey begins with the first step. In 2017, Arca Continental 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. We had the secret formula.
Ladies and gents, this is the moment you've waited for.
We learn from the best, and through collaboration, the Coca-Cola North America system found that together is strong. We deployed a best-in-class commercial strategy, the great marketing model to amplify national campaigns and to exceed expectations through experiences. We accelerated our brand big bets, product innovation, and portfolio diversity, and we have also recruited teens, millennials, and multicultural consumers by executing high-profile brand emotional pillar programs.
Run away, run away. Run away to a better life. Run away to run tonight. Impossible comes true. Taking over you.
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 e-commerce and advanced analytics. We discovered that heroes are real. One team with one dream made this possible.
Oh. Ah.
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 product for the season.
They have been great to listen to what I need in my business goal, so they are not only my vendor, and they're also my partner.
Now I have the high-tech tools, and I am prepared to use them. They tell me exactly what to do on each customer. Easy, simply the best.
The formula is successful. We were recognized as the best commercial partner for our customers. We reached the highest product quality in North America.
Unmatched quality performance. This year's winner is Southwest Beverages, McAllen, Texas.
We were designated by our bottling peers as leaders of execution in the U.S. We have 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, Jean Claude. Very nice video. Good morning. Thank you for being here. It is 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 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 consist in 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 to tell you that we have been using these principles for many years.
Two good examples are with the merge between Embotelladoras Arca and Grupo Continental in 2011, and in 2015 on the acquisition of Corporación Lindley in Peru. 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. Let me talk a little bit about ACT. No, I'm just kidding. Pepe and Jean Claude already explained us very well. Our goal is to grow on average between 6%-8% in the next 5 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, Arturo mentioned. Increased prices above inflation and rationalize our promotions and discounts. Suggested orders to drive more profitable categories. Brío to support our core channel and find new opportunities.
The second component, drive cost and SG&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. 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 MXN 25 million savings. On the supply chain, we've been investing in in-line blow molding in several plants. We reduce freight expenses. With economies of scale, we have good negotiation with our suppliers. Also we have a hedge program to mitigate the risk on raw material prices and foreign exchange rate. We have been using this for many years.
On the side of SG&A and productivity, we maintain a strict control on expenses. 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. 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 24/7. The next is consistent and disciplined capital allocation. Well, I think you know us, we are very disciplined and conservative on 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 flotation and inventory days. On M&As, Arturo also explained, continue with our growth strategy. It's simple. Within the Americas, beverages, food, and snack businesses. Very important, our dividend policy. Maintain a dividend policy with a payout ratio of at least 30%. In the last five years, we've been paying a little bit more than 40%. The fourth is maintaining solid and flexible balancing. Again, we are really conservative on our financial leverage. If we don't do any acquisition, we will reach soon a one-time net debt to EBITDA ratio. With M&A activity, this is able to increase, but we always look to reduce that level to less than two times.
With that, and with a rating of a single A globally, that reflects that we have a very conservative risk policy and a strong cash flow generation. That makes us ready for any M&A opportunity. In summary Let me take it back because you're going to start writing. 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%-8%, EBITDA of 8%-10%. That means that we will be improving our margin. Combined with a disciplined CapEx of 5%-6% of our sales and a low levered ratio, provide us a clear path forward to continue creating value for our shareholders. With that, I'll turn it back to Arturo for key investment highlights. Thank you.
Thank you, Emilio. To finalize our presentation, through a few of our investment highlights, 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. As you can tell by what you heard today, we all believe, the team believes, that we have a very special company. These are some of the reasons for that, and hopefully you will agree with us, and 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. We have a professional management. We have a solid institution. We have the checks and balances. We have an independent audit committee. We have a professional management. Families participate only at the board and committee levels. We have transparency in our communication to our stakeholders. That's really important that it's not necessarily the typical case in some of the Latin American companies. 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, a trust with our customers that's built over many, many years. 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.
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. 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. One important idea here is that this is a 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. 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. 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.
