Good morning everyone and welcome to the Coca-Cola FEMSA's Third Quarter 2022 Conference Call. As a reminder, today's conference is being recorded, and all participants are on listen only mode. At the request of the company, we will open the conference up for questions and answer after the presentation. During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA'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 on 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 will now turn the conference over to Mr. John Santa Maria, Coca-Cola FEMSA's Chief Executive Officer. Please go ahead, Mr. Santa Maria.
Thank you very much. Good morning, everyone. Thank you for joining us today to discuss Coca-Cola FEMSA's third quarter 2020 results. With me on the call today are Constantino Spas, our Chief Financial Officer, and Jorge Collazo, Investor Relations Director. It is a very important moment for our company. We are operating with momentum. We accelerated our digitalization and cultural transformation, and we continue making substantial progress towards our key long-term strategic objectives. For the quarter, despite the uncertain and volatile environment affecting industries worldwide, our business delivered solid volume growth, coupled with double-digit growth in our revenues, operating income, and earnings per share. Our strong momentum is underscored by the consistently healthy volume performance across all our territories. While we continue to substantially mitigate margin pressures mainly driven by increased input costs.
Notably, our operating margin expanded by 70 basis points when adjusting for extraordinary one-time effects recognized during the previous year. Additionally, we continue leveraging the strength of our enhanced cooperation framework with The Coca-Cola Company, operating with improved alignment to increase investment in the market, explore new revenue streams, and significantly advance the rollout of our digital strategy. During the call today, I'll review the results of this quarter and then reflect on the highlights of the significant transformation that our business has experienced over the past five years. This transformation is enabling us to capture opportunities today, while ideally positioning Coca-Cola FEMSA to continue capturing the many opportunities that are in front of us for many years to come. Before our Q&A session, Constantino will walk you through our division's performance, closing with a few highlights of sustainable finances.
We continue making history on this front, becoming the first company in the consumer sector in the Americas and the first in the Coca-Cola system to successfully price social bonds, underscoring a profound commitment to our community. Let's begin with the review of our consolidated results. Our consolidated volumes for the quarter grew 8.4% year-on-year and 7% on a comparable basis. This growth was driven mainly by solid volume growth in Mexico, Brazil, Colombia, and Uruguay, coupled with double-digit volume growth in Argentina, Guatemala and most of our territories in Central America. Growth has been driven by all of our categories. Our core sparkling beverage category grew 7%, driven by 6.3% growth in brand Coca-Cola and 9.8% growth in flavors. Additionally, our still beverage and water categories grew 15% and 26% respectively.
Today, all our territories volumes are ahead of a pre-pandemic level, evidencing consistent growth across our franchise territory. Indeed, when compared to the third quarter of 2019, our consolidated comparable volumes is up a solid 12.1%. Driven by our affordability capabilities and relentless point of sale execution, we continue gaining share across markets and categories. We are executing to win away from home and at home consumption occasions, thanks to several market initiatives that enable us to provide our consumers with unmatched affordability. That has been the case throughout the year despite inflationary pressures. We continue leveraging initiatives to drive single-serve mix growth. We remain on track to reach our ambitious single-serve mix for the year, with more than 65% of our volume growth coming from single-serve presentations.
On the innovation front, we once again highlight the success of Coca-Cola Zero Sugar across all of our territories. This important growth driver increased 17.1% versus the previous year as we continue leveraging a consistent value proposition with sampling, innovation and customer experience. As a result of our top line initiatives, together with a resilient consumer environment, our consolidated total revenues increased 18.2% and 19.3% on a comparable basis. Our solid volumes, pricing initiatives, and revenue growth management capabilities drove this growth. Notably, we achieved a solid top-line performance despite the decline in beer revenue resulting from the transition of Heineken's beer portfolio ended in Brazil and an unfavorable currency translation effect in Mexican pesos, mainly from the devaluation of the Colombian and Argentine pesos. Importantly, this marked the last quarter that we will cycle the unfavorable beer transition effect in Brazil.
Moving on, our gross profit increased 16.4% and our gross margin contracted 70 basis points. Our pricing initiatives, revenue growth management, and favorable raw material hedging strategies continued to largely mitigate higher PET and sweetener costs. Our operating income increased 13.3% year-over-year, leading to an operating margin contraction of 60 basis points. However, by normalizing the one-time effects recognized in Brazil during the previous year, our operating income margin would have expanded by 70 basis points, reflecting our resiliency and our team's ability to double down on expense efficiencies. On a comparable basis, excluding M&A and currency translation effects, our operating income increased 13.1%. Finally, our operating cash flow for the quarter increased 14% year-over-year, resulting in operating cash flow margin of 18.6%.
As we have done on previous calls, let me provide you with an update on the build-up and rollout of our omnichannel multi-category digital commercial platform. In Mexico, we added another 70,000 monthly active purchasers, reaching approximately 360,000 stores. In other words, 52% of our total client base in Mexico is an active monthly buyer. In Brazil, we now have more than 195,000 monthly digital buyers, which is close to 65% of our total client base. In Colombia, we continue accelerating with close to 70%, while in Costa Rica and Panama, we reached approximately 25%. In summary, at consolidated level, we added more than 115,000 active monthly users to reach 760,000 customers.
