Please note this call is being recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors.
Thank you, operator. Good morning, everyone. Thank you for joining the senior management team of Arca Continental to review the results for the second quarter and first half of 2026. Their earnings release went out this morning, and it's available on the company website now at arcacontal.com in the investor relations section. It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutiérrez , the CFO, Mr. Emilio Marcos, the Chief Planning and Strategic Capabilities Officer, Mr. Jesús García, and the Chief Operating Officer, Mr. Jean-Claude Tissot. They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance. With that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutiérrez , who is going to begin the presentation.
Please go ahead, Arturo.
Thank you, Melanie. Good morning, everyone. We appreciate you joining us today to discuss our performance during the second quarter and first half of the year. Our quarterly results reflect the resilience of Arca Continental's business model and the discipline of our teams across markets. In a complex operating environment, we delivered positive consolidated volume, protected profitability, and continued advancing the capabilities that support sustainable growth. The factors we faced at the start of the year persisted throughout the first half, including a challenging consumer backdrop in some of our markets, volatility of input costs, and evolving regulatory dynamics. In this context, our focus remained clear. We leveraged precise revenue growth management, hedging strategies, rigorous cost control, and operating efficiencies while staying close to our customers to create value across the entire chain. Now I will begin with our consolidated performance.
Total consolidated volume remained positive, up 0.6% in the quarter and 1.7% year to date. Notably, our stills categories increased 2.4% on top of a 2.1% improvement in the prior year period, underscoring our ability to capture evolving consumption trends through a dynamic and innovative portfolio. Consolidated revenues were broadly in line with last year, both for the quarter and on a year-to-date basis, driven by effective pricing strategies and favorable mix effects. EBITDA was broadly stable, declining 0.2% in both the quarter and the first half of the year, with margins of 20.7% and 19.7% respectively. Overall, our performance once again demonstrates the strength of our business model and the solid fundamentals Arca Continental has built over time, allowing us to protect profitability, gain value share in key categories, and execute with excellence across all markets.
Let me now provide more detail on the performance across our geographies, starting with Mexico. In Mexico, strong market execution, continued investment at the point of sale, and operating optimization allowed us to deliver net sales and EBITDA growth despite softer volume trends. Our beverage business navigated a more challenging quarter following a strong start to the year as adverse weather conditions, a volatile macroeconomic backdrop, and the excise tax implemented at the beginning of the year weighed on demand and volume performance. Unit case volume, excluding jug water, declined 3% in the quarter and 1% year to date, reflecting the combined effect of these factors on consumer demand during the first half of 2026. Volume trends improved in June, supported by the 2026 FIFA World Cup related events and campaigns, combined with exceptional point-of-sale execution.
We also leveraged the World Cup to foster consumer connections, drive engagement, and consolidate brand relevance, contributing to value share gains across all categories during the first half of the year. Mixed dynamics were encouraging. Returnable formats improved their share within sparkling beverages, while single-serve packages gained mix within our NARTD portfolio. Coca-Cola Zero supported the resilience in colas, maintaining double-digit momentum for the second consecutive quarter and growing 23.6% year over year while steadily gaining share within the brand mix. Furthermore, our financial results in Mexico reflected the discipline with which we manage the business. Total net sales increased 1.5% in the quarter and 4.1% year to date, with average price per case, excluding jug water, up 4.5% over the three-month period and 5% year to date.
EBITDA grew 0.8% in the quarter with a stable margin at 24.5%, while year-to-date EBITDA improved by 3.3% for a margin of 22.8%. Moving to our beverage operation in the United States. Coca-Cola Southwest Beverages delivered sound financial results in the second quarter despite a volatile operating environment. This performance was underpinned by disciplined pricing, effective cost management, and strong point of sale execution, allowing us to navigate input cost volatility, inflationary pressures, and evolving regulatory dynamics. Volume declined 2.3% in the quarter, while year-to-date volume remained positive at 0.9%. Transactions were down 1.4% in the period, with a 2% increase year to date. Quarterly performance was partially supported by 1.5% growth in still beverages, with fairlife, energy, and sports drinks up 12.4%, 1.8% and 4.2% respectively.
Notably, our zero-calorie portfolio also maintained strong momentum, growing 8.9% versus the prior year, driven by a 10.4% increase in Coca-Cola Zero and a 5.1% growth in Diet Coke. For innovation initiatives, we introduced more than 15 new SKUs, including the launch of BODYARMOR FIT, strengthening portfolio relevance, and responding to growing consumer demand in functional beverages. We continued to improve our market leadership position, gaining value share across both sparkling and still categories within the NARTD portfolio. Consequently, net revenues grew 2.3% in the quarter and 5% year to date, with average price per case up 4.5%. At the profitability level, EBITDA was up 1.8% in the quarter with a stable margin at 17.8%. Year to date, EBITDA increased 5.4%, reaching a margin of 17.1%. Data-driven and AI-enabled initiatives are progressing across the entire value chain.