I think what is the big strength, and probably we should put this first, is that this is a company that has a very strong heritage of the loyalty and the commitment of our associates. If you go to the market, if you visit any of our markets, there's a lot of passion of people that have been with the company for years and have this connection with us and with our brands. That now 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 93-year-old partnership. For a 93-year-old marriage, I would say that we're doing pretty well. 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 right conversations of the relevant topics. We debate a lot, but I think that's healthy debate. We believe this is a great opportunity to continue to explore projects for the future for us. The financial discipline, 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 want to do. We also are committed to paying dividends. We like to pay dividends. It's very clear. The only question you might have in this slide is, why is that picture there for financial discipline? I couldn't answer that when I was reviewing it this morning. We said that it represents that Emilio pulls the right levers for profitability and our balance sheet.
Certainly, this is one of the things that distinguishes our company from others. Our capacity to integrate businesses through M&A, I think we've proven that we've been successful in doing that. Very importantly, we continue to learn. What you heard from Mark, the U.S. was our biggest challenge. I think we're 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. This learning experience also puts us in a better position for future integrations. 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. We spoke about sustainability as well.
This finalizes our presentation. To conclude, I just want to say that 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 on 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. 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. That concludes the presentations. We're going to just take a few minutes to set up the Q&A. Just so you know, we have some reusable tote bags, and there's product everywhere. We're going to ask you guys to take some home, try some BODYARMOR. We brought a bunch of BODYARMOR flavors. A couple other items here. We have a survey. We would love to get your feedback on the event. There's a survey with the hostesses outside. On your way out, if you could answer that would be awesome. I'm going to ask Emilio, Pepe and Arturo to come up. Your standard Q&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.
Our hostesses are here with microphones. Please just tell us your name and your affiliation, and we'll start taking your question. Right here we have one. Hang on. We'll get everybody seated. Just one second.
All right. Just taking notes.
All right.
All right. Good morning. Ben Toro from Barclays. Arturo, thank you very much for the detailed presentation. Actually, one part I thought 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. 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. It's slightly different in every market, in all three markets where we operate. The building blocks would be the same. 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. It's slightly different. The challenges change from one market to the other. First you have Peru, where we basically have incorporated into our own sales force, this third-party distribution that we had.
We're now capitalizing on that effort of the last maybe couple of years. Yeah that we've been doing that. Now all the sales force is ours. We have third-party delivery, but that was a fundamental change of how we operated the business. We are right now in the 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 pack architecture redesigned, we've made a lot of progress there. 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. You become a PhD in revenue management pretty quickly in Argentina with inflation. We've been doing that, but also we've been changing our go-to-market as well. 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. That also is part of our execution model. It's different elements that we roll out and that we strengthen or emphasize depending on the situation of the market. I don't know, Pepe, if you want to add to that?
Yes. I think your question was right. We put plenty of Mexican and U.S. examples. Actually, for example, in Peru, I think Peru is catching up, and 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. We're working there. Argentina, as Arturo said, very much focusing on developing the outskirts and the rural areas. Yes, we are moving in all of the different operations.
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. As I mentioned before, RGM is the example that I mentioned. In every single process, we track the maturity. How well are we doing versus this best in class? That's really important to know where do we either dedicate our resources and our efforts in our yearly business plan.
One last follow-up for Emilio. You have the leverage chart, and obviously, it looked very good, like going down to under one times in a very short period of time. You've done M&A on the beverage side, but also on the snacks side. What would be your 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? What would it be would attract your attention in terms of M&A?
You want to-
Well, I can answer that. We're going to move into what creates value. 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. Certainly, what we prefer of the options available would be the specifics of the project. The valuation, the structure of the project itself, that will dictate where we allocate our resources.
Within the growth strategy that we all know. Within the Americas.
Right
beverages
Which is the Americas and the food and snack space. Beverages is divided really in 2 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. Still, we would be within the partnership of Coke, but in a separate model. There are all those possibilities out there. Now as I said, we learn more about what works and what doesn't work as well in our capabilities.
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 communications 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.? The second question for me in terms of the guidance. When we take a look at CapEx, it seems that you have really taken a look in terms of reducing the CapEx in a material way for the 2019-2024 from what we were expecting, slightly above 6%.
