Earnings Call: Q2 2021

Jul 28, 2021

Earnings release

Good morning, and welcome everyone to FEMSA's Second Quarter 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the presentation, there will be a question and answer session. During this conference call, management may discuss certain forward looking statements concerning Insta's future Performance and should be considered as good faith estimates made by the company. These forward looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which can materially impact the company's actual performance. At this time, I'll now turn the conference over to Juan Fonseca, FEMSA's Director of Investor Relations. Please go ahead, sir. Good morning, everyone. Welcome to FEMSA's Q2 2021 results conference call. Today, we are joined by Paco Camacho, FEMSA's Chief Corporate Officer Eugenio Garza, our Finance and Corporate Development Director and Jorge Collazo, who heads Cope FEMSA's Investor Relations effort. The plan for today is to have Paco comment on some higher level trends and more strategic considerations And then to have Eugenio walk us through the numbers for the quarter, and we will follow the remarks with Q and A as always. So with that, let me turn it over to Paco Camacho. Thank you, Juan. Good morning, everyone. Thank you for joining us today. We hope you and your families are safe and doing well. As you know, the health emergency is not over. Despite this, our operations posted solid results for the Q2 of 2021. While this partially reflects increased mobility and some economic recovery, it is also driven by the team's superior operational capabilities And a top notch ability to execute. Exactly 1 year ago, we were discussing the full impact of the COVID pandemic and the effect of the resulting lockdowns in our operations. Energy and resources were being quickly reallocated to prioritize The safety of our employees and customers to help our communities, to preserve our cash And to ensure the continuity of our business. Once these priorities were addressed, we look for opportunities and ways to come out Stronger on the other side of this crisis. Some of our operations, particularly OXXO and OXXO Gas, We're affected by the significant reductions in consumer mobility. Some orders, like Coca Cola FEMSA and other drugstore operations, We've been monitoring and managed to deliver a solid performance in 2020. Today, 6 months into 2021, All of them are achieving much better results than they were a year ago. And in some cases, we are already at levels that match or exceed 2019 results. Clearly, we are not out of the woods yet. Vaccination levels have been unproductive. Operating restrictions still exist in many markets, and consumers will generally increase or decrease their proportion to the level of concern. In fact, as you know, there is a bit of a rebound in cases right now in what seems to be a 3rd wave. So it continues to be a bumpy ride, but there is a clear recovery taking place in Mexico and in most of our markets. This recovery, combined with the learnings and efficiencies developed during the crisis by our teams, is helping us deliver an encouraging set of numbers today And setting the stage for compelling growth going forward. In our Proximity division, Less stringent restrictions have led to an increase in customer mobility. In turn, this has Translated into a steady recovery of OXXO's most relevant categories like beverages in single presentations. We have also been able to maintain the momentum that some other categories picked up during 2020, such as spirits and some traditional pantry items. Importantly, we are seeing our customers come right back to the store as soon as they regain some sort of normality in their routines. At our Health division, we continue to leverage our consolidated platform capability to increase our market share in key territories, Such as Mexico, Chile and Colombia. Even our fuel division got a shortfall in demand last year As consumers largely stop driving their vehicles, it's showing a recovery as demand gradually comes back even if the pace is slower than we would like. For its part, our logistics and distribution operations continue See better demand trends across markets, although some end user segments in the U. S. Such as hospitality, education And office access will get back to normal activity levels. Finally, Coca Cola FEMSA kept finding Ways to drive volumes, while its adoption of digital platforms continue to help develop the business in Brazil and Mexico. At the same time, product mix is recovering towards smaller, more profitable presentations, ultimately helping the bottom line. With that, I would now turn the call over to Eugenio, who will go over the results in more detail. Thank you, Paco. Given the operational challenges we faced in many of our operations last year, growth figures relative to 2020 do not tell the full story, And we will therefore complement them with some comparison data relative to 2019, where we consider this to be helpful. Starting with TEMSA's consolidated quarterly numbers, Total revenues during the Q2 increased 19.7%, while income from operations increased 87% compared to the Q2 of 2020. When we compare results versus the Q2 of 2019, total revenues increased 7%, while income from operations increased 17%. FEMSA's net income increased significantly and reached ARS 5,300,000,000 reflecting the generally on