Embedded in this effort, our inventory balancing platform is improving forecast accuracy and product availability while supporting better service levels across the network. Turning to our beverage operation in South America, total volume increased 11% in the second quarter and 7.1% for the first half of the year, led by robust sequential improvement in Peru and Ecuador with a softer performance in Argentina. Total revenues for the quarter were up 6.5%, with EBITDA improving 5.7% with a margin of 17.1%. Year to date, revenues declined 0.9% and EBITDA decreased 4.2% for a margin of 18.1%, mainly due to unfavorable currency translation effects. South America presents an improving operating environment. The region is showing renewed momentum, reflecting the strength of our business model and our ability to capture growth as underlying market conditions become more favorable.
Peru delivered a remarkable result, with total volume increasing 17.6%, our strongest second quarter result since entering this market in 2015. These solid results were broad-based across categories, with sparkling and water up 16.6% and 25.2% respectively, driven by favorable consumer conditions and solid execution. This performance echoes the momentum of our dual Coca-Cola and Inca Kola strategy, as well as our ability to capitalize on the capabilities we have built through consistent investment in the operation, particularly in cooler coverage while expanding affordability, availability, and consumption occasions across the market. Channel trends were also positive, with all channels delivering double-digit improvements. This was supported by disciplined price pack initiatives and strategic investments made over the past several years, reinforcing Peru as a progressively important market within our business.
In Ecuador, total volume increased 12.1% in the quarter and 8.8% year to date, proving excellence in our execution capabilities and fundamentals, which drove improvements in service levels and product availability. Growth was broad-based across categories, with sparkling and still beverages up 11.4% and 14.9% respectively, reinforced by positive momentum in both modern and traditional trade and a 29.4 quarterly uplift in Coca-Cola Zero. We gained value share in NARTD beverages while the mix of single-serve packages improved 2%. In Argentina, total volume declined 8%, cycling growth of 11.6% in the same period last year. The traditional channel showed better dynamics, supported by targeted promotions as well as activations linked to Coca-Cola sponsorship of the 2026 FIFA World Cup. We also gained value share across our NARTD categories driven by affordability initiatives and returnable packaging innovation, including the rollout of the 1.5-liter returnable bottle for Fanta and Sprite.
At the same time, digital orders accounted for 83.5% of volume in the traditional trade, marking the highest level across our Latin American operations. To wrap up our operations review, our food and snacks division posted a mid-single-digit decline in net sales during the quarter, primarily due to foreign exchange effects. In Mexico, Bokados delivered positive results with net sales and EBITDA increasing mid-single digits, supported by growth in key channels, cost efficiencies, and marketing campaigns tied to the 2026 FIFA World Cup. Inalecsa posted a robust quarter in Ecuador with EBITDA improving by double digits, driven by its market leadership position and pricing initiatives. Before moving to the financial review, let me briefly touch on sustainability.
During the quarter, Arca Continental was once again included in the FTSE4Good Index Series with an improved score across environmental, social, and governance dimensions, positioning the company among the top 5% of performers in the food and beverage sector. In connection with the 2026 FIFA World Cup, we worked with The Coca-Cola Company to implement a circularity model across matches and engagement events in our territories, recovering and recycling most beverage containers sold. These achievements reflect the progress of our sustainable business model and the role of innovation and strategic partnerships in strengthening the long-term resilience, competitiveness, and investment profile of our business. With that, I'll turn it over to Emilio. Please, Emilio.
Thank you, Arturo. Good morning, everyone, and thank you for taking the time to review our financial performance for the second quarter of 2026. As Arturo mentioned, we continued to navigate a challenging environment in the second quarter with macroeconomic headwinds, adverse weather condition, and FX translation impacting top-line performance. Despite these pressures, we successfully protected our EBITDA margin through effective revenue growth management initiatives and a disciplined approach to cost and expense management. Let me offer further insight into the financial results. In the second quarter, consolidated revenues remained stable year over year at MXN 63.5 billion. First half revenues totaled MXN 120.6 billion, also in line with the same period of 2025, reflecting volume pressure in certain markets, as well as the translation effects given our US dollar exposure. On a currency-neutral basis, revenue rose 5% in the quarter and 6.8% year to date.
