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Hello, and welcome to the Coca-Cola FEMSA First Quarter 2026 Conference Call. My name is Felipe, and will be your moderator for today's event. Please note that this conference is being recorded. For the duration of the call, all participants will be in listen-only mode. You will have the opportunity to ask questions at the end of the presentation. To do so, please use the Raise Hand feature in Zoom, and we will open your line.

If you're experience any technical issues during the call, please use the chat function to request assistance. I would now like to hand the call over to Jorge Collazo, Investor Relations Director at Coca-Cola FEMSA. Jorge, please go ahead.

Thank you, Felipe. Good morning, and welcome to this conference call to review our first quarter 2026 results. Before we begin, let me remind all participants that today's conference call may include forward-looking statements that should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data.

The actual results are subject to future events and uncertainties that can materially impact the company's performance. For additional details, please refer to the full disclaimer in the earnings release that was published earlier today. I am joined this morning by Ian Craig, our Chief Executive Officer, and Gerardo Cruz, our Chief Financial Officer.

After prepared remarks, we will open the call for Q&A. To do so, please signal for questions using the Raise Hand feature in your Zoom toolbar. With that, let me turn the call over to Ian, our CEO, to begin our presentation about our first quarter results. Ian, please go ahead.

Thank you, Jorge. Good morning, everyone. We appreciate you joining us for today's call. In Mexico, as expected, we faced the excise tax increase compounded by a soft consumer backdrop, which pressured demand. We prepared ahead for this environment together with The Coca-Cola Company with a comprehensive commercial and financial playbook designed to emerge with a strengthened competitive position that will support long-term sustainable growth.

While Mexico volumes were softer in the quarter, they came in within our expectations and our strong 0.6% point value share gain in CSDs and a 0.4% point gain in NARTDs confirms to us that our strategy is working. In this context, we're leveraging the breadth of our portfolio, our scale, consistency in investment and execution, and our differentiated digital enablers to win in the market and set the foundations for long-term growth.

While Mexico presented near-term headwinds, our operations in Central and South America delivered solid performance during the quarter, including record volumes for our first quarter in Guatemala, Colombia, and Brazil. This reaffirms the value of our geographic diversification and our ability to continue building relative scale throughout all of our markets.

We remain confident in our long-term strategy anchored in Coca-Cola FEMSA's differentiated strengths of an unmatched portfolio of brands, the largest distribution footprint, consistent investment, relentless execution, and leading-edge digital enablers. With that context, I will now walk you through our consolidated results. After which, I will provide more details on developments in each of our key markets before handing the call over to Gerry to expand on our divisional and financial results.

During the first quarter, our volume increased 1.2% to reach 998 million unit cases. This growth was driven by a positive performance across most of our territories, which offset a volume contraction in Mexico, explained mainly by the effects of the excise tax increase and softer consumer dynamics. Total revenues for the quarter grew 1.1% to MXN 70.9 billion.

Our volume growth and revenue management initiatives were partially offset by unfavorable mix effects and headwinds related to the currency translation from all our operating currencies into Mexican pesos. By excluding currency headwinds, our total revenues increased 6.0%. Gross profit increased 4.5% to MXN 33.3 billion, leading to a margin expansion of 150 basis points to 46.9%.

This margin performance was driven mainly by better PET and sweetener costs and the appreciation of most of our operating currencies as compared with the US dollar. These effects were partially offset by unfavorable mix effects coupled with higher fixed costs such as depreciation. By excluding currency headwinds, gross profit increased 9.5%. Our OI declined 2.3% to MXN 9 billion, with our operating margin contracting 50 basis points to 12.7%.

On a comparable basis, operating income increased 2.6%. This operating margin contraction is explained mainly by right-sizing severance expenses and increased IT expenses related to the implementation of our new ERP, SAP S/4HANA. In addition, we recorded higher marketing and depreciation that were partially offset by expense controls such as maintenance and freight.

Adjusted EBITDA for the quarter increased 0.9% to MXN 13.4 billion, and Adjusted EBITDA margin remained even at 18.9%. By excluding currency translation, our comparable Adjusted EBITDA increased 6.1%. Finally, majority net income declined 15.5% to MXN 4.3 billion, mainly reflecting a higher comprehensive financial result, which Gerry will address in his comments. Now, turning to the main highlights across our major markets. In Mexico, our volume declined 2.6% year-on-year.

As anticipated, we navigated a challenging first quarter marked by the effects of the excise tax increase and a softer consumer backdrop. For instance, Nielsen's fast-moving consumer goods basket in our territories declined close to 3% year-over-year in terms of volume, while inflation expectations moved up in recent forecasts, weighing on consumer sentiment.

Our execution in Mexico was strong, delivering both value and volume share gains across all categories, leveraging our past hard initiatives of cold drink equipment expansion, increases in point of share of sale, share of visible inventory, and SKU combined coverage improvements. These share gains indicate that our top-line initiatives are working within the challenging environment that we are facing. Regarding our portfolio, we accelerated initiatives focused on providing attractive price points in both one-way and refillable formats.

For example, in brand Coca-Cola, we increased coverage of our one-way 3 L presentation by more than 7% points year-on-year, resulting in 32% volume growth in March versus the previous year. We also continued expanding Coke Zero with accessible single-serve packs, such as a 200 ml and 355 ml one-way PET bottle. As a result, Coke Zero achieved 10% volume growth during the quarter.

Moreover, in flavors, we continued combining global strategies in core brands such as Fanta, Sprite with local heritage regional brands such as Mundet and Ameyal, where we increased coverage by more than 10% points as compared with the previous year. We also continue focusing on developing profitable non-carbonated beverages. For instance, we gained more than 3% points of share in both the energy segment with Monster and in the teas categories with Fuze Tea.

In parallel, regarding channels, our progress in execution and digital capabilities are reverting the negative trend in the traditional trade by enhancing our value proposition with higher digital penetration, improved service indicators, and expanded cooler coverage. Notably, during the first quarter, we installed more than 47,000 doors, equivalent to 50% of the total coolers we installed during 2025.

These actions enhance our ability to deliver a tailored cold portfolio to fit diverse consumption occasions. With respect to Juntos+ Advisor, the continued increase in adoption is reinforcing our market presence. Since its launch in Mexico in September 2025, adoption metrics have continued to grow, and usability metrics indicate strong engagement among our commercial teams, with visitation improving 3% points to 93.6% and combined coverages improving 2.8% points to 81.3%.

Finally, our supply chain team implemented a series of initiatives that are delivering improvements in productivity and service levels. Specifically, we strengthened order fulfillment to more than 97% and achieved a 6.5% productivity improvement versus the prior year. Accordingly, we're staying focused on our playbook, strengthening affordability, expanding refillables to defend household penetration, and continuing to deploy state-of-the-art digital tools and revenue growth management initiatives.

Additionally, in partnership with The Coca-Cola Company, we will continue investing for long-term growth, while in the short term, we capitalize on an ambitious plan to capture the FIFA World Cup opportunity. Now, moving on to Guatemala. Our performance reflects a challenging start and a strong recovery toward the end of the quarter.

Performance in January and February was impacted by unfavorable weather and reduced mobility due to a 30-day government-declared curfew measure in mid-January to combat violence and organized crime. Conditions improved in March, allowing us to recapture momentum. As a result, March became a record month for our Guatemala operation, supported by improved mobility, better execution, and stronger consumer activity.

The recovery enabled us to close the quarter with volumes growing 2.7% year-over-year while continuing to strengthen our competitive position. From a category standpoint, brand Coca-Cola remained the primary growth engine, supported by a recovery in multi-serve one-way presentations, which grew 4.6% year-over-year. Additionally, we're capitalizing on the FIFA World Cup, where promotions such as the Trophy Tour resulted in 6.10% growth versus the previous year in participating products.

In addition, we continued advancing our position in flavors where disciplined execution and availability improvements in Sprite drove share gains year-over-year. Stills also delivered a strong performance led by hydration and energy, with brands such as Dasani, Shangri-La, and Monster posting double-digit growth, benefiting from better availability and premium segment expansion.

On the commercial front, we continue reinforcing the virtual cycle of expanding cooler coverage, adding new customers, and leveraging our digital tools to enhance execution. For instance, we expanded our customer base by 10,000 accounts last year and added a further 5,700 during the first quarter. As we look ahead, Guatemala's future is focused on continued development of our core CSD brands and profitable sales categories, all while we capitalize on an ambitious plan for brand Coke and Powerade during and after the FIFA World Cup.

Turning now to Brazil, where our first quarter volumes increased 3.6% year-on-year. Consumer dynamics remained constructive, supported by low unemployment, which sits at 5.8% and real income growth in excess of 5.7%. Despite more moderate temperatures and higher rainfall versus our prior year. Our Brazil operation delivered solid results supported by disciplined marketplace execution and our commercial and digital capabilities.

While volumes faced tough comparables from continuous growth achieved in previous years, our team remained focused on gaining share and strengthening profitability through a balanced approach to RGM, availability, and cost density. Importantly, we continued to gain share across key categories within the non-alcoholic ready-to-drink industry, reinforcing our competitive position in the market. Regarding non-calorics, Coke Zero maintained its double-digit growth, growing 11.4% and reaching 28.6% points in our Colas mix.

Importantly, Sprite accelerated, growing more than 30% versus the previous year, driven by applying Coca-Cola Zero's playbook to Sprite Zero. As a result, Sprite Zero now represents more than 27% of our total Sprite volume. Regarding stills, we are utilizing Powerade to leverage both the FIFA World Cup and CONMEBOL tournaments, coupled with innovation to continue strengthening our value proposition.

The recent launch of Powerade Zero exceeded expectations, with Zero already representing 9% of our Powerade mix. Energy drinks continue seeing double-digit growth from Monster and aligned with our strategic intent to offer zero sugar alternatives. Formulas of Monster Zero and Ultra already represent 45% of our total Monster mix and more than 60% of its growth.

Our digital agenda remains a meaningful differentiator in Brazil. Juntos+, supported by its AI capabilities, continues enabling significant combined coverages increases from 49.6% to 58.6% while generating suggested orders that are personalized for each customer.

In parallel, Juntos+ Advisor continues driver high visitation, improving 1.3% points to reach 94.1% and enabling superior in-market execution with personalized guided missions that support our sales force activities, ultimately resulting in share gains and increased customer engagement. These capabilities are increasingly embedded across our operation and remain central to how we compete and grow in the market. We look ahead to the rest of the year, we remain encouraged by Brazil's opportunities and our position within the market.

Brazil's positive volume momentum is allowing for fixed cost and expense absorption that is resulting in profitability improvements that position us well for sustainable long-term value creation. We previously mentioned, we anticipate that election-related spending, social programs, and the FIFA World Cup will represent important tailwinds for our operation.

To capture these opportunities, our priorities are clear: continue accelerating growth in non-caloric offerings, capitalize on the strength of our core brands, sustain our disciplined execution across channels, and leverage our digital platforms to consistently outperform the industry. With capacity investments that have resulted in an 8% year-on-year increase in manufacturing capacity and 6% year-on-year increase in warehousing capacity, we are well-positioned to continue delivering value in Brazil throughout the year.

Now, moving on to Colombia. Our volumes increased 8.9% versus the previous year. Our positive volume momentum reflects both an improving consumer environment and the continued benefits of disciplined execution across our commercial and operating platforms. While the country navigates a complex backdrop, including higher interest rates, the labor market has remained resilient, with real disposable income growing year-on-year, supported by the minimum wage increase and the upcoming election cycle.

As a result of these factors, at the beginning of the year, Nielsen's FMCG basket and the beverage industry resumed growth year-on-year. Amidst this improving backdrop, we continued strengthening our competitive positions with initiatives to adjust our price architecture in brand Coca-Cola.

For instance, Coke Zero remains a growth engine with ample headroom, contributing 13% of brand Coca-Cola's total growth, while our affordability initiative supported 30% volume growth in multi-serve one-way presentations of brand Coca-Cola. Aligned with our strategy, we aim to continue expanding our competitive position in flavors with increased innovation and availability. As a result of initiatives within Quatro and Sprite, our flavor sparkling portfolio increased 15% versus the prior year.

Regarding stills, we are leveraging the FIFA World Cup to boost Powerade, resulting in 10% growth year-on-year. Additionally, within energy, Monster grew more than 30% year-over-year, reflecting the attractive growth potential within profitable high-growth stills categories. Colombia continues to lead the way in leveraging Juntos+ Premia, a loyalty program, creatively to drive share and volume gains in the traditional channel.

For example, during the quarter, we improved the percentage of customers reaching their volume targets by 12% points. At the same time, we are encouraged by the profitability improvements of Colombia, which are a result of volume growth coupled with positive operating leverage and cost and expense controls. Moving on to Argentina. Our volumes increased 5.4%.

While key economic metrics such as exchange rate and net reserves continue improving, a heterogeneous recovery across different sectors and soft employment continues weighing on consumer confidence. For instance, while the oil and gas, mining, and agricultural sectors are growing double-digits, Nielsen's FMCG basket remained flat year-on-year. In this environment, we continue responding with agility and consistency, sustaining an affordability proposal that has enabled us to continue gaining share.

Our savings zone or Zona de Ahorro initiatives, offering attractive promotions and price points for our consumers in the traditional trade, increased its coverage by 8% points versus the previous year. In flavors, we delivered double-digit growth led by Sprite and Sprite Zero, while Coke Zero increased volumes 10% to reach 20.9% mix of brand Coca-Cola.

We're leveraging our Argentina consumers' passion for the FIFA World Cup with segmented promotions and value proposition initiatives that improved our single-serve mix by more than 3% points to reach 28.4% and more than 4% points of share gains in Powerade. We continue driving digital client adoption with Juntos+, adding more than 7,000 customers as compared with the previous year.

I want to recognize our team in Argentina, who were once again awarded The Coca-Cola Company's prestigious Latin America Excellence Cup, recognizing the region's best bottler for its excellence in execution, talent, and culture. Let me close my remarks by saying that we see the majority of our key markets growing at a healthy clip.

In the case of Mexico, we have plans in place to capitalize on the current low growth and IEPS tax increase environment to emerge with a strengthened relative competitive position, which should allow us to return Mexico to sustainable. For the remaining of the year, we expect to continue executing against our strategic imperatives.

Number one, continue growing our core business by leveraging our big bets, accelerating Coke Zero, improving our competitive position in flavors with Sprite as a flagship, and developing profitable non-carbonated beverages. Second, capitalizing on Juntos+ AI capabilities and continuing to roll out and leveraging Juntos+ Advisor across our four largest markets. Third, continue fostering a customer-centric and psychologically safe culture for Coca-Cola FEMSA. With that, I will hand the call over to Gerry.

Thank you, Ian. Good morning, everyone. I appreciate you joining us today. I will begin by summarizing our division results for the quarter. In Mexico and Central America, our volumes declined 1.6% because of a 2.6% volume decline in Mexico that was offset by growth in Guatemala, Nicaragua, Panama, and Costa Rica. Revenues decreased 1.4% to MXN 39.1 billion, driven mainly by an unfavorable mix and currency translation effects into Mexican pesos, partially offset by revenue growth management initiatives.

On a currency-neutral basis, revenues increased 1.4%. Gross profit increased 0.7% to reach MXN 19 billion, resulting in a gross margin expansion of 100 basis points to 48.6%.This margin expansion reflects unfavorable mix effects post-excise tax increase in Mexico, more than compensated by lower raw material costs such as sugar and PET, coupled with the appreciation of the Mexican peso as applied to our US dollar-denominated raw material costs.

Operating income in the division declined 17.4% to MXN 4.5 billion, and our operating margin contracted 220 basis points to 11.4%. This decline is mainly explained by the Mexican peso appreciation versus the rest of the currencies in the division, right-sizing severance expenses, and increased IT expenses related to the implementation of our new ERP, SAP S/4HANA. In addition, we recorded higher expenses in marketing and depreciation that were partially offset by operating expense efficiencies in maintenance and freight.

Our Adjusted EBITDA in the division decreased 9.9% with a 170 basis point margin decline compared to the previous year to reach 18.2%. Moving on to South America. Volumes increased 4.8% to 453.9 million unit cases. This increase was driven by volume growth across all our territories in the division.

Revenues in South America increased 4.3% to MXN 31.8 billion, driven mainly by volume growth and revenue management initiatives, offsetting unfavorable currency translation effects into MXN from most operating currencies in the division. On a currency-neutral basis, total revenues in South America increased 12.3%.

Gross profit in the division increased 10% and gross margin expanded by 230 basis points to 48.8%, driven mainly by lower raw material costs, a favorable mix, and the appreciation of most of our operating currencies as applied to our US dollar-denominated raw material costs. On a currency neutral basis, gross profit increased 18.3%. Operating income in South America rose 18.8% to MXN 4.6 billion, with operating margin up 180 basis points to 14.4%.