demanding comparison base from the effects of COVID in 2020. This was made even lower by the extraordinary payment of almost ARS 8,800,000,000 agreed with the Mexican Tax Authority, Certain asset impairments and a decrease in our participation in associates, which mainly reflected the results of our investment at Heineken. In terms of our consolidated net debt position, during the Q2, it reached Ps. 75,000,000,000 at the end of June. For its part, CapEx increased 18%, reflecting a comparison base that is not relevant in the Q2 of 2020 when most of our operations Moving on to discuss our operations and beginning with FEMSA Comercio's Proximity division. We opened 128 net new OXXO stores during the Q2 to reach 276 openings for the last 12 months. While we are not yet full while we are not yet up to full speed with our expansion pace, we are on track to achieve our full year target of 800 net new in Mexico and our existing pipeline supports an acceleration in the months to come. We have also put in place an even more rigorous approval process that will ensure the high quality of future store locations. OXXO's in store sales were up 15.6% for the 2nd quarter, Reflecting 7.4% growth in store traffic and an increase of 7.6% in average customer tickets, both against 2020. When compared to the Q2 of 2019, same store sales declined 2.5%. Gross margin increased 190 basis points to reach 41.6%, reflecting a recovery in commercial income from promotional programs with our key supplier partners. Income from operations and operating margin increased significantly to the same period of 2020, reflecting improved operating leverage and strict Relative to the Q2 of 2019, operating income decreased 1.4% While operating margin contracted 80 basis points. These are in the numbers in a still challenging operating environment. Moving on to FEMSA Comercio's Health Division. During the Q2, we expanded our drugstore count by 54 net additions To reach a total of 3,459 units across our territories at the end of June and 2 70 total net new stores for the last 12 months. Revenues increased 17.6%, while same store sales increased an average of 14.9%. We continue to see good momentum at our operations in Chile, Mexico and Colombia, coupled with slowly but steadily improving conditions in Ecuador. Gross margin contracted by 100 basis points in the quarter, reflecting increased promotional activity and higher institutional sales in our South American operations, partially offset by improved efficiency and more effective collaboration and execution with our supplier partners in Mexico. Operating margin expanded 250 basis points, reflecting increased operating leverage. Moving on to FEMSA Comercio's Fuel division, Revenues increased 56.3 percent and same station sales grew 53.7% relative to the Q2 of 2020. When compared to 2019 numbers, we are not yet there, reflecting mobility levels that remain low. During this quarter, gross margin was 13%, While operating margin was 3.6 percent of total revenues, reflecting tight expense control that partially offset operating deleverage. Now let me talk a little bit about our logistics and distribution business. In the U. S, we continue to see different speeds of reopening in different regions. And while some end user categories such as hospitality and entertainment have increased their activity, they are still lagging their historical performance. We expect trends to continue improving further in the second half of the year. On the logistics front, our operations showed good trends across its main Latin American markets of Brazil, Mexico and Colombia, even as economic recovery continues to be slower in those countries than in the U. S. Finally, moving on to Coca Cola FEMSA. Revenues increased 10.9%, driven by portfolio and execution initiatives, Along with recovering mobility and improving price mix trends, Mexico and Central America delivered double digit top line growth, While South America's strong volume performance was driven mainly by solid growth in Brazil, coupled with recovering trends in Colombia, Argentina and Uruguay. As a result, consolidated volumes already exceeded 2019 levels by 1.3%. You can listen to a webcast of their quarterly call that took place yesterday. And with that, let me turn it back to Paco for some final comments. Thank you, Henao. Before we open the call for questions, Let me give you a quick update on the rollout of our digital initiatives. First, let me begin with an update on our OXO Premier loyalty program rollout, Which after a test period in the state of Chihuahua is now being deployed more broadly. So far, the results have been quite positive, And this is even more relevant as OXXO Premier complements our SPIN by OXXO product. As you may recall, SPIN is testing and validating its value proposition To our subsidiary, Compuplavo, which is operating under the Articulos Tavo Transitorio of the Mexican Regulation. This means we're still waiting for the definitive regulatory approval to fully launch and market the SPIN BALANCE product. Wrapping up, a few comments. We are, of course, encouraged by these results. We feel that way mainly because they reflect the strength For value propositions and our team's operating abilities. The deltas are big, but as we have discussed, We still have a bit more work to do here and there when we compare this with the 2019 levels. So we need to keep our heads down and keep