Mexico Retail and Consumer Goods

06 November 2012 Americas/Mexico Equity Research General Merchandise Stores / Soft Drinks / Specialty Pharmaceuticals

Mexico Retail and Consumer Goods Research Analysts THEME Antonio Gonzalez, CFA 52 55 5283 8921 [email protected] Analyzing a Potential Fiscal Reform Alonso Cervera 52 55 5283 3845 Summary – Investor interest towards Mexico has increased notably over the [email protected] last few months, partly on anticipation that congress may finally approve key structural reforms after a long congressional gridlock. Potential for reforms has been a strong catalyst for Mexican equities, given the favorable impact they could have on medium-term growth prospects and on the strengthening of public sector finances. The three most important (pending) reforms in Mexico involve the flexibilization of the labor market, the revamping of the judicial framework governing private sector participation in the energy sector, and the strengthening of non-oil tax collections. In short: labor, energy and fiscal reforms. At present, only labor reform is being addressed in Congress and we think that it will be approved by mid-November. In this note we explore the potential implications that the introduction of value- added taxes on foodstuffs and medicines could have on consumer stocks. We also analyze, from a macro standpoint, the impact of higher VAT on disposable income in Mexico. Our main findings include the following:

■ Companies with different mix of products subject to VAT: Companies that sell products not currently subject to VAT would be the most impacted: Bimbo and Herdez, followed by Genomma Lab.

■ Demand elasticity: If consumption taxes increase, department stores (Liverpool, Grupo Famsa) have a mix of products with high price elasticity (even though their product mix is already subject to full VAT); food and beverages (retailers and bottlers) come second in terms of price elasticity, while healthcare products have the lowest price elasticity (Genomma Lab).

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06 November 2012

■ Threat from informal players: With higher consumption taxes, consumers might shift to informal channels (which can avoid taxes). In this context retailers such as Walmex and Chedraui would be most impacted, as a larger portion of their selling space is concentrated in regions with higher informality (Central and South-East Mexico, 31% informality rate). Soriana would have a lower impact as a larger portion of its selling space is in the North, which has ‘only’ a 24.5% informality rate. Walmex would also be impacted from a high exposure to soft-discount formats, which arguably have a high substitution rate with informal channels.

■ From a macro standpoint, a 5%, 10%, or 16% VAT rate on food and medicines (up from 0% rate currently) would negatively impact disposable income by 0.8%, 1.7%, and 2.7%, respectively.

All in all, we think companies with the highest risk to higher VAT (especially in food and medicines) out of the consumer space in Mexico would be Bimbo, Herdez and Genomma Lab; Exhibit 1 summarizes the risk for each of these companies, under each of these categories.

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Exhibit 1: Mexico retail and consumer goods - impact from a potential hike on VAT in food and medicine Darker (lighter) shading denotes a higher (lower) impact VAT Exempt Price Format Overall Geography Products Elasticity Segmentation* Risk

NA NA

Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 3 06 November 2012 Table of contents

Background 5 Which companies would be more exposed to VAT on food and drugs? 6 Which companies have products with higher elasticity of demand? 8 The threat of the informal market 8 Overall impact on disposable income 11

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Background We remain upbeat about the outlook for the Mexican economy, despite the persistent mediocre growth path in the US. Part of our optimism stems from our high expectations that the new government, due to take office on 1 December 2012, will be able to deliver on key pending structural reforms within its first year in power, particularly on the fiscal and energy fronts. The key reform initiatives – fiscal and energy – will likely be sent to congress soon after the president’s inauguration, with the aim of approving them sometime between February and April 2013, we think. Failure to approve these reforms (particularly the energy reform) before April 2013 (which marks the end of the second ordinary period in congress), would reduce the chances of approval later in the new administration, in our view. A labor reform bill is already being debated in congress and has gained partial approval in the lower house and in the senate. The most contentious issue, which has slowed the full approval process, is related to democratic and transparency practices at workers’ unions, which we do not necessarily view as a major impediment to a more flexible labor market. On the fiscal reform front, we think that the PRI’s focus will likely be on increasing the level of taxation on consumption (which would likely include VAT to food and medicine, currently subject to a rate of 0%), eliminating (or at least reducing) the loopholes in the tax regime for the corporate sector, and reducing the subsidies on gasoline. In this note we analyze the potential impact of a fiscal reform on Mexico retail and consumer stocks, especially if higher taxes on consumption are established. While our analysis is preliminary in nature (given that no fiscal reform is currently under congressional debate), we explore the main items that are likely to be in the spotlight for consumer stocks. a) Current mix of revenues subject to consumption taxes (mostly VAT); b) Demand elasticity, if consumption taxes are established (which companies have more sensitive products?); c) Risk of losing market share vs. informal players (mainly determined by geographic location and format mix for the retailers); and d) Impact on household spending from a macro standpoint (irrespective of impact on individual stocks) from higher taxes on consumption.

Why is a fiscal reform necessary? The debate about the need of a fiscal reform has been a recurring one in the past decade. This debate has centered on the need to increase taxes on consumption, while simplifying the tax regime for the corporate sector. The goals of the measures are to reduce the dependence of public finances on oil-related revenues and to effectively increase the size of the state to, among other things, meet social demands (health, education, etc.) and increase spending in infrastructure. As of 2011, total public sector revenues were equivalent to just 22.8% of GDP, compared to 36.8% in the average OECD country, and not too different from the average of 21.6% recorded in Mexico in the preceding ten years (2001-2010). Furthermore, in 2011, 34% of public sector revenues were oil-related. As of 2011, value-added tax collections in Mexico were equivalent to 3.7% of GDP, a figure that is roughly one-half of that in the average OECD country. The achievement of a thorough fiscal reform is one of the main objectives of President- elect Enrique Peña Nieto. This is something his government will likely pursue within the first year after taking office. According to Mr. Peña Nieto’s campaign materials, some of

Mexico Retail and Consumer Goods 5 06 November 2012 the elements of the reform include: (1) broadening the tax base; (2) reducing as much as possible fiscal exemptions and privileges; (3) simplifying the fiscal system; and (4) exercising budget expenditures in a more efficient and transparent way. In the case of value-added taxes, Peña Nieto is on-the-record saying that “they are an important source of tax collections and must be reviewed.” The current status of Value-added taxes in Mexico The current value-added tax regime contemplates a 16% rate on final consumption in most of the country and an 11% rate in ten states along the country’s borders (the current VAT law defines the borderland as the territory comprised within 20kms from the country’s border). As of today, food and medicines remain untaxed.

Exhibit 2: Products Subject to VAT under the 16% and 0% Rates 16% Rate 0% Rate • Sale of Generalized Goods • Animals and Vegetables • Independent Services • Patent Drugs • Temporary Use of Goods • Water and Ice • Imports • Ixtle, Palm and Maguey • Tractors for Agricultural Purposes • Fertilizers, pesticides, herbicides and fungicides • Hydroponic Greenhouses • Gold, Jewelry and Artistic Ornaments • Books, Newspapers and Magazines • Agriculture-related services • Reinsurance Services • Domestic Water Supply Services

Source: “Ley del Impuesto al Valor Agregado”, Mexico 2010.

Taxes on consumption have been modified a number of times already; the last change took place in 2010, when the VAT rate went from 15% to 16% (10% to 11% in borderland). Meanwhile, former President Vicente Fox also promoted a VAT law that intended to tax food and medicines. This proposal was rejected by the PRI and PRD in 2001, however.

Which companies would be more exposed to VAT on food and drugs? Below we present a chart with the current mix of revenues that is subject to VAT for consumer stocks in Mexico. The companies on the left-hand side of the chart (i.e., those who sell products that are not subject to VAT) would have the largest potential impact from a new VAT law that taxes food and drugs. Importantly for Alsea, even though the company’s revenue mix comes mostly from food (in addition to spirits and beer), the company already pays full VAT, as preparation of food inside restaurants prevents the company from exemption status.

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Exhibit 3: Revenues Subject to VAT (as % of total revenues, Mexico operations only)

0% 30-50% 86% 100%

1% 30-50% 88% 100%

49% 55% 98% 100%

100%

Source: Company data, Credit Suisse estimates

Exhibit 3 shows that most affected sub-sectors within consumer stocks would be: 1- Foods (100% exposure): Companies like Bimbo and Herdez are mostly exempt of VAT. There are some exceptions such as restaurant operators (Alsea), since prepared food in restaurants is subject to full VAT rate. 2- Pharmaceuticals (51% exposure): Genomma Lab’s only taxed products are the ones belonging to the Personal Care segment, which is 38% of their consolidated revenues (49% of its revenues in Mexico). 3- Retailing (24% average exposure): Exposure to food and medicines for each retailer (as opposed to assortment of textiles or electronics) determines how heavily each of the companies would be affected. Least affected retailers would be department stores (0% exposure), such as Liverpool and Grupo Famsa. Grocery retailers’ revenue mix has, on average, ~50% exposure to food and beverages. Walmex would be the least affected of the three grocery retailers under our coverage (45% exposure), followed by Chedraui and Soriana. 4- Bottlers and Brewers (7% average exposure): Under the current law, nectars, bottled water and still beverages remain exempt from VAT; however, carbonated soft drinks are already taxed. Out of this group, the company that has the lowest potential impact is Grupo Modelo, since beer is a non-exempt good in the VAT law. Grupo Modelo already pays VAT in Mexico (Mexico accounts for 50% of total revenues). Secondly, 98% of Coca-Cola FEMSA’s products are subject to VAT, followed by Arca Continental with 88% (a larger portion of AC’s mix comes from bottled water, still beverages and jug water) and finally FEMSA with 86% of products subject to VAT (two-thirds of OXXO revenues are subject to VAT, and almost all of KOF, as mentioned above).