This improvement was driven by operating leverage coupled with expense efficiencies such as labor, partially offset by market. Finally, Adjusted EBITDA in the division increased 16.8% to MXN 6.2 billion for a margin expansion of 210 basis points to 19.6%.Let me expand on our comprehensive financing results, which recorded an expense of MXN 1.8 billion as compared to an expense of MXN 1.1 billion during the same period of the previous year.

This increase was driven mainly by, First, we recorded a higher net interest expense driven by the issuance of new debt during the second quarter of 2025 and later during the first quarter of 2026. In addition, we recognized lower interest income reflecting a reduced cash position in key markets, partially offset by a higher cash balance in Mexico. Second, the recognition of a loss in financial instruments of MXN 167 million compared to a gain of MXN 135 million in the prior year, primarily reflecting higher interest rates in Brazil at the end of the quarter.

Third, we recognized a foreign exchange loss of MXN 117 million during the quarter compared to a loss of MXN 59 million in the same period of the previous year. This was driven mainly by the appreciation of our operating currencies as applied to our US dollar cash holdings in Brazil and Costa Rica. Finally, these effects were partially offset by a higher gain in monetary positions in inflationary subsidiaries related to Argentina. As we look ahead, we anticipate commodity prices and input costs to remain volatile.

That said, these conditions are not new to us. Over time, our well-established protocols and governance structures have enabled us to plan, respond, and adapt effectively to these environments while protecting long-term profitability. Throughout the year, we leveraged three key initiatives. First, a disciplined hedging strategy designed to reduce short-term volatility and provide visibility as we move through the year.

We operate under hedging frameworks that allow us to mitigate volatility and provide certainty to our operations in terms of supply and raw material prices. We currently have hedged 60% of our PET requirements, 93% of our sugar requirements, 98% of our HFCS requirements, and 72% of aluminum. Second, we benefit from a diversified and resilient supplier base across our key inputs, leveraging a strong network of local suppliers. This reduces concentration risk and improves continuity of supply.

Finally, we operate within the Coca-Cola system, which is an advantage that allows us to lean on a global footprint that operates on a local scale. This enhances our market intelligence and strengthens our ability to protect our cost structure across key commodities and inputs. Finally, before opening the call for questions, I'd like to briefly comment on sustainability. During the quarter, we continued strengthening both our performance and transparency across our sustainability agenda.

We maintained prime status in ISS ESG rating, positioning Coca-Cola FEMSA among the leading companies in the beverage sector, and we achieved an improvement in our Morningstar Sustainalytics risk score, reflecting stronger management of ESG-related risks. We also published our 2025 Integrated Report, which for the first time aligned our report with IFRS S1 and S2 sustainability-related financial disclosures.

These disclosures were published alongside our financial statements and with independent assurance one year ahead of local regulatory requirements without relying on transitional reliefs beyond comparability as a first-year report, strengthening decision usefulness for investors. This report also includes our first TNFD-aligned disclosure.

In this context, Coca-Cola FEMSA became the first non-alcoholic beverage company in the Americas and the fourth globally to formally register as a TNFD adopter, expanding our assessment of nature-related dependencies, risks, and opportunities across the value chain.

The report highlights continued progress across key areas including water efficiency, waste diversion, renewable energy use, safety performance, and gender diversity and leadership. For further details, I invite you to visit our 2025 Integrated Report available on our website. With that, operator, we're ready to open the floor for questions.

Okay. At this time, we are going to open up for questions and answers. If you have a question, please click on Raise Hand for audio questions or write it down in the Q&A section for written questions. Please remember that your company's name should be visible for a question to be taken. We do ask that when you pose your question that you pick up your headset to provide optimal sound quality. Please hold while we pull for questions. Our first question comes from Ben Theurer with Barclays. Your microphone is open.

Hello, Ben.

Good morning, Ian, Gerry. Thank you very much for taking my question and the detailed openings. Wanted to dig deeper a little bit and dig into some of the things that you've highlighted in terms of costs and expenses in Mexico, driving that margin contraction. Maybe help us understand a little of what you've been doing, particularly on the marketing side, but also those restructuring and IT expenses that you've highlighted. How should we think about this for the rest of the year?

Just to put it into perspective a little bit as what you're expecting as it relates to profitability in Mexico, Central America in particular, because of these investments seem to be focused for that region. Thank you very much.

I'll start it off and then Jorge and Ian can complement. First, on the marketing side, and this is by design, given that we have the World Cup going on this year. A lot of our marketing spending is being brought forward to the first part of the year to highlight and support this big event that obviously is a very valuable asset for the brand. For the remainder of the year, we expect that number for in full-year figures will taper down and remain in line with our usual marketing spend.

A little bit of the same goes in the relation to IT expenses that I mentioned as well as Ian in our prepared remarks. This is a timing issue. We have a very strict a level of 2.5% to sales of investment in IT. That for the full year, we expect that it will remain or it will remain in under that level.

Threshold

... which is the explanation regarding the IT. We had severance related expenses during this quarter. We needed to rightsize facing the excise tax impact that we were facing for the start of the year. We had to rightsize the business, and that resulted in extraordinary expenses in the first quarter for MXN 200 million. That's a little bit of in a nutshell, the main components behind our numbers in our Mex- Central America division.

Perhaps, Ben, to complement Gerry, what I would mention is to give you a sense on magnitude. You know, you can think about MXN 600 million, around MXN 600 million headwind on the operating income level in Mexico and Central America. There are three elements there, each pretty much similar size, around 1/3, around MXN 200 million, excuse me. MXN 200 million of severance that Gerry mentioned. Around MXN 200 million related to the IT expense.

The other MXN 200 million are related to unfavorable currency translation, you know, that we have from the other markets in Mexico and Central America when we compare to Mexican pesos. Of course, some of those, as Gerry mentioned, severance is more of an extraordinary element. The IT expense, when we think about the full year, should be pretty much in line. There is a timing issue there. Does that answer your question, Ben?

It perfectly does. Thank you very much. I'll pass it on. Thank you.

Thank you, Ben.

Our next question comes from Thiago Bortoluci with Goldman Sachs. Your microphone is open.

Hey, guys. Good morning, everyone. Thanks for taking my questions. I would just like to explore a little bit more your performance, volume performance in Mexico by each one of the sub-segments, right? My first question is by category, we were surprised to see stills underperforming sparkling in the quarter, particularly in face of all the innovation and efforts you've been putting on the marketplace. If you could give us some color on what happened there.

Then, somehow tied to this question also in Mexico volumes, if you could comment a little bit more on how your volumes strengthened by channel and how your affordability efforts gain traction and participation on your mix. That is the question. Thank you very much.

Good. Hi, Thiago. It's Ian. There are a couple of elements there. I'll try to go in order of your question. In terms of the difference between stills and sparkling, it has more to do with a specific issue with a very large chain in Mexico, which adjusted their parameters for Powerade. That is being addressed and should start to see an adjustment in those parameters in May, June. That's a very specific issue.

The other segment of stills is really bulk water. In there we have adjusted our price. It's not a big profitability driver at all, but it is a big volume driver. That's the other stills segment where we had an issue and where we were dispositioned in price. It has to do with a large chain for Powerade and with our relative price in bulk water versus our market, and that's not really a big profitability driver, to put it that way. In terms of the performance of volumes per se, it's really a.

A different picture of what you can say we saw during the first trimester, where we were not cycling the effects of the consumer backlash. We had a difficult comp base together with a tax increase on the economy for January, February. Then you see a big relative improvement in that trend for March, April. It has more to do with the base effect than with actual average daily sales improving, okay?

We're still. That's why we're still monitoring the evolution of the situation. It's just a much easier comparison base because we had the consumer backlash last year. You can take it on channel.

Regarding volume for channel, Thiago, we are seeing better performance in traditional channel. We obviously prioritized, given the excise tax impact, we prioritized the traditional channel, taking differentiated pricing action in each of the channels. Traditional channel is performing slightly better than what we had planned for.

The modern channel, and a lot due to the explanation that Ian mentioned regarding stills specifically Powerade in the modern channel, is underperforming slightly. We expect the modern channel to improve as we move through the year and we are continuing to see the traditional trade slightly outperform.

No, thanks. This is helpful comment. If I may just follow up on affordability, returnables, any comments on how volumes performed and participation in the mix, printed out in the quarter?

Yes. I would say mix effect was probably the only thing that surprised us in the quarter versus what we had planned. Meaning, the consumers given the pinch of the price increase with the IEPS tax move more towards multi-serve in a larger magnitude than what we had expected. You are seeing better performance out of multi-serve than our single serves. It is, let's say in line with what we would have imagined with a large price increase, but it was more than we had planned for.

Interesting.

Similar situation, Thiago, with regards to one way and refillables, you know. There is more one way than refillables at this point.

Super interesting. Thank you very much, guys.

Thank you.

Our next question comes from Henrique Brustolin with Bradesco. Your microphone is on.

Hello, everyone. Thanks for taking my question. I wanted to hear a little more about Brazil, right? You, you delivered another strong quarter of volume growth, and this has been a very consistent trend. We start to see some softness in some consumer categories in the country.

Would be very interesting to hear, you know, how you are seeing volumes evolving for specifically soft drinks and your categories in general. How has market share contributed to the volume performance you have been achieving and your expectations for the remainder of the year in the country? Thank you very much.

Hello, Henrique. We haven't been seeing that softness. Within our territories, we continue to perform. I mean, Brazil is. Well, like I mentioned in my remarks, really all territories are growing at a healthy clip with basically Mexico, where we're having to digest the tax. Brazil is included in that comment. That being said, you're right. A relevant proportion of the gains come from share gains. We are gaining share across categories, and that's a big or that's a relevant portion of the volume piece that we need to account for.

Here to complement Ian, Henrique. I would also highlight and Ian mentioned this briefly in his prepared remarks. In Brazil, where we had since the fall of 2025, the benefit of having our Juntos+ Advisor platform deployed. We have continued to see very good performance out of combined coverages both in CSDs as well as in stills, that we think this is helping on the side of share gains, helping performance overall in Brazil.

We continue to be excited and we see good numbers coming out of what we're seeing in execution in the market related to Juntos+ Advisor. In that sense, the rest of Coca-Cola FEMSA, including Mexico, will be benefiting from this as we move forward.

The only category where you could say that we are seeing softness is beer. We are seeing softness in beer, but it has more to do, I think, with our segment of economy, where we are very big in economy. Because if we exclude economy, we have a limited premium offering, but we're growing their volumes. But economy is such a large portion of our portfolio that does drive our beer volumes down, even though we're growing within premium.

That's all very helpful. Thank you very much.

Our next question comes from Ulises Argote with Santander. Your microphone is open.

Hey.

Hello, Ulises.

Gerry, Jorge. Hey, how are you? Thanks, thanks for the space for questions. Wanted to ask on details into the regional performance in Mexico, particularly what you're seeing in the center, versus versus more on the south region. If you're actually seeing any difference in trends there. Also you're seeing competition and market share evolving on the back of the special taxes. How are other companies reacting? How are you seeing that step up there? Thank you.

Hi, Ulises. Well, there are two parts to the question. Are we seeing big difference in regional performance within our regions? Yes. I would say the most sluggish region for us is the Southeast. The Southeast digested last year the cons of, you know, the large infrastructure projects being wound down by the government, and we still have some tail effects there.

The Southeast, I would say, would be the region that has the lowest or the biggest impact and because it's more structural and we're still seeing the tailwinds of the wind down of those large infrastructure projects that the government had. It's really related to that. I mean, weather-wise, we don't have really an impact versus last year. It's more or less a wash. What was the other point?

Sure.

In terms of competition, I think, this is a great question. You know, what happened. If you allow me to take a step back and share what happened in the prior excise tax. In the prior excise tax, in 2013, we passed. Of course, we didn't have the digital enablers, the level that we have them today to run, you know, the algorithms to determine the best competitive pricing response per region, channel, and geography.

Even within that context, with the amount of price that we put through there in 2014, 2015, we lost about 120 basis points of share in two years. It's a very large share gain that we lost, and it put us in a trend of losing 500 basis points of share from 2013-2023 until we finally arrested that share. If you remember, in 2023, we revamped our price pack architecture and addressed that. It was the first year where we arrested what had been 500 basis points of continuous share loss.

The big impact was precisely when the IEPS tax was passed and the pricing pass-through that we did, it turned into 120 basis points of loss in just two years. I would say it's a very big difference in how we're entering this IEPS price adjustment. Leveraging on our digital enablers with a more, you know, segmented RGM strategy, we're starting off the year, you know, growing 0.6% points in share of value in CSDs, growing 0.4% points in share of value in NARTDs.

Growing both volume and value shares, it's a very different picture to what happened in the IEPS tax. We're basically following the same playbook that we did in Argentina and also in Panama now that we're addressing a competitive situation. Our strategy is not to have an impact in our household penetration. We want our consumers that are feeling the brunt of this tax to still be able to access Coca-Cola.

We're being very prudent and very tactical in what we're doing in price because this is a scale industry, as we've talked in the past, and we have all of the intentions of coming out with a strengthened competitive position. So far it's going on as planned, except for the mixed effect that I highlighted in Henrique's question. Everything is firing there according to plan. Does that help, Ulises?

Yeah, no, that.

I gave you a little broader context, but anyway.

No, that's precisely I think what we were looking for and what really helps us. Thanks for the color there. Extremely, extremely helpful. Gracias.

Thank you.

Our next question comes from Alejandro Fuchs with Itaú. Your microphone is open.

Thank you, operator. [Non-English content], Ian, Gerardo, Jorge. Thank you for the space for questions. I have two very brief ones. First maybe for Ian, in Mexico. I wanna see if we could categorize this quarter, Ian, for volumes as maybe the toughest quarter in the year, right? Going forward, you were mentioning we could see a little bit of a better momentum in volumes.

Does that mean that maybe the prior guidance of, let's say, 4%-5% decrease in volumes in Mexico for the year, could that be a little bit better? Do you feel more comfortable with volumes for the full year in Mexico? That would be the first one. Maybe the second one for Gerardo.

In terms of hedges, I appreciated the, a lot of the detail that you gave on the call. When you guys are thinking about 2027, are you taking any positions right now, or do you wanna wait a little bit to have less volatility in some of the Raw Materials, PET, aluminum and so on, sugar, before taking those hedges? Thinking about 2027. Thank you.

Hi. Hello, Alex. Like I mentioned, the first quarter was not only gonna be our toughest quarter in terms of the volume comparison, but also in terms of the profitability comparison. We're over that hump, which was going to be the toughest comparison. Like also, like I mentioned, it's a different thing when we're comparing our base without the backlash than now that we're comparing with the backlash.

It's a completely different trend, but it has more to do with the base effect. I would say it'd still be too premature to adjust our guidance. We're over the tough comps, both in terms of volume and profitability. That's out of the way, but it's too early for us to adjust our full year guidance.

Regarding Alejandro, hedges, as we've previously disclosed, we have a pretty sound hedging process, and we try to stick to it all the time. This doesn't mean that we don't have a flexibility. We do have a range of space where we move, but we tend to be Try to be taking the less speculative positions regarding how behavior in markets is going to be.

Having said that, certainly we think that the volatility that we're facing right now related to conflict in the Middle East allows us to be to wait a little bit more to see how that evolves and look for better timing to increase our position for hedging for 2027.

We do have a base in our process that we will always have hedged, and this is the case for 2027 in that 12-month rolling period that we always look at. We always try to follow it a little bit and see how market evolves before we take on larger positions for next year.

Super clear. [Non-English content].

Thank you, Alex.

Our next question comes from Henrique Morello with Morgan Stanley. Your microphone is open.

Hi, everyone. Thank you so much for the space for questions. I have just a follow-up on the hedging side as well. If you could just comment and dive a little bit deeper at what levels on a year-on-year basis you are hedged or you have inventories on the energy and packaging inputs, mainly for this year. If you can also comment how are you seeing like diesel input costs, logistic expenses in the past months and also going forward.

Basically trying to grasp your perspective on the timing and the magnitude of the cost pressure we might face from higher oil flowing through your costs in the coming quarters. That's my question. Thank you very much.

Thank you, Henrique. I'll start by saying, We have our main packaging exposure is the PET for our bottles that is related to energy, the energy market. In this regard, we have around 60% of our requirements for 2026 hedged at better levels that we had for the last year. This is a bit of a tailwind for us for this year as it has been for the first quarter.

We, on other packaging materials, secondary packaging materials, even though it's a much smaller portion of our cost of goods sold as a proportion of our total cost of goods sold, it mainly, shrink wrap for our pallets and the material that we use to pack our unit cases, our physical cases, that we have, more exposed. That is, I think the main concern for us for the remainder of the year, although it's a much smaller portion of our total expense. Regarding sweeteners and aluminum, we-

To give a-

Yeah.

-around 4%.

Yeah.

It's very, it's a small proportion of our variable costs where we don't have that hedge.