Digital revenues as of September amounted to more than $110 million, meaning that approximately 11% of our total revenues are coming from digital sales. Consistent with our vision and alliance with our enhanced cooperation framework with The Coca-Cola Company, we continue exploring new revenue streams and strategic partners. We are encouraged that as this week, Coca-Cola FEMSA and Heineken began a pilot program in the Mexican city of [Irapuato] . This pilot aims to prove the distribution and selling capabilities of Coca-Cola FEMSA to strengthen Heineken's products presence in the traditional trade channel, enabling more customers and consumers to a broader portfolio, while always putting our customers and consumers satisfaction at the center of everything we do.
As part of this pilot program, Coca-Cola FEMSA will include products from Heineken's portfolio in the traditional channel portfolio in the region, targeting clients that are not currently serviced by Heineken's commercial team. We expect that these pilot programs will allow us to obtain the necessary learnings and insights to continue advancing towards a potential strategic alliance in the future. As this is the beginning of the pilot test, further details will be provided in due course. Now I'd like to switch gears and reflect on the significant business transformation that Coca-Cola FEMSA has experienced over the past five years. Since 2017, we focused on driving top line growth, and we fueled this growth by leveraging our industry-leading capabilities and value-accretive acquisitions in Brazil, Guatemala, and Uruguay. At the same time, we focused on increasing profitability and driving efficiency throughout our organization.
We deployed a set of initiatives, including our Fuel for Growth efficiency program, to strengthen Coca-Cola FEMSA in new ways of working and streamlining our cost base. This ultimately supports our strategic priorities, resulting in continuous return on invested capital over the past six years, a KPI that is now in the double digits. The results have been driven by a profound cultural transformation based on our DNA and obsessive focus on our clients and consumers, operational excellence, putting people first, having an owner's mentality, and being able to take agile decisions. Our achievements materialized during a social political context that became more challenging throughout the region. However, in order to successfully navigate this environment, we are focused on four pillars to strengthen our core business. First, portfolio and revenue management. For our territories, we have made substantial progress with our reduced and zero-calorie formulas.
As a result, this mix has increased an impressive 57.1% as compared to 2017. At the same time, our refillable bottles volume has increased 17.7% versus 2017, supported by the successful rollout of the Universal Bottle. Second, route to market and focus on improving execution in the point of sale. Resulting not only in increased cooler coverage and share gains, but also in Coca-Cola plants being considered consistently recognized for its execution capabilities. For example, our Guatemala team have been awarded for the last three consecutive years the Coca-Cola System Excellence Cup, and has been recognized as Latin America's best bottler in 2021 due to its historic execution score improvements and consistency. Third, people and culture have been the key to achieve our organization transformation.
We have significantly advanced on diversity and inclusion with an increase of 4% in the mix of women in the company, and an increase of 6% in the mix of women in leadership positions as compared to 2018, with such level reaching 26%. While we are not where we want to be, we are taking decisive steps in the right direction. Additionally, our organization ranks above the industry benchmark for employee engagement with outstanding commitment from our teams to the organization and to our objectives. Fourth, relentless focus on business efficiencies such as supply chain reinvention have contributed to our solid results. Over the past three years, we have generated close to $230 million in savings, which is more than 50% ahead of our original target for the period.
These four pillars have been fundamental to Coca-Cola FEMSA's positive momentum to it, as we continue to strive to accelerate the transformation to achieve our vision of becoming the world's preferred and most sustainable commercial ecosystem. In order to achieve this vision, we set a clear transformational path that follow these steps. First, we transformed into a digitalized bottler, adopting technology and digital capabilities across our value chain. Second, we are now becoming an omni-channel and multi-category player with a clear ambition of becoming a full commercial ecosystem into the future. I am confident that we are implementing the right initiatives to achieve our short-term objectives as we approach the end of the year. We have clear objectives and the capabilities to achieve our long-term ambitions. With that, I will hand over to Constantino to expand on the divisional results.
Thank you, John, and good morning, everyone. In Mexico, our volumes increased a solid 8.7%, while our total revenues increased 17.5%, driven by strong volumes in all of our channels, particularly in the modern trade, coupled with the pricing initiatives, revenue growth management, and a favorable price mix. In Central America, our operations continued to deliver strong results with double-digit volume growth and a 17.6% revenue growth. Remarkably, our volumes in Guatemala continued to show significant volume growth even when considering a high comparable baseline. As a result, our quarterly revenues increased a solid 17.5% in Mexico and Central American division.
On the profitability front, our gross profit increased 11.6%, which resulted in a gross profit margin of 46.9%, representing a margin decrease of 250 basis points as compared to the third quarter of 2021. This contraction was driven mainly by increases in commodity prices, which were partially mitigated by our revenue management and raw material hedging strategy. As in previous quarters, we were able to partially mitigate gross margin pressure by implementing savings and efficiencies in our SG&A, which enabled us to increase our operating income by 18.6% and to expand our operating margin by 20 basis points in the Mexico and Central American region. While we continue to see macroeconomic volatility as we approach year-end, we expect to carry on protecting profitability through our revenue growth management and focus on driving expense efficiency.