Mexico Retail and Consumer Goods 7 06 November 2012

Which companies have products with higher elasticity of demand? A second approach we explore is which company might suffer most from having products that have higher demand elasticity under a scenario of higher taxes on consumption (assuming companies will pass through the impact of increased taxation to final customers). In 2002, Fernando Aportela and Alejandro Werner 1 published an academic paper estimating the price elasticity of various consumer goods using data from before and after the 1995 VAT rate increase in Mexico (from 10% to 15%); Exhibit 4 displays their results.

Exhibit 4: Demand Elasticity, and expected impact on demand from a given change in tax rate Demand Elasticity 5% Tax Effect 10% Tax Effect 16% Tax Effect

Glassware and Household Appliances 48% 2,4% 4,8% 7,7% Education, Culture and Hobbies 46% 2,3% 4,6% 7,4% House Maintenance 39% 2,0% 3,9% 6,2% Food and Beverages 35% 1,8% 3,5% 5,6% Transportation 29% 1,5% 2,9% 4,6% House Cleaning Products 28% 1,4% 2,8% 4,5% Clothing and Footwear 27% 1,4% 2,7% 4,3% Personal Care 24% 1,2% 2,4% 3,8% Housing and Electricity 24% 1,2% 2,4% 3,8% Healthcare 22% 1,1% 2,2% 3,5%

Source: “La Reforma al Impuesto al Valor Agregado de 1995: Efecto Inflacionario,Incidencia y Elasticidades Relativas” F.Aportela and A.Werner, January 2002.

From the exhibit above, we infer that under a scenario of higher taxes on consumption, department stores (Liverpool, Grupo Famsa) would have the largest impact (even though their product mix is already subject to full VAT, and we do not expect additional taxation on these products); food and beverages (grocery retailers and bottlers, such as KOF, AC, Walmex, Soriana, and Chedraui) come second in terms of price elasticity, while healthcare products have the lowest price elasticity (Genomma Lab).

The threat of the informal market An important threat to consumer-related companies under a new VAT regime would be market share losses to the informal market. The informal sector might have a price advantage through tax evasion (especially in the more sensitive mid- and low-income groups).

1 Banco de Mexico, “La Reforma al Impuesto al Valor Agregado de 1995: Efecto Inflacionario, Incidencia y Elasticidades Relativas”, January 2002.

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As per Euromonitor data, the retail value of the informal economy is estimated at between 13% and 35% of GDP. We believe that (i) geographic presence and (ii) format segmentation are the two main aspects to take into consideration when analyzing a demand shift towards the informal sector (for grocery retailers), whereas for players like Genomma Lab, trading down to informality could be a broader problem.

Geographic footprint The National Institute of Statistics, Geography and Informatics (INEGI) has estimated that informality is mainly explained by population density (higher density translates into higher informality, 45% of the informal market is located in cities with population greater than 100,000 inhabitants) and lower per capita income (higher informality rates where income is lower). Workers that are employed in companies that don’t have accounting recordkeeping and don’t pay any form of tax are considered as part of the informal sector, under INEGI’s classification. According to INEGI, the highest rates of employment in the informal sector are concentrated in the Southern and Central regions of Mexico. Under the 2012 National Survey of Occupation and Employment, Central Mexico recorded an average 31% informality rate – Tlaxcala (40%), Estado de Mexico (34.4%), Michoacan (34%) are the states with highest rates of informality (Exhibit 5). The Southern territory of the country recorded a 30.6% rate – led by Guerrero (38%), Oaxaca (37%), and Yucatan (34%). Mexico’s lowest informal employment rates were recorded in its Northern region (24.5%); lowest recorded rates were 19.4% in Baja California Sur, 19.6% in Chihuahua, and 20.5% in Nuevo Leon. In addition, perishable goods, such as food crops, are grown mainly in the central region of the country; these goods have to be sold in a short period of time, making it virtually impossible for them to reach Northern Mexico.

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Exhibit 5: Distribution of formal vs. informal employment in Mexico

Low Informal Employment Rate Medium Informal Employment Rate High Informal Employment Rate

Source: INEGI, Credit Suisse estimates

Exhibit 6: Grocery retailers – Geographic Distribution (% of total selling space) Mexico North

18% 46% 9%

Mexico Central

Mexico South

68% 38% 33%

14% 16% 58%

Source: ANTAD, Company data, Credit Suisse estimates

Exhibit 6 shows the geographic footprints of Walmex, Chedraui, and Soriana. Soriana, having 46% of operations in the northern region could be the least affected from informality, while Walmex and Chedraui are concentrated in the regions more prone to informality.

Mexico Retail and Consumer Goods 10 06 November 2012

Walmex has 40% of its store base in the metropolitan region, which accounts for the highest informal employment rate (17.5% of the country’s total informal employment).

Format Segmentation We believe informal retail is more likely to get share gains vs. formats such as soft- discount stores (which have lower price points and offer a shopping experience that is not as differentiated), while formats such as hypermarkets and high-end supermarkets have more differentiation via assortment and shopping experience. Walmex has the largest exposure to soft-discount (Bodega) formats (39% of total stores) making it the most exposed retailer under this criteria, followed by Soriana (34%, albeit only 23% of selling area) and Chedraui (21%).

Exhibit 7: Grocery Retailers – Store Breakdown by Format (% of total store count) Soft Discount Hypermarket Supermarket Membership Clubs

39% 28% 6% 27%

34% 43% 18% 6%

21% 8% 71% NA

Source: Company data, Credit Suisse estimates

For the food sector, we believe location should not be a major consideration for companies under our coverage, given broad distribution networks and presence in the vast majority of the Mexican territory. In the beverage sector, Arca Continental, which has a higher percentage of nectars and water on its revenue mix (10% of volume vs. KOF’s 5.5%), could find more substitutes in the informal sector, but this effect is offset by AC’s concentration in the country’s Northern region. The informal drug market in Mexico is widely spread (according to the Mexican Association of Pharmaceutical Research Industry, 60% of the pharmaceuticals market in Mexico is informal), making Genomma Lab largely exposed to a competitive threat from informality.

Overall impact on disposable income The final criteria we explore is the impact that higher consumption taxes would have on disposable income, from a macro standpoint, irrespective of company-specific impacts.

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Based on the National Survey of Household Income and Expenditures (ENIGH, from INEGI’s latest numbers, 2010), 22% of the Mexican families’ disposable income is spent on food & drugs. We ran a simple sensitivity analysis to see how much would a 5%, 10% and 16% VAT rate on food and drugs impact overall disposable income. Assuming companies pass 100% of the tax increase to customers via price, disposable income would decline by 0.8%, 1.7% and 2.7%, in each of our three scenarios. Exhibit 8 summarizes these results and Exhibit 9 displays how much we estimate government revenues would increase as a percentage of GDP in all three cases.

Exhibit 8: Impact on Disposable Income from higher VAT rates on food and medicine

2011

Disposable Income in Mexico (MXN bn) 9,783

Share spent on Food & Drugs 22%

Impact on Income From a 5% VAT 0.8%

Impact on Income From a 10% VAT 1.7%

Impact on Income From a 16% VAT 2.7%

Source: INEGI, “Encuesta Nacional de Ingresos y Gastos de los Hogares” 201,. Credit Suisse estimates

Exhibit 9: Government proceeds from a possible increase in VAT rate in food and medicine Numbers as a % of 2011 GDP

5% VAT 0.7%

10% VAT 1.1%

16% VAT 1.7%

Source: INEGI, "Encuesta Nacional de Ingresos y Gastos de los Hogares" 2010 , Credit Suisse estimates

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Exhibit 10: Arca Continental – Model Summary BASICS COMPANY DESCRIPTION Sector Beverage Ticker AC* Second largest Latin American bottler, and fourth largest globally, with operations in Mexico, Price (MxP$) 95.84 Ecuador, and Argentina. Arca Continental sells 1.2bn unit cases of soft drinks, juices and water. Target (MxP$) 77.0 Target (US$) 5.9 Arca-Continental also has a salty snacks business under the brand Bokados. Recommendation NEUTRAL Market Cap 154,423 11,878.7 POSITIVES Daily liquidity (US$/day) - 3M avg 0.9 Unleveraged balance sheet Strong cash flow generation SHAREHOLDING STRUCTURE TOTAL World-class execution in Mexico operations, with upside potential in Argentina and Ecuador Arca-Continental Group 76% The Coca Cola Co. 8% NEGATIVES Free Float 16% Less diversified South American footprint relative to KOF or Andina Heavy-investment cycle in complementary businesses (i.e. snacks business, Bokados) Lower chances of diversifying into other EM's away from Latin America