Yeah. That's small. We obviously look for alternatives, but it's not a significant impact for our P&L. Regarding sweeteners, both sugar and HFCS, we have a high percentage of hedges above 90% for each of them. Aluminum that we had already expected pressure unrelated to the volatility that we've seen recently. Certainly it has increased, we also have a high portion, above 70% of our requirements hedged for the year.

In a nutshell, we don't see significant impacts in our most likely scenario that we're expecting for the year. We don't see significant impacts coming from these sources, given the positions that we already have and certainly the initiatives that we're taking on to mitigate any pressure that comes on.

That's helpful. Thank you very much.

Our next question comes from Carlos Laboy with HSBC. Your microphone is open.

Hello, Carlos.

Carlos, I don't know if your microphone is muted.

There we go. Sorry about that.

There you go.

Ian, you mentioned that Juntos+ is gaining share and clients with its platforms, perhaps better than other markets. Can you expand on this, please? To what might you attribute this standout performance for Juntos+ in Colombia? Can you comment on whether the competition for digital capabilities in Colombia is perhaps less intense for you? Or where do you have the greatest intensity of competition, and maybe where might you have more opportunities to make bigger headway?

Hi, Carlos. I don't know if your question is broader for Coca-Cola FEMSA or only for Colombia. I'll start with Colombia. Colombia does not have Juntos+ Advisor yet, which is a Salesforce tool. What we're leveraging in Colombia is the app and the analytics for the pricing. Really, the Colombian team has been outstanding in their leverage of the loyalty program. That has probably been their edge. They have been very creative in driving clients to tender points to reach volume goals.

They have been also very successful in increasing the amount of clients that are using, not only increasing the total client base, but increasing the use of our digital platform. It's those two things. As you know, the digital platform has the suggested order driven by AI. The algorithm only gets better. The initiatives are driven down by clients. It's that increased use, increased client count, increased use of the app, and the creative use of the loyalty program, for which I would say Colombia is a best practice, is driving our outperformance there.

In terms of our app versus what's in the market, for other competitors, we have no gaps. Our app is, it's either the best out there by feature or comparable to the other ones that are out there. As you know, Carlos, we have a much, much larger footprint than any other company out there in all of our territories, right? I don't know if you also needed a view of the total regarding the app, but that's what pertains to Colombia.

No, no, I, my focus is mostly on Colombia. By the way, thank you for the answer you gave Ulises. That was excellent. Thank you.

Thank you.

Our next question comes from Renata Cabral with Citi. Your microphone is open.

Hi, everyone. Thank you so much for this space for questions. My question is a follow-up on the performance in Brazil. As you are gaining market share and having great execution here, how do you see the current price gap versus competitors? How are you thinking about balancing the share going forward?

If you could give some color also on the highlights of the portfolio, if that continues to be higher penetration on Coke Zero, on flavor, especially Sprite. If you can give some color on what happened this quarter would be really helpful as well. Thank you so much.

Hello, Renata. Yes, by category it continues the same. We're seeing, you know, Coke Zero growing double digits, Sprite growing high double digits on the back of Sprite Zero. That's really a new phenomenon that we're seeing there since the end of the last year and that we're starting to exploit, not only in Brazil, but outside Brazil as well. Pretty much in every market, save Mexico, we're doing a big push in Sprite. We're also seeing brands, other brands respond, such as Fanta, which hadn't been in the past.

Energy, teas are doing very well. You know, I wouldn't say we have been timid with prices in Brazil, just to be clear. We are gaining share, we have increased our prices in Brazil. It's not on the back of, you know, aggressive, or below inflation pricing. That's not been the case. We've been able to digest, you know, our price increases in Brazil and continue gaining share. It's a multi-year phenomenon. If you look at, you know, shares in Brazil, for CSDs since 2,000, you know, those are 300+ basis points in share of value.

If you look in sports drinks, it's 15% points of share. Teas, it's 10% points. Water, 200 basis points. Juices, 500 basis points. Energy, 10% points. It's in Brazil. Same as in Colombia, now we have gotten into this positive flywheel where we, you know, reset our price pack architecture, and then every year we're gaining relative scale, which allows us to be, you know, very smart in, and tactical in the pricing. The industry tends to follow, it's just a virtual circle, which is exactly what we intend to capitalize in this juncture for Mexico as well.

Renata.

Mm-hmm.

Just to clarify one thing Ian mentioned on these share gains. He mentioned since 2000, just to clarify, this is from 2020.

2020, sorry.

It's a five-year period.

Sorry, sorry.

Just to clarify.

Mm-hmm. Mm-hmm.

To complement Ian, Renata, I would say for us, and this is not only pertaining to Brazil, but our overall strategic approach to pricing, is that we're always looking to gain relative scale, maintain our position with our customers, being able to serve all of our customers' consumption occasions. This is what we take into account to determine our pricing. We obviously have to compensate for pressure and costs, we look at that angle in different timeframes.

We're looking at our relative scale in a longer-term basis, and we obviously try to address short-term pressures the best we can without sacrificing that overall intention of maintaining and growing in relative scale with our customers.

That's a very great call. Thank you so much, Ian, Gerardo, and Jorge.

Thank you.

Thank you.

Our next question comes from Antonio Hernandez with Actinver. Your microphone is on.

Hi. Perfect. Thanks for the specific questions. Just a quick one regarding pricing. I mean, even the overall performance in Mexico in terms of volumes may be a little bit better than expected. Do you think, or are you considering your pricing plans for Mexico to be maybe different to what you already mentioned in the last conference call? Thanks.

Hello, Antonio. I think we're given that overall volumes came in soft during the quarter, even considering that the improvement in the last trimester, I think for us it's still prudent to maintain, you know, this pricing strategy. That being said, if a scenario materializes where, you know, the conflict in the Middle East extends for a long period or there are certain disruptions there that reflect in raw material price increases in the second half or whatever, there we could probably revise this upward.

Additionally, if volume starts to respond in a different way, that's another instance where we could rethink the strategy. Where we are today, I think it's prudent to maintain both our volume and pricing guidelines.

Okay. Perfect. Thanks.

Thank you, Antonio.

Our next question comes from Rodrigo Alcántara with UBS. Your microphone is-

Hey. Hello, guys. Ian, Gerry, Jorge, thanks for my question. Just reassuring additional comments on, in Mexico, Fintechs, MXN 600 million, kind of like, I guess, a more reasonable contraction, right, in EBITDA margin. Now taking the discussion to South America, where it was just the opposite picture, right? Just also curious if you can share with us to what extent you upfront marketing expenses in the region, right? Also, if you can comment on the EBITDA margin performance by country, right?

I'm asking this as, you know, it seems that you, correct me if I'm wrong, but it's kind of like the South America, not necessarily Mexico, it's kind of like the region where you can expand margins the most, right? I mean, Colombia, you redesigned your distribution, your supply chain network, right, which presumably generated some efficiencies, right? Brazil, there are some opportunities there to expand margins, Argentina as well, so on. Also that's why I'm interested in knowing how the margins are performed by country in South America.

Last but not least, I mean, hit us with, I mean, I'm asking, you know, we heard, you know, news from in Colombia about water licenses and a regulator, well, you know, at first, issuing some comments regarding your license there in Colombia and the usage of water there. I mean, any comments about that, if that to some extent implies some disruption there or we can just ignore that, any comments on that would be very helpful. Thank you very much.

Thank you, Rodrigo. Good morning. I'll kick it off regarding South America margins. I think you're spot on in terms of the potential for margin improvement in South America is significantly higher, just on the base of having a lot of head space in margin performance, both in Brazil and Colombia. We have a long-term plan that we're chipping through every year, improving margins, improving profitability.

Mainly on the back of gaining scale, improving execution, leveraging on our digital capabilities that Ian highlighted, especially for Colombia, and I mentioned regarding Brazil. We have this conjunction in the case of Argentina, where we had a significant margin adjustment contraction in 2024 when we reset the market to address a consumer situation there that year. We've been recovering that margin improvement as well.

Those three operations, I think, will continue to provide a tailwind for profitability performance in specifically in South America. In the case of Colombia, the news that you saw is regarding the renewal of the concession for water for premium water brand Manantial in Colombia. I would start off by saying that this is a small portion of our business, it's less than 2% of the volumes in the country.

I think that the development is a very positive development in the sense that the conclusion of the process that we were in was that our business does not present any risks to the water supply in the region, and that we can continue using our concession. It was renewed. The process will be reviewed closely as we move forward, but we, I think we're very optimistic in the sense of the openness that we saw in the process. It was a very open, transparent process where a lot of people participated in the discussion.

Government authorities, as well as the community that's close to our Manantial plant. I think everybody expressed their opinion and I think the development ended up being a very positive one in the sense that the conclusion was that we were able to renew the concession and continue operating that business in the following years.

If I may, Rodrigo, perhaps the only thing that I would add, going back to the first part of your questions on margins on South America. You know, if we were to look at proof points of whether this sustainable growth model is working, as you know, we have been discussing about this on this flywheel of getting, you know, more relative scale. When you see the markets in South America, you see Brazil gaining share, Colombia gaining share.

Yep.

Argentina as well. Profitability improvements that come from relative scale gains, you know, and the pricing is not really the lever that brings these profitability improvements. No, it's fixed cost dilution, and we can take this to sustainable value creation. That's the only point that I would add to that. As Gerry mentioned, we see profitability improvements across the board in South America.

Yeah. Yeah. Ex Mexico, which was great. Thank you, Jorge. Thank you, Gerry, for the detailed answer.

Thank you.

Our next question comes from Lucas Ferreira with J.P. Morgan.

Hi, guys. Thanks for the space for questions. Appreciate. The first question is actually two questions on Mexico. The first one is, if this initiative to sort of a right size the company for this, you know, tough year, also envisions sort of a, eventually an acceleration of growth we may have in the coming quarters and eventually years.

How flexible you are if things are coming better than expected to sort of, you know, make sure you have the right size to keep, you know, coping with the growth of the market and market share. Then number two is a bit more of a conceptual question on Mexico growth. For instance, if I look at Brazil's volume growth, let's say, volume CAGR over the last, I don't know, five years, has surprised a lot to the upside, right? Very good and high mid to high single digits, volume growth.

I attribute part of this to the Coke Zero growth. My question on Mexico is the following: I mean, would you see sort of a similar playbook here where, you know, your average growth rate in Mexico on a consolidated basis could be surprising the market to the upside and accelerating, let's say from the average growth rates you had in the previous years?

You think eventually Mexico, there's something cultural that would prevent the growth of zero to be, you know, accelerating similar pace we saw in Brazil and some other countries as well in LatAm and in the world? That's my question. If you see like a Coke Zero being sort of in the spotlight globally like we saw in the case of Brazil. Thank you.

Hi, Lucas. I would say it's a two-part question. In terms of the right sizing, we've done what we needed to do. We don't need to do any further. We have enough flexibility in our manufacturing, distribution and headcount structure to weather, let's say a 5% volume surprise upside. We are where we need to be in terms of productivity, and we have enough of the assets and both manufacturing distribution assets that we could address, you know, a 5% volume upside surprise.

We are where we need to be in terms of a structure now and going forward. We have time to respond if a trend will improve with necessary investments and especially with increases in our headcount, which was probably what we would need faster. More headcount and especially in the distribution. I think we're well-positioned for that. It wouldn't be an issue. In terms of whether we can see Coke Zero respond as it did in Brazil, we're very glad that, say, two years ago, we cracked a code on Coke Zero in Brazil.

Zeros are doing very well in Mexico from a much smaller base. You know, that's where we were in Brazil in a few years ago. It's a phenomenon that takes time. It's not immediate. We don't see anything different in Mexico with regards to Brazil. We took a little longer to crack it, but now it's responding, it's growing positively. We're also going to be doing a push on other light flavors. That platform should perform in line or let's say, outperforming the market.

We have a much better position in Zeros than most of our competitors, so we're confident of that. The one caveat that I would have that's different to a market such as Brazil, for example, is that per capitas in Mexico are much higher. There's an underlying effect in Brazil of the overall category gaining in per capitas. That's the only thing that I would say would be different. That being said, in Mexico, in 2023 and 2024, we did gain per capitas.It's not that it's impossible. It is possible, but it's at a much higher pace per se already, the category.

Thank you very much. Yeah.

Thank you.

Our next question comes from Álvaro García with BTG. Your microphone is open.

Hey, good morning. Thanks for this. Great questions. Two questions. One on Venezuela. I was wondering, you know, how should we think about this business? What can you share about maybe recent volume dynamics and sort of cash flow from that business? Do you see grounds maybe to consolidate it at some point in the future again?

My second question for Gerry, if you could maybe provide an update on capital allocation. At the end of last year, you kind of, you know, mentioned you were in a position to give us an update. When might we expect an update on that front? Thank you.

Just operationally, Venezuela, you know, continues doing very well, accelerating, but the items that we need to reconsolidate that operation are still not there yet. We don't have visibility on that yet. I wouldn't think we could be reconsolidating Venezuela, for this year or next year at least. But it is doing very well. Obviously, it was already doing well. Now it's doing even better. There's a big change going on down there, but it's too early to think of putting that back on the books. Gerry?

Regarding capital allocation, Alvaro, the excise tax that came up, was something that certainly we didn't have in our plans. It was something that came up late last year. It got passed very quickly.

We're given the uncertainty that this scenario presents for us in terms of cash flow generation and how the Mexico business will continue to evolve in the next few months, we're taking a step back to review and have more information before we decide what we're gonna do to address the issue of capital allocation and our capital structure that we recognize that we have opportunities there.

Great. Thank you very much.

This concludes the questions and answers section. At this time, I would like to turn the floor back to Mr. Jorge for any closing re-.

Just to thank everyone for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, we are available to answer any remaining questions, and we look forward to seeing you again soon. Thank you.

Thank you.

Thank you. This does conclude today's presentation. You may disconnect now. Have a nice day.

Hello, and welcome to the Coca-Cola FEMSA Fourth Quarter 2025 Conference Call. My name is Sophia, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Jorge Collazo, Investor Relations Director at Coca-Cola FEMSA. Jorge, please go ahead.

Thank you, Sofia. Good morning, and welcome to this conference call to review our fourth quarter and full year 2025 results. Before we begin, let me remind all participants that today's conference call may include forward-looking statements and should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties that can materially impact the company's performance. For more details, please refer to the full disclaimer in the earnings release that was published earlier today. Joining me this morning are Ian Craig, our Chief Executive Officer; Gerardo Cruz, our Chief Financial Officer; and the rest of the Investor Relations team. After prepared remarks, we will open the call for Q&A. [Operator Instructions] With that, let me turn the call over to Ian, our CEO, to begin our presentation. Ian, please go ahead.

