…become a simpler and humbler organization that is tolerant of uncertainty. Our history of growth has created a multicultural, living organization that works 24/7 around the world, fostering our employees’ mobility to enable our company to rise to the challenges and seize the opportunities that lie ahead in the beverage industry in a disciplined, responsible way. 1 new operating horizons innovative new horizons As the complexity of our business Innovation is integral to our strategic grows, we continually work to increase growth and development. Through our our operations’ capacity to achieve the unwavering commitment to innova- full potential of our business, success- tion, we ensure our ability to antici- fully meet our industry’s challenges, pate and satisfy consumers’ evolving satisfy an expanding needs, enter new beverage catego- base of consumers ries, adapt to specific more efficiently and ef- markets, and capitalize fectively, and prepare on new opportunities our company for the to widen our industry’s future. horizons. 2 to see beyond our frontiers new market horizons sustainable new horizons Over the past several years, we have We embrace sustainability as an inte- demonstrated our capacity to identify gral part of our business’ strategy and and embrace new ways of comple- day-to-day decision-making. Focused menting our business’ organic growth on three governing pillars—our people, through value-creating transactions, our communities, and our planet—our including sustainability strategy en- mergers, ac- ables us to concentrate and quisitions, and more efficiently allocate our joint ventures. resources on those areas that will generate the greatest positive impact on our busi- ness, the environment, and the communities we serve. 3 financial highlights Millions of Mexican pesos and U.S. dollars as of December 31, 2012 (except volume and per share data) 2 Under International Financial Reporting Standards. Figures do not include results of Coca-Cola Bottlers Philippines, Inc. or Grupo Yoli. (U.S.$) 20121 (Ps.) 2012 (Ps.) 2011 change Sales Volume (millions of unit cases) 3,046.2 3,046.2 2,648.7 15.0% Total Revenues 11,396 147,739 123,224 19.9% Income from Operations 1,694 21,956 18,392 19.4% Controlling Interest Net Income 1,028 13,333 10,662 25.1% Total Assets 12,813 166,103 141,738 17.2% Long-Term Bank Loans and Notes Payable 1,911 24,775 16,821 47.3% Controlling Interest 7,841 101,649 90,028 12.9% Capital Expenditures 791 10,259 7,862 30.5% Book Value per Share 2 3.86 50.06 45.34 10.4% Controlling Interest Net Income per Share (EPS) 3 0.51 6.62 5.72 15.7% 1 U.S. dollar figures are converted from Mexican pesos using the exchange rate for Mexican pesos published by the U.S. Federal Reserve Board on December 31, 2012, which exchange rate was Ps.12.9635 to U.S.$1.00. 2 Based on 2,030.5 and 1,985.5 million outstanding ordinary shares in 2012 and 2011, respectively. 3 Based on 2,015.2 and 1,865.6 million weighted average outstanding ordinary shares in 2012 and 2011, respectively. revenue 20% growth 4 147,739 3,046 123,224 2,649 2,499 2,429 102,767 103,456 2,243 82,976 08 09 10 11 12 08 09 10 11 12 Sales Volume Total Revenue million unit cases millions of Mexican pesos 2.77 2.36 21,956 18,392 17,079 15,835 13,695 1.41 0.73 0.51 08 09 10 11 12 08 09 10 11 12 Income from Operations Dividend per Share millions of Mexican pesos Mexican pesos per share Income from operations for the years 2008, 2009 and 2010 presents figures under Mexican Financial Reporting Standards. 5 José Antonio Carlos Salazar Fernández Chief Executive Chairman of the Officer Dear fellow Board shareholders: new horizons As a learning organization, we work—individually and collectively— America. During 2012, we capitalized on this structure to continue to broaden our horizons to realize the full potential of our business, bolstering our bench of management with international operating to develop innovative ways to anticipate and satisfy our consumers’ know-how, providing us with the necessary skills and capabilities needs, to complement our organic growth through accretive merg- to take advantage of new and existing market opportunities— ers and acquisitions, and to create economic, social, and environ- opening new horizons. mental value for all of our stakeholders. We further accelerated our evolution to a value-driven commercial In the face of a challenging commodity environment for part of the model to capture the full potential of the non-alcoholic beverage year, our committed employees across Latin America delivered industry. During 2012, we completed the rollout of our value-driven double-digit top- and bottom-line growth. For 2012, our total sales commercial model to all of our territories, including our recently volume grew 15.0% to more than 3 billion unit cases. Our consoli- merged franchises in Mexico. dated revenues rose 19.9% to Ps. 147.7 billion. Our