ROIC VS WACC OWNERSHIP STRUCTURE

30%

25% Free Float 20% 16% The Coca Cola 15% Co. 8% 10%

5% Arca-Continental Group 0% 76% 2008 2009 2010 2011 2012 2013

ROIC WACC

FINANCIAL METRICS (MxP$ m 2010 2011 2012E 2013E 2014E 2015E OPERATING METRICS 2010 2011 2012E 2013E 2014E 2015E Revenues 27,060 44,672 57,031 60,191 65,724 70,942 Volume (MnUC) 644.1 1,309.9 1,355.6 1,415.7 1,479.8 1,541.6 Gross profit 12,401 20,166 25,699 27,028 29,899 32,550 % change y/y - 103.4% 3.5% 4.4% 4.5% 4.2% Gross margin 45.8% 45.1% 45.1% 44.9% 45.5% 45.9% Revenues / UC (MXN / UC) 42.0 34.1 42.1 42.5 44.4 46.0 EBIT 4,220 6,662 8,862 9,370 10,956 12,202 Gross profit / UC (MXN / UC) 19.3 15.4 19.0 19.1 20.2 21.1 EBIT margin 15.6% 14.9% 15.5% 15.6% 16.7% 17.2% Ebit / UC (MXN / UC) 6.6 5.1 6.5 6.6 7.4 7.9 EBITDA 5,436 8,418 11,114 11,815 13,586 15,028 UC's per employee 17,286 34,198 35,392 36,961 36,961 36,961 EBITDA margin 20.1% 18.8% 19.5% 19.6% 20.7% 21.2% Adj. EBITDA 5,436 8,418 11,114 11,815 13,586 15,028 Net financial expenses (309) (602) (795) (562) (419) (245) LEVERAGE 2010E 2011E 2012E 2013E 2014E 2015E Taxes (1,021) (1,342) (2,446) (2,644) (3,278) (3,838) Net debt/ Adj. EBITDA 0.9 1.0 0.5 0.2 (0.1) (0.3) Net income 2,632 3,892 5,527 6,026 7,127 7,966 Net debt / Equity 0.3 0.2 0.1 0.1 (0.0) (0.1) Net margin 9.7% 8.7% 9.7% 10.0% 10.8% 11.2% Foreign Debt / Total Debt ------# weighted shares (mn) 806 1,326 1,611 1,611 1,611 1,611 Capex / Operat.Cash Flow (1.4) (0.3) (0.3) (0.3) (0.3) (0.3) EPS (MxP$) 3.26 2.94 3.43 3.74 4.42 4.94 EBITDA/Net Interest Exp. 17.6 14.0 14.0 21.0 32.4 61.3 NOPAT 3,199 5,320 6,416 6,727 7,680 8,367 Depreciation 1,216 1,756 2,252 2,445 2,630 2,826 RETURN / YIELD 2010E 2011E 2012E 2013E 2014E 2015E Capex 6,114 2,148 3,000 3,166 3,457 3,547 ROIC 13.6% 13.8% 12.5% 12.9% 14.5% 15.6% FCFE 54 4,707 4,204 5,487 6,650 7,649 WACC 8.0% 9.8% 9.4% 9.7% 10.0% 10.2% Dividends 846 5,020 2,417 2,764 3,013 3,563 Cost of Equity (ke) 11.6% 12.0% 12.8% 12.8% 12.8% 12.8% Total assets 34,592 59,819 62,960 66,716 71,678 76,960 ROE 15.9% 14.6% 14.6% 14.6% 15.8% 16.2% Cash 3,628 3,316 4,894 7,617 11,253 15,339 FCF Yield 0.1% 3.7% 2.7% 3.6% 4.3% 5.0% Change in WK 695 41 164 44 217 251 Div. Yield 1.1% 4.0% 1.6% 1.8% 2.0% 2.3% VALUATION 2010E 2011E 2012E 2013E 2014E 2015E Net debt 4,687 8,257 5,574 2,851 (785) (4,871) EV/Sales 3.0 3.0 2.8 2.6 2.3 2.1 Book value 17,324 36,229 39,693 42,951 47,028 51,394 EV / Adj. EBITDA 15.1 16.1 14.4 13.3 11.3 9.9 Market cap. 77,249 127,067 154,423 154,423 154,423 154,423 EV / IC 3.0 2.7 3.1 3.0 2.9 2.8 EV 81,893 135,175 159,856 157,132 153,469 149,364 P/E 29.4 32.6 27.9 25.6 21.7 19.4 Invested capital 27,689 50,956 51,980 52,657 53,267 53,737 P/B 4.5 3.5 3.9 3.6 3.3 3.0 Source: Company data, Credit Suisse estimates

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Exhibit 11: Chedraui –- Model Summary BASICS COMPANY DESCRIPTION Sector Retail Ticker CHDRAUI Founded in 1970, Grupo Comercial Chedraui is Mex ico's fourth largest retailer in terms of rev enues, Price (MxP$) 36.54 the company operates 133 Hy permarkets under the banner Chedraui, 38 Supermarkets under the Target (Mx P$) 40.00 banner Super Che, and 36 supermarkets in the US under the banner Bodega Latina. Revenues as of Recommendation OUTPERFORM 2010 reached P$52.8bn. Mkt. cap. (Mx P$ mn) 34,960.9 Daily liquidity (US$ mn / day ) 1.7 POSITIVES Strong competitive position in the Southeast region of Mexico SHAREHOLDING STRUCTURE TOTAL Aggressiv e pricing strategy , with broad-based discounts across the store Chedraui Family 84% Free Float 16% NEGATIVES Low gross margins due to aggressiv e pricing strategies Small scale, prev enting better negotiations with suppliers

NET DEBT VS. NET DEBT/EBITDA ROIC VS WACC OWNERSHIP STRUCTURE

9,000 1.2 x 18% 8,000 1.0 x 16% 7,000 14% 6,000 0.8 x Free Float 12% 16% 5,000 0.6 x 10% 4,000 8% 3,000 0.4 x 6% 2,000 0.2 x 4% 1,000 2% - 0.0 x 2009 2010 2011 2012 2013 2014 0% 2009 2010 2011 2012 2013 2014 Ne t Deb t (L HS) Chedraui Family 84% MxP$mn Short Term (L HS) Net Debt/EBITDA (RHS) ROIC WACC

FINANCIAL METRICS (MxP$ m 2011A 2012E 2013E 2014E 2015E 2016E OPERATING METRICS 2011A 2012E 2013E 2014E 2015E 2016E Rev enues 57,487 65,983 74,555 85,732 100,486 118,903 Total selling space Sqm 1,241,110 1,343,691 1,513,572 1,721,503 1,987,401 2,282,699 Gross Profit 11,323 12,863 14,590 16,838 19,842 23,652 # of stores 219 233 258 294 346 402 Gross margin 19.7% 19.5% 19.6% 19.6% 19.7% 19.9% SSS growth (nominal) 2.2% 4.0% 5.5% 5.5% 5.5% 5.5% EBIT 2,715 3,209 3,892 4,782 5,992 7,567 Sales / Avg Sqm (P$ / sqm) 49,562 51,055 52,187 53,001 54,186 55,691 EBIT margin 4.7% 4.9% 5.2% 5.6% 6.0% 6.4% y /y growth -4.7% 3.0% 2.2% 1.6% 2.2% 2.8% EBITDA 3,709 4,295 5,103 6,146 7,551 9,359 Ebit / Av g Sqm (P$ / sqm) 2,340 2,483 2,724 2,956 3,231 3,544 EBITDA margin 6.5% 6.5% 6.8% 7.2% 7.5% 7.9% Adj. EBITDA 3,709 4,295 5,103 6,146 7,551 9,359 LEVERAGE 2011A 2012E 2013E 2014E 2015E 2016E Net financial expenses (751) (950) (1,039) (1,187) (1,042) (1,200) Net debt/ Adj. EBITDA 1.1 0.8 0.7 0.6 0.6 0.5 Tax es (427) (490) (620) (782) 1,374 1,768 Net debt / Equity 0.2 0.2 0.2 0.2 0.2 0.1 Net income 1,517 1,741 2,203 2,779 3,538 4,555 Foreign Debt / Total Debt 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% Net margin 2.6% 2.6% 3.0% 3.2% 3.5% 3.8% Capex / Operat.Cash Flow (1.5) (0.9) (0.9) (1.0) (0.7) (0.7) # shares ('000) 957 957 957 958 964 964 EBITDA/Net Interest Ex p. (4.9) (4.5) (4.9) (5.2) (7.2) (7.8) EPS (Mx P$) 1.6 1.8 2.3 2.9 3.7 4.7 NOPAT 2,117 2,503 3,036 3,730 4,314 5,448 RETURN / YIELD 2011A 2012E 2013E 2014E 2015E 2016E Depreciation 995 1,086 1,211 1,364 1,559 1,792 ROIC 10.0% 10.5% 11.8% 13.3% 13.8% 15.5% Capex 5,045 3,500 4,032 5,185 6,531 7,487 WACC 9.9% 9.9% 9.9% 9.8% 9.7% 9.8% FCFE (1,692) 590 725 1,066 826 956 Cost of Equity (ke) 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Dividends 216 226 261 331 417 531 ROE 8.9% 9.3% 10.7% 12.1% 13.5% 15.1% Total assets 37,122 41,304 45,796 51,916 59,335 67,959 FCF Yield -4.8% 1.7% 2.1% 3.0% 2.4% 2.7% Cash 999 1,951 2,415 3,150 3,559 3,984 Div . Yield 1% 1% 1% 1% 1% 2% Change in WK (230) 651 886 1,154 1,302 1,642 Total Debt 5,233 5,500 6,000 7,000 8,000 8,500 VALUATION 2011A 2012E 2013E 2014E 2015E 2016E Net debt 4,234 3,550 3,586 3,850 4,442 4,516 EV/Sales 0.7 0.6 0.5 0.5 0.4 0.3 Book v alue 17,125 18,624 20,567 23,015 26,137 30,161 EV / Adj. EBITDA 10.6 9.0 7.6 6.3 5.2 4.2 Market cap. 34,961 34,961 34,961 34,961 34,961 34,961 EV / IC 1.7 1.6 1.4 1.3 1.2 1.1 EV 39,195 38,511 38,547 38,811 39,403 39,477 P/E 23.0 20.1 15.9 12.6 9.9 7.7 Inv ested capital 23,689 24,677 26,651 29,357 33,062 37,151 P/B 2.0 1.9 1.7 1.5 1.3 1.2 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 14 06 November 2012

