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1 Jan 2005

FINANCIAL HIGHLIGHTS


Saturday, 01/01/2005, 12:00:00 am

We are very proud of the advances that Coca-Cola FEMSA achieved in such a short period. The smooth integration and consolidation of eight franchise territories - located in eight countries with very diverse macroeconomic environments and market dynamics - is an amazing accomplishment.

With our repurchase of 30% of FEMSA Cerveza's capital, we begin an exciting new chapter for our company. This transaction gives us 100% ownership of our beer operations, provides us with maneuvering flexibility, and lays the foundation for a new stage of growth in our exports particularly to the United States. As we previously announced on January 1, 2005, we started marketing and distributing our brands through the powerful commercial platform of Heineken USA.

We now have the flexibility to select the ideal commercial partner for each business opportunity. Heineken offers quality growth possibilities for our flagship brands in the US rapidly growing market for imported beers, while the agreement with Coors Brewing Co. to sell and distribute Coors Light will help us to capture share of Mexico's imported beer segment.

During the year, we made great strides with FEMSA Cerveza's business model. Through our differentiated brand management and segmented market execution strategy, we aim to stimulate and satisfy consumers' thirst on almost any occasion by offering them the right product, presentation, and price at the right point in their lives.

As evidenced by our profitable market growth, we have also advanced considerably on the capabilities required to execute FEMSA Cerveza's business model. We made further progress in the deployment of our new ERP-based business architecture. For example, by year-end, we sold 86% of our direct sales volume through our pre-sale process and 79% of our direct sales volume through our new business system. Thanks to these and other initiatives, we were able to gain market share and achieve a return on invested capital of more than 11.1%, despite lower real prices, higher raw-material costs, and aggressive competition.

Looking forward, we will continue to manage our company with a view for the long-term. We are unwilling to sacrifice our long-term goals for short-term market share gains. To the contrary, we will continue to balance our profitability, our brands' equity, and our market growth while working to preserve and enhance the value of our industry.

Finally, our retail operations produced top-line growth of more than 24% for the third consecutive year. Approximately one third of this growth came from same-store sales, and two thirds came from our successful expansion; we opened 668 new stores in 2004.

Today Oxxo is the largest and most profitable convenience-store chain in Latin America. Importantly, it is the largest nationwide seller of Coca-Cola and beer in Mexico. Indeed, it is now FEMSA Cerveza's top customer, buying approximately 7% of our beer volume in 2004.

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