pushing hard, Executing our action plans and moving forward. We are confident about our strategy. We are certain we are on the right path, and importantly, we have over 300,000 resilient extraordinary team members That help us to move forward every day. Thank you for being here today and for your continued support. And with that, we can open the call for your questions. Operator? Thank you. The question and answer session will begin at this time. Your question will be taken in the order that it is received. And our first question comes from the line of Bob Ford with Bank of America. Hey, thank you and good morning everybody and congratulations on the results. It's great to see you making so much progress. Bako, with respect to spin, it appears to be accelerating Very nicely right now in San Luis Potosi. And I was curious if you could talk a little bit about what's behind that and any AB testing that you're doing? And what do you need to get your final regulatory approval So you can roll out nationally. And then you mentioned Tanya, and I was just curious from an app architecture perspective, How you plan to maybe integrate that with Spin or will you I'll leave it there. Just how you plan to integrate that Bob, thank you for your question. Well, on the regulatory front, we are just making sure that we proceed according to the requirements that we have to get all the Necessary approval. You know that this takes time and on our side, what we need to do To make sure that we comply with what we have been requested, and that's exactly what the team is doing. Then as for Premier, As you know, loyalty programs will allow us to the loyalty program will allow us to give Spin A significant boost in terms of consumer preference. And I guess that that's the best way to look at it. Eugenio, you want to add to that? Sure. From an architecture perspective, they're separated right now, but they will be put together as we roll out the Sprint product more broadly. And again, with the regulatory approval, what it does not allow us to do is to still engage in heavy marketing campaigns or full out marketing campaigns. So we're taking advantage of this time, and we've had success at least with regards to early use. But what it does allow us to do is do AB testing We have different features, with pricing elements and different demographics to make sure that we tinker around with the product features and the value prop As we prepare for the full rollout, so far so good and we are encouraged with the results we're seeing in the initial cities where we pulled out. And we also mentioned cities Go ahead. I'm sorry. I was just going to say you mentioned cities, so it sounds as if you're beyond San Luis Potosi now? Correct. At this point, we are beyond San Luis Potosi, still rolling out in a number of different cities, And we expect to be nationwide by the end of the year. Paremia right now has been launched in Chihuahua, Aguascalientes and Leon and SPIN has basically, I would say, 5 other cities besides San Luis where we started. And again, all With positive results and we also expect that as we roll out with more cities, the use case of the peer to peer product will clearly be more compelling As we start to broaden the reach. Great. Thank you very much. Thanks, Bob. Thank you. Our next question comes from the line of Alan Alanis with Santander. Thank you so much, Paco, Eugenio, Juan and Jorge. Hope you're well. My question has to do with capital deployment. And I mean, you have okay. You have $9,000,000,000 a little bit more than $9,000,000,000 of debt, But you have $5,400,000,000 of cash. So you basically I mean, you have a lot of ammunition still. So the question has to do with has anything changed or can you give us an update regarding what you're thinking in terms of capital deployment criteria, The size of the acquisitions that you could be thinking, are we still thinking mainly in terms of logistics in the United States? And if that is the case, What are the indications that you're seeing from the logistics business in the United States that it's worth continuing with the strategy of consolidating that business? That would be my question. Thank you so much. Sure. Thank you, Alan, for the question. I mean, as you know, our portfolio presents, I think, I mean, very attractive optionalities in terms of future capital deployment. You mentioned the logistics and distribution business, that Being one of them that, I mean, we do participate in a very fragmented industry and we continue to look at targets that are complementary and synergistic, Both small and large. So that presents, I think, a good avenue for future capital deployment As well as many of the other traditional businesses where we've been and as well as the other investments we've made in Mexico in cash Carrie, so overall, I would characterize our portfolio as being very convex in the sense that it provides a lot of downside protection, both In terms of us being a consumer oriented company and also with diversity of markets and exposure to currencies, But then also provides nice optionalities for upside in capital deployment. That's why we're keeping the liquidity on the balance For now, looking for those opportunities, but also at the same time, keeping in mind to have the right capital structure to ensure Adequate returns for shareholders, but we do see, I mean, ample opportunities for value creation