Exhibit 12: Coca-Cola FEMSA – Model Summary BASICS COMPANY DESCRIPTION Sector Beverage Ticker KOF Coca-Cola FEMSA produces and distributes Coca-Cola, Sprite, Fanta, Lift and other trademark Price (Mx P$) 169 beverages of The Coca-Cola Company in Mexico, Guatemala, Nicaragua, Costa Rica, Panama Target (Mx P$) 140 Target (US$) 114.0 Colombia, Venezuela, Brazil and Argentina, along with bottled water, beer and other bev erages Recommendation NEUTRAL in some of these territories. The Coca-Cola Company owns a 28.7% equity stake in KOF. Mkt. cap. (Mx P$ mn) 342,936.2 Daily liquidity (US$ mn /day ) - 3M av g 33.6 POSITIVES Strong operators and high flex ibility to change package / channel mix . SHAREHOLDING STRUCTURE No. Of shares (mn) % Leading bottler worldwide in terms of negotiations with TCCC. FEMSA 992.1 (Series A) 48.9% Ov erlooked recovery in Mexican market The Coca Cola Co. 583.5 (Series D) 28.7% Free Float 270.9 (Series L) 13.3% NEGATIVES Grupo Tampico 63.5 (Series L) 3.1% Lower exposure to Brazil as compared to Andina. CIMSA 75.4 (Series L) 3.7% Low clarity on deploy ment of cash. FoQue 45.1 (Series L) 2.2% Lower div idend distribution compared to peers. Total 2,030.5 *Series A and D hav e v oting rights **Series L shares don't hav e v oting rights

DEBT VS. NET DEBT/EBITDA ROIC VS WACC OWNERSHIP STRUCTURE

25,000 0.6 x Grupo Tampico FoQue 20% CIMSA 3% 2% 18% 4% 20,000 0.3 x 16% 15,000 14% 0.0 x 12% 10,000 10% Free Float 13% -0.3 x 8% 5,000 6% FEMSA 49% 4% 0 -0.6 x 2009 2010 2011 2012 2013 2014 2% The Coca Cola Co. 0% Total Debt (LHS) 2009 2010 2011 2012 2013 2014 29% MxP$mn Short Term (LHS) Net Debt/EBITDA (RHS) ROIC WACC

FINANCIAL METRICS (M xP$ 2009A 2010A 2011A 2012E 2013E 2014E OPERATING METRICS 2009A 2010A 2011E 2012E 2013E 2014E Revenues 102,767 103,456 123,224 147,381 153,045 165,738 Volume (MnUC) 2,429 2,500 2,649 3,103 3,275 3,412 Gross Profit 47,815 47,922 56,539 68,068 71,379 77,803 COGS/UC (Ps$ / UC) 19.7 19.2 21.3 21.9 21.8 22.8 Gross margin 46.5% 46.3% 45.9% 46.2% 46.6% 46.9% Ebit/UC (Ps$ / UC) 6.5 6.8 7.1 7.4 7.7 8.3 EBIT 15,835 17,079 18,739 23,102 25,296 28,352 Price per UC (Ps$ / UC) 42.1 41.2 46.3 47.4 46.6 48.4 EBIT margin 15.4% 16.5% 15.2% 15.7% 16.5% 17.1% UC's per employ ee 69,343 69,965 72,682 83,487 86,385 88,223 EBITDA 19,746 21,022 23,400 28,795 31,188 34,723 # employees 35,026 35,727 36,441 37,170 37,913 38,672 EBITDA margin 19.2% 20.3% 19.0% 19.5% 20.4% 21.0% Adj. EBITDA 19,746 21,022 23,400 28,795 31,188 34,723 Net financial ex penses (1,609) (1,463) (1,096) (881) (260) 412 LEVERAGE 2009A 2010A 2011E 2012E 2013E 2014E Tax es (4,043) (4,260) (5,603) (6,765) (7,572) (8,604) Net debt/ Adj. EBITDA 0.3 0.2 0.4 0.2 (0.1) (0.4) Net income 8,523 9,800 10,819 14,322 16,031 18,473 Net debt / Equity 0.1 0.1 0.1 0.1 (0.0) (0.1) Net margin 8.3% 9.5% 8.8% 9.7% 10.5% 11.1% Foreign Debt / Total Debt 53% 53% 53% 53% 53% 53% # shares ('000) 1,846 1,846 1,881 2,019 2,031 2,031 Capex / Operat.Cash Flow 0.4 0.4 0.4 0.5 0.4 0.4 EPS (MxP$) 4.6 5.3 5.8 7.1 7.9 9.1 EBITDA/Net Interest Exp. 12.3 14.4 21.4 32.7 119.9 (84.2) NOPAT 10,915 12,082 12,554 15,941 17,454 19,647 Depreciation (3,911) (3,943) (4,661) (5,693) (5,892) (6,371) RETURN / YIELD 2009A 2010A 2011E 2012E 2013E 2014E Capex (6,282) (7,478) (7,826) (12,033) (9,030) (9,281) ROIC 14.6% 17.2% 12.1% 13.5% 14.5% 16.1% FCFE 1,817 9,054 (10,473) 8,131 14,785 17,082 WACC 11.8% 11.4% 11.3% 11.6% 11.6% 11.7% Div idends 1,344 2,604 4,366 5,625 6,075 6,560 Cost of Equity (ke) 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% Total assets 110,661 103,500 140,514 154,166 166,507 181,438 ROE 13.5% 14.7% 13.7% 13.4% 13.7% 14.3% Cash 9,740 12,142 12,173 14,679 23,390 33,911 FCF Yield 0.7% 3.6% -4.1% 2.9% 5.3% 6.1% Change in WK 1,045 (2,504) (1,874) 385 1,182 999 Div. Yield 0.5% 1.0% 1.7% 2.0% 2.2% 2.4% Total Debt 15,986 17,295 22,518 20,202 20,284 19,707 VALUATION 2009A 2010A 2011E 2012E 2013E 2014E Net debt 6,246 5,153 10,345 5,523 (2,479) (12,480) EV / Adj. EBITDA 16.1 15.1 14.0 12.0 10.9 9.5 Book value 68,472 65,185 93,053 107,130 117,087 128,999 EV / IC 4.3 4.5 3.2 2.9 2.8 2.7 Market cap. 311,833 311,839 317,725 341,032 342,936 342,936 P/E 36.6 31.8 29.4 23.8 21.4 18.6 EV 318,079 316,992 328,070 346,555 340,457 330,456 P/B 4.6 4.8 3.4 3.2 2.9 2.7 Inv ested capital 74,718 70,338 103,398 118,048 120,003 121,915 EV/Sales 3.1 3.1 2.7 2.4 2.2 2.0 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 15 06 November 2012

Exhibit 13: FEMSA – Model Summary BASICS COMPANY DESCRIPTION Sector Beverage Ticker FMX Femsa is a holding company whose principal activities are grouped under the following Price (MxP$) 117.46 subsidiaries: Coca-Cola FEMSA, which engages in the production, distribution and Target (MxP$) 105.00 Target (US$) 85.0 marketing of non-alcoholic beverages; FEMSA Comercio, which engages in the operation of Recommendation NEUTRAL conv enience stores. The company holds a 20% stake in Heineken Mkt. cap. (Mx P$ mn) 420,298.5 Daily liquidity (US$ mn / day) - 3M avg 67.6 POSITIVES Realization of hidden v alue after ex clusive agrement to sell Heineken beer at Oxx o in 10 y ears SHAREHOLDING STRUCTURE B UNITS (mn) BD UNITS (mn) TOTAL Strong growth outlook and high returns for c-store business Controlling ownership Trust 6,915 75% 0 0% 38.6% Strong execution at KOF Free float 2,332 26% 8,645 100% 61.4% TOTAL 9,246 8,645 NEGATIVES **B - FULL VOTING RIGHTS Bearish outlook for Heineken in Western Europe, Russia and Nigeria. **BD - LIMITED VOTING RIGHTS / 25% DIVIDEND PREMIUM Cash allocation uncertainty

DEBT VS. NET DEBT/EBITDA ROIC VS WACC OWNERSHIP STRUCTURE

50,000 35% D-L Shares D-B Shares B Shares 0.9 x 4,322,355,540 4,322,355,540 9,246,420,270 30% 40,000 0.7 x (Full Voting) 0.5 x 25% 30,000 ADS’s BD Units B Units 0.3 x 20% 2,161,177,770 1,417,048,500 20,000 0.1 x 15% (NYSE: FMX) (BMV: FEMSAUBD) (BMV: FEMSAUB) -0.1 x 1 ADS = 1 BD Unit = 1 B Unit = 10,000 10% -0.3 x 10 BD Units 2 D-L Shares 5 B Shares 5% 2 D-B Shares 0 -0.5 x 1 B Share 2009 2010 2011 2012 2013 2014 0% BMV 2009 2010 2011 2012 2013 2014 NYSE The Shares trade on the Mexican Total Debt (LHS) The BD Units are listed on the form Stock Exchange in the form of BD