During the quarter, gross profit increased 2.1% to MXN 30.3 billion, while gross margin expanded 90 basis points to 47.8%. For the six months of the year, gross profit grew 1.7% to MXN 57.1 billion, with gross margin expanding 80 basis points to 47.4%. On a currency-neutral basis, gross profit grew 6.2% in the quarter and 7.5% year to date. Consolidated EBITDA slightly decreased 0.2% in the quarter to MXN 13.1 billion. Despite a challenging operating environment, we maintain a solid EBITDA margin of 20.7%, reflecting our disciplined approach to cost and expense management. For the first half of the year, EBITDA decreased 0.2% to MXN 23.8 billion with a slight 10 basis points dilution in the EBITDA margin to 19.7%. On a currency-neutral basis, EBITDA grew 3.8% in the quarter and 5.4% in the accumulated period.
Net income for the quarter decreased 9.4%, reaching MXN 4.9 billion, resulting in 80 basis points contraction in net profit margin. For the year-to-date period, net income totaled MXN 8.7 billion, marking a 9% decrease compared to the previous year, with an 80 basis points contraction in net profit margin, mainly explained by the dilution in the operating margin. Now moving on to the balance sheet. As of June, cash and equivalents totaled MXN 28.5 billion, with total debt stood at MXN 61.9 billion, resulting in a net debt to EBITDA ratio of 0.7x . We declared extraordinary dividend of MXN 2.50 per share to be paid on August 5th. Combined with the ordinary dividend of MXN 4.28 paid in April, we reached a total distribution of MXN 6.78 per share.
Looking ahead, while volatility is likely to persist, we remain confident in the resilience of our business and our ability to navigate challenges effectively. Our diversified geographic footprint, strong portfolio of brands, and proven operating model continue to position us well to respond effectively to dynamic market conditions. We'll continue to leverage our core capabilities, execute with discipline, and maintain a prudent approach to cost and expense management. That concludes my review. Now I'll turn it back to Arturo. Please, Arturo.
Thank you, Emilio. To conclude, let me reiterate our firm commitment to the full year guidance shared at the beginning of 2026 Arca Continental is built to perform through different market cycles, capturing opportunities when market conditions are favorable and demonstrating resilience in more challenging environments while building on our fundamentals, investing in the business, and strengthening our leadership over time. As we commemorate 100 years of partnership with The Coca-Cola Company, this relationship remains a key driver of shared value creation. Our alignment supports sustainable and profitable growth while opening new avenues across our markets. We are now ready to take your questions. Operator, please proceed.
Thank you. At this time, if you wish to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two. In the interest of time, we ask you please limit yourself to one question. We'll take our first question from Lucas Ferreira with JP Morgan. Please go ahead. Your line is open.
Hi. Thanks for the question. Hi, everybody. My question is on the Mexican market. If we can understand the business evolution from what I thought was a very first quarter now to a bit more challenging 2Q. Looking at the 2Q numbers, it feels like the weakness was a bit more concentrated on water and flavors, which I believe tends to explain a little bit the weather trends. Wondering if you guys can comment on the state of the Mexican consumer. How you saw the evolution from a very good first quarter to a bit more challenging 2Q now. If it's really more explained by weather, like I said in the beginning, or if macro, in your view, and elasticity of the consumer turns to be a bit more challenging.
Just wanted to understand what to expect for the rest of the year, once we expect, obviously, some sort of a normalization for weather as we go forward. Thank you very much.
Thank you, Lucas. Good morning. Well, we thought Mexico had a very resilient quarter nonetheless. Volume has been above our expectations throughout the year, considering that we have headwinds for the year. A combination of tax-related pricing pressure, elasticity on unfavorable weather, as you mentioned in the second quarter. That does affect when you look into a quarter isolated and a softer consumer demand in the quarter. We are confident that our fundamentals are very strong. We're gaining market share in Mexico and our performance is pretty much tracking in line or even slightly better than we initially anticipated, considering the circumstances. There are other factors that have impacted volume, some positive. We actually had a good month of June. We will remain prudent in our assessment for the remainder of the year, but it has not changed our outlook for the year in Mexico.
With respect to water and flavors, I'll turn it over to Jean-Claude to give you more detail.
Thank you, Arturo. I'll think if you allow me, I would like to reinforce about where are we, not just in Mexico, but in our five operations, is that we are gaining value share in all our operations. That reinforce what you're saying about strengthening our strategy and strengthening our execution, our digital initiatives, and taking advantage of consumer initiatives such as the World Cup. Regarding flavors, there's a consumer preference that continue to evolve with growth shifting towards categories such as ready-to-drink, hydration, isotonic. Part of the pressure in flavors and water reflects honestly those mix changes rather than a structural market issue.