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? Especially trying to understand within the potential requirements in terms of investments in digitalization and initiatives that could require material investments.
Yes, thanks for the question. With respect to the U.S. system, 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 the processes that we had with the strength of the operation in Texas, which was the best division in Coca-Cola Refreshments. Now, I think we are much more confident. I think the team has figured out what is the best combination of those capabilities and 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. Again, the building blocks are the same.
We're much more excited about that, and so we know that that can be replicated successfully in the U.S. 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.
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. This is basically by segmenting the CapEx requirements, things that are replacing current assets versus growth projects. 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. 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 the business in the long term, so we're still going to be placing coolers and doing the introduction of returnable formats. 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%-6% is the average for the next five years. This year, since we have the Northpoint plan, will be a little bit higher than that for this year.
Hi.
Toño.
Hello, Antonio. Hello, can you hear me?
Yes.
Antonio Gonzalez from Credit Suisse. Thank you so much for the presentation. I had two questions. First, on the U.S., would you be able to break down the guidance, I guess the 5-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 2 years. Yet, EBITDA margins, particularly last year, didn't improve because of the aluminum and the PET headwinds that you also described now. 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. I guess the first question is, how do you frame the U.S. specifically in the context of this broader guidance? I have a second question, but I'll wait.
Well, the answer to that, is the margin going to improve? The answer to that is yes. Generally 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 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 non-produced categories, because that includes Topo Chico versus the growth of sparkling. That represents a shift in margins, but an increase in profitability, which is, I think, a good thing. That's why we spoke about just expanding the EBITDA for the business is the target. Margins are going to improve because we have the synergies also.
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. Yes, we're going to have better margins in the next few years.
Okay, thanks. Secondly, in the context of your digital strategy, I wanted to zoom in into Brío 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. Payments specifically, is an area where we're seeing literally MXN billions of new entrants coming into the market in terms of CapEx. 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? Do you envision perhaps leaving the CapEx guidance aside, a much more aggressive investment behind Brío to catch up with these fintech open commerce, I guess, in Mexico?
Well, Brío has many aspects to that, and that's why I love this project. Brío initially is an evolution of our 21st Century Project, I know you're familiar with. 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. 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 Brío, 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 Brío. The beauty of Brío versus Siglo 21 is that it has immediate returns. You collect from commissions, so you have a business that is independent from our operation and has a business itself, like a startup, like it was, because we acquired. There's other aspects here. One is about information. Brío 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 sell-out of the traditional trade customer in Mexico or Latin America. We don't know about inventories of those customers. That is a way of perfecting our routes to market in the traditional trade.
We can evolve our route to market. We are, as Pepe has mentioned, implementing ideas for a B2B platform, which is not necessarily the original concept of Brío, but it evolves into that. You have other opportunities that Jesús 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, 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 about analytics. 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 with startups for our direct-to-home business, for our vending business, and also for Brío. We're starting to partner with Banco de México 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 startups. We continuously evaluate startups, not only in fintech, which is a logical given what Brío does, but also in loyalty program and analytics. We typically see 30-40 startups per month, what they're doing, if they're able to partner with us. We're looking into that.
Thank you.
Thank you very much for the event. I have a couple of questions also. Can you give more color on the snacks and the dairy business? How excited are you about those businesses? Maybe if you can address on M&A, are you potentially interested in other areas, regional areas, like at the beginning, maybe, I don't know, organic 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. I'll ask a second question later.
Well, let me talk about snacks first. We have, as you know, separate snack business, and they have very different challenges. 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. The opportunity there is to 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 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.
It's a good way of experimentation for us to see what we can do in collaboration with the different categories of products. There, we're innovating. We just launched products in new categories where we did not participate in the past. That's a different opportunity. In Mexico, the challenge is to turn our business into a more national business and have presence, especially in the center of the country and ideally in every region of Mexico, which we're mostly in the regions where we operate as a Coca, which is almost half of the country in size. There are some parts of the country, especially Mexico City, where we need to expand to. We're doing that. 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&A, unfortunately for us to do in those markets. 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 Bokados, for our operation, they're very valuable because direct delivery routes DSD for these products are very hard. 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 DSD. That system usually collapses because then you don't sell enough and you start optimizing routes. It's like that downward spiral. We're beyond that.