Thank you, Jorge. Good morning, everyone. We appreciate you joining us for today's call. 2025 tested our business in multiple ways, which provided the opportunity to learn and adjust to changing conditions. It also underscored the resilience of our core business and reinforced our conviction in our strategy of following a sustainable long-term growth model. Throughout the year, we implemented decisive measures to react to the short term while ensuring we continue progressing towards our long-term objectives. Among other actions, in Mexico, we adjusted our promotional grid and strengthened our affordability initiatives to address a weaker-than-expected consumer and the effects of temporary unfavorable brand sentiment early in the year. We focused on recovering our competitive position and protecting profitability with swift and decisive actions that became a best practice within the global Coca-Cola system. On the other hand, our markets in South America enjoyed more favorable consumer dynamics that coupled with market execution, investments behind capacity and the full reopening of our plant in Porto Alegre resulted in volume growth across most of our territories and an improved competitive position. Notably, gradual sequential improvements during the last quarter of the year led to consolidated volume growth year-on-year. Indeed, volume performance in December marked the strongest month in our company's history. Despite the many headwinds faced, our full year 2025 results demonstrate top and bottom line growth with resilient operating and adjusted EBITDA margins. We were also successful in reinforcing our relative scale across our markets, supported by progress in installed capacity and the rollout of our digital initiatives. As we look to 2026, we are confident that we will deliver both opportunities and challenges, including the impact on our consumers and customers of the excise tax increase in Mexico. This makes it more important than ever that we adhere to our sustainable growth model to best navigate these challenges and emerge with a stronger relative competitive position. We expect to follow the same strategic playbook, leveraging Coca-Cola FEMSA's differentiated strength of an unmatched portfolio of brands, the largest distribution footprint, consistency in investment above the line and below the line, relentless execution and leading -edge digital enablers. For the year, our key priorities remain unchanged. First, to continue growing our core business by leveraging our big bets, accelerating Coke Zero, improving our competitive position in flavors and developing profitable noncarbonated beverages. Second, to capitalize on Juntos+ AI capabilities and continue to roll out and leverage Juntos+ Advisor across our 4 largest markets. And third, to continue fostering a customer-centric and psychologically safe culture for Coca-Cola FEMSA. With that, let's review in detail our consolidated results for the fourth quarter. Our consolidated volume increased 1.3% in the quarter to reach 1.09 billion unit cases. Gradual sequential improvements in Mexico, coupled with solid volume growth in the rest of our territories supported this positive performance. Total revenues for the quarter grew 2.9% to MXN 77.7 billion, led by revenue management initiatives that were partially offset by unfavorable mix effects and headwinds related to currency translation from most of our operating currencies into Mexican pesos. On a currency-neutral basis, our total revenues increased 6%. Gross profit increased 1.8% to MXN 36.3 billion, leading to a margin contraction of 60 basis points to 46.7%. This margin performance was driven mainly by an unfavorable mix and hedging positions, coupled with fixed costs such as labor and depreciation. On the other hand, these effects were partially offset by better sweetener and PET costs. Our operating income increased 13.3% to reach MXN 13.7 billion, with operating margin expanding 160 basis points to 17.6%. This increase is positively impacted by the recognition of insurance claims recovered in Brazil and Mexico, net of expenses for MXN 1.1 billion. By excluding insurance recovery and related expenses in both the fourth quarter of 2024 and 2025, our operating income would have declined by 2.1%, resulting in an operating income margin contraction of 90 basis points to reach 16.1% -- this normalized operating margin contraction is explained by higher depreciation and labor expenses that were partially offset by expense controls such as maintenance and freight, coupled with an operating foreign exchange gain. Adjusted EBITDA for the quarter, including insurance recoveries, increased 12.8% to MXN 18.2 billion, and EBITDA margin expanded 210 basis points to 23.4%. Excluding insurance effects and related expenses at the EBITDA level, normalized adjusted EBITDA grew 4.4% with a margin expansion of 30 basis points to 21.9%. Finally, our majority net income increased 3% to reach MXN 7.5 billion. This increase was driven by operating income growth that was partially offset by an increase in comprehensive financial results and in the effective tax rate. Now let me expand on the main operational and strategic highlights across key markets. In Mexico, despite facing what is still a soft consumer environment, our volumes improved sequentially, resulting in a 0.9% contraction year-on-year, aided by adjustments to our price pack architecture, coupled with revamped affordability initiatives in multi-serve refillable packs. Regarding categories, Coke Zero maintained its solid growth pace with 14% volume growth year-on-year. Our initiatives to recover share allowed us to fully recover our competitive position and enter 2026 with positive share momentum in both the colas and sparkling flavor segments. Notably, our stills portfolio grew 7.4% year-on-year, driven mainly by the solid performance achieved in Monster, FUZE Tea and Santa Clara, which grew 41%, 33% and 28%, respectively. We also positioned our Mexico operation for significant market execution improvements in 2026 with more than 100,000 new cooler doors installed by year-end 2026. Regarding digital, as I mentioned last October, we began the rollout of our state-of-the-art sales force tool, Juntos+ Advisor in Mexico. We are encouraged to share that with a strong focus on usability. We have completed its rollout and today, its overall performance is improving geo efficiency or visitation, as is also known, by 5.5 percentage points from 91% to 96.5% and offering value-added functionalities to our sales force that are helping them strengthen customer relationships and increase sales. I also want to underscore the swift and decisive nature of our Mexico team's reaction to a difficult first half of the year by implementing top line productivity and cost control measures that reversed a negative trend in volume and profitability. As we enter 2026, we are well positioned to navigate the challenges related to the excise tax increase and continued soft economic growth. We have bolstered our portfolio with key affordability initiatives and are in the process of increasing our returnable pack offerings to capture key price points and defend household penetration. We have also developed an ambitious plan together with the Coca-Cola Company to capitalize on being a host country for the FIFA World Cup. Additionally, we continue with a keen focus on productivity and cost control initiatives, together with a prudent CapEx investment level to navigate the short term while we gain visibility on how the year develops. Moving on to Guatemala, where our volumes increased 3.5% to reach 48.9 million unit cases. During the quarter, we continue seeing a macro environment that decelerated versus the previous years, driven by shifts in consumer behaviors as consumers increased their savings from remittances from 11% up to 40% on average, coupled with reductions in mobility because of rising in security in the country, which is now the #1 public concern in Guatemala. Amid this backdrop, we were able to continue growing volumes and share, although at a lower-than-anticipated pace. In addition, during the second half of the year, we implemented productivity initiatives to put in place a leaner operating model. As we enter a new year, we aim to accelerate top line growth with initiatives to continue our colas momentum while capturing share opportunities in flavors. In colas, we continue to have opportunities to gain share through entry price points, leveraging the FIFA World Cup and increasing availability, while we double down on efforts to boost [ Pride. ] We continue to have ample space to develop profitable stills categories with Powerade and Monster as well as continuing to bolster our Juntos+ platform by unlocking new clients and improving executions. With the ambitious investments that we have completed in Guatemala, capacity constraints are no longer a concern. Our priority now is to continue optimizing our cost structure through disciplined expense management and operational excellence. Now moving on to our South America division. In Brazil, our quarterly volumes increased 2.6%, driven mainly by a historic month of December, outstanding market execution on the back of our digital enablers, coupled with higher average temperatures and significantly lower precipitation drove this growth. Notably, this is the highest fourth quarter volume on record for our second largest operation. As has been the case throughout the year, we continued gaining share in all relevant categories within the nonalcoholic ready-to-drink industry. Importantly, we have recovered the vast majority of the share that was lost in Rio Grande do Sul due to the temporary closure of our plant, which fully reopened last May. Aligned with our strategic intent to accelerate growth in non-caloric and single-serve beverages, we delivered strong growth with Coca-Cola Zero, which grew 44% during 2025 and Sprite Zero, which achieved accelerated growth of 93% year-on-year in 2025. Notably, our Sprite Zero playbook is following a similar script as Coke Zero. As a result, Sprite Zero now represents more than 20% of our total Sprite volume. Regarding steels, we have leveraged our portfolio and commercial capabilities to achieve growth across all categories. For instance, energy drinks continue seeing double-digit growth from Monster, driven by portfolio innovation, execution and availability. In line with these positive performances, juices grew 9% and Powerade grew mid-single digits. Finally, within the alcoholic ready-to-drink category, we achieved more than 50% growth year-on-year, driven by Jack & Coke and Absolut Sprite. Our digital enablers, Juntos Plus monthly active user base continues expanding, surpassing our goal of 303,000 monthly active users, while continuing to increase average ticket size. Importantly, our Juntos+ premier loyalty customer base increased 73% year-on-year. Juntos+ Advisor, which is a game changer for our sales force and is supporting Brazil's positive share performance, increased its efficiency by more than 9.2 percentage points to reach 95.6%. Finally, on the supply chain front, we increased our manufacturing capacity by 8.2% year-on-year, supported by 5 new production lines. In addition, our warehouse capacity increased by more than 25,000 pallet positions, representing a 6% increase year-on-year. This was achieved through state-of-the-art projects such as a vertical automated warehouse located next to our Itabirito plant in the state of Minas Gerais. As we look to 2026, we are encouraged by the growth rate at which we closed the year. We anticipate that election-related spending, social programs and the FIFA World Cup will represent important tailwinds for our operation in Brazil. In this environment, we expect to continue executing against our strategic priorities, striving to outperform the industry, leveraging our digital initiatives and our customer-centric culture. Now moving on to Colombia. Our volumes grew 4.5% as the macroeconomic environment gradually recovers and we cycle the effects of the excise tax increase in the country. As was the case in Mexico, we implemented portfolio initiatives to adjust our price pack architecture in brand Coca-Cola, providing attractive price points aimed at growing transactions. In addition, we're managing price gaps in multi-serve presentations to provide affordability and an attractive value proposition. At the same time, Coke Zero, which achieved double-digit growth during the quarter, remains a growth engine with ample headroom. As I mentioned during our last earnings call, Quatro, our grapefruit flavor, is now the #1 flavored sparkling beverage in the country, and we aim to continue expanding our competitive position in flavors with increased innovation and availability. On the digital front, Colombia closed the year with more than 320,000 monthly active buyers. Importantly, average ticket grew more than 4% and digital orders increased more than 15% year-on-year. We anticipate that our Premier loyalty plan will continue driving adoption and frequency as its use expands during 2026. Finally, I want to recognize our team in Colombia for their cost control measures and the cost to serve reductions they have achieved, aided by our capacity investments in the country, which have enabled us to reduce primary freight costs and third-party warehouse expenses. As we look to 2026, we expect to add another distribution center in Medellin, which will alleviate warehouse saturation and bring additional efficiencies. In Argentina, our volumes increased 3%. Our agile response to a volatile environment ensured our sustained positive performance throughout the year despite a heterogeneous recovery across different sectors of the economy. We have remained consistent with our strategy, enhancing our affordability plans and accelerating our single-serve mix, all while maintaining a lean and flexible cost structure. This strategy resulted in an improved competitive position and single-serve mix that reached 26.3%, a 2.3 percentage point increase year-on-year. Regarding our digital initiatives, we continue driving digital client adoption with the rollout of the latest version of Juntos+, resulting in a 71% increase in digital orders year-on-year. As we look to 2026 for Argentina, we expect to continue executing against the strategy that has been successful thus far, sustain an affordable value proposition in brand Coca-Cola and flavors, boost single-serve and Powerade by leveraging the FIFA World Cup and unlock Juntos+ and Premier Juntos+ full potential while keeping a lean and flexible cost and expense structure. Let me close by emphasizing that we are encouraged to be a part of a vibrant beverage industry within a region with positive growth prospects. The support of our long-term sustainable growth model from our strategic shareholders, FEMSA and the Coca-Cola Company is one of our fundamental strengths. With that in mind, I would like to take a moment to recognize and thank Jose Antonio Fernandez Carbajal and James Quincey for their exceptional vision, leadership and partnership as CEOs of FEMSA and the Coca-Cola Company, respectively. Their vision to grow the Coca-Cola system, combining the unique strengths of both the Coca-Cola Company and the bottlers has been fundamental to our company's success. Additionally, both Jose Antonio and James have personally taken a stake in the system's talent development, leaving a legacy of a deep management bench. We're grateful for the transformational impact they have had over the years and wish them both continued success in the roles as Chairman. We are equally excited to welcome Jose Antonio Garza-Laguera to the role of CEO at FEMSA and Henrique Braun to the role of CEO at the Coca-Cola Company. Their leadership marks the beginning of a new growth chapter in our strategic partnership, and we look forward to continuing to transform the beverage industry and create long-term value together. With that, I will hand the call over to Jerry.

Thank you, Ian, and good morning, everyone. I appreciate you joining us today. I will begin by summarizing our division's results for the quarter. In Mexico and Central America, our volumes were even as a slight volume decline in Mexico was offset by growth in Guatemala, Nicaragua, Panama and Costa Rica. Revenues increased 1.6% to MXN 42.2 billion, driven mainly by revenue growth management initiatives that were partially offset by unfavorable mix and currency translation effects into Mexican pesos. On a currency-neutral basis, revenues increased 3.3%. Gross profit increased 2.6% to reach MXN 20.8 billion, resulting in a gross margin of 49.2%, a 40 basis point expansion year-on-year. This margin increase was driven mainly by lower raw material costs such as sugar and PET, coupled with the appreciation of the Mexican peso as applied to our U.S. dollar-denominated raw material costs. These effects were partially offset by unfavorable mix effects and fixed costs. Operating income in the division declined 1.1% to MXN 6.9 billion, and our operating margin contracted 40 basis points to 16.3%. As described in our earnings release, our operating income includes the recognition of insurance recoveries in Mexico, net of expenses for MXN 116 million. By excluding this effect and related expenses in the same period of the previous year, normalized operating income would have declined 8.1%, resulting in an operating margin contraction of 170 basis points. This contraction was driven mainly by an increase in marketing, depreciation and labor, coupled with a lower operative foreign exchange gain as compared to the previous year. These effects were partially offset by operating expense efficiencies such as maintenance and distribution. Finally, our adjusted EBITDA in the division increased 1.3% with a flat margin as compared to the previous year to reach 22.9%. Importantly, by normalizing insurance claims and related expenses at the EBITDA level, normalized adjusted EBITDA increased 0.5% year-on-year and EBITDA margin contraction of 20 basis points. Moving on to South America. Volumes increased 3% to 504.1 million unit cases. This increase was driven by volume growth across all territories in the division. Revenues in South America increased 4.6% to MXN 35.4 billion, driven mainly by our revenue management initiatives, offsetting unfavorable currency translation effects into Mexican pesos from most operating currencies in the division. On a currency-neutral basis, total revenues in South America increased 9.5%. Gross profit in the division increased 0.6% and gross margin contracted by 170 basis points to 43.7%, driven mainly by an unfavorable mix and higher fixed costs such as labor and depreciation. On a currency-neutral basis, gross profit increased 5%. Operating income in South America rose 32.8% to MXN 6.8 billion, with operating margin up 410 basis points to 19.2%. As Ian previously mentioned, this margin expansion was positively impacted by insurance recovery in Brazil for approximately MXN 1 billion. By normalizing insurance effects and related expenses in 2024 and 2025, our operating income increased 6%, resulting in an operating margin expansion of 20 basis points to reach 16.3%. This improvement was driven by expense efficiencies such as freight, marketing and maintenance. Finally, adjusted EBITDA in the division increased 29.5% to MXN 8.5 billion for a margin expansion of 460 basis points to 23.9%. Excluding the effects of insurance recoveries and related expenses in 2024 and 2025, at the EBITDA level, normalized adjusted EBITDA increased 9.6% year-on-year and EBITDA margin expansion of 90 basis points. Now let me expand on our comprehensive financing results, which recorded an expense of MXN 1.4 billion as compared to an expense of MXN 980 million during the same period of the previous year. This increase was driven mainly by a reduction in interest income, resulting from a lower cash position in key markets and lower interest rates in Mexico, coupled with higher interest expenses driven by the issuance of a U.S. dollar-denominated bond through 2035 and its related derivative instruments. These effects were partially offset by: first, a gain in financial instruments of MXN 162 million as compared to a loss of MXN 33 million in the fourth quarter of '24. Second, a higher foreign exchange gain; and third, a higher gain in monetary positions from inflationary subsidiaries. I would like to briefly comment on our recent financing activity that further reinforces our balance sheet with attractive funding conditions. On February 12, we successfully priced the bond issuance in the Mexican market for a total amount of MXN 10 billion. The transaction was executed through a dual tranche structure, allowing us to balance duration and interest rate exposure. The first tranche consisted of MXN 7 billion with a 10-year maturity priced at a fixed rate of 9.12%, equivalent to a [indiscernible] plus 43 basis points. The second tranche amounted to MXN 3 billion with a 3-year term priced at a floating rate of funding TA plus 38 basis points. This structure reflects both strong investor demand and our disciplined approach to liability management. Importantly, the transaction received the highest national credit ratings from S&P and Moody's, reaffirming our solid credit profile and the confidence that the local capital markets continue to place in Coca-Cola FEMSA. Overall, this issuance strengthens our financial position, extends our debt maturity profile and provides us with continued financial flexibility. Finally, I'd like to take a moment to comment on sustainability, which remains a core element of our long-term value creation strategy. Our disciplined and consistent execution translated into tangible improvements across the main sustainability benchmarks used to assess our performance. Most notably, our S&P Global Corporate Sustainability Assessment score increased by 11 points year-over-year, reaching an all-time high of 81. As a result, we were included in the 2026 Sustainability Yearbook as the highest scoring company in our sector in the Americas, an achievement that underscores the strength of our sustainability strategy and governance practices. In addition, we achieved a record score of 4.1 out of 5 in the FTSE4Good assessment, while also posting improvements across our key evaluations, including MSCI, ISS ESG, Bloomberg ESG and CDP. These results reflect particularly strong performance across climate action, water stewardship and supplier management. Taken together, these recognitions reinforce our conviction that the disciplined integration of environmental and social factors, along with robust risk management across our operations and value chain is a critical enabler of sustainable long-term growth. With that, operator, we're ready to open the floor for questions.

[Operator Instructions] Our first question comes from Ben Theurer with Barclays.

I wanted to get some incremental color, if you can, as to the performance, particularly in Mexico over the course of the fourth quarter and then heading into the first quarter. What have you seen in regards to the volume behavior, October through December and particularly now with taxes being in place early on, what are like the early signs of sensitivities that you've been seeing amongst key customers? And how have you been reacted on that as it relates to the tax and then ultimately, your pricing strategy throughout the year? That would be my question.

What you saw during last year, if you remember, I think in Mexico in the first quarter was around a 5% decline. Then the second quarter, when we really had the impact of the consumer sentiment around the 15% decline -- no, sorry, around 10%, if I remember more or less. And then third quarter, 3.7%. And finally, by the fourth quarter, it was almost flat, declining 0.9%. So you saw a sequential improvement. And I mentioned in the prepared remarks that December was the strongest December on record for Mexico in terms of volume growth. So you can see how the underlying trend was improving to the point of having a December that was the highest on record in terms of volume. That being said, we continue with the same guidance for 2026, which is a low to mid-single-digit decline in Mexico simply because we had to transfer the impacts of the IEPS excise tax, and that was a large price increase that we had to transfer through for the IEPS tax. So we're not changing our guidance there, and we are seeing the impacts of that tax increase in the first quarter.