in deploying more capital In the verticals that we're in already without, as Juan has mentioned before, increasing the complexity. We've reached the complexity in terms of industry already, and the idea is to deploy additional capital within the areas where we described, Not only within the FEMSA portfolio, but also at COF with its own balance sheet where The announcement of our new agreement with Coca Cola, I mean, allows for also, I think, great optionality for further investment in value creation opportunities. Got it. Actually, that last part that you mentioned was my follow-up, so you already answered it. So that was very, very clear of Henry and very useful. Thank you so much. Thanks, Alan. We'll go next to Luis Willard with GBM. Hi, guys. Good morning. Thanks for taking my question and congrats on the results. So As you know, this has been quite recent, some platforms are starting to tap into express deliveries that's less than, Let's say, 10, 15 minutes. I know it's still very early and probably still unprofitable for most of them, but I would Appreciate your thoughts regarding the evolution of the industry towards these types of services and maybe how do you see OXXO evolving Also within this context in the next years. Thank you. Sure. I mean, clearly, Express Delivery, as you know, during the pandemic, I mean, a lot of the e commerce platforms Across all channels grew their volumes exponentially, and last mile delivery continues to be Something that we look at very, very carefully. I think in terms of the proximity value proposition that from a drop size perspective, It's really hard to justify and compete against some of the players that are focused on that segment and at this point Still in kind of startup financial mode, burning cash, trying to adopt consumers to grow into the scale. But we are, I mean, competing there in a smaller scale with our MiOXO app, trying to Attacked in a certain way that category and learned a little bit more about that. I think the higher drop sizes are probably going to be in the So, neon categories or larger gatherings, that could be an option. Having said that, I think in the categories where it is making sense In our logistics division, we are seeing more and more traffic, both in our warehouse division as well as in our LTL divisions Of using e commerce platforms for not just CPG companies, but general, I mean, whether it be apparel companies, Healthcare companies, etcetera, where they are using our warehousing services and our less than truckload services to fulfill that e commerce. And there, we see A very clear opportunity more in the short term and it's actually partially responsible for the good results you've seen in our logistics Portfolio in Latin America. So we see more of an opportunity there than in the Proximity division's value prop. Having said that, We continue to dabble there, do also AB testing to see how that goes, but we see greater promise, I think, in the Logistics division than we do in offering the end to end last mile at a profitable business model except In the cases of the higher drop size occasions. And if I may add, Luis, I think that we need to keep in mind that this is a Rapidly changing environment and our business operations remain very close to understanding what consumers are looking for, How this whole thing is evolving and clearly because we have a broad platform, if we see any opportunity in the future, you can rest assured that we We will take it. I mean, just as Eugenio said, today in our Healthcare division, they do have Actually, some last mile delivery that is performing really well in Latin America. So you can imagine that moving forward, We see the opportunity, but we want to take it when it's convenient in terms of having a sustainable business. And We'll keep our eyes open, and we will move when the opportunity comes. Thank you. That was very helpful. We'll go next to Antonio Hernandez, Barclays? Hi, good morning. Thanks for taking my question. Congrats on your results. Your performance basically in also the lower the different formats. Are you seeing any deceleration on the gradual recovery That you've seen throughout the last couple of quarters, are you seeing any acceleration there because of the rising COVID-nineteen cases? And also, are you seeing in those formats, I mean, you mentioned in your press release that you're having promotional activities in some regions and some formats. Are you seeing some pressure there also because of maybe competition or inflationary environment? Thanks. Sure. I would start with I mean, if you go month by month, clearly, we've seen a month on month improvement overall in volumes. With the recent uptick in cases, to be honest, there hasn't been as much closure or restrictions in terms of mobility as Saw in the past waves of the pandemic. So we've been fortunate there. I mean, having said that, there are still certain restrictions In terms of alcohol sales, the hours of operation in certain of our stores. In June, for example, we had delay Zika because of the elections also for So a weekend there was lost. So it's still going to be a bumpy ride going forward. Having said that, We are not seeing a drastic change in measures taken by the government from what we've seen in the past. And from what at least we've been reading from the government's stance, We don't expect a full fledged lockdown like we saw last year. So those are encouraging signs. Again, We will see certainly, I mean, La Zekas and maybe other operating restrictions in terms of hours going forward. So it will be a bumpy road, but we're encouraged by 2 things. 