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Corporate Presentation 1 Disclaimer During this presentation management may discuss certain forwardlooking statements concerning Arca Continental’s future performance that should be considered as good-faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact Arca Continental’s actual performance. 2 A solid partnership with Coca-Cola since 1926 90 YEARS Pioneers of the in Mexico system 3 Current ownership structure Arca Continental Control Group 68% Float Mexican Stock Exchange: AC* 19% The Coca-Cola Company 9% 4% Lindley Family 4 An institutional company • Balanced Board of Directors: ‒ 21 members ‒ 6 of them are independent • Majority shareholders only at Board level • Audit Committee comprised of independent members only • No transactions with related parties The Coca-Cola Company appoints one member of the Board 5 Sustainable and profitable growth… 1% Exports 13% 2002 CAGR 15% 99% 7.0x 55% 10% 3Q16 LTM 15% 7% Snacks Mxp$13 billion Mexico Beverages Exports and Vending Mxp$ 91 billion Mexico Ecuador Argentina Peru Snacks 6 …based on strong organic growth and an excellent M&A track record 2002 2007 2008 2010 2011 2012 2014 2015 ARCA Merger Snacks Mexico Argentina & Jugos del Valle Ecuador CONTAL Merger Snacks International & Santa Clara Tonicorp Peru 7 Delivering solid results in a challenging environment MXP$ billion Sales EBITDA $91* $17 $76 $60 $20* $62 $13 $56 $51 $14 $11 $10 2011 2012 2013 2014 2015 2016 *Last twelve months as of 3Q16 2011 2012 2013 2014 2015 2016 EBITDA Margin 18.9% 20.1% 21.3% 22.0% 21.9% 21.6% 8 Highest credit rating among Mexican companies Global Scale Net Debt / EBITDA 1.9 “A2” “A” 1.3 National Scale 0.5 “Aaa” “Aaa.mx” 2014 Global Investment Grade above Mexico’s sovereign rating 2015 2016e Financial flexibility and low leverage ratio 9 Consistent value creation… +179% (MXP$ billion) $191 $18 $209 +275% $48 $12 $60 $16 Market Cap Arca Market Cap Arca Dec '02 Dec '10 $75 Contal Arca Dividend '02 - '10 Total Value Dec '10 Market Cap Arca+Contal Dec '10 Market Cap Dec '16 Dividend '11 - '16 Total Value Dec '16 10 …based in our strategic core pillars Value Creation Operational Strengths Execution (ACT) • Segmentation • Price-pack architecture • Service models • Talent development • Organizational capabilities Supply Chain Management • Supply network design • Operational Excellence • Sustainability People & Organization Finance & IT • Solid financial profile • Standard and streamlined business process • State of the art IT platform • Culture • Social Responsibility 11 A model that connects the entire organization in order to reach the perfect execution Segmentation RGM RTM Fundamentals Market tools Sales School Collaboration Commitment Innovation Innovation Standardization 12 Balanced business portfolio New sparkling beverage franchises Emerging still categories + Value added dairy CSDs Snacks, vending machines and exports Core NARTD Adjacencies SSDs NARTD: Non-Alcoholic ready to drink 13 Arca Continental: beverage operations Start date: 1926 Start date: 2010 • Sales volume (MUC) • Mexico • 1,078 % KO volume 30% Population served (MM) 30 • Sales volume (MUC) • Ecuador • 156 % of KO volume 100% Population Served (MM) 15 Start date: 2015 • Sales volume • Peru • 292 % of KO volume 100% Population served (MM) 31 (MUC) Start date: 2008 • Sales volume • Argentina • 143 % of KO volume 21% Population Served (MM) 9 (MUC) 14 An extensive brand portfolio to satisfy every consumption occasion 28 Brands 2006 +128SKUs + Brands 50 2015 + 1,200 SKUs + 15 Strategic franchise location in Mexico Nogales • The dawn of a new era of growth CDF • Active participation in the consolidation of the KO System in Mexico AC Nayar Bepensa Rica Colima • Further opportunities for synergies and find better ways to serve KOF 16 Mexico 2% 7% 10% S-Markets Vending 6% 11% On Premise Stills Flavors 5% Water 13% C-Stores 17% Jug Channel Category 8% Other 60% 61% Traditional Colas Format 48% Single-serve 52% Multi-serve 37% Returnable 63% Non Returnable Package 17 Argentina: Investing in core capabilities and increasing profitability • EBITDA margin expansion from 10% to 20% in 7 years • Increasing cooler coverage and reaching a 48% cooler coverage • Standardized operational processes and replicating best practices such as ACT 22 Argentina 2% 21% 1% 3% On Premise C-Stores 10% Stills S-Markets 29% Other Water 25% Flavors Channel Category 47% 62% Traditional Colas 8% Single-serve Format 44% Returnable 56% 92% Non Returnable Multi-serve Package 19 Ecuador: Successful expansion of best practices • Deployment of business strategies learned in Mexico to mitigate tax effect • Increasing cooler coverage from 24% to 45% in the