As expected, like the volume declines or very much...

As expected.

Our next question comes from Ricardo Alves with Morgan Stanley.

Ian, I remember the cycle of investments in 2024, the focus on growth and then you have 2025 with all the challenges and one-offs, IEPS came through. And I think that to credit Coke FEMSA, the company was very fast in adjusting the cost structure as needed, the price hikes. So when you think about -- the question is your strategic views into 2026. When you think about everything that you have in place, right, I think that since 2024, all the investments or the major investments at least were made, even rebuilding plans. The costs were adjusted in Mexico, a big discussion that we had in the first half of last year. You priced through the tax issues or IEPS issues into 2026. So with -- assuming that all of that is kind of behind you, what would be for this year and the next 2 years, your main strategic ambitions for 2026, not necessarily Mexico only, but across the board. What is keeping you awake as big opportunities ahead? And then just one other question for Jerry. Just a quick update on the shareholder remuneration would be much appreciated given the below 1x EBITDA leverage. So I think that an update on shareholder distribution would be appreciated.

Thank you, Ricardo. Well, just to be clear, as you mentioned, we're very proud of the adjustment that our Mexico team or the reaction, let's say, the rapid reaction that our Mexico team had when we were facing the change in consumer sentiment and the sluggish demand, coupled together with weather, by the way. So it was a quick and swift reaction, and that's behind us. Going into 2026, we are already with a lean structure, and we adjusted our CapEx primarily in Mexico because the rest of the territories are growing as expected. So we adjusted our CapEx there. And our key priorities remain the same. I mean, -- we want to continue growing our core business. It's amazing what's happening with Coke Zero even within this environment in Mexico, even with the tax, we're continuing to accelerate Coke Zero. There are opportunities to improve our position in flavors. What I'm seeing with Sprite Zero in Brazil is nothing short of amazing. What we have done with Quatro in Colombia is very positive. And that's something that we want -- what we're doing with the heritage brands in Mexico. So that's something that we want to continue to leverage this year and also on profitable NCVs, which continued to gain mix and grow at very attractive rates. So that would be my first priority. The second one is we will have Juntos+ Advisor in our 4 largest markets this year. We already have it in Mexico and Brazil, where it's maturing, where it's giving us improved visitation, improved combined coverages. I mean those things are growing 3 to 2 percentage points, and those translate directly to increases in share. You see that in Brazil, more compliance on the guided missions. So I think we expect to continue to scale that and leverage those enablers. And finally, we continue working on the culture piece. It's very important for us that we continue improving on our customer centricity journey, improving our customer-centric measures. We believe that's key to the fundamental long-term health of the business. And that's what we're driving, Ricardo. We've talked about this in our conversations. This is a scale business. It's important that we continue growing relative scale. It's a year that we need to be prudent because of the tax increase in Mexico. It's not a minor tax. It's a very large tax increase. So we need to be prudent. But that only reaffirms our commitment to our sustainable long-term growth model. We need to come out of this stronger and continue accelerating what all of our territories outside of South America. Jerry?

Yes. Thank you, Ricardo. And to briefly complement Ian, I would like to just connect a few of the points that Ian mentioned regarding first, our grow the core strategic initiative as well as our digital enablers as our second most important growth strategic priority. because it came -- or it's coming at the right precise moment that we can leverage those digital capabilities and the AI-enabled capabilities that our platforms have to take the best advantage of our revenue growth management initiatives at a moment where specifically in Mexico, we're facing important challenges with the IEPS tax coming online. Going to capital allocation, Ricardo, I think we are very -- or following very closely our capital structure situation. We understand that we are pending to give information to the market regarding what we're doing. with our dividend strategy. Given that we're facing this challenge in Mexico with IEPS, we're holding on a little bit to see how cash flow behaves during the year. We'll certainly try to do our best to have the less disruption possible from this effect in our cash flow generation. But we're being a bit cautious, just waiting out and see how the first half of the year develops with the World Cup coming on and see how our projection for cash flow for the remainder of the year progresses. So we'll give you a bit more information as the year moves on.

Our next question comes from Thiago Bortoluci with Goldman Sachs. We are going to move on to the next question that comes from Rodrigo Alcantara with UBS.

Can you hear me?

Hello Rodrigo.

Nice to hear from you. One question for Ian to elaborate on the very encouraging momentum observed in Brazil, right? I mean we discussed here in terms of the 0 concepts momentum, but also judging on competitors' performance, looking -- your performance is quite strong as well. So I'm not sure if we're -- if it's a matter also of price relativity, allowing you guys to give better performance, digital tools. Just wanted to understand the drivers behind not only the strong category growth momentum, but also the relative performance versus competitors in Brazil. That would be for nonalcoholic beverage. And the other question for Jerry, and this is a topic that to tell you truth, I mean, we were asked as writing the review today, what happened to cash flow? I mean, there was a meaningful outflow in working capital, Jerry, that actually burn all the gains that we saw at the EBITDA level. So I just wanted to -- I mean, investors wanted to understand precisely this and what happened to working capital. And if I recall correctly, I mean, -- it's something to do with payables and stuff like that, but it's a topic that we have previously discussed in the past. So I thought that we have turned the pitch on that. So just curious on this and when can we expect some sort of normalization on working capital? Those would be my 2 questions.

Rodrigo, so just in terms of the market performance, Brazil is the perfect example of having decided to adopt a long-term sustainable growth model where we are leveraging a top-notch portfolio of brands, consistent investment year-over-year over-year above the line and below the line. with the widest distribution in network, focusing on expanding our customers, improving our customer service metrics and also rolling out digital enablers. So it's a combination of that consistency year-over-year. And you end up improving your relative competitive position that fits into more scale. It fits into a more orderly market. You can end up continuing to leverage again your scale. And you see it where we have decided to focus. I mean, the Coke Zero playbook worldwide for the system is called the Brazil playbook for a reason. So it was developed there. It's working for Coke Zero. It continues to work, and now we rolled it out across other geographies, and it's working as well. Sprite Zero, nothing short of amazing what we're doing there. The growth that we saw in Sprite Zero last year and has continued again into this year, which is also, by the way, great news when we think of the impact that is going to, at some point, start to flow through on the GLP-1s. It's great for us to improve our non-caloric mixes. So in Brazil, I would say it's a story of consistency behind our strengths that I mentioned in the prepared remarks. And it's just feeding through. And we're very fortunate to now be at a stage where we have very advanced AI enablers, all rolled out and scaled in Brazil, and we just continue to fine-tune them. and that continues to show through. I mean when you look at the share that we are winning and exclude the effects of Rio Grande do Sul, so if you look at mature territories of Sao Paulo and Minos, I mean, these are very large share gains, and they come from that consistency.

Rodrigo, thank you for your questions and for your time. Regarding working capital, it's exactly accounts payable, the effect that you're seeing, and it's an effect in the base. Just to remind everyone in the call, we are in the process of rolling out and deploying the implementation of our new ERP, SAP/4HANA. Due to delays last year, we had a significant increase in accounts payable that were a big effect in fourth quarter of '24. So when you compare to a normalized fourth quarter of '25, you see that large reduction in accounts payable, which basically is the hold effect that you're seeing in working capital. We have normalized that for the year and don't expect to see any further disruptions coming from accounts payables or receivables for 2026.

Awesome. And so just to confirm, starting 1Q '26, we should go back to normal on those outflows or inflows on working capital.

That's correct. Even since fourth quarter '25, I would say, is the normal, that the disruption comes from the base fourth quarter '24 when we had unusual increase in accounts payable back then.

Okay. No, that's encouraging. I mean excluding -- I mean, that said, I mean, it was a great quarter, guys. Congrats.

Our next question comes from Thiago Bortoluci with Goldman Sachs.

Can you hear me now?

Yes Thiago.

I would just like to move the conversation back into Mexico with 2 follow-ups. The first one, I know you mentioned January moving in line with expectations, and it's still too early to call for a more aggressive capital allocation. But I remember having prior conversations on pricing. Obviously, the industry as a whole has been pretty clear in passing the IEPS, but we had some diverging views on whether to go for a second round of increase to cover the underlying raw materials inflation, right? So the first question is, with the elasticities that you're seeing so far in Mexico, how comfortable you are or not in implementing another round of price adjustments this time to cover your underlying cost inflation? This is the number one. And then the number two is with the level of hedges that you have so far, particularly on the FX line, what's the visibility that you have in the direction of your gross margins and cost inflation for the next 12 months? That's the question.

I'll take the first half, Thierry. It's still too early to tell. We need to let the first half -- the first quarter flow through. If you remember, January of last year was very strong. Then we have February where we started seeing changes in sentiment. And in March, we started seeing both the change in sentiment as well as weather. So it's too early to tell. We need to be a little more cautious. From what I see today, I can tell you this, the elasticity is behaving as we have imagined. The consumer is still sluggish in Mexico. So it wouldn't be prudent to venture into an additional increase today. At least I need to see how we end up closing the quarter and things are reacting. And that gives us plenty of time in any case, before we could do any sort of adjustment, additional adjustment.

And Thiago, connecting my answer to Ian's, I would say, gross margins for Mexico, we are seeing a bit of pressure. We're certainly going to follow up on any pricing decisions that we have to make. We're being very cautious, but we are very concerned with maintaining sustainable growth for the long term and following up on that promise to the market. But we are seeing a bit of pressure in gross margins, even though we see a benign raw material environment with the exception of aluminum, we see flattish to favorable prices in sweeteners, in plastic, but we do see a bit of pressure in aluminum that should result in some pressure in gross margins that we're aiming to try to compensate in fixed cost and expenses to try to deliver as close to flat EBIT margins as possible. It's still a work in progress, but that's what we're expecting for the year...

For the full year.

Exactly.

Our next question comes from Renata Cabral with Citi.

My questions are about the Brazilian operations, some follow-ups. So the first one is regarding the supply chain improvements. We have discussed in the previous quarter, the improvement because of the normalization of the operation in Rio Grande do Sul. My question is how much of incremental savings potential remains in the distribution cost to serve for 2026? Or if it -- in this specific line, we are getting to a peak? And my second question is a follow-up regarding CapEx investments in Brazil. Is Brazil still receiving incremental capacity investment? Or does the current footprint support the growth in the upcoming years without incremental fixed cost improvement or investments this year?

Renata, I would say we still have a couple of months where we're cycling still the Porto Alegre plant closure. So most of the improvements you're going to see really in freight come from that extra freight that was occurring there up until May. In terms of capacity, I think we put in over 4 -- over 5 lines in Brazil. So we've done a lot for the short term in Brazil in terms of lines, and that should not be an issue. Given the growth that we're seeing, if this continues as strong, and we have to see, remember, 2027, a new tax is going to come into effect. So it's a little early to say whether we'll need -- when we'll need the new plant in Brazil. So our projections today is that we will need one to start around 2030. And so investments for that will be in 2029. So I would say from here to 2028, things are at a lower level of investments because we have already invested quite a bit. So from having invested around 8% of revenues we should go down to around 6.5% over the following years, and then it steps up again in 2029 with the start of a new plant. That's the base scenario. But we have to see what sort of impact we see in 2027 from the tax, okay?

Our next question comes from Alvaro Garcia with BTG.

I have 2 questions. I have a bigger picture question on affordability in Mexico. In the context of -- you've stated your long-term sustainable growth model. If you zoom out, is it fair to assume that we could be entering just sort of a longer period of affordability? And we obviously had a phase, let's say, in the 2015, '16, '17, where you probably passed a little too much price, and we've discussed that in the past. given your price gaps today, so maybe some commentary on that would be helpful relative to your competition. And just given the tax and given what the consumer is feeling, is it fair to assume that we could be entering just a multiyear cycle where you're maybe favoring volumes in the context of your long-term sustainable growth model. So any thoughts there would be greatly appreciated. And then just one quick one, Jerry, on CapEx levels for 2026. I think last quarter, you mentioned potentially lower CapEx levels. I'm not sure if you've mentioned it on this call yet or not. I know you cleared up sort of capital allocation, but any comments on specific CapEx levels for '26 would be helpful as well.

Hello Alvaro. I think your general read is some point. We believe this model is the one that delivers the best results, not only in terms of share of volume or even share of value, but also in terms of sustainable bottom line growth. So we saw this, like you mentioned, we lost too much share in the 8 to 10 years prior to 2022. We adjusted the strategy then. It reacted very quickly in 2023, so much so that then we had an availability issues in 2024. I'm talking about Mexico. Then last year, I would say, was a bit of an outlier with everything that happened with the consumer. The reaction again recovered the impact that we have, but that was, I would say, an event-driven strategy to quickly recover the changes in consumer sentiment. when we look at what's going to happen and what is transpiring in 2026 in Mexico, we're very convinced that it's the right strategy because when you're passing through the IEPS price tax increase, it's sort of a similar effect to what we saw in Argentina from there from the economic crisis or in Panama after having to adjust our portfolio, the consumer, we don't want to lose household penetration. It's very important that we maintain that penetration. And it's really a 12-month thing. We don't see it as longer term than that. So we need to come out and we're planning to come out of this yes, impact stronger with a stronger relative position. I think we're very the price gaps are manageable where they are. So the strategy should pay off. It's worked in the other markets. It worked in Mexico as well. We're missing one price point where we're going to be launching a new returnable presentation, but we're keeping that under wraps until that's in the market. But outside of that, we're where we need to be positioned where we need to be, and it's starting to show. So I think it's a 12-month thing, Alvaro, where we reposition this. And then we will grow in terms of RGM initiatives and pricing as much as the market gives us while maintaining increases in competitive position. It's really dictated by that.

Alvaro, I would like to highlight very quickly 2 aspects that I think are very relevant for the implementation of the strategy that Ian was elaborating on, which is our digital capabilities, the ability that we have now to capture and process information from the market and act on that information quickly through our revenue growth management initiatives, I think, is -- puts us in a very strong position to address both the situation that we're facing in Mexico this year and the situation that we will be facing next year in Brazil with the start of the excise tax there as well. The other component, I think, that is worth mentioning is -- we have the learnings from the experience we had in 2014 with -- when the YES was originally enacted. So that will allow us to -- or is allowing us to take more informed decisions with respect to the market to address our growth opportunities in the best way selectively throughout the market. Regarding your question on CapEx, as we were talking about the last couple of years, last year, we invested 8.2% of revenues for the whole year with a big increase coming from deploying capacity, both in manufacturing and distribution. For this year, we're expecting, given the phasing out that Ian already mentioned in our Southeast plant in Mexico as well as our plant in Brazil. We're able to generate a little bit of savings in our investments for this year, dropping our CapEx to revenues from a range of 7% to 7.5%, probably ending in the lower end of that range for the year with the expectations that we have in our business plan.

Our next question comes from Froylan Mendes with JPMorgan.

Can you hear me?

Yes, Froylan.

You mentioned December was the highest monthly volume in Mexico. Was there any overstocking, probably a reaction from the different channels with the upcoming hike on the taxes. Also, you mentioned that price gaps are manageable. Does that mean that the price gap was reduced? And is that a sense that you have been gaining share so far with the IEPS implementation in the industry? That would be great if you could give us some color on how competitors have reacted.

So I don't -- we don't believe there's a stock effect in those -- in that December figure, firstly, because we never used all channels at the same time. And in this case, we adjusted the traditional trade mid-month. So any event of overstocking was, let's say, flow through within the month. So that was done around the mid-December. And the modern trade, as you know, has a huge incentive to improve their working capital in year-end. So they did not really stock in any major form entering into January, and that price flowed through in January. So I don't see that major effect in the Mexico December volumes. It was the highest December on record for our 4 largest operation. and it was the highest fourth quarter on record for Guatemala, Colombia and Brazil. So those are like underlying green shoots that tell you about the strength of the NARTD market that we serve. And in terms of the price gap, it varies a lot by competitor, region and channel. So what I can tell you is the overall mix, it's either the same or very slightly improved than what we have before. But it's very different by competitor and channel geography. It's not a homogeneous thing.

You mentioned a bit about -- no competitor doing anything crazy, right?

No, no deterioration in the price gap. You could say there are some competitors that are being aggressive in certain channels and geographies. What I'm giving you is the blended overall picture.

I mentioned, Froy, a bit about share performance. I think we're very proud of the job, as Ian mentioned in prepared remarks, of the job that the Mexico team did recovering from the backlash effect that we had in the second quarter of last year. And we're very excited of the base from where we're starting this year having recovered that share. So this should be a good position, a good platform to start this year that we're facing the challenge of IEPS with the pricing strategy and RGM initiatives that we elaborated on.

Our next question comes from Antonio Hernandez with Actinver.

Just a quick one regarding -- I mean, you mentioned the different tailwinds for Brazil, especially for this year and next year might be a little bit more complicated. But more specifically, how are you seeing in terms of any volume guidance or sales guidance in Brazil for the year?

