CEO and CFO Roadshow February 2007
Safe Harbor Statement During this presentation management may discuss certain forward- looking statements concerning FEMSA’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 FEMSA’s actual performance. 2
Delivering Growth FEMSA Total Revenue FEMSA EBITDA (US$ million) (US$ million) 11,625 2,316 1,298 5,062 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 CAGR 23% CAGR 16% 3 Note: Figures in Mexican pesos converted to US dollars at the respective year-end exchange rate.
Delivering Cash Generation Free Cash Flow (1) (US$ million) 893 747 731 FCF 118 (2) 497 397 135 94 Dividend 69 60 48 39 2002 2003 2004 2005 2006 2007 Net Debt/EBITDA N.A. 1.8x 1.9x 1.2x 1.3x Note: Figures in Mexican pesos converted to US dollars at the respective year-end exchange rate. (1) Free Cash Flow = EBITDA - (Capex + Taxes + Net Interest Expense) - Change Working Capital. 4 (2) Extraordinary Tax Reimbursement.
The Right Business Model... Publicly Held 14.7% 31.6% 53.7% 100% 100% Total Revenue: US$ 11,625 million EBITDA: US$ 2,316 million 10% 28% 28% 40% 50% 44% 5 Note: Information as of December 31, 2006.
... Best Positioned to Capture Opportunities • Compete successfully • New opportunities Consolidation – Beer in Mexico – Soft Drinks Beer in Central America Integration and Consolidation in Brazil Beer in Argentina 6
The Right Approach to Dynamic Markets Challenges • CSD’s in Central Mexico • Pepsi and b-brands Skills • Beer pricing in Mexico • Evolve business model • Raw material pressure Sustained • Manage complexity Growth • Ability to execute Opportunities • Deploy investment • Grow non-carb segment • Anticipate trends • Integrate businesses • New territories • Invest in brands 7
Learning to Think as “One” Driving synergies among the business units • Shared services • Collaborative purchasing • IT infrastructure • Increase coordination among functional teams • Processes and IT applications • Explore join production • Colle • Collective learning is continuous
Recent Key Achievements Operating • Banner year for top-line growth in beverage operations • US beer export growth outpacing category • Oxxo top-line and infrastructure growth on track Strategic • Meaningful entry into Brazilian beer market • Established long-term framework with The Coca-Cola Company • Purchase of incremental 8% stake in KOF • Joint acquisition of Jugos del Valle with the Coca-Cola system 9
The Road Ahead… • Evolution of business model • Profitable growth across businesses – Coca-Cola FEMSA – FEMSA Cerveza – Oxxo • Asset utilization • Improving returns on invested capital 10
Return of Invested Capital ROIC Per Unit Business (%) (%) 19.7 13.3 18.0 12.1 17.2 11.1 9.9 9.9 9.8 9.4 11.0 10.1 9.2 10.8 9.1 9.4 2000 2001 2002 2003 2004 2005 2006 2004 2005 2006 Cerveza KOF Comercio 11 Note: ROIC calculation is based on the methodology of Stern, Stewart & Co. using inflation adjusted figures for each country where we operate.
Evolution of FMX Growth is key going forward 5-Year Share Price Appreciation 02/26/2007 Price US$ 118.80 Market Cap US$ 14.2 bn 01/02/2002 Price US$ 35.00 Market Cap US$ 3.7 bn 2002 2003 2004 2005 2006 2007 12 Source: Bloomberg and Annual Reports.
Evolving with Consumer Preferences
Recent Highlights • Mexico – Three consecutive years gaining share – Brand health indicators at all-time high – Top-line driven earnings growth • United States – Double-digit volume growth – Greater emphasis on brand development • Brazil – Business turnaround on track – Long-term profitable growth objective 14
Mexico Beer Industry has Strengthened Initiatives Beer Consumption Per Capita (Liters) • Innovation 04 – 06 • Greater segmentation 01 – 03 CAGR CAGR 3.8% • Improved execution 0.8% Liters 51 51 52 53 55 57 Economic momentum Year 01 02 03 04 05 06E Outcome GDP Growth (%) • Accelerated growth 04 – 06 • Increasing relevance 01 – 03 Avg Gwth Avg Gwth 3.2% • Higher barriers to entry 0.7% GDP 0.0 0.8 1.4 4.2 3.0 4.0 Year 01 02 03 04 05 06E Note: Beer Consumption per Capita from Mexican Institute of Statistics and FEMSA Cerveza's estimates. GDP Growth % based on constant price GDP year-on-year changes from International Monetary Fund, World Economic Outlook Database, 15 September 2006 and Analyst Estimations for 2007.