MxP$mn Short Term (LHS) ADS’s under the symbol FMX Units and B Units Net Debt/EBITDA (RHS) ROIC WACC

FINANCIAL METRICS (M xP$ m 2009A 2010A 2011A 2012E 2013E 2014E OPERATING METRICS 2009A 2010A 2011A 2012E 2013E 2014E Revenues 201,463 176,477 201,540 232,838 250,630 276,629 Number of Ox xo Units 7,334 8,426 9,561 10,713 11,882 13,104 COGS (105,579) (101,011) (117,236) (135,058) (144,796) (159,340) Revenues / Store (P$ mn / store) 7.30 7.39 7.75 7.98 8.21 8.46 Gross Profit 95,884 75,466 84,304 97,780 105,834 117,288 Volumes (KOF - UC mn) 2,429 2,500 2,649 3,103 3,275 3,412 EBIT 26,944 23,285 24,894 29,697 33,354 37,841 Price per UC (Ps$ / UC) 42.1 41.2 46.3 47.4 46.6 48.4 EBIT margin 13.4% 13.2% 12.4% 12.8% 13.3% 13.7% Ebit/UC (Ps$ / UC) 6.5 6.8 7.1 7.4 7.7 8.3 EBITDA 36,953 30,277 31,716 37,636 41,811 47,126 EBITDA margin 18.3% 17.2% 15.7% 16.2% 16.7% 17.0% Adj. EBITDA 36,953 30,277 31,716 37,636 41,811 47,126 Net financial expenses (4,631) (2,685) (1,272) (768) (244) 202 LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Tax es (3,894) (5,576) (7,553) (8,421) (9,269) (10,380) Net debt/ Adj. EBITDA 0.7 (0.1) 0.0 (0.0) (0.3) (0.5) Adjusted Net income 9,879 13,402 15,424 16,017 19,678 23,365 Net debt / Equity 0.2 (0.0) 0.0 (0.0) (0.1) (0.1) Net margin 4.9% 7.6% 7.7% 6.9% 7.9% 8.4% Foreign Debt / Total Debt 31% 31% 31% 31% 31% 31% # shares ('000) 3,578 3,578 3,578 3,578 3,578 3,578 Capex / Operat.Cash Flow (0.4) (0.5) (0.5) (0.6) (0.4) (0.4) EPS (MxP$) 2.8 3.7 4.3 4.5 5.5 6.5 EBITDA/Net Interest Exp. 8.0 11.3 24.9 49.0 171.1 (233.1) NOPAT 39,485 17,880 18,322 21,743 23,681 27,245 Depreciation 10,009 6,992 6,822 7,939 8,457 9,286 RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 13,220 11,803 12,515 16,553 14,087 14,899 ROIC 28.8% 21.7% 15.9% 17.2% 18.2% 20.1% FCFE 4,408 10,885 (16,361) 2,247 12,839 18,796 WACC 10.4% 11.6% 10.2% 10.4% 10.5% 10.5% Dividends 1,620 1,750 4,600 6,200 0 7,232 Cost of Equity (ke) 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Total assets 211,091 213,454 263,830 281,531 296,354 318,421 ROE 8.5% 26.2% 8.0% 7.7% 8.9% 9.9% Cash 17,636 26,771 27,170 28,598 34,742 46,306 FCF Yield 1.1% 2.6% -3.9% 0.5% 3.1% 4.5% Change in WK 3,045 (2,714) (1,397) 94 2,075 231 Div. Yield 0.39% 0.42% 1.11% 1.49% 1.61% 1.74% Total Debt 42,618 24,757 28,711 26,917 23,495 24,147 Net debt 24,982 (2,014) 1,541 (1,681) (11,247) (22,159) VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book v alue 115,829 153,154 192,103 207,300 220,282 236,415 Adj. EV / EBITDA 15.9 20.2 19.9 17.1 14.9 13.0 Market cap. 420,298 420,298 420,298 420,298 420,298 420,298 EV / IC 3.3 5.1 3.7 3.3 3.1 2.9 EV 445,280 418,284 421,839 418,617 409,052 398,140 P/E 42.5 31.4 27.2 26.2 21.4 18.0 Inv ested capital 136,995 82,347 115,001 126,646 130,063 135,284 P/B 3.6 2.7 2.2 2.0 1.9 1.8 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 16 06 November 2012

Exhibit 14: Genomma Lab – Model Summary BASICS COMPANY DESCRIPTION Sector Retail Ticker LABB Genomma Lab is one of the fastest growing pharma and personal care companies in Latam. The company develops, sells Price (MxP$) 26.65 and markets a broad range of premium branded products, many of which are leaders in categories in which they compete Target (MxP$) 30.0 Target (US$) 2.3 in terms of sales and market share. Recommendation NEUTRAL Mkt. cap. (MxP$ mn) 28,055.8 Daily liquidity (US$ mn /day ) - 3M av g 7.8 POSITIVES Strong growth opportunities in OTC and PC segments in Mex ico SHAREHOLDING STRUCTURE Potential for operating leverage and market share gains via Line Ex tensions Control group 41% High free cash flow generation giv en 'asset-light' model Free Float 59% NEGATIVES Low earnings visibility Short term growth in international segment highly dependent on competitive US market

ROIC VS WACC OWNERSHIP STRUCTURE

ROIC WACC 45.2%

29.2% Control group, Free Float, 59% 41% 20.2% 20.1% 20.3% 20.4%

10.4% 10.4% 10.4% 10.6% 10.8% 11.0%

2010 2011 2012 2013 2014 2015

FINANCIAL METRICS (MxP$ mn 2010 2011 2012E 2013E 2014E 2015E OPERATING METRICS 2010 2011 2012E 2013E 2014E 2015E Rev enues 6,264 8,075 9,722 12,307 15,320 18,680 Base brands growth 9.4% 18.1% 6.2% 9.0% 8.4% 7.8% Gross Profit 4,449 5,612 6,636 8,401 10,458 12,750 # Line extensions launches 107 88 Gross margin 71.0% 69.5% 68.3% 68.3% 68.3% 68.3% # New Brands launched 9 14 EBIT 1,615 2,057 2,480 3,146 3,949 4,851 International sales % total 23% 23% 26% 29% 31% 33% EBIT margin 25.8% 25.5% 25.5% 25.6% 25.8% 26.0% Revenue mix Mexico** 58-35-7 46-48-6 46-48-6 39-56-5 39-56-5 39-56-5 EBITDA 1,694 2,139 2,554 3,247 4,072 5,002 EBITDA margin 27.0% 26.5% 26.3% 26.4% 26.6% 26.8% ** Mex ico: OTC/PC/Generics Adj. EBITDA 1,694 2,139 2,554 3,247 4,072 5,002 Net financial expenses (2)(42)(77)(76)(53)(15)LEVERAGE 2010E 2011 2012E 2013E 2014E 2015E Tax es (482) (617) (763) (976) (1,287) (1,598) Net debt/ Adj. EBITDA (0.9) (0.3) (0.1) (0.3) (0.5) (0.7) Net income 1,073 1,397 1,560 2,037 2,568 3,187 Net debt / Equity (0.36) (0.10) (0.03) (0.10) (0.16) (0.25) Net margin 17.1% 17.3% 16.0% 16.6% 16.8% 17.1% Foreign Debt / Total Debt 2.9% 2.9% 0.0% 0.0% 0.0% 0.0% # shares ('mn) 1,053 1,053 1,053 1,053 1,053 1,053 Capex / Operat.Cash Flow (0.2) (0.0) (0.1) (0.1) (0.1) (0.1) EPS (MxP$) 1.019 1.327 1.482 1.93 2.439 3.027 EBITDA/Net Interest Exp. 708 50 33 42 77 344 NOPAT 1,120 1,433 1,676 2,140 2,646 3,250 Depreciation 79 82 74 101 124 151 RETURN / YIELD 2010 2011 2012E 2013E 2014E 2015E Capex 227 66 120 150 190 220 ROIC 45.2% 29.2% 20.2% 20.1% 20.3% 20.4% FCFE 83 84 1,071 731 933 1,766 WACC 10.4% 10.4% 10.4% 10.6% 10.8% 11.0% Dividends 00000 0Cost of Equity (ke)11.8%11.8%11.8%11.8%11.8%11.8% Total assets 5,831 9,194 12,233 15,020 18,438 22,580 ROE 30.1% 29.1% 25.0% 25.6% 25.0% 24.2% Cash 1,454 1,539 2,610 3,341 4,274 6,041 FCF Yield 0.3% 0.3% 3.8% 2.6% 3.3% 6.3% Change in WK (419) (1,223) (631) (1,207) (1,514) (1,306) Div. Yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total Debt 0 970 2,420 2,420 2,420 2,420 Net debt (1,454) (569) (190) (921) (1,854) (3,621) VALUATION 2010 2011 2012E 2013E 2014E 2015E Book v alue 4,085 5,531 6,933 8,991 11,553 14,734 EV / Adj. EBITDA 15.7 12.8 10.9 8.4 6.4 4.9 Market cap. 28,056 28,056 28,056 28,056 28,056 28,056 EV / IC 9.4 3.9 2.9 2.3 1.8 1.4 EV 26,601 27,487 27,866 27,135 26,201 24,435 P/E 26.2 20.1 18.0 13.8 10.9 8.8 Invested capital 2,829 7,002 9,621 11,716 14,324 17,562 P/B 6.9 5.1 4.0 3.1 2.4 1.9 EV/Sales 4.2 3.4 2.9 2.2 1.7 1.3

Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 17 06 November 2012

Exhibit 15: Grupo Famsa – Model Summary BASICS COMPANY DESCRIPTION Sector RETAIL Ticker GFAMSAA Grupo Famsa operates 407 department stores in Mex ico and US. Famsa targets the low Price (Mx P$) 15.82 to middle income segment offering consumer credit to its customers. Target (Mx P$) 25.00 Currently , Famsa sells more than 82% of its products on credit Recommendation OUTPERFORM Mkt. cap. (MxP$ mn) 6,948.0 POSITIVES Daily liquidity (US$ mn / day) - 3M avg 0.7 Differentiated consumer finance model Famsa is well positioned in an underdev eloped and highly fragmented market. SHAREHOLDING STRUCTURE # shares (mn) % Banco Ahorro Famsa, the company ’s commercial banking arm, is a compelling story within the Humberto Garza and family 279.3 63.6% company Free Float 159.9 36.4% Total 439.2 NEGATIVES High ex posure to discretionary consumption both in Mex ico and in US Competition from other consumer finance retailers, namely Elektra and Coppel.