1 Is that as the traffic comes back, the use case for Pantry and other items that were not as typical before the pandemic, that those trends will stick. And then also that we frankly took advantage of this pandemic to really be more efficient on the cost side and that those cost savings will And if I may, Antonio, what the other thing that I would add is that The pandemic on top of efficiencies has allowed the team to be significantly flexible To adapt to specific situations of operations. So that means that whenever there is a situation coming up, whenever there is a need on the consumer side, The teams have become even more flexible and adaptable to capture the opportunity and to react to whatever is happening out there. And clearly, these increased capabilities will stay around. And even if governments and people, as Eugenio said, Are less prone to likely heavy lockdowns moving forward. Nevertheless, the habits will continue Changing and shifting and the teams are, I would say, better equipped than ever to respond to these situations. I think you have to remember schools and universities for the most part are not open yet. It seems that they will this coming semester. So that hopefully will also and if there are any further restrictions in terms of hours and lockdown, we will at least bring back some customers that haven't come to our stores For that use case since March of last year. So that is also encouraging. Perfect. And then on the promotional activities and inflationary side and maybe Are you seeing any pressure there? Sure. Sorry, I forgot about that. We are seeing increased promotional activity on behalf of our supplier partners, And that has tinkered around with our gross margin. As usually, you will see the top line decrease, but then we make it up back in commercial income. So the gross margins Look, probably higher than you guys are used to, but it's more on the CPG side, really trying to promote Consumption in the different occasions. We are seeing some inflationary pressures, not to be honest, not so much at OXXO as we're seeing In order of our harder goods like in Indera and the Alto division, but for the most part, I think The inflation at the retail level has been, I think, a little bit more subdued than it has in the other hard goods. And so far, We've not seen any price elasticity impacts in our consumer and no impact on our margin so far. Our thought is that this inflation phase hopefully will be transitory and not permanent. And for now, we are not seeing An elasticity impact in terms of the consumer behavior. Perfect. Thanks a lot and have a nice day. Thank you. We'll go next to Alvaro Garcia with BTG. Hey, gentlemen. Good morning. Thanks for the call. My question is on the Health division, on your gross margin in the Health division. Thanks for clearing up sort of that gross margin strength at OXXO. But in the Health division, we did see a contraction and you mentioned sort of more institutional sales and more promotional activities. I was wondering how recurring that might be going forward? Thank you. Sure. That has to do frankly also with mix. In last year, this quarter, we will see we were seeing a lot of COVID prevention or COVID treatment options with higher margins. So that in and of itself is one of the reasons more institutional sales, especially In South America are hurting our mix as well. And the promotional activity has to do, I think, a lot more with the non drug products that we're selling. And that's a little bit more in terms of trying to adapt and driving continue to drive traffic to the stores, Especially in South America and in Chile where disposable incomes given the liquidity that has been pumped in the system through the pension fund Pension fund withdrawals that you've seen and where we've adjusted that to adjusted pricing to drive more traffic into the stores. So I wouldn't say that I would continue to see a longer trend in this. I think that's more temporary than anything else. But yes, a bunch of different factors affect That's gross margin, including also just the mix of now non COVID related products. On the positive side, just to add to that, you need to also keep in mind that this was compensated situation that we faced in The gross margin in South America was compensated by significant efficiencies from the Mexico side, working with our suppliers. So That one will, of course, keep moving forward. Yes. In Mexico, we're seeing, I mean, month to month, I mean, recoveries of 1 100 basis points or more at similar product categories in gross margin. So that in and of itself is encouraging for the Mexico business. That's great to hear. And that's a function of just greater buying power on your end given your greater scale? Correct. Greater pricing power and then also I think a shift in terms of our commercial strategy with regards to Working with suppliers to put out the right concentrating the purchasing power in less SKUs, the ones that move the greatest where we can get better margins. Well, the team has, as you can imagine, also worked strongly on getting efficiencies and having better operations. Our next question comes from the line of Ricardo Alves with Morgan