Sales guidance, Antonio, what I can say is the year started off this first by [indiscernible] continuing on the back of the strong trend. We've seen no changes there. We had good weather in January. We have social programs. We have election-related spending. So everything moving on strong in Brazil anything that you want to share on that?

Yes. Maybe to complement on that part, Ian, I would say that with all the tailwinds that we're seeing and so far, Brazil has been to a good start of the year, both January and February have been good months. Some of these tailwinds are already materializing from the social spending, even weather has been positive. So with all things considered, I would say that we expect to grow volumes in Brazil this year, which, as you know, when you zoom out and you see Brazil over the past couple of years, all years have been quite strong. And we have been able to outperform even to initial expectations that was -- or has been what has been happening in Brazil. So all things considered, I would say that if we were to put a number, and please consider this as an early take for the year, I wouldn't call it guidance. But I think we can work with positive volumes probably on the low to mid-single digits range. But we will progressively update you on that as the year progresses. But I think that's a fair assumption for you guys to model.

If I may add, Antonio, I think we're cautiously optimistic and a bit excited of what we've been seeing in terms of share gains in Brazil. I want to highlight this because it's a particular situation. Ian mentioned in one of the earlier questions. But one of the big boost that we're getting from the launching of our adviser tool in Brazil that is also online in Mexico and are excited for what we may see in Mexico as well. But a good result that we've seen has resulted in share improvement through improvement in combined coverage, both in CSDs and stills. This tool allows us to better execute at the point of sale, reducing out of stocks as much as possible, and this has resulted in good share trends in all of the categories, which is especially exciting when we see the breakdown. So we're optimistic of what this tool will bring for the rest of our business, especially with the late last year launch in Mexico and the expectation of launching in Colombia and Guatemala this year.

Next question from Gabriela Martinez with [indiscernible].

Do you already have an estimate of the impact of the World Cup? And could you share more details on your strategies to capitalize the opportunities it will bring?

Gabriela, yes, it's Jorge here. I think as Ian and Jerry have mentioned in previous earnings calls, we are very excited about the opportunity that the World Cup brings, not only because of the local aspect of being a host country, but perhaps most especially for the power that it has for our brands. creates a lot of opportunities for us to engage with the consumers, with the customers, with activation and not only for brand Coca-Cola, Coke Zero, but also in other categories as Power it, for example. So we're, as I said, very excited about that. It's hard to put a number like to put a number on the model, let's say, for the World Cup. But I would say the most important upside that we see for the World Cup is regarding to brand engagement, the opportunities on frequency. That is a great opportunity for us to capitalize. And I would say not only in Mexico, in other markets as well. It's a great opportunity to gather. It brings more consumption occasions, and that's a great, great opportunity that we have. We have, for example, not only during the tournament, -- but even before and even after the tournament, we have a lot of activations happening. We have the trophy tour ongoing. It's coming to Mexico as well. So those are the kind of opportunities that I would highlight for the World Cup.

If I may add, Gabriela, as well, regarding the World Cup and the expectations for the year, we are particularly proud of the strength and depth of our portfolio of products because we can offer a product for all of the different consumption occasions that our consumers will have around this event, be it at home, be it on the road or be it on the venues occurring during the event itself. So we offer a consumption occasion and a brand and an SKU that allows us to capture all of these opportunities, be it hydration, be it energy, be it indulgence. All of this is -- has a lot of synonyms with the World Cup, and we're proud to be able to serve the Coca-Cola portfolio of products around this event, which is a good engagement -- brand engagement event for us.

Our next question comes from Fernando Ferreira with Bank of America.

Just a quick follow-up regarding volumes. You have mentioned or you share some outlook on Mexico and Brazil. But maybe if you can give us some color about what you're expecting on a consolidated basis, mainly given the strong recovery that we have seen in Argentina, Colombia and the very good performance of Guatemala, that would be great.

Yes. Thanks for the question. Look, when we put it all together, as I mentioned, we already mentioned low to mid-single-digit decline in Mexico. low to mid-single-digit growth in Brazil and the rest with the -- putting it all together with the rest of the markets, I would say consolidated volume for 2026 will be more of a flattish year, of course, flattish to slightly positive, I would say, if we were to give a range. That's what the team is working on. Of course, we will, as I mentioned before, progress you along the year as the year progresses. Ian and Jerry highlighted the effect of the excise tax that is ongoing, and we still need to get a feel on that. So consider this like an early take on the outlook. But there are several moving pieces, but this is what we have for now, what we've been working on. And of course, the team is very focused on achieving growth this year.

So Ian mentioned, Fair, our sustainable growth model, and we've been talking about this for the past few years. I highlighted performance in share that we are seeing positive performance in share across our territories. So our teams are striving to get -- to return to this path of growth in all of our operations. And I think this year, we certainly will be aiming to deliver slight volume growth across our territories.

This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Jorge for any closing remarks.

Well, just to thank everyone for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, we are available to answer any remaining questions, and we look forward to meeting with you, hopefully, in person throughout the year. Thank you very much.

Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.

Hello and welcome to the Coca-Cola FEMSA Third Quarter 2025 Conference Call. My name is Sophia and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Jorge Colazzo, Investor Relations Director at Coca-Cola FEMSA. Jorge, please go ahead.

Good morning and welcome to this webinar to review our third quarter 2025 results. Joining me this morning are Ian Craig, our Chief Executive Officer; Gerardo Cruz, our Chief Financial Officer; and the rest of the Investor Relations team. Before I hand the call over to Ian, let me remind all participants that this conference call may include forward-looking statements and should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties that can materially impact the company's performance. For more details, please refer to the full disclaimer in the earnings release that went out this morning. As previously mentioned, after our management's prepared remarks, we will open the call for Q&A. [Operator Instructions] With that, let me turn the call over to our CEO to begin our presentation. Ian, please go ahead.

Thank you, Jorge. Good morning, everyone. Thank you for joining us today. Before reviewing our third quarter results, I would like to take a moment to express our sincere support for all of those affected by the recent storms in Mexico. This year's Tropical Storm Raymond brought torrential rain during the first weeks of October, impacting Central and Northeast Mexico. In accordance with our principles and protocols, we're taking action to prioritize the well-being of our teams and their families while also supporting local communities. We're working hand-in-hand with FEMSA and the Coca-Cola Company on several community relief initiatives as we always do during these unfortunate natural disasters. We are hopeful that with everyone's support, the affected communities may soon be back on their feet. Also, we are deeply saddened by the recent passing of our esteemed Board member, Ricardo Guajardo Touché. Ricardo was a member of Coca-Cola FEMSA's Board since 1993, sharing his valued insights in its finance committee and was committed to advancing economic, educational and social development in his community and throughout the country. We offer our condolences and prayers to the Guajardo family. Now moving on to discuss our results. During the third quarter, Mexico continued facing a soft macro background, impacting consumer preferences and demand. On the other hand, South America enjoyed a more resilient macro and consumer environment, which supported positive volume performance. Despite this environment, our consolidated results improved sequentially as we implemented cost control and productivity initiatives. As we look beyond this year, we will leverage Coca-Cola FEMSA's ability to adapt to challenging operating conditions, including the impact of the recent beverage excise tax increase in Mexico. We are confident that focusing on our sustainable growth model, combined with RGM affordability initiatives, short-term productivity and cost control measures and the revised CapEx investment level is the best way to navigate these conditions, while maximizing value for our stakeholders. Now let me expand on our consolidated results for the third quarter. Our consolidated volume declined 0.6% to reach 1.04 billion unit cases, a sequential improvement versus the second quarter, which is partially explained by a softer comparison base in Mexico than the one we faced during the first half of the year. In particular, the quarterly volume decline was driven by contractions in Mexico and Panama that were partially offset by the growth achieved in the rest of our territories. Total revenues for the quarter grew 3.3% to MXN 71.9 billion, led by revenue management initiatives that were partially offset by a volume decline, promotional activity and unfavorable currency translation effects from the depreciation of the Argentine peso and most currencies in Central America. On a currency-neutral basis, our total revenues increased 4.7%. Gross profit increased 0.9% to MXN 32.4 billion, leading to a margin contraction of 100 basis points to 45.1%. This margin performance was driven mainly by an unfavorable mix, increased promotional activity and fixed costs such as labor and depreciation, partially offset by a better sweetener and PET cost. Our operating income increased 6.8% to reach MXN 10.3 billion, with operating margin expanding 50 basis points to 14.3%. This operating margin expansion is explained by expense efficiencies such as freight and marketing across our operations, coupled with an operating foreign exchange gain. These effects were partially offset by higher depreciation, labor and IT expenses. It is important to consider the recognition of a onetime income of MXN 218 million of insurance claims recovered in Brazil, net of expenses during the third quarter of 2025. Adjusted EBITDA for the quarter increased 3.2% to MXN 14.4 billion, and EBITDA margin remained flat at 20.1%. Finally, our majority net income increased slightly to reach MXN 5.9 billion, driven mainly by operating income growth that was partially offset by an increase in our comprehensive financial results. Now diving deeper on our key markets performance for the quarter. In Mexico, our volumes declined 3.7% as we continued facing a soft macroeconomic backdrop. For instance, consumption drivers such as remittances and formal job creation have declined year-on-year. In this environment, consumers are looking for the best value equation and our strategy remains clear, implement top line initiatives to incentivize demand by focusing on providing affordability and attractive price points, allowing us to capture share opportunities. To achieve this, we have made adjustments throughout the year to our promotional grid and [Technical Difficulty] across formats and channels. As I mentioned during our previous call, these initiatives have led us not only to recover share in the modern channel but also to surpass previous year's levels, achieving now more than 6 percentage points of recovery, which positions us at a record level in this important modern channel. In the traditional trade, promotions and execution are also contributing to share recovery, especially by leveraging refillable multi-serve packs. The adjustments we have made to our price pack architecture in multi-serve refillable packs from July to September are showing encouraging initial results, reversing volume declines in this segment of the portfolio. Moreover, Coca-Cola Zero continues delivering positive results, growing 23% versus previous year, [indiscernible] plans increased connect with consumers with the right communication and execution. Indeed, Coca-Cola Zero has grown more than 40% as compared with 2022. In addition, our flavor sparkling portfolio is also ahead of previous year's share levels, driven by the recovery achieved in the modern and on-premise channels. To achieve this, we are combining global strategies in core brands such as Fanta and Sprite with local heroes such as Mundet and other heritage regional brands. These top line initiatives are supported by our ambition to install a new record of 125,000 coolers during the year. In digital, we are encouraged to share that we are now rolling out our state-of-the-art salesforce tool, Juntos+ Advisor in Mexico. This digital tool has been fundamental in supporting share improvements and service levels in Brazil and we expect to see its positive impact in Mexico in the upcoming quarters as adoption matures. Now I would like to discuss recent developments in Mexico. As you know, last week, the House of Representatives approved a federal revenue law presented by the executive branch, including a significant 87% increase in the excise tax on soft drinks, taking it from MXN 1.64 per liter to MXN 3.08 per liter and installing a new excise tax on noncaloric formulas of MXN 1.5 per liter. The federal revenue law is currently pending approval by the Senate and once approved, it would take effect on January 2026. During the past month, we engaged with the government in conversations regarding the proposed excise taxes. As a result of these interactions, the Coca-Cola system in Mexico reaffirmed its commitment to continue incentivizing low and noncalaloric products as well as to maintain an open and constructive dialogue with the health authorities in Mexico. As we look to 2026, we expect another challenging year for volume performance in Mexico, with our customers and consumers dealing with the impact of the excise tax increase together with an economy that is expected to grow a modest 1.5%. However, we anticipate a positive impact on brand equity due to the World Cup as has been the case in host countries for these incredible assets. Taking all of these factors into consideration, we believe that the best course of action for our business in Mexico is to continue focusing on our sustainable long-term growth model while addressing the short-term headwinds with RGM initiatives, productivity and cost control measures and a revised CapEx investment. Now moving on to Guatemala, where our volumes increased 3.2% to reach 50.8 million unit cases. In this important market, we continue seeing a higher propensity from consumers to save. Amid this background, we continue outperforming the industry by gaining share in key categories such as sparkling beverages, water and energy. Notably, Coca-Cola Zero Sugar grew 16.9% year-on-year, while additional capacity is allowing us to strengthen our performance in flavors with Fanta and Sprite growing 8.8% and 3.8%, respectively. Commercial enablers are another area of focus, and I'm encouraged to report that Juntos+ and Juntos+ Premia continue growing at a fast pace. During the quarter, we surpassed 100,000 digital monthly active users in Juntos+, 25,000 more than the previous year, with more than 73% of these users active on the app. This is 23 percentage points more than in the first quarter of the year, underscoring our customers' fast adoption. Finally, in Juntos+ Premia, we have more than 46,000 clients redeeming points, which is more than double what we had in 2024. As we look towards the end of the year, we are adjusting our initiatives to continue optimizing our portfolio, capturing white spaces in key categories and executing rigorous cost control and productivity initiatives to grow sustainably and profitably. Now moving on to our South America division. In Brazil, despite lower average temperatures than the previous year and size of slower growth, we were able to increase our volumes 2.6% year-on-year, driven by share gains. As has been the case throughout the year, additional capacity, coupled with the reopening of our plant in Porto Alegre is supporting share gains in the nonalcoholic ready-to-drink segment. Notably, in the sparkling category, regions like Minas Gerais and São Paulo are more than 1 percentage points ahead of the previous year. And in Rio Grande do Sul, we have recovered approximately 5 percentage points of the total 8 points that were lost due to the temporary closure of our plant. Another highlight from our operation in Brazil remains the continuous growth from Coca-Cola Zero, which during the quarter grew volumes by 38%, supported by the Star Wars campaign that began last September in both Coca-Cola Original and Coke Zero. Regarding still beverages, we saw double-digit growth in juices and energy. In the case of Monster, last month, we launched a new flavor with a local Brazilian appeal, Monster Rio Punch, underscoring continuous innovation across the portfolio. On digital enablers, our monthly active user base in Juntos+ continues expanding with 18,000 additional customers and a 15.8% increase in average ticket size. Importantly, the Juntos+ Premia loyalty customer base increased 40% year-on-year. We remain encouraged by the results we are seeing from the nationwide rollout of Juntos+ Advisor, which, as I have mentioned in previous calls, is a game changer for our sales force and is supporting Brazil's positive share performance. Finally, in Brazil, we continue showing strong improvements in the supply chain front, which translate to increased customer satisfaction. For instance, order fulfillment during the quarter improved 1.9 percentage points as compared with the previous year to reach 94.5%. Similarly, our delivery service metrics improved 1 percentage point to reach 94.6%, supported by declines in product unavailability. For the remainder of the year in Brazil, we will continue striving to outperform the industry, leveraging our digital initiatives and our customer-centric culture as we aim to continue improving our profitability by controlling expenses and increasing productivity. In Colombia, our volumes grew 2.9%, reflecting a gradually recovering economy, driven by improving sectors such as commerce, services and agriculture. Notably, the consumption basket for fast-moving consumer goods has gradually recovered over the past 5 months, driven mainly by an increase in the average ticket. Our positive volume performance is supported by share gains in brand Coca-Cola, flavors and water with clear opportunities for us to reverse the trend in stills. Regarding brand Coca-Cola's category growth, we are leveraging affordability initiatives and managing price gaps in both multi-serve and single-serve, while supporting the growth of Coca-Cola Zero Sugar. Additionally, in flavors, we're encouraged that for the first time in our Colombia franchise's history, Quatro, our great fruit flavor brand, is the #1 flavored sparkling beverage in the country. On the digital front, we are enhancing adoption with monthly active buyers growing 27% year-on-year. We expect to continue leveraging the capabilities of our Premia loyalty plan to drive adoption and generate additional frequency. Finally, we're encouraged by the fact that the CapEx investments behind our supply chain have addressed key logistical pain points, allowing us to improve our cost-to-serve by reductions in primary freight costs and third-party warehouse expenses. Finally, despite facing what is still a complex environment in Argentina, our volumes increased 2.9%. Our strategy during 2025 can be summarized in 4 key elements: enhancing the affordability of plans we implemented since 2024 during the sharp macro adjustment; two, accelerating single-serve mix; three, leveraging digital with the rollout of Juntos+; and four, maintaining a lean and flexible cost structure. During the quarter, we continued delivering positive results across these elements of the strategy. For instance, we have consolidated the execution of what we call [ Sección de Ahorros ] sections or savings home section, which are attractive promotions and price points for our consumers. [ Sección de Ahorros ] is now present in more than 87% of our customers and growing. Regarding our single-serve mix, we reached 25.8%, which represents a 1.8 percentage point increase as compared to the previous year, driven by an 11% recovery in the number of on-premise clients. In digital, we began the rollout of Juntos+ last June. And thanks to its rapid adoption, more than 40% of our client base are now monthly active buyers. Amid Argentina's complex context, we have and will continue emphasizing responsiveness in managing a flexible and lean cost and expense structure. As we look to the last chapter of 2025 and adjust our plan for 2026, we feel encouraged to be a part of a resilient beverage industry. We have a clear long-term strategy, supportive shareholders in FEMSA and the Coca-Cola Company and a committed team focused on continuing to make Coca-Cola FEMSA a stronger and more adaptable organization. With that, I will hand the call over to Jerry.