Our operating cash flow margin for the quarter was 21.2%, which represents an expansion of 10 basis points in the Mexico and Central America division. Now moving on to South America. This division delivered 7.1% volume growth as compared to the same period of 2021. This increase was driven mainly by a 12.1% volume growth in Argentina, a 7.2% increase in Brazil, which includes the consolidation of CVI and a volume growth in Colombia and Uruguay. Despite facing tough weather conditions in Brazil, we were able to deliver enough [audio distortion]
Okay. Nothing. We lost Constantino.
Yes, let's reconnect him. Operator?
Yes. Just bear with me a moment.
Yes. Thank you all for waiting while we reconnect Constantino.
Pricing and volume growth were partially offset by unfavorable currency translation effects and the transition of our beer portfolio in Brazil.
Constantino.
Yes.
You were off air for about 2-3 minutes.
Yes. I'm sorry. I am I?
Maybe, Constantino, if you can go back to South America division, I think we can take it from there.
Sure.
I think it was there where.
Sorry for the technical glitch. I'm back on. If we move on to South America, the division delivered 7.1% volume growth as compared to the same period of 2021. This increase was driven mainly by a 12.1% volume growth in Argentina, a 7.2% increase in Brazil, which includes the consolidation of CVI, and volume growth in Colombia and Uruguay. Despite facing tough weather conditions in Brazil, we were able to deliver another quarter of volume growth driven by resilient consumer demand. On a comparable basis, excluding volumes of CVI in Brazil, volume in the division would have increased 4.4%.
Our revenues for the division grew 19.1% as our revenue management initiatives, pricing, and volume growth were partially offset by unfavorable currency translation effects and the transition of our beer portfolio in Brazil. If we exclude currency translation and M&A effects, our top line would have increased a solid 21.9% during the quarter. On the profitability front, our gross profit in South America increased 25.2%, expanding our margins by 200 basis points. This increase was driven mainly by the operating leverage resulting from volume growth, favorable price mix effects, and raw material hedging strategies. These effects were partially offset by increases in raw material costs.
Our operating income for the division increased 2.9%, while our operating income margin contracted 150 basis points as compared to the third quarter of 2021, driven mainly by a tough comparable baseline related to non-recurring tax effects in Brazil for MXN 620 million recorded at the operating income level during the third quarter of 2021. These effects were partially offset by higher gross profit and an increase in operating leverage resulting from volume growth and expense efficiencies. Our operating cash flow in South America increased by 6.1%, resulting in an operating cash flow margin contraction of 190 basis points. If we normalize by the one-time effects I previously mentioned, our operating cash flow margin for the division increased 130 basis points year-on-year.
Now let me expand on the successful issuance of our social and sustainability bonds in the Mexican market. Consistent with our financial discipline, strong credit profile, and commitment to sustainability, we priced social and sustainability bonds for a total amount of MXN 6 billion. This issuance represents the first social bonds in the consumer sector in the Americas and the first social bonds of the Coca-Cola system. Furthermore, we became the first company in the consumer sector in Mexico to price sustainability bonds. This transaction was completed in two tranches. The first tranche was priced at a fixed rate of 9.95%, MBONO + 0.30% for an amount of MXN 5.5 billion due in seven years. The net proceeds of these bonds of this bond will be used to finance eligible social projects.
The second tranche was priced at a variable rate of TIIE + 0.05% for an amount of MXN 500 million due in four years. The net proceeds of this bond will be used to finance eligible sustainability projects. For additional details on our use of the proceeds and commitments related to this transaction, you can find a copy of our sustainability bonds framework on our website and a copy of the second party opinion provided by S&P, who confirmed that our ambitious targets are aligned with sustainable bond principles. Finally, I want to underscore our focus on maintaining a disciplined financial position in our commitment with shareholder return.
Our strong balance sheet and solid cash flow generation allows us to, as of September 30, 2022, have a net debt to EBITDA ratio closing at 0.8x with a cash position of more than MXN 39 billion.
Even before the proceeds from the social and sustainability bonds I previously mentioned. Additionally, on November 3rd, we will pay the second installment of the ordinary dividend declared last March to complete a total cash distribution to shareholders that exceeds MXN 11 billion during 2022. With that, I will turn the call back to John for his final remarks. Thank you.
Great. In light of our recent management succession announcements, I want to say that I am extremely privileged for the opportunity to serve and lead the Coca-Cola FEMSA as CEO for the past nine years and building world-class bottling company for over the last 27 years of my career. I wanna give a special recognition and thanks all our Coca-Cola FEMSA employees. We have confronted many challenges together, but more importantly, we have achieved great milestones, and for all that, we should all be very proud. Additionally, I am tremendously grateful for the work that I have been able to share with the colleagues of the Coca-Cola Company and at FEMSA throughout this entire journey. It has been a privilege working hand in hand with such amazing professionals.
Finally, I'm also thankful for the continued support, feedback, and interactions I've had with you, the investment community, over all these years. As I previously mentioned, I am convinced that our company is better positioned than ever to capture the many opportunities that are in front of us. I'm very pleased that Ian Craig, our current CEO of Coca-Cola FEMSA Brazil, has been appointed by our board of directors as my successor to carry on as Chief Executive Officer as of January 1st, 2023. Ian is a proven leader with 28-year career within FEMSA and Coca-Cola FEMSA and an outstanding track record that includes senior corporate positions as well as successful business turnarounds in Argentina and Brazil. Ian is a natural successor to lead the company. He brings positive continuity to leverage up the strategy and accelerate towards the goals we have set as the organization.