Stanley. Good morning, everyone. Thanks for the call. I'll limit myself to one question as well. Any shifting a little bit On OXXO same store sales, if we could go back there. I mean, you alluded to some of these sectors. But when you think about your performance in OXXO Post COVID, and we discussed this in the previous call, what were your key findings with OXXO same store sales in the Q2? I mean, a lot of discussions Center around the fact that traffic will improve, right, as mobility increases. But then the question is how your average ticket will perform. So curious to hear what you had to say about that. Your performance, if maybe your average ticket performance Surprised you to the upside given how strong the top line was. I don't know if maybe you have further evidence That some of the items that you alluded to are going to be stickier going forward. Thanks for the call. I will start and let Eugenio add to it. But and thank you, Ricardo, for the question. But clearly, I mean, when you look at the ticket in OXXO, It is being aided by some of these what you're calling a sticky products that we added In the past year, I mean, just as we mentioned, Spirit being one that we continue to see helping in the ticket Price. But importantly, as we were mentioning, the team has been very quick adapting to Consumer's needs in the offering that we have in the stores, and that has made up also some of the more traditional pantry items, as we alluded In the call are also helping in the ticket price. So consumers are coming back to the stores, but at the same time, they find more solutions in the stores, And that is helping the ticket price. It is we expect that these are things that will stay moving forward because consumers have adjusted They're shopping to what they find in the stores. So there is no reason why it shouldn't stay there. Sure. I mean, I would say in terms of what's sticking, I think pantry items, I would say spirits and services. I think Those 3 are probably the ones that are trends that will continue in the future and the ones that I think Our amortizing, I think, also the fact that the consumers with personal that are buying like the personal soft drinks and Smaller snack items are coming back to the store and lowering the average ticket from what we saw in the heat of the pandemic. But those three items, I would say, are the categories that are keeping the ticket higher than it otherwise would have been, and hopefully, that will continue into the future. Much appreciated. Thanks for the color. Our next question comes from the line of Rodrigo Alcantara with UBS. Hi, guys. Good morning for taking my question. I will limit myself to 1 as well. So just about the integration of the U. S. Assets, was wondering if you can comment any update here and about this sequential improvement that we saw on margins on a quarter over quarter basis. I was wondering if you can comment on how much we can attribute this to operating leverage, cost control initiatives Or any synergies there? And what level of margin we may That's for the full year. That will be my question. Thanks. Sure. If you want, I'll start and then Paco, you I mean, there was during the pandemic, I think, the same as Genoptso, a very strong review of So a lot of efforts on the management part in terms of lowering both SG and A as well as being more efficient on house. That is, I think, a good chunk of it. And then volumes came back. I think we're obviously comparing to remember the Q2 last year, There was no beer transportation whatsoever, so that volume also contributes to operating leverage. And then more and more, I think we are getting Pick your contracts with better margins on both on the warehousing side as well as on the LTL side. So there's been, I think, significant pickup in Higher quality, higher margin products. So I mean those are encouraging news into the future and we do expect Again, the margins to continue to move to the upside, which again will be balanced with the logistics Sorry, the distribution business in the state that operates under different margin dynamics, but you should see some improvement there going forward. Yes. Thank you, Rodrigo, for the question. The only couple of things that I will add to what Eugenio just said is that Our Solistica business, it is consistent with what the other operations are doing. It's benefiting from the fact that They have become significantly more efficient in the way they operate, and that we should continue to see the benefits moving forward. And second, when it comes to the integration of the distribution businesses in the U. S, and we made reference to that in previous calls, The integration is also coming along with the synergies that we had expected, and that is also coming along according to plan. And that will help also as we continue to integrate those businesses in the months to come. That's very interesting. Thank you. Thank you both for the answer. Thanks, Rodrigo. Our next question comes from the line of Rodrigo Echagre with Scotiabank. Thank you. I wanted to revisit the SPIN launch. And I guess the question is, what should be the full capabilities at At launch, beyond loyalty, will there be any changes on Saldaso's Strategy, for example, as a result of this launch. And I'm also particularly interested in the last mile initiatives, which you briefly mentioned. But if you could add more color on what could we