Thank you, Ian and good morning, everyone. I will begin by summarizing our divisions' results for the quarter. In Mexico and Central America, volumes declined 2.7% to 612.1 million unit cases, driven by volume declines in Mexico and Panama that were partially offset by growth in Guatemala, Nicaragua and Costa Rica. Revenues decreased 0.2% to MXP 42.5 billion, driven mainly by volume decline, unfavorable mix effects and promotional activity. These effects were partially offset by our revenue management initiatives. On a currency-neutral basis, revenues remained flat. Gross profit decreased 2.6% to reach MXN 20.2 billion, resulting in a gross margin of 47.5%, a 110 basis point contraction year-on-year. This margin contraction was driven mainly by unfavorable mix effects and promotional activity, coupled with higher fixed costs such as labor. These effects were partially offset by lower sweetener costs and the appreciation of the Mexican peso as applied to our U.S. dollar-denominated raw material costs. Operating income increased 1.1% to MXN 6.8 billion and our operating margin expanded 20 basis points to 16%. This expansion was driven mainly by a decrease in freight expenses and an operative foreign exchange gain on MXN 159 million as compared to a loss of MXN 298 million during the same period of the previous year. These effects were partially offset by an increase in expenses such as labor, IT and depreciation. Finally, our adjusted EBITDA in the division declined 1.4% with a 20 basis point margin contraction to reach 21.9%. Moving on to South America. Volumes increased 2.6% to 423 million unit cases. This increase was driven by positive volumes across the division. Our revenues in South America increased 8.7% to MXN 29.4 billion, driven mainly by our revenue management initiatives and favorable mix. These effects were partially offset by unfavorable currency translation effects into Mexican pesos. On a currency-neutral basis, total revenues in South America increased 12.5%. Gross profit in the division increased 7.2% and gross margin contracted by 50 basis points to 41.6%, mainly driven by labor, restructuring and maintenance costs. On a currency-neutral basis, gross profit increased 10.4%. Operating income in South America rose 19.7% to MXN 3.5 billion, with operating margin up 110 basis points to 11.9%. This improvement was driven by expenses -- expense efficiencies such as freight, marketing and the recognition of onetime income, net of expenses of MXN 218 million related to insurance claims from the floods that impacted Brazil in May of 2024. Finally, adjusted EBITDA in the division increased 12.6% to MXN 5.1 billion for a margin expansion of 60 basis points to 17.6%. Now let me expand on our comprehensive financial results, which recorded an expense of MXN 1.2 billion as compared to an expense of MXN 823 million during the same period of the previous year. This increase was driven mainly by, first, a reduction in interest income as a result of a lower cash position and interest rates in Mexico and Argentina. Second, we recorded a foreign exchange loss of MXN 65 million as compared to a gain of MXN 49 million recorded during the same period of the previous year. And third, a loss in financial instruments of MXN 39 million as compared to a gain of MXN 86 million in the third quarter of 2024. These effects were partially offset by a higher gain in monetary positions and inflationary subsidiaries. Finally, I would like to take a moment to expand on the cost environment and commodity hedging strategies for the remainder of the year and into 2026. We feel confident about our ability to manage costs effectively. Although the trade environment may continue to generate some ongoing volatility, especially in aluminum prices, we are seeing more stability in the rest of our key commodities than in prior years, especially regarding sweeteners and PET. Additionally, our teams continue to focus on efficiency, productivity and disciplined procurement, which should continue to help mitigate pressures to our margins. On the hedging side, our approach remains disciplined and proactive. For the remainder of the year, we have already locked in a solid portion of our main commodities, including more than 90% for sweeteners, 75% for PET resin and 65% for aluminum, which gives us good visibility and comfort for the fourth quarter. As we move into 2026, we will keep a flexible stance, protecting against potential volatility while taking advantage of favorable market conditions in raw materials such as sweeteners and PET. For instance, given current market conditions, we have already hedged more than 90% of our needs for the year in sweeteners and 40% for PET. Regarding currencies for 2026, we have hedged approximately 70% in Colombia, 40% in Mexico and 20% in Brazil at levels that are below 2025. Finally, I am pleased to report that our supply chain team has reached our savings commitment for the year ahead of time, generating $90 million year-to-date, approximately $43 million coming from primary distribution, $32.5 million from cost-to-serve and $14.5 million from cost-to-make. With that, operator, we're ready to take questions.

[Operator Instructions] Our first question comes from Ricardo Alves with Morgan Stanley.

A couple of questions. I think that on our side, the main surprise of the quarter came on Mexico and Central America profitability. When we try to calculate the adjusted margin, so taking out the insurance gains from last year, we actually see Mexico and Central America margins up about 50, 60 basis points, if I'm not mistaken. So clearly, a big improvement from the 200 basis points decline that we saw in the second quarter. So to us, that's a remarkable improvement, obviously. But when I look forward, I'm interested in -- is this something that was mostly driven by a better operational leverage because volumes improved on a sequential basis? Or is it much more about internal initiatives and cost-cutting initiatives that you may have put in place to adapt to a new reality of volumes? So I just wanted to go a little deeper on eventual efficiencies that you are looking within KOF in Mexico and maybe Central America because we don't have the breakdown exactly. So that would be my first question to explore a bit more the improvement on profitability. My second question -- it's -- I do have another one in South America but I'll jump on the line again. But I wanted to explore this time Central America, Argentina and Colombia because typically, we spend a lot of time on Mexico and Brazil. And I think that after a while, it would be helpful, Ian, if we could explore again these markets. I remember, for example, a couple of years ago, we were talking about per caps in Guatemala, the opportunities that you saw when you took over in improving per caps. Given that Argentina has surprised us to the upside, I think that Coke FEMSA is outperforming a couple of other bottlers in the region. Colombia is getting back on track and it's been a while that we don't discuss Guatemala in more details. I wanted to see with you, when you take a step back and you reflect on this past couple of years on the lead of the company, what were the strategies that worked for these 3 main markets outside of Brazil and Mexico? What are the things that didn't work that you still see an opportunity? So I just wanted to take a step back and take the opportunity to talk to you to see if -- it seems that there is something coming. Things are improving. So I just wanted to revisit the strategy for these, let's call it, secondary markets outside of Brazil and Mexico.

Thank you, Ricardo. I'll jump on the first one, first on profitability on Mexico and Central America. And there's a few parts to this question. So starting first on gross profit. We are continuing to see pressure on gross profit, even though we see volumes performing better versus last year, that's mostly related to having a lower base from the third quarter of last year. But we are seeing some gross profit pressures coming from mix that are affecting at the gross profit level. But going further down the P&L, the main reason for us turning around our profitability are savings initiatives. We're working all across our P&L to identify and execute savings initiatives starting from raw materials cost and expenses that has been a tailwind for us this quarter. We're optimizing marketing spending. We went through also restructuring in our teams to adapt to our current volume conditions, also preparing for what we're expecting for next year and the supply chain initiatives and other smaller savings initiatives that we are working on. And also, there's a virtual effect that you see in EBIT margins also that we are benefiting from. This is related to operating expenses, accounts payable denominated in foreign currency with a peso -- with a strong peso that is providing also relief to our EBIT margin as well.

Jerry gave a very detailed explanation. But in terms of the strategy, it really was bringing our productivity back in line, Ricardo, the main driver. So like I had mentioned, this is such a resilient business that even if you have challenging volumes, you can still deliver on results, positive results, if you have your structure aligned for that sort of environment, which was our big miss in the first and second quarter where I could say it was tough to read because of the consumer backlash. But by the time we got around to having the real sense of what was going on in April, then in May, we started adjusting very quickly. And now our productivity is back in line and we have a much more lean structure. So that's what explains the turnaround in Mexico. In the 3 markets that you mentioned outside of Mexico, Argentina, Colombia and Guatemala, it all follows under the same umbrella but with different recipes. And what do I mean? As I mentioned, our strategy is to have a sustainable long-term growth model. And why? Because this is a scale business, and it is critical that we continue to improve our relative competitive position because when you don't do so, then it becomes very complicated. Price gaps are stickier with competitors, you give them scale and you end up in a bad place. The way that played out in Argentina, which was the first one you asked about, was knowing that we were going to go into a very deep recession, we did not want to leave Argentine households. So we wanted to maintain household penetration. So we did not pass along all of the increase in inflation in the initial shock. And that obviously implied to us a hit on the P&L. But when the bounce -- the recovery came, we were much better positioned. And that's why when you compare the system, for example, versus 2 years before the crisis, our volumes and our results are much better. And it has been a more resilient strategy to have not lost that relative scale. It was just -- all strategies are valid but I think ours played out well in the end. In terms of Colombia, it's a big learning for us in Mexico because in Colombia, we faced a large tax increase such as the one that we're going to have to face in Mexico starting January. And what that essentially does is it shifts your volume 2 years out. So the growth that we were -- we had planned for '26, now instead of that growth in Mexico, we're going to have, like we had in Colombia, a volume decline to be followed by a recovery in the following year. So in essence, it shifts your curve 2 years out. And what we've done in Colombia is a full review of our OBPPC, focusing on key price points, focusing on key flavors leverages. And in Colombia, you see that year-over-year, we continue to gain share. And now that we've cycled the impact of the tax, we should be continuing to have, I wouldn't say easier comps but comparable comps without the effect of a tax. So now it's -- we're on a comparable basis going forward in Colombia and we entered out of that tax disruption in a more favorable competitive position. And in Guatemala, as we have mentioned, it's just a jewel of a market with a very young population becoming more urban with more disposable income. We hit a short-term turbulence there because with all of this risk on remittances, even though it has been more perceived than real because remittances haven't actually declined but they have slowed there. That anxiety, I would say, has trickled into consumers saving more. So we see nothing more in Guatemala other than a short-term adjustment to consumers saving more under the risk of them -- their family members losing the remittance sending capacity. But everything else being said, I would say this was an adjustment here there. We've also adjusted our structure, become more lean and are ready to resume growth there in Guatemala, where, by the way, our elasticities continue to work very favorably because of our share position. So there's still plenty of headroom there. I hope that was a good overview, Ricardo.

Next question from Alejandro Fuchs with Itaú.

Congratulations on the results. I have just one very brief one related to CapEx. I saw the comments Ian here and on the release about kind of rethinking CapEx a little bit for next year. We have seen at least 3 years of high investments. I wanted to see if you can share a little more color what are the initial thoughts, right? Where would be kind of the savings in CapEx coming from? And this is -- is this just a delaying of the CapEx, as you were saying with volume recovery probably 2027. So if you could give us a little bit more detail, that would be very helpful.

It's exactly that, Alex. So let me give you an example. And it's mostly in Mexico but it's in a couple of other countries where volumes weren't as high as we expected, for example, Guatemala. Let me give you the example of Mexico. We were putting in a couple of new lines, 3 new CDs. The lines are going ahead as planned but the distribution centers, for example, we've taken the land site but we're not going ahead with the construction. Because the worst thing that we can do is if we're going to have a low to mid-single digits volume decline next year due to the tax is to put in 3 new distribution centers and have those distribution centers be unproductive. You just get the extra depreciation, labor cost and you don't need it if our volumes are going to be facing that contraction from the tax. So it's really pushing out Mexico 2 years out. That's basically it.

Next question from Lucas Ferreira with JPMorgan.

Ian, first of all, a follow-up on your comment now. You mentioned low single digits decline in Mexico. Was this just sort of to illustrate or this is the number you are working with for Mexico next year? That wasn't exactly my question. My follow-up on the tax story. If -- well, first of all, the transition towards that around 30% reduction in the calories for the sugary drinks, how fast you guys are thinking on getting there? And if you think there could be any sort of impact on the flavor, on the consumer adoption, anything like this you can comment on sort of the risk of going towards that 30% reduction? And then the other question I have is, if this adjustments towards a sort of a new more leaner structure for Mexico right now, if it's -- how far we are from getting there? So you mentioned the CapEx. Is there anything else to be done still on the expenses side, cost side that you can help us understand to better model Mexico next year? And if I may, a second point is on Brazil, another clarification. If you look at your operations, let's say, in regions outside Rio Grande do Sul with the ramp-up of the plants, how the business is working? I mean you mentioned market share gains. Is this like sort of a better go-to-market strategies? Or is there anything related to pricing there, execution? So just to understand a bit how the operations, let's say, excluding the effect of the ramp-up of Rio Grande do Sul is going, if you're seeing sort of a bad weather, consumer dynamics? I'm asking because we see a lot of other consumer companies complaining right about the consumption in Brazil kind of slowing down. So wondering if you also noticed this happening in Brazil.

So let me -- there were several points there, Lucas and I'll ask Jorge to help me on some of those. But just in general, in Mexico, the big thing was, like we mentioned, starting May, downsizing to what needed to be done in terms of our operational structure. And there is some remaining adjustment there to be done in terms of productivity in line with the volume impact that we expect from the tax increase. You have to -- when you look at the 2026 numbers, you have to normalize internally what the effect was of the backlash. So the effect of the increase in the tax per se is a little worse but it gets masked or it doesn't look as large because we don't no longer have the backlash that we left after the first -- that we also ended around May of last year. So that's sort of taking all of those effects into account, that's why we were saying low to mid-single digits is what we expect. And there's a lot of uncertainty on that. So we have to see what the impact is in the first quarter to see if we have to do further adjustments and what depth of adjustments. We do have a shock plan in terms of savings in all sorts of instances of that. And it's a large plan to go and accompany this tough tax -- excise tax impact. In terms of how we move consumers gradually to low or noncaloric options, that -- it's something that we'll do with our promotional grill -- grid with adjustments to some of our formulas, always taking care to make sure that we are the best choice out there and giving the consumers choice. We don't expect in that sense, really material savings from sweeteners or such. That is not the case. We don't expect that. And we have to be very respectful to consumer space and what they want and how the mix evolves naturally. We can't be too forceful on that. It's just something that we need to be working and it will be gradual. Going back into Brazil, in Brazil, we do see consumption softening. We have the advantage of a really tough base last year with the closure of the plant. So when we normalize what's going on there, that's why we mentioned the type of share gains that we're getting outside of the Southern region. And that's really what has been the differential for us. That's what's been driving our growth there. It's really share gains because you're right, we do see softer consumption. That being said, remember that next year, we're going into an election cycle in Brazil. So I don't think, at least for the remaining of the year and 2026 that we expect anything other -- you know that, still a resilient Brazil. I think the big risk in Brazil is more relating to 2027. We have mentioned that. At that point in time, the selective tax on soft drinks should be coming into effect. And also, there may be as historically has been the case in certain elections, a post-election hangover, for example, like what we saw in Mexico. So I would say, Brazil, we see a softer consumer but it's not a contraction for us and we are not worried of 2026. We have to keep an eye out though on 2027. I don't know, Jorge, if there's anything you'd like to complement.

Perhaps the only thing I would add, Lucas, the first part of your question, you referred to Ian's comment on volume outlook for next year. So of course, this is a very preliminary early take. Now we have to put everything into consideration. We have to think about the implications, of course, of the excise tax. So this is, I would say, like a very early preliminary take on that, where we expect volumes to decline in the low to mid-single digits range -- for Mexico, of course, yes.

Next question from Benjamin Theurer with Barclays.

Just coming back to that point on the volume outlook. And obviously, you tend to have a lot of flexibility as it relates to like packaging mix and trying to offset and help profitability. So I would like to understand, in first place, what has been driving over the last couple of quarters, actually in Mexico but to a degree as well in Central America in contrast to South America transactions being somewhat even weaker than volume. So kind of like that relationship would like to dig into that. And as we look into next year, the way to offset maybe some of that with different packaging or trying to drive transactions, what strategies can you implement to kind of like boost the transactions at least into next year, even if volume might be under pressure, as you've just said, low to mid-single digits?

Well, I'll let Jorge dive into the details on that, Ben. But I would say the main point is whenever you see a more challenging economic environment or disposable income for consumers and things get tight, usually single-serve mix suffers and you move into multi-serve. And within multi-serve, you move into multi-serve returnables. And that's just a natural mathematical result of looking for lower price per liter, okay? And that correlates a lot with transactions. So that's the main directional point. What we do then is, focus a lot on the magic price points. And if you take that -- I mean, I think transaction, like you said, is important. But really the biggest, biggest thing is maintaining our volume base and our household penetration. So for us, the main focus that we have now in Mexico, when we look at our relative competitive position, the biggest gap is in traditional channel, refillables and that's what we are addressing. And what we're addressing that is with the 1.25 liter glass at the MXN 20 price points, which competes with Pepsi 1.75 liter and 2-liter Red Cola at that same price point. So we didn't have anything there. And now we're having the 1.25 liter glass there and that's a very big and important price point. It also drives transactions when you look at multi-serve per se. And then upsizing our 2.5 liters [indiscernible] PET to 3 liters and that's around the MXN 33, MXN 34 price point, which competes with 3 liters [ one way ] of Pepsi and Red Cola. So obviously, we have a very good brand that commands a brand equity lead and that allows us to be able to inconvenience our consumers with a returnable presentation that they have to carry to and from the point of sale but that really is the way that we're able to have that revenue management initiative there. That's our big focus per se. You see all of the transaction growth, for example, the biggest example is Argentina, will recover naturally with single-serve mix as the economy improves. So I would say the biggest and most important question for us with the excise tax increase looming is maintaining our household penetration and volume base really more than the transactions.

