CORPORATE PRESENTATION - Arca Continental175 Variables 93 Variables 11 Sets of 3 Categories...
43
CORPORATE PRESENTATION September 2018
Transcript of CORPORATE PRESENTATION - Arca Continental175 Variables 93 Variables 11 Sets of 3 Categories...
CORPORATE PRESENTATIONS e p t e m b e r 2 0 1 8
…strong relationship with
Years
2
Serving5 countries across the Americas
2.2BUC
S a l e s
V o l u m e
8*US$B
R e v e n u e
50
P r o d u c t i o n
F a c i l i t i e s
359
D i s t r i b u t i o n
C e n t e r s
60Thousand
A s s o c i a t e s
+1Million
P o i n t s o f
S a l e
USA
MEXICO
ECUADOR
PERU
ARGENTINA
3
99%
1%
11%
8%
6%
6%
32%
37%
2017PRO-FORMA
Mxp$ 154 billion
A balanced portfolio of markets and business…
2002
Mxp$ 13 billion
MEXICO
UNITED STATES
PERU
ECUADOR
ARGENTINA
SNACKS &
OTHER BUSINESS
EXPORTS AND
VENDING
MEXICO
BEVERAGES
CAC18%
12x
4
…with on strong organic growth and an excellent M&A track record
2002ARCA
Merger
2007Snacks
Mexico
2008Argentina &
Jugos del Valle
2010Ecuador
2011CONTAL
Merger
2012Snacks &
Santa Clara
2014Tonicorp
2015Peru
2016Sugar Mill
Argentina
2017USA, AdeS
& Snacks
Great Plains
5
Our commitment to always pursue value creation opportunities our shareholders
NARTD: Non-alcoholic ready to drink
Emerging still categories + Value added diaryStills
Food & Snacks
New sparking beverage franchisesSSDs
CORENARTD
6
A wide brand portfolio to satisfy every occasion of consumption
+ 28 Brands
+ 128 SKUs
+60 Brands
+1,500 SKUs2006 2017
7
Strong presence in attractive markets…
Start date: 1926
• Sales volume (MUC): 1,200
• % of KO volume: 30%
• Population served (MM): 30
MEXICO
Start date: 2015
• Sales volume (MUC): 297
• % of KO volume: 100%
• Population served (MM): 32
Start date: 2008
• Sales volume (MUC): 128
• % of KO volume: 21%
• Population served (MM): 9
Start date: 2010
• Sales volume (MUC): 137
• % of KO volume:100%
• Population served (MM): 16
Start date: 2017
• Sales volume (MUC): 440
• % of KO volume: 14%
• Population served (MM): 34
USA
ARGENTINA
ECUADOR
PERU
____________________
MUC –Million Unit Cases
KO – The Coca-Cola Company 8
…with a model that connects the entire organization in order to reach the perfect execution
METRICS
Segmentation
RGM
RTM
Market Audit
Picture of Success FUNDAMENTALS
Customer
Love Score (CLS)Digital Tools
People
9
Value share above market share in all of our operations
58%
67%
SOM SOV
Argentina
74%78%
SOM SOV
Mexico
74%77%
SOM SOV
Ecuador
67%
74%
SOM SOV
Peru
7 Pts.
42%45%
SOM SOV
United
States
3 Pts.4 Pts. 9 Pts. 3 Pts.
10
Innovation at Arca
Continental
Developing fundamental capabilities
Talent
+
Data Algorithms Technology
+ +
Creating a
specialized teamAdvanced
Data Lake from
Microsoft
Enough data for
next study casesEconometric
algorithms and
machine learning
Innovation
12
Understanding key variables to drive growth
175 Variables 93 Variables 3 Categories11 Sets of Variables
19% 16% 10% 2% 14% 3% 11% 7% 4% 4% 4%
Price Gap
Promotion & Advertising
Price Change
Holiday and
Weekend Stockup
Sales Visits
New Customer
Performance
Service Indicators
RED Improvement
Economic
Environment
High Temperature
Weather
Identify key variables of overall performance and
build a scorecard, also differences between Arca
Continental´s Markets
Actions
Price Religion and Fundamentals
Findings
We strengthen our price religion in territories with high
price elasticities and build our fundamentals (KPI´s)
FINDINGS ACTIONS
“ W h y M o d e l ”
13
1. PRODUCT AVAILABILITY
Concrete use cases to apply analytics to improve execution at the point of sale
Out of stock
in POS
Forecast non-availability of
products by SKU and create a
"suggested order“ by POS
1-2 p.p.