Share Gains with Strong Pricing Domestic Volume Growth vs. Domestic Price Industry (1) (%) (MXP) 5.6 5.4 4.9 4.4 Price per hl 2005 2006 % Chg 3.8 Real 941 974 +3.6% Nominal 904 974 +7.8% 2.6 Market share at 43.7% 3 years outgrowing the industry 2004 2005 2006 Industry FEMSA (1) Industry includes FEMSA Cerveza and Grupo Modelo beer sales volume in Mexico only. Data from company filings. 16
Improved Brand Preference: Tecate Light • Consumer preference research brand reposition • High marketing impact – “A great tasting beer that leaves room to drink more” • Leader in light category Brand Value Index % Share in Domestic Market 46.3 5.95% 20.1 1.05% 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 17 Note: FEMSA estimates.
Growth Model for Mexico • Drive top-line – Volume growth with real pricing – Innovation & increased value of core brands • Increase efficiency to offset raw materials pressure – Aluminum impact expected to moderate in medium term • Maintain profitability – Continue to invest in brands – Strengthen competitive position in market 18
Exports to USA: New Heineken Agreement Vol. Growth of FEMSA Exports 2007 Focus vs. U.S. Beer Industry (%) • Dos Equis new campaign 15.3 14.6 • Tecate Light launch 8.1 7.2 1.7 -0.4 2005 2006 U.S. Industry U.S. Import Category FEMSA Source: U.S. Beer Industry data from The Beer Institute for 2005 and 2006 as reported in December 2006. 19 (U.S. represents just over 90% of FEMSA’s exports).
Brazil: Groundwork for Long-Term Sustainable Profitable Growth FEMSA Cerveza Brazil Market Share Main areas of focus: (%) • Develop comprehensive brand 15.1 portfolio • Reinvest profits in marketing 12.2 • Market intelligence / one system 10.8 • Commercial platform 9.2 9.0 8.6 • Model for bottler alignment 7.4 Recent achievements: • Relaunch of Kaiser • National launch of Sol 2002 2003 2004 2005 01/06 06/06 12/06 • Seven months gaining share 20 Source: Nielsen.
Building a System
Grow, Build, Operate... % of FEMSA Cerveza Domestic Beer Top-line growth of over 20% Sales in Oxxo • +700 new stores per year 9.9 • Creating new profit streams 8.6 7.3 Building infrastructure 5.4 • Segmentation 4.5 • Direct distribution 3.9 • Information systems Operating excellence 2001 2002 2003 2004 2005 2006 22
Plenty of Room for Growth 12,000 Oxxo’s by 2015 Oxxo Penetration Level by Population Nuevo León Population: 4,200,000 Oxxo Stores: 510 Jalisco Population: 6,800,000 Oxxo Stores: 326 Valle de Mexico Population: 22,800,000 Oxxo Stores: 582 23 Source: INEGI and FEMSA estimates.
Building a Strong Infrastructure Distribution Technology Segmentation • Six distribution centers servicing 40% of sales • Store segmentation based on communities and consumers • Oracle financial and replenishment system deployed in 2007 • Opportunity to grow underpenetrated categories – Fast food – Services 24
Capturing Growth Across our Markets
CSD Growth Driven By Brand Coca-Cola... CSDs Sales Volume (mm UC) 1,695 85% 1,604 78% 1,549 1,493 58% 2003 (1) 2004 2005 2006 CAGR 03 – 06: 4.3% Total Colas Flavors (1) Includes full-year sales volume of our original territories and our new territories acquired from Panamco. 26
Non-carbonated segment offers greatest potential Non-Carb Sales Volume Growth Non-Carb Sales Volume (mm UC) as % of Total Volume (1) 32.8 4.8 4.7 22.5 19.0 18.2 2.2 1.2 1.0 0.9 2003 2004 2005 2006 Brazil Colombia Mexico Argentina Venezuela Central CAGR 03 – 06: 21.7% America (1) For the year 2006. 27
Providing Attractive Growth Opportunities • The Coca-Cola Company will provide additional marketing support for the carbonated and non-carbonated beverage portfolio • A new business model in the non- carbonated beverages segment • Potential expansion of our footprint within Latin America and in other markets 28
New Joint Venture for Non Carbonated Beverages with Jugos del Valle Transaction Value US$ 470 MM or 1.1x 2006 Revenues • KOF leadership in NCB – Expected growth in low double digits – #1 in Brazil and #2 in Mexico packaged juice – KOF to manage operations • Increase top line 50% 50% • Capture synergies across value chain • Leverage distribution network in Mexico and Brazil • Future participation of other bottlers in JV 29
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