And real quick on pricing. I mean, obviously, you need to pass through the tax. Are you planning to anticipate some of the pricing already in the fourth quarter to kind of like get the consumer kind of like used to a new price point because of that? Or are you simply just going to wait and do the regular pricing as we move into next year, coupled with the tax as it might has to be applied?

The base plan basically is maybe at the very end of the curve but it's really preparing and passing through the excise tax that will commence in January. It's how -- there are certain time that you have to give, especially the modern trade to process that change in the pricing lists. So it's basically going to be that. It's the pass-through of the excise tax, getting ready by giving the modern channel enough time to have that ready to start in January.

Next question from Ulises Argote with Santander.

Sorry, I was having some technical issues here. This is kind of a follow-up question that I had on the pricing side of the equation. But given those changes in taxes and the differentiation there between sugar and nonsugar products, we wanted to get some color on how you're thinking about the price gaps on the 2 kind of going forward, right? Any color there on how you're thinking on the strategy? And maybe if there's any major shift there happening on pricing on one versus the other, that would be really helpful.

Well, one of the things that we've committed to is to incentivize a move towards noncalalorics. And in that sense, be it through differentials in baseline prices on the aisle or through a more intense promotional grid or both, a combination of both, we expect in the end to have that sort of differential above the size of the tax between those 2 to try to incentivize a move on -- in the mix. That being said, like I said, we are very respectful of being pro choice, offering the consumers what they want and we'll always have the full original formulas and the zero-calorie formulas and we'll let the consumer choose. It's just how do we nudge them with either increased promotional grids or different baseline prices, okay? We do expect, in the end, a lower effective price by either of those 2 measures.

Okay. No, that's super clear. Yes. And maybe a quick follow-up, if I may, just looking there a little bit on the capital structure side of things. I mean net debt-to-EBITDA is below 0.8x. Obviously, you've made those comments on lowering the CapEx. You don't have any major debt commitments in the short term. So how should we think about the capital allocation priorities kind of for the next couple of years?

Ulises, as we've been talking to the market throughout the past few quarters, we certainly are aware of our inefficient capital structure and are looking to address it. In 2026, obviously, with the excise tax coming to play, we will put -- evaluate how we start the year and what implications it has. As Ian mentioned in regarding our previous question, this results in a delay of a couple of years to cycle the impact of the tax in Mexico, which in turn will have some impact in our cash flow projections for the year. So we'll evaluate that further and let you know of any news during -- starting next year.

Next question from Thiago Bortoluci with Goldman Sachs.

I have also 2, right. And those are follow-ups in Mexico. The first one and I think this is for Ian. Just to understand, Ian, how you see your company position versus the state of the consumers, right? If I can summarize what we saw in the quarter, you obviously declined volumes a little bit more than apparently where the industry is, while you keep pricing growing with inflation but decelerating the pace versus the first 6 months of the year, right? In your comments, you alluded to the need of promotional activity to keep demand somehow healthy. But going forward and imagining that macro shouldn't improve that much in the near term, at least, how you think about the fit of your pricing on a like-for-like basis versus the demand sentiment that you're getting from consumers? So how you're seeing your average price list and effective pricing to accommodate the current situation? I think this is the first question. And then the second one related to this topic but now on the excise tax, to the extent that you can comment, how much and, or how at all would the new rate fit in your discussions with Coca-Cola Corporation for the concentrate prices going forward?

Thank you, Thiago. Let me put things into perspective. Remember that this year, January started strong. And then in February, we had the backlash, which we exited by the end of May, June. So Mexico is a very big country, not as big as Brazil or the U.S. but it's a very big country and it has different economic performance in different regions, by the remittances impact and different depth in the backlash that we face was different along the regions, mostly impacting our region, which is where most migrants have family members in the U.S. So I think when you look at and break that -- break out that effect, you see our share, if you look at our monthly chart, taking a big hit in February and then recovering month over month over month. Well, today, if you look at September, for example, the point data in share of value versus September of last year, in flavors, stills, fruit drinks, teas, water, energy, sports drinks, ARTDs, we're above last year. So we had a value and we're above last year. In colas, we still have about 0.6 points to recover. And that has -- is really what explains the increased promotional grid. And really, the point that we have missing is, like I said, traditional trade multi-serve refillables. That's the share point that we have left. And with the latest adjustments that we've done, eventually, we're hoping or thinking that we should get to cover that gap and we'll be above last year and having cycled everything. So I would caution that we are doing well versus the industry. But like I said, we took a big impact that other competitors didn't take in February, right, Thiago? So you have to normalize with that. So we took that impact but we're every month getting back to where we need to be. And we're back in every single segment and only missing 0.6 points in colas still. So that's the context. I think your question is very pertinent going forward because when you have a region that is with soft macros and now we have a large excise tax increase, obviously, our pricing power, we believe, is going to be limited. So we're not expecting anything above inflation because our customers, it's also a big impact for customers and consumers are going to be dealing with that excise tax. So to assume that we're going to have real pricing above that, I don't think is very realistic. It's already going to be a lot for customers and consumers to digest just with the excise tax impact, okay? Does that help?

It certainly does. Anything you could share on the relation between Coke under the new excise tax?

Yes. Well, the way our model works, like I said is, we look at how the system profits behave and then divide those profits. Obviously, when you have an impact such as a tax, well, it's going to have an impact in our profitability and that's taken into account in the model. So it remains to be seen because you have to look at both companies' relative performance on what that trickles to and whether it's some sort of support or cost avoidance. We don't have enough visibility on that yet. But what I can say is that, that is included as well as when we do very well, that's also included in the model. So yes, that effect will be captured but it's too early to tell -- to see if there's going to be really an impact for us on that. It's -- we don't know yet. We'll have to see in the first quarter how customers and consumers deal with this excise tax pass-through.

Next question from Rodrigo Alcantara with UBS.

As a means of just staying a bit out of the tax discussion, I would like to explore on some interesting commentary we heard a couple of days ago in [indiscernible] conference call regarding their dairy category, right? They already mentioning the Coke system already a market share leader in terms of value, right? Volumes growing 13% in the third quarter, right? So my question would be here how this figures or how this category is shaping for you guys specifically, right? And what is really driving this good performance and the relevance of overall the Santa Clara brand for -- and the dairy category for you guys? That would be one question. And the other one very quickly, I mean, unfortunately, right, we saw what's happening in Costa Rica, Veracruz, right? In addition to that, weather is not improving and macro is still weak, right? So any preliminary read on Mexico volumes ahead of the fourth quarter? And kind of like a similar question would say to, to Brazil, right, where you somehow mentioned about the share gain momentum, et cetera but also some commentary on volumes on the 4Q would be also very, very helpful. Those would be my 2 questions.

Rodrigo, thank you very much for your question. I'll start with the dairy question. And indeed, Coke mentioned that we're now leaders in value-added dairy, which is great news. This is the main focus for us with Santa Clara. As you know, this is a great brand, a brand that we're very proud of that has grown amazingly when it was brought into the system. This year, as you mentioned, dairy has been an outperformer for us in the still business. Stills business growing at a rate of 20% for the year, year-to-date. So this is great growth, especially when you look at it in the context of macro weakness overall. So we expect dairy to continue to be an outperformer. This is something that we're very excited about and that we can leverage the brand, the umbrella of the brand of Santa Clara to bring innovation and do all sorts of interesting things in this space. So that's good news for us. In terms of our fourth quarter, we -- I think a good thing that we are seeing is, we see patterns of improvement in weather that certainly we expect to continue to help. And we expect to see a little bit of an uptrend in volume performance for the remainder of the year as compared to what we've seen in the year-to-date. This is Mexico.

Yes. This is Jorge. On the comments about the fourth quarter and weather as well expectations for Brazil, I think something that we certainly saw in the early weeks of October in parts of the South Cone and especially Brazil was a little bit of unfavorable weather. That seems also, as Jerry mentioned, it seems that it's going finally to end. It seems that weather is finally improving. Throughout the third quarter in Brazil, we saw about 1 degree Celsius on average below the previous year. But I think the good part is that it, that seems to be out of the road for us. And you mentioned about the unfortunate events also going back to Mexico, in Veracruz. That's definitely very -- as Ian mentioned during the prepared remarks, we are working hand-in-hand with FEMSA and with the Coca-Cola Company on several community support relief efforts. Specifically for the business, we have taken into consideration also support to our teams on the ground. I wouldn't say that the region represents a big material part of the big Coca-Cola FEMSA Mexico volumes. So we think in terms of -- if you are asking about a specific impact about that, you can think maybe around 350,000 unit cases over the first 8 days of the disaster there. So not material. And as I said, I think the most important part is that we're working on community and support relief efforts there.

Yes. This difference to last year -- year before last, where we had either lost a plant or equipment, in this case, our infrastructure was not impacted other than a couple of vehicles and routes but not really large infrastructure. Our clients, however, were very impacted. So we have around 1,600, 2,000 clients that we're sensing to see if our coolers still work, if they got damaged, we'll replace them. And we did have, unfortunately, for us, for the first time, some loss of life in our collaborators' families. So that was the worst part. And obviously, we're supporting our collaborators that were impacted in these unfortunate floods.

Next question from Renata Cabral with Citi.

I have 2 quick follow-ups here. The first one on Mexico. You are discussing right now about the weather that's going better. And it's possible to try to have an evaluation on how much of the current performance, I mean, from the year is more related to weather and/or the economic situation. I know it's super difficult to make the assumptions but a best guess. Or if you also could give some color of the performance per month, so we can try to make here some correlations related to the weather, it would be really helpful. And another follow-up is related to Argentina because we saw an improvement for the company in terms of volumes and margins, I mean, compared to last year, naturally. So for now on, we know that stability is great but at the same time, we are seeing also a slowdown in terms of overall consumption in Argentina. So the outlook for -- to conserve the current improvement or even continue to improve in the country.

Thank you, Renata, for your question. I'll start with weather patterns in Mexico. I think in this third quarter, weather was less -- significantly less relevant as a comp effect versus last year. Even though we didn't have good weather, it wasn't consumption promoting weather, we had bad weather during the third quarter of last year as well. So when you see weather compared to this same period last year, it seems to be less of a factor. What has been playing out to be an important impact for consumption certainly has been overall macro development. I think for the first time this quarter, we saw the whole Nielsen basket underperforming or decreasing altogether. We had in previous moments seen consumption in certain industries underperforming versus others. But this quarter, we did see an outright underperformance in all consumption products. So I mean, macro has been, I think, the main driver of underperformance during the third quarter. Looking a little bit forward, I think we do see a little bit of better macro performance next year, although nothing exciting but certainly a marginal improvement from the base that we have in 2025.

Moving to Argentina, Renata, I think there -- it's very clear that things have started to slow down especially since the Buenos Aires province election. And remember, we have very important legislative elections this weekend. So consumption really took a -- slowed down going into this election. What we're seeing from our advisers in Argentina is there's a lot riding on the outcome of this weekend's legislative elections in the sense of whether the government's position, how much will it be strengthened and will they be able to avoid logjams in the legislative branch regarding reforms. So Argentina, I would say, let's wait and see what happens this weekend and that will give us a guide. That doesn't mean we expect a recession next year. That's not in the cards, at least from what our advisers tell us but there could be a case of sluggish growth next year instead of continuous recovery. So that's really what we're going to look at. Will it be a scenario of sluggish growth next year, or will we continue and reaccelerate as the government has a more favorable position that will allow it to push through reforms? So it's a bit early to tell, Renata. But like I said, we think this slowdown has a lot to do with the elections this weekend and we'll see what happens.

Next question from Antonio Hernandez with Actinver.

This is Antonio. Just following up on those beverages sweetened with noncaloric sweeteners. I mean you've already mentioned a couple of times during the call that there's not going to be a specific push from you towards the consumer. But just wanted to get a sense if you have a type of a target going forward of maybe how much they can represent as a percentage of total sales? And also, how do you see competition specifically in that segment?

Antonio, we don't have a specific target per se. But like I said, even before the excise tax, to us, Coke Zero is a big, big silver bullet. It's great for the health of the category. It does fantastic for the Coca-Cola trademark brand umbrella. And we were already focused on growing Coke Zero and this type of alternatives. So when you think of what we've been able to do in Brazil, where we've taken the mix of Coke Zero all the way to 28% and it's still growing high double digits. There's plenty, plenty of headroom in Mexico. We don't have a target yet but we're around [ 4% ] mix in Mexico. So there's plenty to grow our Coke Zero and other noncaloric alternatives, Sprite Zero, so another fantastic product. So I don't have a -- we don't have a target per se, Antonio. But that more or less gives you a sense of the difference on the market that has already developed Coke Zero getting to 28 percentage points versus a market where we're starting to crack the code such as in Mexico, where we're around 4%. So there's plenty of headroom there.

Okay. And in terms of competition in that space?

I would say we have a leadership position there. It's not that much that will come out of share gains there. Really, it's more a portion of growing the mix and growing the total category. We -- there are some share gains opportunities there but that's not the big driver at all.

Next question from Felipe Ucros with Scotiabank.

Most of my questions were asked, but I had a few smaller ones. So Ian, you talked about Coke Zero in recent quarters and you talked about being able to break the code finally in Mexico. So just wondering how your perception has changed, if at all, since obviously, there's an expectation that it's going to accelerate from the trend that it already had. Still feeling very confident about cracking that code? And the other 2 questions. One, on the World Cup, what kind of historical impacts have you guys seen in the portfolio when the World Cup is going on? And obviously, the occasions increase. Just to get a sense of what we expect for 2026 when it comes to KOF. And then in Brazil, obviously, your plant is back up and running and back up at capacity. Wanted to see if you could give us a sense of where the competition stands with regards to their capacity in that region. Are they also back up and running? Or did they not have disruptions? Just any color you can give us on that side would be great.

Thank you, Felipe. So I would say on Coke Zero, we're very confident that we're on the right track. I think the biggest measure of that was that during the consumer backlash in the beginning of the year, Coke Zero grew double digits and continued to grow double digits. And it's even under this softer macro environment, it's still growing double digits. So Coke Zero is doing nicely. It's going to get a boost also from the World Cup. It's going to be a hero product there. It's going to be highlighted in all of our publicity and marketing campaigns. So I think our confidence on Coke Zero and our care towards making sure we keep that ball rolling and we keep all of the 5 elements from the Brazil playbook that we call for Coke Zero being there is a huge source of focus. Like I said, we think of Coke Zero as a silver bullet for us and we're taking great care with that. Regarding the World Cup, it really -- when you look at historical effects, I think it's like a 5% uplift in volumes -- relative volumes during the World Cup months. It's not a big volume thing per se but it's huge in terms of brand equity. I was there in Brazil during the World Cup and I remember clearly that the most recalled and remembered favorable brand post the World Cup was Coca-Cola. It's an incredible asset and we're going to leverage it fully for both Coke brand, including Coke Zero and for Powerade. And finally, your final point on Brazil capacity in the South, I would say that during the floods, only Coca-Cola FEMSA was impacted. So we were the only ones to lose a production facility, which was also our biggest distribution center. So that's why we lost 8 points of share, Felipe. It was only a Coke FEMSA impact thing. We're back on track, like I said, since midyear. So we're producing at full capacity now and we've recovered 500 basis points of those 800 basis points that we lost. Obviously, the last remaining points of share are going to be the hardest but we have plans to recover them fully. So no, the rest of the competitors did not receive the impact. And we're starting also on the way -- by the way, on the remediation plan, meaning the containment walls and pumps to be ready to face any future natural disaster. So that has -- we're back on track producing. We are not yet finished with the remediation to face a future flood and that should be done by next year.

No, great color on that. If I can do a very small follow-up on that World Cup. When you talked about the low single digit -- low to mid-single-digit volume decline expectation in Mexico due to the tax, is that purely containing the effect of the tax? Or is that net of everything else that you have going on? So for example, is the World Cup impact included in that number [indiscernible]?

It's net of everything else. Just the tax, it's a higher impact. But we are cycling a backlash that we no longer have and we're including the World Cup. So that includes everything.

Thank you. This concludes the question-and-answer section. I would now like to hand the floor back to Coca-Cola's team for closing remarks.

Thank you very much for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, we are available to answer any of your remaining questions. Thank you and we wish you a great weekend.

Thank you. This does conclude today's presentation. You may disconnect now and have a nice day.

Thank you, Sophia. Thank you, team.