Contribution
margin
Quantify the effect of each
execution variable by POS and
prioritize it
Volume sales
increase
2-3%
Contribution
margin
2. COMMERCIAL EXCELLENCE
14
• Improving store activation
• Adding Web-enabled POS
~1K
Active
Customers
3%
Sales
increase
• Sales information on all categories
• Customer insights
• Discounts Control
• Increases traffic, sales and profits
• Additional income from e-payments
• Competitive advantage
Improving sales performance in traditional channel with technification
Customer Benefits
AC Benefits
15
Mexico
A flexible price-pack architecture to drive consumption and profitability
66%Retornable
No Retornable
$6 $10 $13 $20$6 $25
600 PET
3.0 NR
2.0 Ref Pet
355 mlVR
Low elasticity SKU´s Protect affordability
(multi-serve &
Returnable)
Leverage on single serve presentations
+20 SKUs only for regular Coke in Mexico
PACKAGE FORMATMXP
$6
MXP
$34
66%
34%
RETURNABLE
52%48%
NON RETURNABLE
MULTISERVE
SINGLE SERVE
17
Maintaining leadership in core Mexico market while growing diversified portfolios
Growing still beverages portfolio
Expanding value-added dairy
• Very positive trend in market share across all categories
• Command #1 or #2 market leadership in most still categories
• Continue strengthening our portfolio through Ades acquisition
• Profitable single-serve presentation and premium pricing
• Strongly positioned in consumer preferences
• Tripled sales and increasing point of sales coverage of 44%
in traditional channel
• Leveraging the Direct to Home channel
• More than 5,500 coolers introduced in 2017
• Maintained a CAGR of 28% in 2017
85%
38%11%
60%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Market share of Powerade relative to competition (%)
Main Competitor Powerade 18
South America
• Revenue growth management initiatives enable us to compensate for high inflation rates maintaining profitability despite macroeconomic volatility
• Continue expanding point-of-sale execution capabilities through our commercial model
• Strengthened vertical integration with Famaillá sugar mill to optimize sweetener cost
ARGENTINA - 2008
• Reformulating products to offer more low-calorie or zero calorie options (first in the world)
• Focus on affordability products in key entry packages
• Capturing cost savings by centralizing production capabilities in new Tonicorp’s plant
• Approximately 17,000 new coolers introduced to capitalize on future volume
ECUADOR - 2010
• Solid annual GDP growth since 2010,
averaging 4.3%
• Delivered annualized synergies of USD $40
million, 60% above the original target
• Reduced debt and exposure to foreign
exchange debt by 80% with a three-notch
uplift by Fitch Ratings
• Aim to accelerate and innovate in still
beverages, while focusing on warehouse
infrastructure optimization while increasing
own sales force and distribution capabilities
PERU - 2015
South America: AC operates in attractiveMarkets with positive growth outlook
20
Investing in core capabilities and increasing profitability in South America
MUCs Cooler
Coverage (1)
EBITDA / Sales
MUCs Cooler
Coverage (1)
EBITDA / Sales
MUCs Cooler
Coverage (1)
EBITDA / Sales
118
128
18%
61%
10%
21%
2008* 2017 2008* 2017 2008* 2017
119
137
24%
48%
17%
18%
2010* 2017 2010* 2017 2010* 2017
278
297
29%
33%
18%
21%
2015* 2017 2015* 2017 2015* 2017
____________________*End of the year acquisition of each territoryMUCs – Million Unit Cases(!)Cooler Coverage – Percentage of points of sales with at least one cooler
21
22
EcuadorArgentina
Peru Mexico
AC Bebidas
Arca Continental (AC) & Coca-Cola Refreshments USA (CCR), a fully-owned subsidiary of The Coca-Cola Company (TCCC), signed last February a Definitive Agreement that establishes the following:
▪ AC contributed to AC Bebidas its interest in the equity stake of all its beverages business
▪ TCCC contributed CCR’s Southwest Operating Unit territory (Texas, parts of New Mexico, Oklahoma, Arkansas) including its assets and related liabilities in exchange of a 20% equity stake in AC Bebidas
▪ The newly created entity, Coca-Cola Southwest Beverages LLC (CCSWB), has the rights to bottle, distribute and sell Coca-Cola beverages in southwestern US
▪ AC’s Complementary Business portfolio consists of snacks products
Market Cap(1): USD$192 Bn Market Cap(1): USD$11.6 Bn
Coca-Cola Refreshments
61%39%
100%
(2) (2)
AC Corporate Structure
Coca-Cola Southwest
Beverages
AC Complementary Business
100%
100% 100%
100%80%20%
____________________(1) Considering a share price as of December 30, 2017. AC market cap was calculated using an exchange rate of MXP$18.90(2)Participation after the contribution of all of AC’s Beverages Business.
23
____________________
MUC – Million Unit Cases
• Sales volume of 440 MUC and 2017 revenues of US$2.7 Bn
• 10 production facilities, 40 distribution centers and over 8,700 associates
• Expected annual synergies: US$90 million by year 3
• U.S. market share of approximately 42%
• Consumer environment with similar dynamics as Mexico
• ~ 30 million consumer in market with 40% Hispanic
• AC will deploy core pillars: commercial model, operational excellence and supply chain management
• Potential to expand snacks business presence in the US and increase sales of Topo Chico mineral water and Coca-Cola “Nostalgia”
AC joined the Coca-Cola System in the US in April 2017
San Antonio
McAllen
Houston
El Paso
Fort Worth
Gulfgate
AbileneDallas
Oklahoma
Nacogdoches
24
Savings:
• In-line blow molding (ILBM)
• Direct Procurement
• Improvement in production lines
• Lightening of the PET bottles
• Reduction in freight costs
Detailed work plans for short and mid-term identified synergies
Revenue:
• Vending
• Topo Chico
• Mexican Coke
Strategic:
• New facility in Houston
• Shared Services
USD$ 90 MM in 2020
More than 30 projects to reach
25
CCSWB Wins 2018 Market Street Challenge
Through a Culture of Excellence
in Execution…
• Coca-Cola Market Street Challenge recognizes excellence in market execution across major retail channels
• CCSWB competed against eight Coca-Cola bottlers from a wide range of geographies and sizes
• While the company’s first year was focused on exceptional customer service and smoothly managing its transition to Arca Continental, the team also began laying the groundwork for significant improvements in customer execution
26
CCSWB is now above the total level of U.S. execution metrics across all channels
27
Our McAllen manufacturing team has
been awarded the 2017 President's
Award for Quality Excellence
66%
• McAllen is the best facility in North America to receive the award this year from Coca-Cola, competing against 71 facilities for the distinction
• To win each Coca-Cola facility in North America is scored on their commitment, compliance and capability
• In each measure, the McAllen facility scored highest of any Coca-Cola facility in the region. Additionally, Coca-Cola Southwest Beverages had 2 of the top 10 highest-scoring facilities and 5 in the top 25
CCSWB team can truly say they have the highest
quality Coca-Cola facility in all of North America 28
CCSWB to build new plant in Texas
• Investment of US$250 million in a facility close to 1 million square feet in size
• First Coca-Cola production plant built in the U.S. in a decade
• State of the art technology, with five new production lines and in-line blow molding capabilities
• Includes distribution facilities, warehouse and sales, which will enable CCSWB to efficiently serve the Southeast Texas market.