I am confident in the bright future that lies ahead for Coca-Cola FEMSA under his leadership. Finally, I want to thank and congratulate Constantino Spas, our CFO, who has been fundamental to our company's transformation journey and who has been invited by FEMSA to become Chief Executive Officer of FEMSA Strategic Businesses as of the next year, succeeding Alfonso Garza, who is retiring after a highly successful 37-year career at FEMSA. I wish both Ian and Constantino great success in their new appointments. Constantino?
Thank you, John. After five years at Coca-Cola FEMSA and four years as Chief Financial Officer, I will continue my career at FEMSA as Chief Executive Officer of FEMSA Strategic Businesses. Working at Coca-Cola FEMSA has been a privilege, nothing less. I have worked with an extremely talented team and witnessed the company's profound transformation throughout these years, and I'm confident that we have set the right objectives, and we have positioned the company together for remarkable success. I also wanna thank you, John, publicly for your leadership and dedication to this company over the years. You have been a true leader in shaping Coca-Cola FEMSA into the amazing company that it is today. I'm beyond grateful to John, my team, and all my other fellow members of Coca-Cola FEMSA, all the employees of this great company, for their contributions as we have worked together to transform this company.
Thank you all for your continued trust and support and for joining us today for the call. With that, operator, we would like to open the call for questions. Thank you.
Thank you, Mr. Constantino. Ladies and gentlemen, as a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll pause just for a moment to allow everyone an opportunity to signal for question. We'll now go with our first question from Alan Alanis from Santander. Please go ahead. Your line is open.
Thank you so much, operator. Good morning, everyone. Well, first of all, congratulations to both of you. Congratulations, John. I mean, you will be dearly missed. Congratulations, Constantino. Very well earned move. Let me take advantage that this is, well, I guess the last time we're gonna be talking in a quarterly call to make more of a strategic question rather than the quarter. If you could describe what do you see? I mean, you've seen a lot in the Coca-Cola FEMSA operations, the Coke system. What do you think will be the biggest changes that Coke is facing in the next three and five years?
What would be your advice for Ian on the operating front and as well in the relationship with the Coca-Cola Company, which by the way, also reported pretty impressive results this morning? Let's leave it at that.
Alan, can you just, you know, clarify your question one more time?
Sure, sure. I mean, what... The question is, I mean, what do you think are the biggest challenges that Ian and Coca-Cola FEMSA is facing in the next three years and five years? How do you see the evolution in the relationship with the Coca-Cola Company in recent years and going forward? I think that the relationship with the Coca-Cola Company is extremely important for both the stock price and, obviously, the driver of the stock price, which is the profit split within the system.
Sure. I think the challenges we have are addressed by all the strategies that we put in place. The first one is to continue to digitalize our company profoundly and across all our territories. We are very clear with how we're gonna do that and roll it out. As I said on the call, there's probably about 750,000 average monthly users on our digital base. You can probably use that, you know, that scale and think through that next year we're probably doubling that, okay? I think our digital strategies continue to be deep, profound, and accelerating. I think along with that comes a willingness to start working with different partners.
Partners that'll give us that relevance at the point of sale, and obviously, in conjunction with, you know, the Coca-Cola Company. That's gonna be a challenge because obviously when you work with so many partners, you know, you're gonna have operating issues, it's important to basically iron out. When we have done this in the pilots, everywhere we've gone, we've seen tremendous volume uplifts for all our partners. I think we're in the right place with the right strategy. Third, I think just, you know, continuing to leverage up on innovation inside the Coca-Cola Company. We've seen that happening more towards the alcoholic ready-to-drink sector with everything that they're coming out with from Topo Chico Hard Seltzers to Jack and Coke to the Schweppes mixed drinks.
I think we have a very big, large area of opportunity that we have to learn from and continue to move forward. I think more than anything else, it's just about going out and making sure that we are reinvesting correctly in the business to be able to capture all these opportunities. I think, Alan, one thing that you have seen in Coca-Cola FEMSA is that under this new long-term relationship model that we have with Coke, our capital investments have nearly doubled over the last two years, and probably gonna be around that level for the next for the foreseeable next two years because demand is growing so strongly. I think going forward, you know, we have the right strategies in place, we have the right digitalization strategies, we have the right partner relationship.
I think it's just gonna be a very strong operating focus from here on out for Ian to continue to do this.
That's very clear and it makes a lot of sense to me. Thank you so much, John. Congratulations for a very successful career. Constantino, best of luck over there. You're leaving a very strong company with a very strong balance sheet. I mean, congratulations. Best of luck.
Thank you, Alan.
Thank you.
Thank you very much.
Thank you. We'll now take our next question from Marcella Recchia from Credit Suisse. Please go ahead. Your line is open.