consolidated operating income improved 19.4% to Ps. 22.0 billion, and our In alignment with the rollout of our commercial model, we ag- consolidated controlling interest net income increased 25.1% to gressively increased our cooler coverage—a distinct competitive Ps. 13.3 billion, resulting in earnings per share of Ps. 6.62. advantage—across our franchises. During 2012, we installed an additional 121,000 coolers, particularly in Venezuela, Colombia, Brazil, Argentina, and Mexico. new operating horizons As the complexity of our business grows, we constantly increase On the operations side, we remain at the forefront of technol- our operations’ capacity to maximize their potential, meet our ogy. Early in the year, in Mexico, our Toluca mega-plant installed industry’s challenges, satisfy an expanding base of consumers, a cutting-edge manufacturing process that integrates the bottle and prepare our company for the future. blower, labeler, and filler in one interconnected line or block. This new tri-block technology produces higher efficiency, while consid- In 2011, we simplified and strengthened our organizational struc- erably improving productivity. ture into two new divisions: Mexico & Central America and South 6 167 of consumers, and drove consolidated volume growth of 25% in this category. 134 119 Building on the renewed Estrella Azul brand in Panama, we launched innovative new dairy products and presentations to reinforce our portfolio in a dynamic market. Among them, we developed and deployed Duo, a refreshing, nourishing milk- based product with all of the characteristics of liquid yogurt in a convenient, 250-ml high density polyethilene (HDPE) presentation. Moreover, to complement the customary 1-liter milk cartons, we 10 11 12 introduced an affordable, 1.125-liter HDPE bottle with a convenient Still Beverages replaceable cap—the only such container in the marketplace in this particular size. These and other initiatives helped us to regain million unit cases market share across multiple dairy segments, including almost 50% market share growth in the long-shelf-life milk category—the fastest growing sector of the milk market. We are further leveraging our growing market knowledge to innovative new horizons expand our vending machine business. We are tracking different Through our firm commitment to innovation —an integral part of consumption patterns to refine our portfolio to better match our our strategic growth and development—we ensure our ability to clients’ and consumers’ needs, while extrapolating our market anticipate and satisfy consumers’ evolving needs, enter new bev- intelligence to go beyond retail into other encouraging high-traffic erage categories, adapt to specific markets, and capitalize on new venues such as universities and offices—engaging directly with opportunities to expand our industry’s horizons. consumers. For example, we conducted a promising pilot offering both beverages and snacks at a number of “at work” locations in In May 2012, we launched FUZE tea in a variety of presentations Mexico. Given Latin Americans’ increasing willingness to use vend- across most of our operations. Thanks to our implementation of ing machines, this business offers bright new horizons for growth. our integrated marketing strategies, we doubled the historic point- of-sale coverage of the previous brand, attracted a broader base new market horizons We continue to capitalize on our financial and operating flexibility to firmly advance on our strategy to grow through accretive trans- actions—from our mergers with the beverage divisions of Grupo Tampico, CIMSA, and FOQUE, to our incursion into the Philippines through our acquisition of a majority stake in Coca-Cola Bottlers Philippines, Inc., to our recently announced merger agreement with Grupo Yoli. Altogether, this marks five transactions in the Coca-Cola bottling space in the last 18 months, representing an aggregate value of more than US$3.5 billion. In addition to these transactions, we entered the Mexican milk and value-added The launch of FUZE tea supported 25% growth in the tea category 7 We have proactively provided reduced calorie presentations for our consumers dairy category through the joint acquistion of Santa Clara with our Building on our history of value-creating transactions with our partner, The Coca-Cola Company, and the rest of the Coca-Cola partner, The Coca-Cola Company, in January 2013, we closed bottling system in Mexico. the acquisition of 51% of Coca-Cola Bottlers Philippines, Inc. (CCBPI), The Coca-Cola Company’s bottling operations in the Leveraging our expertise, we worked closely with our new col- Philippines. The first incursion of a Latin American bottler outside leagues to swiftly and smoothly integrate the franchises of Grupo of the region, this transaction represents an important strategic Tampico, CIMSA, and FOQUE into our Mexican operations.