CORPORATE PRESENTATION - September 2018 - Arca Continental
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CO RP O RATE P RESEN TATIO N
September 2018
Years
…strong relationship with
2
Serving USA
MEXICO
5 countries across the Americas
Sales Production ECUADOR
Vo l u m e Facilities Associates
PERU
2.2
BUC
8*
US$B
50 359 60
Thousand
+1
Million
ARGENTINA
Revenue Distribution Points of
Centers Sale
3
A balanced portfolio of markets and business…
PERU
MEXICO
EXPORTS AND 11% ECUADOR
VENDING
8%
1% 37% ARGENTINA
PRO-FORMA 6%
CAC
2002 18%
12x 2017 6% SNACKS &
OTHER BUSINESS
MEXICO 99%
BEVERAGES
32% UNITED STATES
Mxp$ 13 billion
Mxp$ 154 billion
4
…with on strong organic growth and an
excellent M&A track record
Great Plains
2002 2007 2008 2010 2011 2012 2014 2015 2016 2017
ARCA Snacks Argentina & Ecuador CONTAL Snacks & Tonicorp Peru Sugar Mill USA, AdeS
Merger Mexico Jugos del Valle Merger Santa Clara Argentina & Snacks
5
Our commitment to always pursue value
creation opportunities our shareholders
SSDs
New sparking beverage franchises
CORE
NARTD
Stills
Food & Snacks Emerging still categories + Value added diary
NARTD: Non-alcoholic ready to drink 6
A wide brand portfolio to satisfy every
occasion of consumption
+ 28 Brands +60 Brands
2006 + 128 SKUs 2017 +1,500 SKUs
7
Strong presence in attractive markets…
MEXICO
USA
Start date: 1926
• Sales volume (MUC): 1,200 Start date: 2017
• % of KO volume: 30% • Sales volume (MUC): 440
• Population served (MM): 30 • % of KO volume: 14%
• Population served (MM): 34
ECUADOR
Start date: 2010
• Sales volume (MUC): 137
• % of KO volume:100%
• Population served (MM): 16
ARGENTINA
PERU Start date: 2008
• Sales volume (MUC): 128
Start date: 2015
• % of KO volume: 21%
• Sales volume (MUC): 297
• Population served (MM): 9
• % of KO volume: 100%
• Population served (MM): 32
____________________
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
Segmentation
METRICS
RGM
Picture of Success FUNDAMENTALS
RTM
Market Audit Customer
Love Score (CLS)
Digital Tools
People
9
Value share above market share in all of our
operations
Mexico Argentina Ecuador Peru United
78% 77% States
74% 74% 74%
67% 67%
58% 45%
42%
4 Pts. 9 Pts. 3 Pts. 7 Pts. 3 Pts.
SOM SOV SOM SOV SOM SOV SOM SOV SOM SOV
10Innovation at Arca
ContinentalDeveloping fundamental capabilities
Innovation
Data Algorithms Technology Talent
+ + +
Enough data for Econometric Advanced Creating a
next study cases algorithms and Data Lake from specialized team
machine learning Microsoft
12Understanding key variables to drive growth
“Why Model”
175 Variables 93 Variables 11 Sets of 3 Categories
Variables
Price Gap Sales Visits
Promotion & Advertising New Customer Economic
Price Change Performance Environment
Holiday and Service Indicators High Temperature
Weekend Stockup RED Improvement Weather
19% 16% 10% 2% 14% 3% 11% 7% 4% 4% 4%
Findings
FINDINGS Actions
ACTIONS
Identify key variables of overall performance and Price Religion and Fundamentals
build a scorecard, also differences between Arca
Continental´s Markets We strengthen our price religion in territories with high
price elasticities and build our fundamentals (KPI´s)
13Concrete use cases to apply analytics to
improve execution at the point of sale
1. PRODUCT AVAILABILITY 2. COMMERCIAL EXCELLENCE
Forecast non-availability of Quantify the effect of each
products by SKU and create a execution variable by POS and
"suggested order“ by POS prioritize it
Out of stock Contribution Volume sales Contribution
in POS margin increase margin
1-2 p.p. 2-3%
14Improving sales performance in traditional
channel with technification
Customer Benefits
• Improving store activation • Increases traffic, sales and profits
• Additional income from e-payments
• Adding Web-enabled POS • Competitive advantage
Active Sales
Customers increase
~1K 3% AC Benefits
• Sales information on all categories