We're trying to figure out how to do it in territories where we don't have strong brands. 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. Then if we move into the U.S., that's probably the biggest challenge. We have issues with our infrastructure that we need to evolve. We've made some recently to improve our margins in that operation. I think it's not the question of whether we want to stay the way we are. I think we need to do something in the U.S. to have more scale. We're also thinking about that and about expansion. That's pretty much the picture.
Great. 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, it's an initiative that they're pursuing, and I think more and more consumers.
Yeah
are demanding that, but is this going to hit you?
It is for most people. It is more expensive for most. 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 years, I guess. We've been able to maintain very competitive prices for recycled resin versus virgin resin in our operation. If we increase the scale of PetStar, that's still going to improve. It all depends, obviously, the price of resin and the price of oil fluctuates over time. We are very competitive in collecting, and that makes a big difference. If you look at the prices of PetStar versus virgin resin, they've been marginally higher in average, and there have been even some periods of time where it's been lower resin. We're very satisfied with that, and we are again exploring how to expand that, which will have the double benefit.
We're going 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. 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 in Mexico. It's not necessarily the same model because we don't have enough scale, but we are looking for alliances with our suppliers in bottle and make this analysis and get the same advantage in the cost of the resin. In the U.S. 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.
Who has the mic?
Ladies first.
Ladies first. Ladies first. Yes.
Sorry.
Thank you. I'll take it. Two questions, thanks. One on the direct-to-consumer model. I wonder if you 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.? Is it profitable now, or do you see a view to it becoming as profitable as the rest of your business? I have one more on Mexico.
Well, it's mostly 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. We're actually leveraging this for other products, because 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, the 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. I'll turn it over to Pepe to talk about future growth.
Yes. We think there's a huge opportunity even in Mexico. We think we can double the business within some years. We're 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 we can probably expand to our other operations in Latin America faster. There are plenty of ways in which we business.
I would say that also with the digital payments.
Yeah
will increase the drop size because now cash is an issue. Sometimes they don't have enough money there.
Yes. As of now, a customer that pays digitally consumes 30% more on an average than a customer who pays cash. We already reach a fair number of homes. 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. We have every single way to improve what we're doing there. It's really important for us.
Also, I talked about the vending business. We have 350 million transactions. Now, we don't know who these guys are. Digital payments, if we put a name on those 350 million transactions, what we can do with 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 is starting to come down a bit. How do you see that? Is it a big concern of yours at this point? How do you see the business faring if growth does begin to slow more measurably?
Yeah. Well, our business in Mexico is still growing, heard about all these possible scenarios and possibilities. What we know is that we are very well prepared for those situations and worse. We don't think it's going to 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. Still, we can have the impact of even a global slower growth, and that's only natural, especially with our connection and exposure to the We're used to that, and we know how to adapt to those circumstances. We know which of the channels, of the packages, and the price pack strategy will be flexible to adapt to that situation. We are incorporating that into our Just to have all the different scenarios.
The business is still growing. It's still growing now versus previous year, even though we had last year the World Cup and a fantastic summer season. It continues to grow. Look at our pricing. That also gives you an idea that consumers are still spending in Mexico.
Who goes next?
Thank you very much for the presentation. It's Pedro Zevallos 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.
Yeah. Well, actually, if you think about that pledge, we're pretty much on our way to double it, from what we said in what 2017.
Yeah, 2017 to 2022.
2022, because we had this huge acquisition. We spoke with the board about this just this week. We had the presentation for our strategic plan, and last year with our planning committee. We were discussing how this becomes very much an internal target, but there are so many other things that we need to do, especially 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. We're going to get to that doubling size that we projected when we spoke about that initially about, what, three years ago, because we had the U.S. business now.