NET DEBT VS. NET DEBT/EBITDA ROIC VS WACC OWNERSHIP STRUCTURE

25,000 10.0 x 10% 9.0 x 9% 20,000 8.0 x 8% 7.0 x 7% 15,000 6.0 x 6% 5.0 x 5% Free Float 10,000 4.0 x 36% 4% 3.0 x 5,000 2.0 x 3% 1.0 x 2% Humberto Garza and family 0 0.0 x 1% 64% 2008 2009 2010 2011 2012 2013 0%

Total Debt (LHS) 2008 2009 2010 2011 2012 2013 Short Term (LHS)

MxP$mn Net Debt/EBITDA (RHS) ROIC WACC

FINANCIAL METRICS (M xP$ m 2008A 2009A 2010A 2011A 2012E 2013E OPERATING MET RICS 2008A 2009A 2010A 2011A 2012E 2013E Revenues 14,763 14,947 14,993 15,232 17,360 18,916 Total selling space Sqm 547,415 544,456 541,387 539,918 562,712 592,160 Gross profit 7,191 7,592 7,632 7,881 8,898 9,705 Growth in selling area 10.7% -0.5% -0.6% -0.3% 4.2% 5.2%

Gross margin 48.7% 50.8% 50.9% 51.7% 51.3% 51.3% Sales / av g sqm (Ps$ / sqm) 28,274 27,344 27,415 27,983 31,263 32,660 EBIT 1,031 1,123 1,307 1,317 1,799 1,999 SSS growth (nominal terms) -9.1% -4.5% 5.8% 5.8% 6.0% 6.0% EBIT margin 7.0% 7.5% 8.7% 8.6% 10.4% 10.6% # of stores 421 410 410 401 437 469 EBITDA 1,416 1,596 1,702 1,721 2,261 2,509 EBITDA margin 9.6% 10.7% 11.4% 11.3% 13.0% 13.3% Adj. EBITDA 1,416 1,596 1,702 1,721 2,261 2,509 LEVERAGE 2008A 2009A 2010A 2011A 2012E 2013E Net financial ex penses 858 1,110 1,086 1,212 1,125 1,110 Net debt/ Adj. EBITDA 6.1 6.0 7.3 8.6 5.6 5.5 Tax es 56 210 592 181 (164) (216) Net debt / Equity 1.18 1.15 1.39 1.61 1.25 1.28 Net income 587 97 706 126 516 680 Foreign Debt / Total Debt 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Net margin 4.0% 0.7% 4.7% 0.8% 3.0% 3.6% Capex / Operat.Cash Flow (0.5) (0.1) (0.1) (0.2) (0.3) (0.3) # shares ('000) 329 439 439 439 439 439 EBITDA/Net Interest Ex p. 1.6 1.4 1.6 1.4 2.0 2.3 EPS (MxP$) 1.79 0.22 1.61 0.29 1.18 1.55 NOPAT 773 546 967 704 926 1,029 RET URN / YIELD 2008A 2009A 2010A 2011A 2012E 2013E Depreciation 385 473 395 405 461 510 ROIC 5.1% 4.0% 9.5% 6.5% 8.6% 9.4% Capex 677 262 231 286 526 669 WACC 8.1% 8.7% 7.7% 7.8% 7.2% 6.8% FCFE 1,847 (2,444) (592) 323 427 492 Cost of Equity (ke) 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% Div idends 750 0 0 0 0 0 ROE 8.2% 1.2% 8.2% 5.1% 5.2% 6.5% Total assets 20,982 22,604 25,668 28,322 29,801 32,430 FCF Yield 26.6% -35.2% -8.5% 4.6% 6.1% 7.1% Cash 1,450 1,706 1,114 1,437 3,243 3,735 Div . Yield 10.8% 0.0% 0.0% 0.0% 0.0% 0.0% Change in WK (2,329) (1,748) (3,122) (1,074) (1,410) (1,653) Total Debt 10,054 11,276 13,588 16,252 15,873 17,504 VALUAT ION 2008A 2009A 2010A 2011A 2012E 2013E Net debt 8,604 9,570 12,474 14,815 12,630 13,768 EV/Sales 1.1 1.1 1.3 1.4 1.1 1.1 Book v alue 7,289 8,350 8,965 9,199 10,102 10,772 EV / Adj. EBITDA 11.0 10.3 11.4 12.6 8.7 8.3 Market cap. 6,948 6,948 6,948 6,948 6,948 6,948 EV / IC 1.0 1.5 0.9 0.9 1.8 1.9 EV 15,552 16,518 19,422 21,763 19,578 20,716 P/E 11.8 71.4 9.8 55.2 13.5 10.2 Inv ested capital 16,276 10,711 21,607 24,191 10,837 11,019 P/B 1.0 0.8 0.8 0.8 0.7 0.6 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 18 06 November 2012

Exhibit 16: Grupo Modelo – Model Summary BASICS COMPANY DESCRIPTION Sector Beer Ticker GMODELOC Grupo Modelo, founded in 1925, is the leader in Mexico in the production, distribution and Price (MxP$) 115.56 marketing of beer, with a total annual installed capacity in Mexico of 70mn hl. Target (MxP$) 87.50 Grupo Modelo has a 50/50 JV in the US with Constellation Brands, Crow Imports, the top Recommendation NEUTRAL importer in the country. Mkt. cap. (MxP$ mn) 373,718 2.09% POSITIVES Daily liquidity (US$ mn /day) - 3M avg 38.7 Strong brands (Corona, Modelo Especial, Negra Modelo and Pacifico). Unleveraged balance sheet. SHAREHOLDING STRUCTURE Shares (mn) % (%) Voting Rights Controlling Shareholders (series A) 1,459 45.1% 56.1% NEGATIVES Anheuser-Busch (series B) 1,142 35.3%43.9% i) Lack of visibility regarding long term strategy. Free Float (series C) 633 19.6%0.0% ii) Crown Imports JV in the US has several years without delivering results. TOTAL 3,234 100% 100.0% iii) Modelo might need to pay a steep multiple to Constellation Brands, its partner in the US, to *Series A and B have voting rights regain full control of that business. **Series C don't have voting rights

ROIC VS WACC OWNERSHIP STRUCTURE

30% Anheuser-Busc h Public Float- Mex icanBolsha Bolsa Controlling Shareholders Series B–Voting Shares Series C–Non -Voting Shares Shares Series A–Voting Shares 1,142,017,984 650,351,920 1,495,389,728 25% 35.3%E 19.6%E 45.1%E 43.9%V 0.0%V 56.1%V 20% GrupoModeloGrupo Modelo 15% S.A.B. de CV 23% 10% 77%

E = Economic DibloS.A. de C.V. Constellation (STZ) 5% (Brew ing Operations) ConstellationSTZ ( ) V = Voting 100% 50% 0% 50% 2009 2010 2011 2012 2013 2014 All Domestic Operation Crown Imports Units (U.S.) ROIC WACC (Mex ico)