• Customer insights
• Discounts Control
15Mexico
A flexible price-pack
architecture to drive
consumption and +20 SKUs only for regular Coke in Mexico
profitability MXP
$34
2.0
Ref 3.0
Pet NR
MXP 600
355 PET
PACKAGE FORMAT $6 ml
VR Retornable 66%
SINGLE SERVE No Retornable
NON RETURNABLE
$6 $6 $10 $13 $20 $25
34%
48%
52%
Low elasticity SKU´s Protect affordability
66%
(multi-serve &
Returnable)
RETURNABLE MULTISERVE
Leverage on single serve presentations
17Maintaining leadership in core Mexico
market while growing diversified portfolios
Expanding value-added dairy
• 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
Growing still beverages portfolio Market share of Powerade relative to competition
(%)
100%
• Very positive trend in market share across all categories 85%
80%
• Command #1 or #2 market leadership in most still categories
60%
• Continue strengthening our portfolio through Ades acquisition 60%
• Profitable single-serve presentation and premium pricing 40%
11% 20%
38%
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Main Competitor Powerade
18South America
South America: AC operates in attractive
Markets with positive growth outlook
ARGENTINA - 2008 ECUADOR - 2010 PERU - 2015
• Revenue growth management initiatives
enable us to compensate for high inflation • Reformulating products to offer more low- • Solid annual GDP growth since 2010,
rates maintaining profitability despite calorie or zero calorie options (first in the averaging 4.3%
macroeconomic volatility world)
• Delivered annualized synergies of USD $40
• Continue expanding point-of-sale • Focus on affordability products in key million, 60% above the original target
execution capabilities through our entry packages
commercial model • Reduced debt and exposure to foreign
• Capturing cost savings by centralizing
production capabilities in new Tonicorp’s exchange debt by 80% with a three-notch
• Strengthened vertical integration with
plant uplift by Fitch Ratings
Famaillá sugar mill to optimize sweetener
cost • Approximately 17,000 new coolers • Aim to accelerate and innovate in still
introduced to capitalize on future volume beverages, while focusing on warehouse
infrastructure optimization while increasing
own sales force and distribution capabilities
20Investing in core capabilities and increasing
profitability in South America
Cooler EBITDA / Cooler EBITDA / Cooler EBITDA /
MUCs MUCs MUCs
Coverage (1) Sales Coverage (1) Sales Coverage (1) Sales
297
61% 278
137 48% 21%
21% 33%
128 18%
18%
118
119 17% 29%
24%
18% 10%
2008* 2017 2008* 2017 2008* 2017 2010* 2017 2010* 2017 2010* 2017 2015* 2017 2015* 2017 2015* 2017
____________________
*End of the year acquisition of each territory
MUCs – Million Unit Cases
21
(!)Cooler Coverage – Percentage of points of sales with at least one cooler22
AC Corporate Structure
Arca Continental (AC) & Coca-Cola
Refreshments USA (CCR), a fully-
owned subsidiary of The Coca-Cola
Company (TCCC), signed last Market Cap(1): USD$192 Bn Market Cap(1): USD$11.6 Bn
February a Definitive Agreement
that establishes the following:
Coca-Cola Refreshments
(2) (2)
▪ AC contributed to AC Bebidas its interest in the 20% 80% 100%
equity stake of all its beverages business
▪ TCCC contributed CCR’s Southwest Operating AC Complementary
Unit territory (Texas, parts of New Mexico, AC Bebidas
Business
Oklahoma, Arkansas) including its assets and
related liabilities in exchange of a 20% equity
stake in AC Bebidas
39% 61% 100% 100%
▪ The newly created entity, Coca-Cola Southwest
Beverages LLC (CCSWB), has the rights to
bottle, distribute and sell Coca-Cola beverages Coca-Cola Southwest
Peru Mexico
in southwestern US Beverages
▪ AC’s Complementary Business portfolio 100% 100%
consists of snacks products
Argentina Ecuador
____________________
(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.