Yeah, if you keep the base of 50 in 2012, we got higher than 100 in 2017. With the growth that we're expecting in the next five years, in 2022-
By 2022.
we'll reach more than.
We're going to be on the MXN 200 billion mark.
With organic-
We're not satisfied with that now, so we really need to think about growing our profitability at a higher rate.
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 to terms than Mexico, but it's very profitable. You're going to be building a lot of cash in the balance sheet very quickly. Should I expect as a shareholder to see special dividends like 11 or 13? Otherwise it's going to build up there, or is that doubling of the size relevant?
Right. Dividends are a decision from our shareholders. What we want to 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. That's what we're working on. 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. That is what we continue to do, and we're not yet prepared to do something. That is kind of the decision that we need to make, balancing all those opportunities versus another use for cash. Certainly, you can be assured that our controlling shareholders like dividends. There's no doubt about that. Carlos.
He has the microphone.
Hi, good morning.
Good morning.
Thanks for the event. Going back to Argentina, I got the feeling that after second quarter results, you were a bit more positive regarding the situation there. Things got complicated again. I just would like to get your general feeling for that region, and if this new scenario could trigger some M&A activity.
Do you think that players like Andina would be more open to talk? The second one, regarding Mexico, there's been a lot of noise on a possible tax increase on carbonated drinks, among others. 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?
Yeah, thanks. Well, in Argentina, certainly the scenario changed. It changed at once. It was funny because we were to present our plan for the next five years. Just two days before that, we had this primary election, we call it the PASO election in Argentina. It kind of changed the scenario. It surprised the markets as we all know. We are revising our projections. We are still receiving the impact of lower consumption and lower real wages in Argentina. That continues to be a problem. We believe that some of these public policies of this possible is bad for us in the short term, though. Government spending is always something that benefits a consumer goods company. We are concerned mostly about the valuation. We think the market is going to be better. 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, that it's the same bottle that we equal 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. Other companies, I don't know what they want to do. Companies that operate in the south part of the continent. What I'd be, again, interested in looking at possibilities in the Americas for our business. 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.
The opportunity's there. Eventually, it will be captured. That is what I think.
As you mentioned, in the past, the government provided several subsidies, so that could help. On the other hand, we have zero debt in Argentina, so that's also a good point. Yeah.
Yeah, that's great. That's important. Moving on to Mexico, as you say, well, we don't expect the tax because there's a pledge from the President. He 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. You still need to be prepared for any eventuality. The learnings, and probably, Memo, you can expand on that. The learnings from us have been, I would say, in two aspects: how to communicate better what we do with the authorities. I've been talking to 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 told the President personally.
It doesn't create. Mostly, it imposes the taxes on the poor, which is something that they particularly don't like. The way we communicate our message is one of the learnings. The other part is how do we react to a tax that is imposed in the market with our pricing? 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. Look at the Peruvian market. I think the team has done a very good job of the taxes that was imposed just last year. I don't know, Memo, do you want to-
Yes
elaborate on?
Also, there's a common knowledge that taxes is not the way to go, and there's a lot of more information in many countries that indicate to explore the obesity or health issues for a different way. For the reasons that Arturo just mentioned, even in Mexico, there is more openness to explore with the industry other ways to lower the sugar footprint or solve the health issue and not affecting the poorest part of the society.
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? Are you tempted to perhaps test the waters on the logistics businesses in Mexico?
Now or you want me to answer first?
Well, the second question, perhaps it's a Jean Claude question, really. On food service on premise in the U.S., and when you look at the small independent clients, how do you rank them in terms of your list of priorities? How 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'll start to collect that data, as I said. This is certainly value and to understand the dynamics of our own customers for our current business. To where you're going and will this present an opportunity for doing something else? This is part of what Jesús referred to in his presentation. The situation with a typical mom-and-pop store 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. Even though they don't know about sellout either, but at least they have a more direct relation.
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 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. What we're trying to do is figure out how can that be solved, again, combining technology with solutions that are out there. The typical logistics push that you've seen by wholesalers in Mexico either. That's kind of the exploration that we have right now.