Thank you, Lucas.
Thanks.
Thank you. We will move next with Benjamin Theurer with Barclays. Please go ahead.
Sure. This is Rahi on for Ben. Our question is, how should we think about price implementation in the different regions for the second half? How much of consumer sensitivity have you seen lately on the excise tax in Mexico? I know you mentioned a little bit of color, but if you have any other add-ins. Thank you.
Thank you, Rahi. Good morning. Well, I'll tell you about pricing in general, and Jean-Claude will give you more detail about the impact of the tax that was imposed in the Mexican soda drinks. In general, as you know, our strategy is to price at or above inflation and manage competitiveness, affordability, and mostly have a long-term perspective on every market. For that, especially this year, returnable packages have been very important in our Latin American markets. The price pack architecture, based on the tools that we have developed, has been very important to balance, as I said, affordability and the profitability of the business. The pricing tool that we have is now embedded across all of our operations in Latin America, and that's been key to protect our margins in the region.
Same thing for the promotion optimization, which is very important as we have a very dynamic market, and some of the local decisions now are based on these tools that have been rolled out and deployed and have reduced non-productive spend in all of our business units. With respect to the tax in Mexico, I'll have Jean-Claude give you more detail on the impact.
Regarding the excise tax, as we shared during the last call, there's a new rate of MXN 1.5 per liter for beverage. As you know, we executed a full pass-through of the excise tax, resulting in an average price around 8%. What is important is what we did and the strategy that we implemented. We implemented our digital pricing tools with granular segmentation on price elasticity scenario, where we knew that affordability was going to be key, the single-serve packages were going to play a critical role, and our master plan of returnable. That's why we have a plan and results that are above initial expectations. That's what we are planning to do for the next of the year.
As you know, one of our competitive advantage that we have is RGM, using the tools, the teams, but more important, you have to translate those strategy to the point of sale and our execution.
[Hi, Corinne.]
We will move next with Felipe Ucros with Scotiabank. Please go ahead.
Thanks, operator. Good morning, Arturo and the team. Quick question on the performance during the World Cup. You talked a little bit about the product mix, but there's a couple of other mixes that I'm interested in. One is, I wanted you to talk about the digital tools and how they behaved during a period where consumer traffic and behavior is perhaps not as you would usually have during an average summer. The second one, you talked about the product mix. Also wondering if there were any channel mixes that could have changed what would have been usual profitability patterns during the quarter. Thanks a lot.
Thank you, Felipe. Well, first, about the World Cup and dynamics. I think they were very intense weeks for us, not only in terms of how we connected with our customers via the digital platforms, but also it was a test on our supply chain and our S&OP operation. We had the best indicators probably in any summer in the recent years in terms of service to our market, so we're very pleased with that. Our point about the World Cup, it's beyond, really, the market dynamics of those few weeks. It really serves as a very powerful platform to strengthen customer and consumer connections beyond the weeks of the tournament. What we did with collector packaging, with the activations, with the Panini albums, the consumer promotions in every country, that really, for us, is a way to strengthen brand relevance of marketplace execution.
Those consumer connections and customer partnerships really extend well beyond the weeks of the tournament itself. That was the intent of how we activated the World Cup. Naturally, it creates new consumer and consumption occasions and, for example, we had two million visitors in Texas. We had more than two million Fan Fest attendees in our venues in Monterrey and Guadalajara. That is not probably the typical consumption occasions that we have in these weeks, but in general, I think we're looking beyond the immediate impact of the event and creating those connections for our brands, particularly Coke Zero and Powerade.
Thank you.
Thank you, Felipe.
Our next question comes from Ricardo Alves with Morgan Stanley. Please go ahead.
Hello, Arturo, Emilio. Thanks for the call. I had a question on maybe more longer term, less related to the quarter, specifically. The deceleration that we saw in your volumes in Mexico, sequentially speaking, it's been across the board when we think about the Mexican consumer. With that in mind, with a more elastic consumer, if you will, what's been your main strategy? What's been keeping you awake at night in terms of the main short-term changes that you have to execute? Are you more focused on attacking affordability issues more aggressively with the returnables? I don't remember who exactly was mentioning the pack size on the single side. Is it a channel focus shift? I'm just curious. 2026 has been a tough year, right?
You had the excise tax that you had to price through. Now you have a consumer that is kind of lackluster. You had a good start in the first quarter, second quarter decelerated. It seems a very dynamic environment. I'm curious to hear, number one, where is your focus in terms of adapting your strategy? Maybe more important, where you are in this path of executing more on the affordability, maybe pricing or more tactical pricing. Just curious to hear your thoughts on that. Thank you.