Hi, John, Constantino. First of all, congratulations as well to both of you for all achievements at KOF, and wish you all the best going forward. I have two questions, very quickly. The first one is in Mexico. Basically, you were able to more than offset a [250] basis points gross margin compression because of higher input costs. Can you just give us a little bit more color, what were the drivers that led such amount of savings in OpEx, and how sustainable they are going forward? This is my first question. Secondly, if you can elaborate a little bit more about the partnership with Heineken in Mexico. I understand you are the first bottler to distribute beer in Mexico.
How are you planning to deal with the license requirements to sell alcoholic beverages in the traditional channel, for example? If you have any views on how incremental this partnership can become in terms of volumes and synergies. Thank you so much.
Thank you, Marcella. On the margins in Mexico, definitely. Gross margins were, first of all, very pressured, mainly by the higher PET and sweetener costs. Fortunately, our hedging initiatives and price mix continue to mitigate this effect. One key element for, you know, cost containment and margin protection is revenue growth management, which is a disciplined, very disciplined practice within Coca-Cola FEMSA that will continue to be there in our hedging initiatives that follow a process. We have been quite assertive with these hedging strategies up to now. I believe that if we continue following the process, that will continue to provide for positive impact in our margin protection.
On the SG&A side, our team in Mexico has been able to double down in efficiencies in an outstanding way, mainly generating efficiencies from marketing expense by doing better execution and much more optimal and optimization of the marketing expense initiatives. Labor cost savings such as professional services, travel expenses, et cetera. Within that, achieving this whilst facing increases in freight and maintenance costs. On the SG&A side, a lot of work too, despite important increases in freight and maintenance. Our very important element is our supply chain reinvention. This has also helped to significantly reduce our cost to make and our cost to serve. On a consolidated level, we have saved approximately MXN 935 million year to date. This has been also key to protect the profitability of the business.
Having said all that, we're confident the team's ability to continue to double down on these efficiencies and continue to protect their margins for the remainder of the year, 2022 and well into 2023, considering that we will face enormous volatility and pressure in 2023. I hope that provides a little bit of color on the margins. Then on the pilot program with Heineken, first of all, and then I'll have John provide more color and his view on this. This pilot program will definitely allow Coca-Cola FEMSA to prove its distribution and selling capacity for Heineken products in the beer category in Mexico.
We've done that in Brazil for many years, and we're aiming to strengthen such products presence in the traditional trade channel, allowing more customers and more consumers to have access to a broader portfolio, as always, putting our customer and consumer satisfaction at the center of everything that we do. We expect that these pilot programs will allow us to obtain the necessary learnings and insights to continue advancing towards a potential strategic alliance in the future. As of now, we're beginning these pilot tests, and evidently further details will be provided in the future. This pilot, just to give you more precise information, will start in the state of Guanajuato. We will assess more potential territories according to the learnings and the market needs that we identified with this initial pilot.
The focus as of now in this initial stage is that Coca-Cola FEMSA will cover a customer base that is not currently covered by the Heineken route to market, allowing for an expansion of coverage and increased execution in these particular regions. John, I don't know if you want to add something to Marcella's question?
No, I think, Marcella, this is on the Heineken piece more than the Mexico piece. I think, you know, as we go forward, you know, we're gonna see where it makes sense for both companies, where we can add value for Heineken. I don't think you can take this solution as being something that is immediately translatable to all countries within Coca-Cola FEMSA. What makes sense and where it makes sense for us and where it makes sense and has value for Heineken, I think we are having the right dialogues to be able to go out there and learn together as to how we can go out there and maybe down the path, find something that is more longer term and more sustainable.
These are very encouraging first steps, okay, especially in territories that are difficult in the Mexican market, you know, for Heineken. We'll see if, you know, we have the capabilities to go out there and add value to them.
Okay, gentlemen. Thank you so much. Very clear.
Thank you, Marcella.
Thank you.
We'll now take our next question from Felipe Ucros from Scotiabank. Please go ahead. Your line is open.
Congratulations on the recent announcements on retirement for John and future endeavors for Constantino. Thanks for the space for questions. Just a couple on my end. The first one, you know, with recent reports of marginal down trading in some of the most discretionary categories in the sector, I wanted to ask you about the role of returnables and affordability in the current and upcoming environment. Maybe if you can give us some color on how returnables and other affordability options behaved in prior recessions, and whether the consumer augmented its focus on returnables and whether you were able to keep the consumer within your price ladder, or whether the consumer traded out of the Coke portfolio into maybe private label, water alternatives.
Just looking to see what kind of reaction you expect from consumers in the upcoming slowdown.
You wanna grab that one, Constantino?
Oh, you go ahead, John. You're the expert, and you've seen everything in the last 30 years regarding returnables. I can add more color.
All right, Felipe. I think one of the things as we have. I think we're better positioned today than we've ever been positioned in the history of Coca-Cola FEMSA. We have a broad set of returnables throughout all of our organizations, all our countries. Frankly, you know, we continue on to build it out both on the multi-serve and the single serve side. There's a lot more work to be done, but we're very pleased with where we are. In an environment that has very high economic volatility or very high pressure for our consumers, you know, we basically trade them in and out of different type of value packages. You know, some are returnable, some are non-returnable, you know, one-way packages.