expect on the last mile, especially even You've had some learnings through FEMSA Ventures and the exposure to startups like Justo. So I'm just curious as to How can we put it all together? Thank you. Well, I'll start and let So, Jose, you'll add to it. But first, and thank you, Rodrigo, for the question. Look, it's been, as we said, We are in the process of using the test market as to really fine tune The value proposition. And so we are, at the moment, understanding what it is that consumers want, how they are using The service, what notifications and changes and improvements we need to make to it, and that's precisely the purpose Of the pilot test. And as we open up other cities and we'll Improve the experience and the services we provide based on these learnings. As for the last mile, As we said in one of the previous questions, we see that consumers are, of course, using that service as part of the Experience out of the pandemic. But as we said at this stage, we don't see a way in which we can actually have A sustainable business with the type of economics that those practices have today. We clearly see That this whole environment is changing a lot. Consumers are changing their habits. We see that an opportunity may arise using our whole platform as a way to provide better economics, And we will do that, as Eugenio said, when we see that the ticket size Makes it attractive, so that we can have a sustainable business. Now yes, indeed, we have learnings with either Some of the participation we have in Trufence Aventures and also Myoxo, as Eugenio said before, And we're taking those. And I'm sure that we will see a way to use those learnings in the future. But, Hen, do you want to add to that? Sure. Your last question with regards to Saldaso, by the way, Saldaso remains open as a product and we're letting basically consumers decide Whether it's Eldas or Spin makes sense for them. So they will coexist at the store. Just quickly on Spin, I think also you asked kind of what functionalities are being launched right now. The MVP includes basically, I mean, the ability to pay at Okta stores through the wallet, Peer to peer and cash in and cash out of those transfers at any OXXO store. And then it allows also for bill payments. And it is integrated to OXXO PREMIER, so you can earn points and then transfer them to your OXXO PREMIER account. So that's what the MVP includes. Clearly, The optionality there going forward, I mean, it's limitless. We can do, I mean, credit. We can do, I mean, a lot more stuff From the platform, but that's where we're starting right now. And just adding on into last mile, I mean, we're learning a lot in the investments we're making both in Justo, cheaper And other, call it, distribution heavy last mile companies that are attacking not only the end consumer, but also At the Mom and Pop stores, but as Paco said, I mean, the key thing is there will be certain use cases like in Justo That has a very high average ticket volume and also for certain of our categories like Reunion and other bigger ticket items that where it will make And there will be others where it won't make sense. So we'll make sure to have a robust product offering Through our digital channels to the consumer, but we will also be very wary of just burning cash Or being unprofitable just for the sake of having customers adopt and come into our platform. I think there's I mean, there's a lot of value to be added from the OXXO network and a lot of that we can offer both in terms of speed, delivery and product availability That the other platforms cannot offer, and we'll try to do the right things from an economic perspective. Got it. Makes sense. Sounds like the ticket obviously is a very important question. Thank you very much for the answer. Our next question comes from the line from Marcella Recchia of Credit Suisse. Hi, gentlemen. Thank you for taking my question. My question is more related to OXXO here in Brazil. We know that Raizen has been road So talking to the market about your expansion plans, but it would be great to hear from you an updated expectations on that. And ultimately, I have also seen a lot of more new stores here being opened as well. So it would be great if you can share your initial impressions about the market dynamics and how it compares to Mexico. And what are the main difference on that, that we will likely to get adopted? Thank you very much. Sure. We're very happy with the way the partnership is going with Raizen there. As you know, during the pandemic, the select stores, I mean, over 1,000 of them remained relatively solid throughout the pandemic. They adopted, of course, Value props and operations, but those remain relatively solid, and we're happy with that. And with the initial rollout of the proximity concept Through the OXXO stores, I mean, we've only got a handful of stores at this point, but which are very different from A mix perspective than the traditional Mexican OXXO stores. They have, I think, a lot more food service, a lot more bread, a lot of more Occasions that are not necessarily the consumption, it is more akin to compete with the local padreas, I think, Than with a traditional mom and pop store in Mexico. But so far, I think I mean, we're very happy with the performance. They're being Able to compete with, I think, a good product offering on the bread side, especially, and uncertain of the beverage