Thank you, Ricardo. Really important question. As we look into Mexico, this is a great example of what we've been saying about being resilient in situations where we have headwinds in the operations short term and being able to protect our market leadership, as Jean-Claude was mentioning, with our share market, protect our profitability also. Because we know that we're going to have better times, we're going to capitalize on the fundamentals of the business. Actually, this particular quarter, we have kind of the two examples of what we do. We're resilient in difficult circumstances like Mexico. We really thrive when we have some tailwinds, like in the case of Peru now. Talking about the priorities, beyond what is the day-to-day execution, attention to detail, that obviously we want to reinforce when we have challenging times.
I would say there are three things that are really, really important for us this year, consistent in our strategy, in our playbook. One is the price pack architecture, pricing tools, combining returnable packages with the one-way packaging, the single-serve, multi-serve, protecting affordability. Protecting actually some packages that we want to make very competitive. At the same time, have the profitability and the margins of the business that we aim to have. That's really important. For that, we have new tools that have been very useful in this year and the previous years in Mexico and Latin America. Second is that we have a more robust efficiency plan in terms of OpEx and cost savings. We can talk more about that. This is, again, reinforced in a year when you have these challenges that we face.
Number three is that we continue to invest, that's super important. We continue to invest in things that we know that are going to make us much stronger when we face a more positive environment. This is exactly the story of Peru now. We've invested last year, probably not the best year in that market, but we are capitalizing on the investments now. That's something that we have learned over the years, because in Latin America, we know that there's volatility in the markets. We've been consistent in that strategy as well, and that's paid off every time. We look forward to a much better future in Mexico as well.
Much appreciated.
Thank you, Ricardo.
Thank you. We will move next with Alvaro Garcia with BTG. Please go ahead.
Hi, Arturo, Emilio, Jean-Claude. Thanks for the space for questions. One for Emilio on margin dynamics. Gross margin dynamics seemed pretty healthy. On the flip side, some operating deleverage probably across Mexico and the U.S., but additional marketing spend probably from the World Cup. I thought the overall margin print was quite healthy given where top line was sort of flattish both in Mexico and the U.S. If you could just walk us through those drivers and what you saw in the second quarter, that would be quite helpful.
Yes. Thank you, Alvaro Garcia, for the question. Yes. As you can see, we have an increase in OpEx, where our ratio of OpEx to sales is higher, 100% basis points than the first half of first year. We closed the first half of around 32.5%. The increase was mainly driven by higher depreciation. We have 10% higher in the quarter and 8% year to date, given the investment that we have made over the past few years to improve our operation capabilities. Additionally, we have in the quarter higher DME expenses related to FIFA World Cup commercial and marketing activities. We anticipate this ratio to normalize in the second half of the year into we won't have those, some kind of the expenses that we have in the first half.
Also, we have implemented some productivity and saving programs that maybe if Chuy want to share with us some of those. That will allow us to end the year on a ratio of around 32%. Talking about the EBITDA margin consolidated, although the market conditions are expected to remain difficult, we maintain our discipline execution and manage all the expenses that we control. We're implementing, as I mentioned, some of efficiencies and saving programs that we may share with you some details. Also, our hedging strategy is helping us to reduce the volatility in raw material prices.
We maintain the outlook with all these initiatives to support a profitability margin for the full year of around 20%.
Yes. Alvaro, thank you for the question. As far as what we are doing in regards to productivity and efficiencies, we remain committed to continuous improvement and efficiencies across the organization. For 2026, we expect to generate about MXN 630 million in savings. We obviously have many initiatives. I will give you some examples of what we are working on. Just clarifying, the MXN 63 million is pesos.
We have a multi-year investment in our U.S. infrastructure that we have talked about in these calls before. Most of the benefits are going to materialize in 2027, but we expect to generate some savings in 2026. We are scaling a B2B-enabled model across Latin America. This is going to allow us to improve outlet-level efficiency and reduce our cost to serve. We expect to continue expanding that in 2026. We are expanding the way we monitor our execution at the customer level.
We have gone from 15,000- 50,000 customers by June 2026. You get an idea, more than half of the traditional trade is now monitored through photo recognition by our frontline sales force and also external sampling. We are also working on lightweighting initiatives, routing redesign, network optimization. As you know, we operate in five countries. We share a lot of best practices. Some of them will be specifically for a country, but most of them will be replicated across the organization.
Awesome.
Thanks, Alvaro.
Thank you so much. Great color.
Thanks, Alvaro.