last 5 years • All CAPEX investments made from its own cash flow 20 20 Ecuador 13% 8% 10% On Premise S-Markets 1% C-Stores Stills 32% 10% Flavors Water 11% Other Channel Category 67% 48% Traditional Colas Format 21% 29% Returnable Single-serve 79% 71% Multi-serve Package Non Returnable 21 New partnership in South America COLOMBIA ECUADOR • • • • • • • Population Currency 2015 Sales volume EBITDA margin Net Debt Collaborators Production facilities 31 million Nuevos soles 292 MUC +17% $380 MMD 3,300 8 Iquitos Sullana Piura BRAZIL PERU Chiclayo Trujillo Callao Lima Cusco Ica BOLIVIA Arequipa Plants (8) Key Population Density: 80-6,000 10-25 25-80 0-10 22 Peru: large market with attractive macroeconomic and demographic dynamics Five avenues to reach value creation opportunities of US$25 million at CL 1. Raw Materials 2. Process Innovation and Packaging 3. Supply Chain and Transportation 4. Administration 5. Revenue Expansion Alternatives 23 Peru 9% 1% 11% S-Markets 4% On Premise Jug 7% Stills 4% Vending 17% C-Stores Water 8% Other Channel Category 67% 72% Traditional CSDs Package 41% Single-serve 59% 28% Returnable Multi-serve 72% NonReturnable Format 24 RGM strategy: sustain profitability & affordability $30 MX 2.0 RP $5 MX 600 PET 12 Oz VR $5 3.0 NR $5 $10 $13 $20 $25 Low elasticity SKU’s Protect affordability (Multi-serve & Returnable) Keep magic prices Leverage on diet & single serve presentations 25 Transactions: A way to profitable volume • • Smaller formats, higher profitability Finding new opportunities and competitive advantages 1 x 2 lts 3 x 600 mls better than 3 transactions • Higher price per milliliter • Increase single-serve mix • Packaging innovation 1 transaction • RGM initiatives • New consumption occasions 26 Growing our Still Beverage Portfolio • Very positive trend in Market Share • Higher volumes in AC than in the rest of Mexico Market Share Total Channels (%) 85.0 57.5 39.1 11.0 • Surpassed our main competitor in the indicator base of consumption and closing gap in the indicator Favorite Brand 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Powerade Main Competitor 27 27 An extensive brand portfolio to satisfy every consumption occasion Mexico • Introduced UHT milk in in the traditional channel, 48% growth vs 2015 • Leveraging our Direct to Home channel • Coverage of 39% in traditional channel • More than 3,000 coolers introduced in the last two quarters Ecuador • Founded in 1967, with leading position in high value-added dairy: flavored milk and yogurt • 50/50 Joint Venture with TCCC • Consolidating AC as one of the most important consumer companies in Ecuador 28 Leveraging our capabilities in adjacent business: Salty Snacks… 2007 • 3rd largest snack brand in • Mexico • • 40 year history • • Plan to expand nationwide • • One of the largest distribution networks 2013 2013 Over 90 years history • 40 year history Leading regional brand • Strong position in the Ecuadorian market #1 brand in NY metro area USD$7 billion market size in regions served • 2nd largest player at a national level 29 … and successful development of Direct to Consumer channels Vending Leading innovation with telecommunications to increase profitability Direct to Home Jug Water & DTH currently reach more than 600,000 households Mexico DTH Routes Vending Machines 532 (‘000) 336 31 226 26 163 2012 2012 2013 2014 2015 2015 30 Capitalizing on exports to the US $104 MM USD growing market Million Unit Cases Exports to USA 8.0 Coca-Cola (Nostalgia) 6.9 7.7 6.8 6.4 5.2 4.5 3.9 3.1 2005 4.9 2.0 2006 2007 13.0 13.0 2013 2014 2015 10.6 4.0 2.9 13.0 9.0 4.3 4.4 2008 2009 6.6 2010 2011 2012 31 Expanding Topo Chico • On July, Arca Continental (AC) agreed to transfer the rights of the Topo Chico brand in Mexico to The Coca-Cola Company (TCCC) • This will allow the expansion of volume in all the territories operated by Arca Continental. • The new territories are the states of Jalisco, Zacatecas, Durango, San Luis Potosí and Aguascalientes • We expect a 20% volume increase for Topo Chico 32 Our strategic revenue growth target Future 2x Sales 100 MXP$ billion 2x 2x 13 2002 56 25 2008 2012 2017 Strategic pillars support our goal to reach Mxp$100 billion in sales by 2017 and sustain our profitable growth momentum beyond… 33 Our Commitment to Sustainability RECYCLING Mexico 2015 34% Of PCR 49,447 Tons of resin produced by PetStar Mexico is the global leader in recycled resin use *2015 data for AC Consolidated WATER* 1.69 Water Lts. / Beverage Lts. 16% Improvement vs 2010 Leader in water reuse technology ENERGY* 23.5 G CO2/ Beverage Lts. 10% energy reduction Vs 2010 17.3% from renewable sources 34 Contact us at: [email protected] [email protected] [email protected] [email protected] 35