FINANCIAL METRICS (M xP$ m 2009A 2010A 2011A 2012E 2013E 2014E OPERATING METRICS 2009A 2010A 2011A 2012E 2013E 2014E Revenues 81,862 85,019 91,203 99,427 103,323 110,636 Domestic Volume (000's Hl) 37,253 36,844 39,088 40,338 41,992 43,881 Gross profit 44,028 45,552 49,427 53,744 55,806 60,492 Export Volume (000's Hl) 15,267 15,830 16,901 17,594 18,122 18,575 Gross margin 53.8% 53.6% 54.2% 54.1% 54.0% 54.7% Volume (000's Hl) 52,520 52,674 55,989 57,932 60,113 62,456 EBIT 21,730 21,694 23,842 26,292 27,637 30,896 COGS/HL 838 865 883 928 928 969 EBIT margin 26.5% 25.5% 26.1% 26.4% 26.7% 27.9% Ebit/HL 414 412 426 454 460 495 EBITDA 24,970 24,933 27,421 29,979 31,528 34,991 Price per HL 1,440 1,478 1,501 1,584 1,575 1,614 EBITDA margin 30.5% 29.3% 30.1% 30.2% 30.5% 31.6% Adj. EBITDA 22,277 22,180 24,638 24,995 28,857 34,991 Net financial expenses 665 651 949 833 957 1,005 LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Tax es (4,282) (4,962) (5,530) (6,051) (6,882) (7,559) Net debt/ Adj. EBITDA (1.0) (1.1) (1.3) (1.4) (1.5) (1.5) Net income 8,630 9,943 11,945 11,944 12,687 14,690 Net debt / Equity (0.3) (0.3) (0.4) (0.5) (0.5) (0.6) Net margin 10.5% 11.7% 13.1% 12.0% 12.3% 13.3% Foreign Debt / Total Debt ------# shares ('000) 3,234 3,234 3,234 3,234 3,234 3,234 Capex / Operat.Cash Flow 0.3 0.2 0.2 0.3 0.2 0.2 EPS (MxP$) 2.7 3.1 3.7 3.7 3.9 4.5 EBITDA/Net Interest Exp. 33.5 34.1 25.9 30.0 30.2 34.8 NOPAT 16,694 16,465 18,342 19,796 20,452 23,172 Depreciation 3,240 3,239 3,579 3,686 3,891 4,095 RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex (5,729) (3,969) (4,151) (4,971) (5,166) (4,979) ROIC 19.9% 19.1% 21.2% 23.0% 23.5% 26.4% FCFE 8,510 13,397 20,503 17,968 19,049 21,549 WACC 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% Dividends 0 11,239 12,045 14,099 10,710 11,991 Cost of Equity (ke) 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% Total assets 117,362 122,516 129,105 134,617 144,248 155,666 ROE 12.6% 13.2% 14.8% 17.7% 18.5% 18.9% Cash 21,655 23,814 32,271 36,140 44,480 54,038 FCF Yield 2.3% 3.6% 5.5% 4.8% 5.1% 5.8% Change in WK 2,532 (2,201) (125) 51 580 (150) Div. Yield 0.0% 3.0% 3.2% 3.8% 2.9% 3.2% Gross debt 000000 Net debt (21,655) (23,814) (32,271) (36,140) (44,480) (54,038) VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 73,854 77,167 81,831 80,022 81,760 83,950 adj. EV / EBITDA 20.8 20.8 18.4 18.0 15.3 12.3 Market cap. 373,718 373,718 373,718 373,718 373,718 373,718 EV / IC 5.5 5.3 5.3 5.2 5.1 4.9 EV 463,693 461,534 453,076 449,207 440,868 431,310 P/E 43.3 37.6 31.3 31.3 29.5 25.4 Invested capital 84,740 87,799 85,303 86,537 87,233 88,266 P/B 5.1 4.8 4.6 4.7 4.6 4.5 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 19 06 November 2012

Exhibit 17: Soriana – Model Summary BASICS COMPANY DESCRIPTION Sector Retail Ticker SORIANAB Founded in 1968 and publicly listed in 1987, Monterrey -based Soriana is the largest retailer in Northern Price (MxP$) 42.86 Mex ico and the second largest retailer in Mex ico (after the acquisition of Gigante stores in 2007). Target (Mx P$) 42.00 Controlled by the Martín family , it operates the Soriana hy permarket chain with Ps$93.7bn in sales Recommendation OUTPERFORM and 508 stores as of YE 2010 Mkt. cap. (MxP$ mn) 77,148.0 Daily liquidity (US$ mn / day) - 3M avg 2.4 POSITIVES Rev amped format segmentation might bring upside to rev enues and margins SHAREHOLDING STRUCTURE TOTAL Aggressiv e loy alty program, differentiating itself from Walmex 's EDLP strategy Martín Bringas Family 57% Martín Soberon Family 29% Free Float 14% NEGATIVES Tough integration of Gigante stores, which have lower profitability levels compared to former Soriana stores. Limited brand equity in the Central region of Mex ico and in Mex ico City

NET DEBT VS. NET DEBT/EBITDA ROIC VS WACC OWNERSHIP STRUCTURE

10,000 0.6 x 25% 9,000 0.4 x

8,000 0.2 x 20% 7,000 0.0 x Free Float 6,000 -0.2 x 14% 15% 5,000 -0.4 x 4,000 -0.6 x 10% 3,000 -0.8 x

2,000 -1.0 x Martín Soberon Martín Bringas 1,000 -1.2 x 5% Family Family 29% - -1.4 x 57% 2009 2010 2011 2012 2013 2014 0% 2009 2010 2011 2012 2013 2014 Ne t Deb t (L HS)

MxP$mn Short Term (L HS) ROIC WACC Net Debt/EBITDA (RHS)

FINANCIAL METRICS (M xP$ 2011A 2012E 2013E 2014E 2015E 2016E OPERATING MET RICS 2011A 2012E 2013E 2014E 2015E 2016E Revenues 98,263 105,194 120,036 138,894 163,427 193,836 Total selling space Sqm 3,081,100 3,241,890 3,478,219 3,756,549 4,125,918 4,533,787 Gross Profit 20,404 22,069 25,423 29,694 34,939 41,440 # of stores 558 611 686 781 906 1,046 Gross margin 20.8% 21.0% 21.2% 21.4% 21.4% 21.4% SSS growth (nominal) 2.6% 5.0% 5.0% 5.0% 5.0% 5.0%

EBIT 4,949 5,526 7,164 9,267 11,072 14,293 Sales / Av g Sqm (P$ / sqm) 32,714 33,274 35,724 38,396 41,466 44,767 EBIT margin 5.0% 5.3% 6.0% 6.7% 6.8% 7.4% y /y growth 0.2% 1.7% 7.4% 7.5% 8.0% 8.0% EBITDA 6,968 7,744 9,557 11,891 13,992 17,564 Ebit / Av g Sqm (P$ / sqm) 1,683 1,748 2,132 2,562 2,809 3,301 EBITDA margin 7.1% 7.4% 8.0% 8.6% 8.6% 9.1% Adj. EBITDA 6,968 7,744 9,557 11,891 13,992 17,564 LEVERAGE 2011A 2012E 2013E 2014E 2015E 2016E Net financial ex penses (232) (1) 186 407 640 915 Net debt/ Adj. EBITDA 0.4 (0.2) (0.5) (0.9) (1.0) (1.2) Tax es (1,393) (1,669) (2,133) (2,693) 3,263 4,239 Net debt / Equity 0.08 - 0.04 - 0.11 - 0.19 - 0.23 - 0.29 Net income 3,060 4,025 5,370 7,096 8,593 11,141 Foreign Debt / Total Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Net margin 3.1% 3.8% 4.5% 5.1% 5.3% 5.7% Capex / Operat.Cash Flow 0.6 0.6 0.7 0.7 (0.5) (0.4) # shares ('000) 1,800 1,800 1,800 1,800 1,800 1,800 EBITDA/Net Interest Ex p. (30.0) (5,480.8) 51.5 29.2 21.9 19.2 EPS (MxP$) 1.7 2.2 3.0 3.9 4.8 6.2 NOPAT 3,401 3,906 5,015 6,487 7,751 10,005 RET URN / YIELD 2011A 2012E 2013E 2014E 2015E 2016E Depreciation 2,019 2,218 2,393 2,624 2,919 3,271 ROIC 6.5% 7.9% 10.2% 13.4% 15.7% 19.6% Capex (3,464) (3,500) (5,296) (6,350) 8,484 9,205 WACC 8.8% 9.2% 9.2% 9.3% 9.3% 9.4% FCFE 995 424 3,700 5,068 4,191 6,697 Cost of Equity (ke) 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Dividends 000000ROE 7.7%10.5%12.4%14.0%14.8%16.4% Total assets 74,084 75,102 83,759 95,131 108,699 126,014 FCF Yield 1.3% 0.5% 4.8% 6.6% 5.4% 8.7% Cash 3,082 4,152 7,852 12,921 17,112 23,809 Div. Yield 0% 0% 0% 0% 0% 0% Change in WK 165 1,158 1,449 1,881 1,379 1,744 Total Debt 6,188 2,600 2,600 2,600 2,600 2,600 VALUAT ION 2011A 2012E 2013E 2014E 2015E 2016E Net debt 3,106 (1,552) (5,252) (10,321) (14,512) (21,209) EV/Sales 0.8 0.7 0.6 0.5 0.4 0.3 Book v alue 37,922 41,645 46,827 53,767 62,168 73,080 EV / Adj. EBITDA 11.5 9.8 7.5 5.6 4.5 3.2 Market cap. 77,148 77,148 77,148 77,148 77,148 77,148 EV / IC 1.6 1.5 1.5 1.4 1.3 1.1 EV 80,254 75,596 71,896 66,827 62,636 55,939 P/E 25.2 19.2 14.4 10.9 9.0 6.9 Inv ested capital 50,735 49,609 48,506 48,662 50,090 51,807 P/B 2.0 1.9 1.6 1.4 1.2 1.1 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 20 06 November 2012

Exhibit 18: Walmex – Model Summary BASICS COMPANY DESCRIPTION Sector Retail Ticker WALMEXV Founded in 1958 by the Arango family and now controlled by Wal-Mart (68% ), Walmex Price (Mx P$) 39.67 is the leading retailer in Mex ico with over US$ 35bn total sales for 2011, 2,345 stores Target (Mx P$) 38.00 Target (US$) 3.1 and 5.7 million sq. mt. of selling area. It also operates 364 restaurants, with total seating capacity Recommendation NEUTRAL for 82,405 people. Mkt. cap. (Mx P$ mn) 692,327 Daily liquidity (US$ mn / day) - 3M avg 45.8 POSITIVES i) Leader in Mex ican food retailing – market share differential likely to widen in the coming years, SHAREHOLDING STRUCTURE No of shares (mn) TOTAL maintaining stable returns. Walmart Stores 12,157 68.5% ii) Strong Balance Sheet, no debt and negativ e net working capital. Free Float 5,590 31.5% NEGATIVES i) Slow turn around in Central America. ii) High ex pectations = disappointment? ROIC VS WACC OWNERSHIP STRUCTURE