categories as well. So we're encouraged, but again, still too early to tell. We've only been rolling out in the outskirts of Sao Paulo at At this moment, but they're going and maturing. The stores are maturing according to plan, and we're encouraged about the expansion plans there. Okay. Thank you very much, guys. Our next question comes from the line of Ulysses Argote with JPMorgan. Hi, guys. Good morning. Thanks for the space for questions here. So just a quick one on my side. I wanted to ask on the performance around OXXO in Mexico, maybe on a bit more segmented basis. So if you can provide Some color there on how trends are, let's say, in the city or big city locations versus the ones in the tourist centers that had been I'm lagging a bit behind. Any comments there on the details on evolution and performance will be available? Thanks. Sure. I think, I mean, regionally, it's certainly one cut of it. And as you said, I mean, the tourist locations Have been very tough during the heat of the pandemic over the last summer. They are coming back. Having said that, we are seeing significant traffic In the beach areas in the Southeast and in the Pacific Coast of Mexico, the city, it depends on which ones you look at. The ones that are Close to bus stops and traditional transportation hubs, they're doing well. Clearly, the office locations are still suffering, as well as the school locations. So I think it has more to do with specific locations, generally speaking. But again, we are encouraged By the trends that with the new product mix that they are doing relatively well. And what I would add, Luis, is that we see broad recovery this last quarter on a city basis for OXXO. And it is more within the city, the type of mobility and traffic that affect consumers' Way of doing and conducting their lives. If we have a store that is close to, for example, At school, you can imagine that, that is still affecting the city is doing well. When we see a store that is closer to An office area, and that office area is back into a more normal working hours, then of course, we also see an improvement. So this whole way of operating, which we manage the store and depending on what is happening around it, As you can imagine, it's helping us a lot in terms of performance because we have that ability and that type of capillarity. Perfect. Thank you very much for that, guys. Thanks, Avizas. Our last question comes from the line of Carlos Laboy with HSBC. Yes. Good morning, everyone. FEMSA once viewed the Heineken stake as strategic and Later, it became more tactical and you started selling it down. And now FEMSA has new leadership members, Heineken has a new CEO, Coe Heineken, Coke You all see cross category collaboration growth and partnership opportunities very differently than just 2 or 3 years ago. Does this change your view of the medium to long term merits of holding on to the Heineken stake? Is it Becoming more strategic and less tactical now. Thanks for the question, Carlos. I think I mean, as we said before, Heineken does I mean, number 1, it does provide A very, very stable downside protector in terms of revenue generation stability and developed market exposure To the portfolio, and on the other side, we are also, I mean, as you know, growing our partnership for a number of years now in Brazil, hopefully in other markets going forward. So It is, I think, both a strategic relationship as well as a good financial platform from our perspective. I mean, having said that, We evaluate the Heineken stake the same way we evaluate all of our businesses and are continually revising kind of what returns we expect From the current valuation levels vis a vis other opportunities as well as the cash on our balance sheet as we continue to look at Capital deployment opportunities and balance the funding requirements For those opportunities, looking not just at our current portfolio, but also our debt capacity and figure out what How the portfolio would look like pro form a, that's the way we did it, of course, when we entered the Janssen space in the space. That's the way we funded our investment in JetBlue Restaurant Depot. And going forward, we will continue to evaluate any and all funding opportunities as we look to deploy capital From many sources. Again, for now, we remain happy shareholders in Heineken, and we still think that it provides, I mean, A good backdrop and safety net to the portfolio as well as having strategic implications. But that Asset as well as any other asset is going to be looked at in the event that we look at a larger capital deployment opportunity going forward. The one thing to add, Carlos, and thanks for the question, is that as you said in the way you phrased your question, We do have a very good relationship with the management Of Heineken and we have very good relationship with the management of Coca Cola Companies. So those are things that are also there and are important. Thank you very much for your insights. Ladies and gentlemen, that is all the time we have for questions for today. I will now turn the conference back over to Francisco Camacho Well, I think that's all for today. Thank you very much for your participation. Thank you for your support, and have a great day. Thank you. And ladies and gentlemen, if you wish to replay the webcast for this call, you may do so at FEMSA's Investor Relations website. This concludes our conference