What we're basically doing is pulling together an array of pricing and packaging architecture that allows to capture the consumer at any price point that he has within his pocket.
Change it in his pocket and stay within the daily rituals of the Coca-Cola of drinking Coca-Cola or carbonated soft drinks. I think that's worked for us in the past. When we're confronted with the volatility in exchange rate, and all of a sudden you have the pressures for increased pricing, for because the foreign exchange or PET commodity is the costs, you know, at least we have a lag effect that lasts for some time that allow us to maintain and give them a larger value as compared to the pricing that they need to take to maintain themselves in the franchise and bring us back into, you know, the drinker base that we are looking for.
I think the value of returnables is not only from a, you know, there's a sustainability angle to it, but it really is also a volatility hedge for the Coca-Cola system in all Latin America.
Very clear. Thank you.
Can you hear me?
Yes, yes, of course. Very clear. If I can do a follow-up, my second question. Congrats on the Juntos+ rollout. I just wanted to ask a little bit about this new effort and how you envision to beef up the product offering, whether pilots are being included in this platform and how this fits with the WhatsApp effort that you had been rolling out so successfully across Latin America.
I'm sorry. I had a hard time hearing you. Did you hear that, Constantino?
Sure. It's a question regarding our omni-channel platform, John, and Juntos+ and its connection with multi-category offering for the customer.
I can take it, Felipe, and then have John complement. As you have seen, we're basically expanding every month our digital coverage of our omni-channel platform. I think there's a couple of principles that are very important in the way we have envisioned the omni-channel platform and at the same time, how it plays along with multi-category offering for the customer. First of all, it is truly a multi-channel focus. What we are doing is using digitalization as a way to enhance and expand the touch points with our customers. The way that the customer interacts with Coca-Cola FEMSA through digitalization is not a productivity tool to reduce cost, but an enhancement tool to increase our service level and the possibility of interaction with us.
As of today, we continue to center our efforts of engagement with our customers with our pre-seller, physical presence. At the same time, we're adding WhatsApp. We have added WhatsApp capabilities and interaction through WhatsApp, and we're rolling out a digital app in the case of Juntos+, in most of our markets in a very programmed manner, in a sequential manner. In the case of Mexico, we also have a pilot called [Magenta] that is testing very different value propositions to a certain sector of customers, right? We're expanding our product offering. Secondly, this allows for the window, the service window, for our customers to increase significantly.
In the case of Mexico, for example, in [Magenta], we are being able to accept orders by 11:59 P.M. with... in one day and deliver them the next day. In different countries, we're trying different configuration and service windows. This allows for our customers to be less time-constrained, browse our product offering and make sure that they can go deep and broad in our portfolio. This then connects with the multi-category product offering that we have since now the customer is less time-constrained and the pre-seller is less time-constrained, allowing for a broader portfolio without hindering execution and efficiency on the physical routes. This evidently will let us increase as we expand our relationship with different partners, like the one that we just mentioned with Heineken in Mexico.
This will allow us to continue to enhance our multi-category offering in a way that we have defined, which is customer-focused and value accretive for everyone in the value chain.
For our customer, for their consumers, for Coca-Cola FEMSA, and for the partners that can benefit from the usage of such a powerful route to market and commercial platform like Coca-Cola FEMSA. At you know, the very high level construct of the thinking behind digitalization and our omni-channel capabilities, very much focused on increasing the impact and the effectiveness of our platform and not as a means of pure efficiency and cost reduction and productivity. Evidently, productivity's come along. The focus is on the effectiveness side and on increasing our Net Promoter Score with our customers and creating value, you know, for everyone in the value chain, and evidently for our shareholders too. I don't know, John, if you want to complement on that. Felipe, I don't know if that answers your question.
Yeah. I would just say that everywhere we put together the correct partnership on the platform, we're seeing incremental Coca-Cola portfolio volumes as well as incremental coverages and sales of partner volumes. It's turned out to be very synergistic. We are very clear as to what the next steps need to be to be able to continue advancing towards our goal of putting 2 million customers on our platform in short order in every country that we operate in. You know, this is one of our core foundations and core strategies, and then through that, offer the relevant services for the traditional trade as we start building this omni-channel platform.
That's very clear. Thanks to both of you. Again, congratulations for all the achievements.
Thank you.
Thank you, Felipe.
Thank you. We'll now take our next question from Thiago Bortoluci from Goldman Sachs. Please go ahead. Your line is open.
Yes. Hi, good morning, everyone. Congrats on the results, guys, and thanks for the presentation, for taking questions. I'll also like to take the opportunity, John, to say congrats on your mandate ahead of cost and good luck to Ian and Constantino on the new roles. Well done, guys. I have a quick follow-up on the operating front. Constantino, in your remarks, you mentioned PET and sweeteners were the lines in which costs came under more pressure on the quarter, especially in Mexico, right? Could you please give us a sense on how the raw material prices are evolving for 2023 and the details around the hedges you have closed for the forward so far, please?
Yeah, let me provide some color on the hedges, and I'll have also Jorge answer some of the questions, right? In terms of raw materials and hedges, just to give you a sense of how significant the hedges have been to avoid the costs, we have saved approximately MXN 1.2 billion year to date because of the raw material hedging initiatives of this year. As expected, we saw increases in raw material prices, as you mentioned, particularly PET and sugar across most of our markets. However, our hedging strategies have definitely helped us mitigate the impact of most of the commodities we use. Let me give you a couple of examples for this.