23AC joined the Coca-Cola System in the US in
April 2017
Oklahoma
• Sales volume of 440 MUC and 2017 revenues of US$2.7 Bn
• 10 production facilities, 40 distribution centers and over 8,700 Dallas
El Paso Abilene
associates
Nacogdoches
• Expected annual synergies: US$90 million by year 3 Fort Worth
Houston
• U.S. market share of approximately 42% San Antonio
• Consumer environment with similar dynamics as Mexico
• ~ 30 million consumer in market with 40% Hispanic McAllen Gulfgate
• AC will deploy core pillars: commercial model, operational
excellence and supply chain management
• Potential to expand snacks business presence in the US and
increase sales of Topo Chico mineral water and Coca-Cola
“Nostalgia”
____________________
MUC – Million Unit Cases
24Detailed work plans for short and mid-term
identified synergies
Revenue:
• Vending
• Topo Chico
• Mexican Coke Savings:
• In-line blow molding (ILBM)
• Direct Procurement
Strategic: • Improvement in production lines
• New facility in Houston • Lightening of the PET bottles
• Shared Services • Reduction in freight costs
More than 30 projects to reach
USD$ 90 MM in 2020
25CCSWB Wins 2018
Market Street
Challenge
• 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 Through a Culture of Excellence
improvements in customer execution
in Execution…
26CCSWB is now above the total level of U.S.
execution metrics across all channels
27Our McAllen manufacturing team has
been awarded the 2017 President's
Award for Quality Excellence
• 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
66%
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 28CCSWB 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 $30 million in cost
savings and operating efficiencies, as
part of the USD 90 million synergy
program.
Scheduled to begin
operating in early 2020 29Food and Snacks
Continue accelerating growth and gaining
scale in snacks & other business
Vending Direct to home Snacks
#1 Vending Operator Beverages delivered Participating in the industry with
In Mexico and Peru to 600,000 homes Leading brands and Gaining scale
31High potential growth opportunity based on
strategic adjacencies
USD$ 360 MM in 2017
Complementary to our core business
Expand snack business in Mexico under Bokados
and complements with Wise
Strengthen our presence in the US and Ecuador
32Strengthening our snacks business
with Deep River brand
• 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
33Financial Per formance
Delivering strong and consistent results
Consolidated Results
$13
$137 $26
$11
+46% $20
+30% +45%
$9
$94 $17 $8
$76 $7
$14
$13 $6
$60 $62 $11Conservative debt profile & diversified
maturity schedule
Debt Maturity Profile PEN
Total Debt: MXP$ 56,923 million USD 13%
ARS
7,945
1%
7,945
39%
7,119
6,868
6,378 By MXP
5,721 5,742
Currency Variable
2,888
2,175 2,356 47%
1,487 28%
296
By
Interest Rate
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Bank Loans Bonds
• 96% debt is in local currency
• Projected debt profile with average maturity of 7 years Fixed 72%
____________________
36
*Using an exchange rate as of June 2018 of MXP$ 19.86Highest credit rating
among Mexican companies
Global Scale Net Debt / EBITDA
1.9
“A2” “A” 1.3
1.2
National Scale
“AAA(mex)” “mxAAA”
2015 2016 Jun '18
Global Investment Grade above Mexico’s
sovereign rating Financial flexibility and low leverage ratio 37History of
discipline Sales >200
growth MXP$ billion 2x
2x
2x
100
2x 56
25
13
2002 2008 2012 2017 2022
Net Debt
to EBITDA 0.2x 0.5x 0.8x 1.2x
____________________
*As of March 2018 38Social Responsibility
Strong commitment towards
our environment
RECYCLING WATER* ENERGY*
Mexico 2017
28% of PCR 1.7 Water Lts. /
Beverage Lts. 25.8 g CO2/
Beverage Lts.
51,049 Tons 17% improvement 11% energy reduction
of resin produced by PetStar vs 2010 vs 2010
Mexico is the global leader in Leader in water reuse 25% from renewable
recycled resin use technology sources
____________________ 40
*2017 data for AC consolidatedKey investment
HighlightsKey investment highlights
Key investment highlights
Global leader… One of the largest Coca-Cola bottlers in the world with
a leading profitability in the KO System
Resilient and defensive industry
…in the right markets…
Strong presence in attractive markets
Highly diversified and well-balanced geographic
…the right products… presence with a wide product portfolio and
distribution channels
Proven track record of disciplined growth
…and a disciplined growth
strategy Strategic business model that connects the entire
organization in order to optimize execution
42TH AN K YO U! J U LY 2 0 1 8 Investor Relations Contact Information: Ulises Fernandez ulises.fernandezdelara@arcacontal.com Felipe Barquin felipe.barquin@arcacontal.com Pamela Ortiz pamela.ortizsa@arcacontal.com Francisco Leyva franscisco.leyvaa@arcacontal.com
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