30%

25%

20% Free Float 31.5% 15%

10% Walmart Stores 68.5% 5%

0% 2009 2010 2011 2012 2013 2014

ROIC WACC

FINANCIAL METRICS (M xP$ 2011A 2012E 2013E 2014E 2015E 2016E OPERATING METRICS 2011A 2012E 2013E 2014E 2015E 2016E Rev enues 380,907 428,228 476,980 543,789 621,356 709,755 Total selling space Sqm 5,735,484 6,207,111 6,954,956 7,811,520 8,776,806 9,850,811 Gross profit 83,699 94,330 105,685 120,005 137,033 156,382 Growth in selling area 12.8% 8.2% 12.0% 12.3% 12.4% 12.2%

Gross margin 22.0% 22.0% 22.2% 22.1% 22.1% 22.0% SALES / AVG SQM (Ps$ / sq 69,033 70,344 77,049 81,344 86,335 90,702 EBIT 30,079 34,001 40,272 47,522 55,264 64,199 SSS growth (nominal terms) 3.7% 4.5% 4.5% 4.5% 4.5% 4.5% EBIT margin 7.9% 7.9% 8.4% 8.7% 8.9% 9.0% # of stores 2,345 2,671 3,111 3,601 4,141 4,731 EBITDA 37,415 42,429 49,634 58,083 67,187 77,646 EBITDA margin 9.8% 9.9% 10.4% 10.7% 10.8% 10.9% Adj. EBITDA 37,415 42,429 49,634 58,083 67,187 77,646 LEVERAGE 2011A 2012E 2013E 2014E 2015E 2016E Net financial ex penses 194 479 871 1,256 1,765 2,421 Net debt/ Adj. EBITDA (0.7) (0.5) (0.6) (0.7) (0.9) (1.0) Taxes (7,940) (9,908) (11,512) (13,641) (15,950) (18,633) Net debt / Equity (0.2) (0.2) (0.2) (0.3) (0.3) (0.4) Net income 22,254 24,562 29,602 35,077 41,014 47,914 Foreign Debt / Total Debt ------Net margin 5.8% 5.7% 6.2% 6.5% 6.6% 6.8% Capex / Operat.Cash Flow 0.6 0.5 0.6 0.6 0.6 0.5 # shares ('000) 17,747 17,648 17,550 17,452 17,355 17,258 EBITDA/Net Interest Exp. 193.3 88.5 57.0 46.2 38.1 32.1 EPS (Mx P$) 1.25 1.39 1.69 2.01 2.36 2.78 NOPAT 21,055 23,801 28,593 34,216 39,790 46,223 RETURN / YIELD 2011A 2012E 2013E 2014E 2015E 2016E Depreciation 7,336 8,427 9,362 10,561 11,923 13,448 ROIC 16.6% 17.8% 20.8% 23.5% 25.9% 0.0% Capex (18,173) (17,480) (22,356) (25,606) (28,856) (32,106) WACC 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% FCFE 10,165 15,987 21,704 26,890 32,441 39,376 Cost of Equity (ke) 11.5% 11.5% 11.5% 12.0% 12.0% 57.4% Div idends 9,659 11,539 12,348 14,091 15,987 18,044 ROE 17.4% 18.7% 21.3% 22.2% 22.7% 23.0% Total assets 225,026 229,649 257,436 292,986 335,120 384,890 FCF Yield 1.5% 2.3% 3.1% 3.9% 4.7% 5.7% Cash 25,166 20,380 29,736 42,534 58,988 80,320 Div. Yield 1.4% 1.7% 1.8% 2.0% 2.3% 2.6% Change in WK 597 2,911 5,118 6,856 8,360 10,121 VALUATION 2011A 2012E 2013E 2014E 2015E 2016E Net debt (25,166) (20,380) (29,736) (42,534) (58,988) (80,320) EV/Sales 1.8 1.6 1.4 1.2 1.0 0.9 Book v alue 132,962 130,294 147,531 168,524 193,555 223,429 EV / Adj. EBITDA 17.8 15.8 13.3 11.2 9.4 7.9 Market cap. 692,327 692,327 692,327 692,327 692,327 692,327 EV / IC 5.0 5.0 4.7 4.3 4.0 3.7 EV 667,161 671,947 662,592 649,793 633,339 612,007 P/E 31.1 28.2 23.4 19.7 16.9 14.4 Inv ested capital 133,265 133,496 141,379 149,573 158,151 166,694 P/B 5.2 5.3 4.7 4.1 3.6 3.1 Source: Company data, Credit Suisse estimates

Mexico Retail and Consumer Goods 21 06 November 2012

Companies Mentioned (Price as of 06 Nov 12) ARCA CONTINENTAL, S.A.B. DE C.V. (AC, peso95.84, NEUTRAL, TP peso77.00) CHEDRAUI (CHDRAUIB, peso36.54, OUTPERFORM, TP peso40.00) Coca-Cola Femsa SAB de CV (KOFL, peso168.89, NEUTRAL, TP peso140.00) Fomento Economico Mexicano SAB de CV (FEMSAUBD, peso117.46, NEUTRAL, TP peso105.00) GENOMMA LAB INTERNACIONAL, S.A.B. DE C.V. (LABB, peso26.65, NEUTRAL, TP peso30.00) Grupo Famsa (GFAMSAA, peso15.82, OUTPERFORM, TP peso25.00) Modelo (GMODELOC, peso115.56, NEUTRAL, TP peso87.50) Soriana (SORIANAB, peso42.86, OUTPERFORM, TP peso42.00) Walmex (WALMEXV, peso39.67, NEUTRAL, TP peso38.00)

Disclosure Appendix Important Global Disclosures I, Antonio Gonzalez, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for LABB

LABB Closing Target 41 Price Price Initiation/ 40 Date (MXN) (MXN) Rating Assumption 36 9-Jun-11 29.35 40 O X 21-Sep-12 25.16 30 N 31 O 30 26 N

9-Jun-11 MXN11

Closing Price Target Price Initiation/Assumption Rating

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. As of October, 2 2012 Analysts’ stock rating are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10- 15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10- 15% levels in the Neutral stock rating definition, respectively. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Mexico Retail and Consumer Goods 22 06 November 2012

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight: The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 43% (53% banking clients) Neutral/Hold* 40% (49% banking clients) Underperform/Sell* 15% (40% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (LABB) Method: Our discounted cash flow to equity (DCFE) analysis supports our MXN30 per share target for Genomma Lab Internacional. At our target price, the stock would trade at a enterprise value/earnings before interest, taxes, depreciation and amortization (EV/EBITDA) multiple of 12.3x for 2012 and 9.4x for 2013; and a price/earnings (P/E) multiple of 20.2x for 2012 and 15.5x for 2013. Risks: The following risk could impede achievement of our MXN30 target price for Genomma Lab Internacional: 1) weak performance in the international segment 2) changes in the regulation of OTC/PC/Generics products 3) inability to renegotiate advertising time with major broadcasters; 4) a market share erosion in OTC or PC in Mexico; and 5) further deterioration in the working capital cycle. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names. The subject company (LABB) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (LABB) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (LABB) within the next 3 months. Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (LABB) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. I, Antonio Gonzalez, CFA, certify that (1) The views expressed in this report solely and exclusively reflect my personal opinions and have been prepared independently, including with respect to Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates (“Credit Suisse”). (2) Part of my compensation is based on various factors, including the total revenues of Credit Suisse, but no part of my compensation has been, is, or will be related to the specific recommendations or views expressed in this report. In addition, Credit Suisse declares that:

Mexico Retail and Consumer Goods 23 06 November 2012

Credit Suisse has provided, and/or may in the future provide investment banking, brokerage, asset management, commercial banking and other financial services to the subject company/companies or its affiliates, for which they have received or may receive customary fees and commissions, and which constituted or may constitute relevant financial or commercial interests in relation to the subject company/companies or the subject securities. CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-month period relative to the relevant coverage universe. Because Trade Alerts and stock ratings reflect different assumptions and analytical methods, Trade Alerts may differ directionally from the analyst's stock rating. The author(s) of this report maintains a CS Model Portfolio that he/she regularly adjusts. The security or securities discussed in this report may be a component of the CS Model Portfolio and subject to such adjustments (which, given the composition of the CS Model Portfolio as a whole, may differ from the recommendation in this report, as well as opportunities or strategies identified in Trading Alerts concerning the same security). The CS Model Portfolio and important disclosures about it are available at www.credit-suisse.com/ti. Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. • Antonio Gonzalez, CFA, non-U.S. analyst, is a research analyst employed by Casa de Bolsa Credit Suisse (Mexico), S.A.. • Gustavo Wigman, non-U.S. analyst, is a research analyst employed by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates. • Claudio Lensing, non-U.S. analyst, is a research analyst employed by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates. • Alonso Cervera, non-U.S. analyst, is a research analyst employed by Casa de Bolsa Credit Suisse (Mexico), S.A.. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit- suisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

Mexico Retail and Consumer Goods 24 06 November 2012 Americas/Mexico Equity Research

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Consumer stocks analyzing a potential Fiscal Reform in Mexico2.doc