Corn prices have increased double digits, but we were able to mitigate the impact and hedge our needs of fructose at prices that are around 20% below the spot price. To give you a sense of that, we hedged 90% for Mexico in fructose in 2022 and in 2023. We have hedged 60% of all of our needs for 2022 and 30% for 2023. The most affected commodity, as we mentioned, has been PET, and we now have covered more than 70% of our needs for 2022 and already 30% for 2023 based on our commodity risk management process. In Brazil, sugar prices have also increased importantly, but our hedging strategies once again have allowed us to partially mitigate that impact.
For 2022, we have hedged more than 90% of our needs at prices that are around 20% below market value, and we have hedged 30% of our needs for 2023. All in all, although it is certainly a very dynamic environment with a lot of pressure, we're confident that with our pricing initiatives, where we increase in line or ahead of inflation depending on the market, fundamentally sustained by revenue growth management, combined with hedging initiatives like the ones that I have described, we will be able to substantially mitigate the pressures and protect the profitability of Coca-Cola FEMSA. Jorge, I don't know if you want to add something additional to these remarks.
I think that's the most important part, Constantino. I would just probably say that, you know, combined with this, going forward, you know, the teams, the operators have a very robust plan, you know, that we are executing for the remainder of the year, but also positions us very well, going forward in terms of, you know, leveraging our top-line initiatives, the hedging strategies that you just described, and other capabilities that should allow us to mitigate margin pressures as we move into 2023 and some of these hedging strategies have a natural rollover effect.
That's clear, guys. Thank you very much.
Thank you, Thiago. We'll now take our next question from Sergio Matsumoto from Citigroup. Please go ahead. Your line is open.
Yes, good morning. It's Sergio Matsumoto from Citigroup. John, all the best for in the next chapter, and Constantino, we look forward to working with you on the FEMSA side. My question is on-
Thank you.
Thank you. My question is on the goal that you mentioned, John, for 2022. I believe it's in Mexico, where 65% of volume growth would come from single serves. Can you give us more context on this, on how much attribution you give to the increase in mobility, and how does the consumption environment for single serves compare now to pre-pandemic times? What are the optimal sales mix for single serves in the long term, not just 2022, but you know, more on a few years out? Thank you.
Well, a lot of this, Sergio, thank you for your comments, and I appreciate them very much. You know, one of the things that we're doing through our alcohol portfolio at FEMSA is focusing on single serve multi-packing in modern channels. When you walk in there, you're gonna start looking at modern channels having an extremely large assortment of single serve multi-packs, not only of single brands, but also of combined brands, where you have a combined pack with Cokes and maybe Fanta or Cokes and Sprites, et cetera. It has to do with going out there and giving the consumer what they want. What we have found is that this is some, you know...
The behavior of drinking, you know, single serve is something that we had not exploited as much as we could. During COVID, we found that the consumption occasionally went back home. We put together these types of packages, and at the end, it's we're seeing the things growing at a remarkable rate. Single serve is 5% versus 2020 in Mexico and in Brazil, and it's up, you know, in terms of percentage points. How much further can we go? You know, I wouldn't venture a number there. You will see that we're continuing to push this not only in modern channels, but also look for the right and adequate packaging or multi-packs for traditional trades.
Great. Thank you.
Thank you.
All right. Thank you. We'll now take our next question from Rodrigo Alcantara from UBS. Please go ahead. Your line is open.
Hi. Thank you very much for taking my question. Two quick ones, if I may. On the beer sales in Brazil, appears that the sequential recovery was a bit faster than previous quarters. Just curious if you would highlight anything here, or was it just seasonality or inflation driven? Any comment regarding the updates on the multi category there in Brazil would be very helpful. The second question would be, as we approach year-end, if you have any preliminary thoughts on the dividend for next year. Those would be my two questions. Thank you.
Jorge, you wanna take the beer Brazil one?
Yes. Thank you. Yes, Constantino. Absolutely. I will take the beer part first. Thanks for the question, Rodrigo. Just to point out one thing, actually, this third quarter is the first quarter that basically marked the unfavorable comparison base reflecting the transition, you know, that basically happened last September. A little bit is related to that, you know, that we are not fully comparing with the quarter with the full Heineken portfolio from the previous year, finally, you know? That's some good news in the sense of the comparison base, you know, that this quarter marked the first or the last quarter that we cycled that transition, no?
For this reason, beer revenues declined around 45% this quarter as compared to the rate of approximately 60% that we had in the previous quarter, no? Secondly, I'm taking advantage of the question and to provide you some additional color on beer. You know, we are doing several initiatives there around beer, no? First, for example, with Therezópolis, we're rolling out a new marketing campaign with brand Therezópolis. It's called in Portuguese, but it's [Foreign language] , which it's a great campaign that we're rolling out. Most importantly, as we mentioned during the previous call, we're building this portfolio for the long term, you know, in terms of beer. Building great brands is something that doesn't happen overnight, so we continue to focus on coverage expansion.