• Close to USD $30 million in cost savings and operating efficiencies, as part of the USD 90 million synergy program.
Scheduled to begin operating in early 2020 29
Food and Snacks
#1 Vending Operator
In Mexico and Peru
Vending
Beverages delivered
to 600,000 homes
Direct to home
Participating in the industry with
Leading brands and Gaining scale
Snacks
Continue accelerating growth and gaining scale in snacks & other business
31
USD$ 360 MM in 2017
High potential growth opportunity based on strategic adjacencies
Complementary to our core business
Strengthen our presence in the US and Ecuador
Expand snack business in Mexico under Bokados and complements with Wise
32
• 2017 Net Sales: US$ 45 MM
• Founded in 2002 by Jim Goldberg
• Portfolio oriented to Better for You products,
mainly Kettle chips
• Products certified as gluten-free, without
artificial ingredients
• Deep River complements Wise's portfolio
• Arca Continental becomes a more significant
player in the salty snacks industry in the United
States
Strengthening our snacks business with Deep River brand
33
Financial
Performance
S A L E S E B I T D A N E T I N C O M E
Delivering strong and consistent results
2012 2013 2014 2015 2016 2017
+20% CARG
$56$60 $62
$76
$94
$137
+46%
2012 2013 2014 2015 2016 2017
+19% CARG
$11
$13$14
$17
$20
$26
2012 2013 2014 2015 2016 2017
+21% CARG
<$5
$6
$7
$8
$9
$13
+45%
C o n s o l i d a t e d R e s u l t s
M X P $ B I L L I O N
$11
+30% +45%
35
Conservative debt profile & diversified
maturity schedule
• 96% debt is in local currency
• Projected debt profile with average maturity of 7 years
Debt Maturity Profile
Total Debt: MXP$ 56,923 million
____________________
*Using an exchange rate as of June 2018 of MXP$ 19.86
By
Interest Rate
13%1%
47%
39%By
Currency
MXP
ARS
PEN
USD
28%
72%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Bank Loans Bonds
296
2,888
7,1196,868
5,721 5,742
2,175
1,487
2,356
6,378
7,945 7,945
Variable
Fixed
36
Highest credit ratingamong Mexican companies
Financial flexibility and low leverage ratio
“A2”
Global Investment Grade above Mexico’s
sovereign rating
“AAA(mex)”
“A”
“mxAAA”
1.9
1.31.2
2015 2016 Jun '18
Global Scale
National Scale
Net Debt / EBITDA
37
History of discipline growth
0.2x 0.5x 0.8x 1.2xNet Debt
to EBITDA
1325
56
100
>200
2002 2008 2012 2017 2022
2x
2x
2x
2x
____________________
*As of March 2018
SalesMXP$ billion
38
Social
Responsibility
____________________
*2017 data for AC consolidated
of resin produced by PetStar
28% of PCR
51,049 Tons
1.7Water Lts. /
Beverage Lts.
17% improvement
25.8 g CO2/
Beverage Lts.
11% energy reductionvs 2010vs 2010
25% from renewable
sources
Leader in water reuse
technology Mexico is the global leader in
recycled resin use
Strong commitment towards our environment
WATER* ENERGY*RECYCLINGMexico 2017
40
Key investment
Highlights
One of the largest Coca-Cola bottlers in the world with
a leading profitability in the KO System
Resilient and defensive industry
Strong presence in attractive markets
Highly diversified and well-balanced geographic
presence with a wide product portfolio and
distribution channels
Proven track record of disciplined growth
Strategic business model that connects the entire
organization in order to optimize execution
Key investment highlightsKey investment highlights
Global leader…
…in the right markets…
…the right products…
…and a disciplined growth
strategy
42
Investor Relations Contact Information:
Ulises Fernandez [email protected]
Felipe Barquin [email protected]
Pamela Ortiz [email protected]
Francisco Leyva [email protected]
THANK YOU!J U L Y 2 0 1 8