We don't have a particular 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 to them. Imagine a guy or a lady, usually 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. That's a true pain point. We're addressing how that could be solved, how we can incorporate into her order, the order of other things, and then connect the different building blocks, which would be the procurement and the last mile delivery. 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.
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 that. Just to let you know that 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 exactly are the white truck system, and we think there's opportunity actually in both of those business segments, but 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.? As we had the opportunity to be in the trade, a top priority. 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 represents 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. It's 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, when you go to a channel, there's an opportunity to have here in a taqueria in San Antonio, why there's not a Coca-Cola from Mexico? Why is not a Coca-Cola in immediate consumption with glass? Why there's no Topo Chico? That's an opportunity to capture in terms of profit. 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. Also we can think, okay, increasing the level of visit, therefore, you are going to increase your cost of serve. As I share, it has been the other way around because also we have the opportunity to have different levels of go-to-markets in term of service.
Let me give you an example. As 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%. Let's connect the same example that Pepe Borda was sharing. Where the people are ordering online, they're ordering more and more profitable SKUs. Everything is connected. The same vision. How is our profits year-over-year expanded the most profitable categories that we manage?
Thank you.
Hi. Thank you so much.
Fernando
for the event. Thank you for the question. My first question is about your CapEx. If you can give us a breakdown by country. In which countries are you going to invest more in the next five years? How should we think about it, specifically the economy is 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 so much.
Thanks, Renato. Let me talk about CapEx and briefly about labeling, then probably Emilio and Memo will expand. The variations in CapEx, it's normal, specific investment projects and infrastructure. 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. We also might be investing in our Ecuador business, in the short term. That creates mainly the variation. Probably Emilio would expand on that. Labeling. We've known what the effects of those regulations are in South America as well, now labels in our South American countries. Normally doesn't have as much impact in our business as in other industries. 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 would have a huge impact. Maybe Memo can talk more about that. Why don't you explain more about the CapEx.
I just want to add component that will have part of our CapEx is the digital. I don't know, Pepe, if you want to explain some of the concept, but digital is going to be very important on CapEx. It's going to be around 20% of CapEx in different countries, but it's an advantage on CapEx.
It's mostly IT.
In Mexico first and in some other countries. In all the initiatives, we are going to be investing in digital, and that's part of CapEx.
That's mostly IT CapEx.
Yeah. 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 from any of the projects requires some IT platforms that will require investment. I would say in Peru is where we need to evolve the most.
Mexico.
Maybe in Mexico. The basic structure for that. Memo, can you talk about labeling in Mexico and what is going on?
Sure. Yes. First, to tell that we are all about transparency and the consumer to have the right information to make their decisions. We are participating along with the authorities in the analysis of if the labeling needs to be changed. We are very open to make the adjustment when they are on the scientific basis to better inform. As a Coca-Cola participant, very open if there is the need of a modification, we will be part of that conversation. For us, if there is a better label, better way to label our products, we 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 BODYARMOR or something much smaller in the Coca-Cola world, such as dairy or coffee? 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. Every non-alcoholic beverage category we would be pursuing if there's an opportunity in the market. That's what we try to do. This is something that I try to explain to with Coca-Cola, because many people would like to have this huge new idea, and it's probably not going to happen. It's probably going to be much more granular as we grow. I think the complexity is not something that we would like, but it's what the market wants. The growth of categories and subcategories of the brands and how the market is evolving in the last few years.
We have to be prepared for that. We have to be prepared in our supply chain. Mostly in our commercial lane today is super important for building a platform that can work for every single category. Dairy is important because it already exists. We are small or categories that are starting to appear with stronger presence, which is very important in the U.S., not as important in Latin America, growing. We're going to have Coca-Cola Energy, as you know now, as a huge opportunity. You have in the U.S. categories like sports beverages. You have subcategories like BODYARMOR is within that space. We need to grow like that long tail of SKUs. At the same time, be able to obviously eliminate things that should not be part of portfolio.
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. Depends on the market, obviously.