For example, with Eisenbahn accelerating its momentum and its coverage, continue to build Tiger and the focus on execution and brand building that we're doing together with Heineken there. All in all, Rodrigo, we're very optimistic about the portfolio in the future, you know. Next quarter, of course, will mark a like-for-like comparison there for the portfolio as compared to after the transition. It's behaving, you know, as we said, mostly as an S-curve on the development part of the beer portfolio, and that's what we're focusing on.
Rodrigo, on the dividend side, we have been delivering a very solid dividend. Just as a reminder, our current dividend represents an increase of 7.7% versus 2021 to an amount of MXN 11.4 billion, which is important. It is an increase of 53.4% versus 2019, which underscores our commitment and our view of total shareholder return. As of now, we continue to have our capital allocation priorities quite clear. First of all, to continue to deliver a sustainable ordinary dividend that's attractive to our shareholders, reinvest in the business. John was mentioning the significant investment in CapEx in the last couple of years that we have put behind the business focused on growth.
Last, but not less important, to continue to look for value accretive growth opportunities. That is our focus right now. We will pay our next installment of the dividend in November 3rd, and once more underscore the significant increase versus 2019, and evidently versus 2021 of our current dividend policy. I hope that helps.
Oh, that's great. Thanks for the comment, Constantino. Jorge, just to complement there, if you can give, I know it's still small, but any qualitative arguments there on how is it going on with the rest of the multicategory? I don't know, Mentos, Campari, with the rest of the categories would be helpful as well. Thank you.
Jorge, you take that one too?
Sure, absolutely. Yeah, I would say, Rodrigo, what we're seeing is, you know, great results because if you think about, for example, a year ago, you know, October, when we were beginning with the pilots, for example, of Diageo, P&G in Mexico. We were beginning in basically one city in each case. You know, in the case of Puebla, for Diageo and Veracruz for P&G. Over the course of this year, we have been able to expand the critical mass of those pilots, you know, and we're gathering learnings and a lot of insights from that development. Similarly, we have been doing that in Brazil with Perfetti, with Campari, you know, gathering learnings. Things are going in the right direction.
You know, I would say that overall we're very, very enthusiastic about the trajectory that we're getting with pilots and also with the early days of the distribution agreements that we have with Perfetti and Campari.
Okay, that's great. Thank you very much, Jorge and Constantino.
Thank you. We'll now take our next question from Luis Willard from GBM. Please go ahead. Your line is open.
Hi, guys. Good morning. Thanks for taking my question. I join the rest of my colleagues in wishing you the best of luck in your next adventures. Basically, I mean, I'll try not to be repetitive here in my question, but I mean, it's remarkable to see the acceleration of the digitalization progress, especially in Mexico, as you have mentioned throughout the call. As it continues to gain momentum over the next quarters and the next year, and you continue to think of it as an enhancer of the ecosystem, do you see digitalization also increasingly relevant when you think of capital allocation in the future?
Let me see if I understood your question. What you're mentioning is, given the evolution and the increase of relevance in digital channels for Coca-Cola FEMSA, would capital allocation on digitalization be a priority going forward? Is that the question? Just to make sure, Luis.
That's precisely it.
Okay. Yes, for sure. As we have stated in previous calls and interactions, the way that we are looking at value accretive plays in inorganic growth and capital allocation, we have been focusing on assessing opportunities that are evidently, on one end, expanding our footprint in the current business where opportunities, you know, come that are both strategically sound and value accretive. We will not do any inorganic plays just for the sake of growing. They definitely have to bring value, both strategically and economically to our shareholders. At the same time, looking at adjacencies and other categories with the Coca-Cola Company that can make sense.
For our network within, you know, the beverage sector, such as, you know, other categories that might be in the NARTD space, non-carbonated, et cetera, that is something that we always look at, and The Coca-Cola Company is very active on those fronts in this region and in other parts of the world. Also, to answer your question, looking at technologies and digital partners that could enhance our value proposition to our customers in the omni-channel platform that is fully digitally enabled, and at the same time, that can allow us to accelerate with capabilities our digitalization efforts. The answer is, you know, a solid yes.
We are looking at and assessing different opportunities in all of those three different spaces, as we normally do as part of the course of our activities on an everyday basis. I hope that clarifies.
Yeah, no, that's perfect. Thank you very much.
Thank you, Luis. It appears there is no further questions at this time. Mr. John Santa Maria, I would like to turn the conference back to you for any additional or closing remarks.
Thank you, operator, and thank you all for your confidence and interest in Coca-Cola FEMSA. As always, my investor relations team, led by Jorge and all of his team, are available to answer any of your questions or any questions you may have. I would like to again just take the opportunity to thank all of you for your continued support during my tenure as CEO and just reiterate how excited I am about the continuity that's come along with team and the strategy that we're underlying and how we see an accelerated momentum in Coca-Cola FEMSA. Not only are we growing faster, we're investing more, and we're also returning an enormous amount of money back to our shareholders. We've got three very good levers going in terms of our strategy.
I think what you have in Coca-Cola FEMSA is a replicable asset in Latin America that only has room to grow on a global scale. Thank you very much. Operator?
Thank you. Thank you for joining today's call. You may now disconnect.