Thank you. Our next question comes from Renata Cabral with Citigroup. Please go ahead.
Hi, everyone. Thank you so much for this space. My question is related to the U.S. business. We saw a decrease in terms of volumes and the company holding price increases. My question is related to the dynamics in the quarter. If you can give us some color on how the company has had those results, even in a decrease of volumes, and what we can expect for the U.S. in the second half of the year.
Yes. Thank you, Renata. I will make some general comments, and I'll ask Jean-Claude to provide more detail. I would say that the U.S. has been facing a challenging consumer environment, affordability concerns of our consumers, and weaker store traffic in general. Momentum improved throughout the quarter. We had actually a very good month of June and a record week of transactions, which is what we're focusing on. Very importantly, as Jean-Claude mentioned, we are very solid in our leadership in the market. I'll turn it over to him to expand on the U.S. performance.
Yeah. Renata, thank you for the question. Despite the challenges that Arturo is sharing, it's important to reinforce the strategy that we have in place together with The Coca-Cola Company. We have been consistent through the years to grow transactions above volume, and we are doing the same this year. Actually, we are growing around 2% our transactions, which is a really good number year to date. What we see is also that we are keeping our EBITDA margin at record high, and we are gaining value and volume share, which is extremely positive. What do we see for the rest of the year? We'll continue to face the same challenges with the consumers. That's a reality, that's why we need to focus on the strategy that we have in place that Arturo was sharing.
Our RGM, our digital tools, as Chuy was sharing as well, the obsessive mindset that we have in our execution. We took World Cup as an opportunity to strengthen our execution. If you see the numbers in terms of fill rate, number of displays, we were able to achieve a record high in our execution, and we keep as a bottle leading the execution in the U.S. That's why we continue to be optimistic, maintaining the same guidance that we have for the rest of the year regarding our business in the U.S.
Thanks.
Thank you, Renata.
The call was very useful.
Thank you, Renata.
Thank you. We will move next with Kevin Zavala with UBS. Please go ahead.
Hello, good morning, Arturo, Emilio, and Claude. This is Kevin from UBS on behalf of Rodrigo Alcántara. Could you comment on recent market share trends in Mexico and the U.S.? In Mexico specifically, it would be helpful to understand whether the weakness in the flavor beverage category reflects market share dynamics or a broader category trend. Similarly, in the U.S., how do you assess the underlying health of the category given the soft volume performance? Is this weakness primarily category-driven, or there are also company-specific market share factors at play? Thank you.
Yeah. Kevin, thank you for the question. That's something that we are going to reinforce today during our town hall with the Unchartered company, is how proud we are about our value share results. That we are gaining value share in our five operations. We're facing different realities and challenges, some of them out of our control. Despite those challenges, we have been able to grow market share. Why? The strategy, the RGM strategy, the focus in Mexico in term of returnables, execution, sorry to be repetitive about execution, but all our KPIs of execution continue to improve in all our operations. How we are promoting Coke Zero and Zero as we were sharing at the beginning of the conference call, growing double-digit. The fundamental of the business, growing value share, continue to be a reality in all our operations.
Thank you, Kevin.
Thank you.
We will move next with Alejandro Fuchs with Itaú. Please go ahead.
Thank you, operator. [Paul], Arturo, Jean-Claude, Emilio, thank you for the space for questions. I have one brief one, if I may. Coming back to Mexico again, I wanted to see maybe Jean-Claude or Arturo, if you could elaborate a little bit on what you're seeing in terms of competition, especially in the north of Mexico. Are you seeing anything different that happened this quarter for maybe the beer brands or other players that was surprising to you? Then maybe if you could elaborate, Arturo, these first weeks of July, just overall, how are you seeing the momentum in the company? Is it being sustained, the good momentum in June that you mentioned, or has it normalized a little bit? Thank you.
Thank you, Alejandro. Really, we have not seen anything different in the competitive environment that we've seen in Mexico in recent times. We're facing, as I said, a challenging environment in general. I think our affordability strategy has paid off really well in terms of market share. What certainly has been different, and it's reflected in the last few weeks, and that's why we had a very good trend at the end of the quarter, was obviously the activity around the World Cup, as I mentioned before, and we were well-prepared for that. In general, the consumer environment is pretty much what we expected, considering also the tax that has been imposed. As I said before, our performance so far is above our initial expectations, assuming the elasticity that's implicit in the price movements that we have carried out.
Super clear. Thank you, Arturo.
Thanks, Alejandro.
Thank you. We will move next with Fernando Olvera with Bank of America. Please go ahead.