Yes. We'll look for opportunities in any diverse category. To the other part of your question, we see ourselves as 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. Hand in 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 Coca-Cola Vanilla in the U.S. or smartwater antioxidant, smartwater alkaline or ISOLITE in Mexico. We'll try variations of different categories, and we'll keep on growing, as Arturo said, the long term.
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 Arturo raised a great question. Once again, that gives us the opportunity to reinforce the 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 sales. If you can see BODYARMOR 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. We have been growing and product and a brand that is premium and is improving not just our revenues, but also our profitability per case, and also is bringing value to the category and is bringing value to the customer.
The customer is saying, "Great," and it's how you protect both, having both players, how that equation has been very successful.
Okay, I think we have time for one more question. Go ahead.
Great. Thanks, Melanie. Filippo Gross from Scotiabank. Thanks, guys, for the event and for the space for questions. One is a little bit around distribution. You discussed a little bit about the pain points in solving a distribution system that has some issues in Latin America and how Brío can play on that. I wanted to take it to the other side of the equation, which is The Coca-Cola Company's side of the equation. It seems that of late, 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 Embotelladora Andina has done with Heineken. Obviously, there are more distributed products today. The breadth is much wider on the products that are distributed. What's the opportunity there?
Well, first, how is the perspective of The Coca-Cola Company changing and why it's changing, and what's the opportunity for you guys around this? 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 you know, we distribute beer obviously with the approval of The Coca-Cola Company ever since we operate in Argentina for more than 10 years. 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 with them also. We can get rid of some of the old paradigms in the system, which you naturally have in a company with such a strong legacy, and then you try to work on things that make sense for the market.
The answer is, what are you going to do? Well, depends. Depends on what you 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. That is what we're exploring now in that particular market. If 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. The good thing here is that the relationship with The Coca-Cola Company is very open, very transparent about it. Again, their approach is much more pragmatic about that particular issue.
Yeah. Definitely. We're exploring together with them. For example, in Ecuador, we do have a distributor in which we distribute a whole range of products, okay? There's no one specific way to go through that.
We own it jointly with The Coca-Cola Company.
We own it jointly with The Coca-Cola Company.
That's right.
In the business.
Dairy business. Yeah. Mm-hmm. You had a second question?
Yeah. Great. The second one was about Brío. Pepe, you've all the great things about Brío, right? You're accumulating data and business intelligence on your competitors. You're exploring payments. Obviously, you're building a stronger alliance with the mom-and-pops. Can you talk a little bit about pain points you've had while implementing the system? One of the things that I can think of is how do you get to be incentivized to scan everything? 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 they're probably going to try to fight or incentivize the mom-and-pop to not scan their products.
How do you think the additional granularity on even categories that you don't play in? For example, you're getting great visibility in terms of what maybe Lala and Alpura are doing versus Santa Clara and then you're also getting 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 what are the issues with the traditional trade, the scanning. Jesús and I had this meeting with a startup that it's one of those that he continues to see every month. We met with them, and they had a project, and I was asking, "What issues, what challenges have you found?" Because they were already engaging a number of customers, and 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.
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. Say, you own the store. If you need to leave because you want personal time, or you need to buy things. If you don't have a system, you will not be able to leave your nephew or someone else to take care of store, because every single price you need to have in your mind. If you start scanning, then you can delegate and work easier. Those are the kind of things that this new possibility, and obviously we affiliate people more effectively. Certainly, I think that would be the biggest pain point.
I don't know, Jesús, if you want to add to that?
Just a couple of things. There are two variables. One is identifying the owner profile. It's amazing the differences between them and how somebody will be ready to scan every single transaction, and you go from that to somebody who doesn't really care about scanning anything. Two, when you tell them that the system is going to 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 their recommendation is going to be. Those two things are helping us in that.
Retention rate with your partners. Retention rate with your partners?
The churn.
Retention.
Churn. The opposite, the churn.
With the mom and pops?
Yes.
Right, it was between 2%-3%. Very low.
Churn.
Churn.
Churn.
All right. I think that wraps it up. If there's any other question, you can always reach Ulises 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. We have gifts for you. 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. We really look forward to the next one. Thank you.
Thanks.