Hi, good morning, thanks for the space for questions. My question is related to South America. If you can give us more color about the main drivers that explain the strong demand seen in Peru and Ecuador during the quarter. If this performance is in line with your initial expectations or above, and what should we expect in coming quarters? Thank you.
Thank you, Fernando. I'm going to take that question. We have been able to demonstrate as Arca Continental that when we face challenges, headwinds, we are resilient. At the same time, when we have tailwinds, we take advantage of those tailwinds. Why? Because we have been investing in the business, because we have a clear strategy in place, because we focus on the execution. That's what we are doing in Peru and Ecuador. Focus on RGM initiative about affordability, reinforcing returnable, something that is working extremely well in Peru that we shared during the last conference call. The strategy of the dual strategy, supporting Inca Kola and Coca-Cola at the same time, is driving extremely good results. Weather is helping as well, but we are taking advantage of that weather that is helping us to improve our execution and results.
We expect and results are above our original expectations in most countries, and we expect that for the remainder of the year, we will continue to deliver with that similar trend.
Okay, great. Thank you.
Thank you, Fernando.
Thank you. We will move next with Henrique Brustolin with Bradesco. Please go ahead.
Hello, everyone. Thank you for taking my question. Arturo, I would like to move back to Mexico only on the discussion of the guidance, right? If I recall correctly, the guidance for mid-single digit top-line growth, it applied for all the markets, right? In Mexico, you are well on track with that for the first half of the year, but Q2 was a deceleration and implicit in the mid-single, we would need to see a re-acceleration of top-line growth in the second half of the year relative to where it was in Q2. Just wondering if you could qualify a little more on where you see the main drivers for top-line growth accelerating on the back half of the year.
If it's more comfort on volumes recovering from the performance in Q2, if it's more on the maybe incremental pricing front, I think that would be really helpful. Thank you.
Thank you, Henrique. We have not changed our guidance for 2026. As you well said, it's sales growth in the mid-single digits, and that would be currency neutral for the year. We are keeping our guidance in CapEx as well for the year. That takes into account the situation in Mexico that, as I mentioned, it's been challenging. We are confident we're going to navigate this environment effectively. It's not going to be our best year in terms of growth, and we have certainly some tough comps by the end of the year that also we have to take into account. We're looking here more at the long-term perspective in Mexico and investing in the future, reinforcing our fundamentals, reinforcing our supply chain, and we're very satisfied with what we've done, leveraging returnable packaging, et cetera.
It's not that we're expecting spectacular growth, but that's pretty much embedded into our guidance for the year.
Thank you.
Thank you, Henrique.
Thank you. We will move next with Vanessa Quiroga with Eternal Capital. Please go ahead.
Hi. Thank you for taking my question. I want to dig deeper into that cost side, especially on bottles PET, because we saw Alpek results where they are seeing a big increase in their profitability because of the higher prices, higher spreads. I want to understand better how that flows into your costs across the different countries, if you have any hedges in place. If not, when could we see any of that reflected into your results? With what lag of time? Thank you.
Thank you, Vanessa. I'll just say in general that our PET in 2026 is certainly expected to be above 2025, we have sweetener costs that are more favorable, there's also the effect of aluminum that is being hedged mostly in Mexico and the U.S. I'll have Chuy expand and give more detail on our raw material overview and situation.
Thank you, Arturo, thank you, Vanessa, for your question. Evidently, there is volatility across global commodity and energy markets. For us, the main potential areas of impact remain, as we discussed in the other quarter, in the previous quarter, PET, aluminum, and diesel. Having said that, on aluminum, we have fully hedged 2026 on LME for Mexico, 97% for the U.S. Midwest, 50% in the U.S. PET prices continued to trend upward across our operations during the quarter. They did remain broadly similar to those observed in the first quarter, we will get some pressure on PET. Most of that impact has been contained in the U.S. We expect a bit of pressure in Mexico and South America.
Overall, our hedging program, the agreements we have in place with our suppliers, the sourcing strategy, and ongoing cost control leave us well positioned to mitigate these pressures and support the profitability of the organization.
In peso terms in Mexico, PET also has a more favorable environment because of the exchange rate. Thank you, Vanessa.
Okay. Thank you.
Thank you. We will move next with Tiago Harduim with Bloomberg Intelligence. Please go ahead.
Good morning, Arturo, Emilio. Thank you for taking my question. I wanted to ask a follow-up on Felipe's and Renata's question here, basically on U.S. and World Cup. In the last quarter, we talked a little bit about the rollouts of the suggested order tool in the U.S., just wondering how that's evolving, specifically in the second quarter that we had World Cup, I understand that could be a little bit of a boost for engagement. Also, I know we also talked about Peru, but since it had such an amazing performance, just wondering if we could discuss a little bit on how the dual strategy between Inca Kola and Coca-Cola played a role. I understand that we're entering a phase of capitalizing on investments. Yeah, I'm just trying to give a little bit more of weight to Peru's performance here. Thank you.
Thank you. I'll address the question on Peru, Tiago, then I'll turn it over to Jean-Claude. What I would say it's that, yeah, this dual strategy in Peru, it's pretty unique. If you look at the Coca-Cola system in the world, there's probably no other market where you have this great advantage. You've been to Peru, you know how Inca Kola has this very strong connection with consumers, with certain consumption occasions, with meals. Look at the growth of those two brands at the same time, 18%, 12% respectively. That tells you a lot about how they reinforce each other in the marketplace. Probably have not capitalized fully that in the recent past. We're very confident that that's still going to bring growth. We're projecting further growth in Peru in the rest of the year.
We're confident this is very sustainable going forward and also in profitable terms. That would be for Peru. I'll ask Jean-Claude to address your question on the U.S.
Maybe something just to reinforce a little bit about Peru is that that alignment with The Coca-Cola Company behind the dual strategy on how to strengthen also and to capture the opportunities in rural areas is working. That's the mindset that we have about being a market developer. That's our role as a bottler. Regarding the World Cup, we already said that we took advantage of the opportunity, and in all aspects. In terms of the digital tools, digital tools that we put in place were to improve our execution, to improve the relationship with our customers, but also something that we did together with The Coca-Cola Company to improve the consumer experience. If you see the difference of this World Cup with any other World Cup was the digital engagement with consumer and customers.
We had a lot of discipline to track our execution, as I already shared, and all our execution because compliance, field rate, SOV was improved. Something that was remarkable as well is how we were able to improve our execution and performance in the on-premise channel in both countries, in the U.S. and in Mexico. We worked with Henrique Braunn last week during the final, and something that he recognized was that this was one of the best activations for the World Cup that we had as a system.
This is fantastic.
Thank you.
Thank you very much.
Thank you, Tiago.
Thank you. We will move next with Carlos Laboy with HSBC. Please go ahead.
Yes, good morning, everyone. Can you please comment on three elements of your market development strategy? The first one is, how are you driving both affordability and premiumization in Peru against the discount competitor? Do you need more refillable capacity there? The second one is, can you give us some context on your cold drink efforts, and the amount of white space that you still have to fill there in terms of coolers in these rural markets in Peru? Third.
This is.
What elements of this effort that are driving this really fast growth in Peru might have been impossible in a pre-digital era?
Thank you, Carlos. Jean-Claude, feel free to jump in with any additional detail. First about affordability, certainly investment is also relevant there. As you know, the physical cases of both sparkling Coke and flavors that we've introduced are very important to balance that strategy that you mentioned and make sure that we maintain the profitability and premiumization of the category, but at the same time, have the price points and the price pack architecture that we know works in the marketplace. For that connects to your third point. Because we're getting more information from the market, we have better tools to implement that, and that would not been possible recently, or at least it would not been as agile, I would say, because the tools, they don't only provide deeper analytics, but they provide more agility to take those actions.
We feel more confident when we do them. That's really important. In terms of cold drink equipment, we've invested heavily on cold drink units last year and continued this year. If you look at the penetration of coolers in Peru, it's still really low as compared to Mexico. It might be 60%, and Mexico, we're above 80%. It tells you there's an opportunity. Obviously, it requires, again, having the right strategy to do it, especially when you go into the rural areas. That's been also part of the success in Peru, as Jean-Claude explained, being successful in the provinces in that country as well. The digital tools, going to the third point, are also relevant, as we've explained before, to manage the complexity of the business. Growth will come also from a larger number of SKUs.
Peru, it's the best example of multi-category that we have in our system. It continues to gain momentum. We have, as you know, beer in Peru that's been growing in our distribution system, and that is only possible when you expand the bandwidth of our frontline with the digital platforms and the digital capabilities. I think all three aspects that you mentioned are really critical to make this growth sustainable for the future and to make us confident that this is not just navigating this wave of tailwinds, but really building a stronger, profitable business for years to come in Peru.
Thank you.
Thank you, Carlos.
This concludes today's Q&A portion. I would like to now turn the conference back to Arturo Gutiérrez for any additional or closing remarks.
Thank you, operator, and everybody for joining today's call. Thank you for your interest in Arca Continental. If you have any follow-up questions, our investor relations team remains available to assist you. We hope you enjoy the rest of your summer and look forward to speaking again in the fall. Have a great day.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.