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Table of Contents
As filed with the Securities and Exchange Commission on April 23, 2024

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
Commission file number 001-35934
Fomento Económico Mexicano, S.A.B. de C.V.
(Exact name of registrant as specified in its charter)
Mexican Economic Development, Inc.
(Translation of registrant’s name into English)
United Mexican States
(Jurisdiction of incorporation or organization)
General Anaya No. 601 Pte., Colonia Bella Vista, Monterrey, NL 64410 Mexico
(Address of principal executive offices)
Juan F. Fonseca; Tel (52-818) 328-6167; investor@femsa.com
General Anaya No. 601 Pte., Colonia Bella Vista, Monterrey, NL 64410 Mexico
(Name, telephone, email and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class: |  | Trading Symbols: |  | Name of each exchange on which registered:
American Depositary Shares, each representing 10 BD Units, and each BD Unit consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares, without par value |  | FMX |  | New York Stock Exchange
4.375% Senior Notes due 2043 |  | FMX43 |  | New York Stock Exchange
3.500% Senior Notes due 2050 |  | FMX50 |  | New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

2,160,796,470 |  | BD Units, each consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares, without par value. The BD Units represent a total of 2,160,796,470 Series B Shares, 4,321,592,940 Series D-B Shares and 4,321,592,940 Series D-L Shares.
1,417,048,500 |  | B Units, each consisting of five Series B Shares without par value. The B Units represent a total of 7,085,242,500 Series B Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☒ Yes | ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes | ☒ No

Table of Contents
Indicate by check mark whether the registrant: (1) has filed all reports required to be file by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes | ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes | ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ | Accelerated Filer ☐
Non-accelerated Filer ☐ | Emerging Growth Company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☒ Yes | ☐ No

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check market whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 | ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes | ☒ No

Table of Contents
TABLE OF CONTENTS

INTRODUCTION |  | 1
| References |  | 1
| Currency Translations and Estimates |  | 1
| Forward-Looking Information |  | 1
ITEMS 1-2. NOT APPLICABLE |  | 2
ITEM 3. KEY INFORMATION |  | 2
| Selected Consolidated Financial Data |  | 2
| Dividends |  | 2
| Risk Factors |  | 4
ITEM 4. INFORMATION ON THE COMPANY |  | 15
| Introduction |  | 15
| Corporate Information |  | 16
| Corporate History and Information |  | 16
| Ownership Structure |  | 18
| Significant Subsidiaries |  | 18
| Business Strategy |  | 19
| Coca-Cola FEMSA |  | 20
| Overview |  | 20
| Capital Stock |  | 21
| Business Strategy |  | 22
| Coca-Cola FEMSA’s Territories |  | 24
| Coca-Cola FEMSA’s Products |  | 25
| Packaging |  | 25
| Sales Volume and Transactions Overview |  | 26
| Seasonality |  | 28
| Marketing |  | 28
| Product Sales and Distribution |  | 29
| Principal Competitors |  | 30
| Raw Materials |  | 31
| Proximity Americas Division |  | 33
| Proximity Europe Division |  | 37
| Health Division |  | 40
| Fuel Division |  | 41
| Other Businesses |  | 44
| Description of Property, Plant and Equipment |  | 45
| Insurance |  | 45
| Capital Expenditures and Divestitures |  | 46
| Regulatory Matters |  | 46
ITEM 4A. UNRESOLVED STAFF COMMENTS |  | 53
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |  | 53
| Overview of Events, Trends and Uncertainties |  | 53
| Effects of Changes in Economic Conditions |  | 54
| Operating Leverage |  | 55
| Critical Accounting Judgments and Estimates |  | 55
| Future Impact of Recently Issued Accounting Standards not yet in Effect |  | 55

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| Operating Results |  | 56
| Liquidity and Capital Resources |  | 66
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |  | 75
| Directors |  | 75
| Senior Management |  | 84
| Compensation of Directors and Senior Management |  | 91
| EVA Stock Incentive Plan |  | 92
| Insurance Policies |  | 9 2
| Ownership by Management |  | 9 2
| Board Practices |  | 9 3
| Employees |  | 94
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |  | 95
| Major Shareholders |  | 95
| Related-Party Transactions |  | 9 6
| Voting Trust |  | 96
| Interest of Management in Certain Transactions |  | 96
| Business Transactions between Coca-Cola FEMSA, FEMSA and The Coca-Cola Company |  | 97
ITEM 8. FINANCIAL INFORMATION |  | 98
| Consolidated Financial Statements |  | 98
| Dividend Policy |  | 98
| Legal Proceedings |  | 98
| Significant Changes |  | 98
ITEM 9. THE OFFER AND LISTING |  | 98
| Description of Securities |  | 98
| Trading Markets |  | 99
| Trading on the Mexican Stock Exchange |  | 99
ITEM 10. ADDITIONAL INFORMATION |  | 99
| Bylaws |  | 99
| Taxation |  | 105
| Material Contracts |  | 109
| Documents on Display |  | 102
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |  | 112
| Interest Rate Risk |  | 112
| Foreign Currency Exchange Rate Risk |  | 116
| Equity Risk |  | 120
| Commodity Price Risk |  | 121
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |  | 121
ITEM 12A. DEBT SECURITIES |  | 121
ITEM 12B.WARRANTS AND RIGHTS |  | 121
ITEM 12C.OTHER SECURITIES |  | 121
ITEM 12D.AMERICAN DEPOSITARY SHARES |  | 121
ITEMS 13-14. NOT APPLICABLE |  | 121
ITEM 15.CONTROLS AND PROCEDURES |  | 122
ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT |  | 125
ITEM 16B.CODE OF ETHICS |  | 125
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES |  | 125

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ITEM 16D.NOT APPLICABLE |  | 126
ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |  | 126
ITEM 16F.NOT APPLICABLE |  | 126
ITEM 16G.CORPORATE GOVERNANCE |  | 126
ITEM 16H.NOT APPLICABLE |  | 128
ITEM 16I.NOT APPLICABLE |  | 128
ITEM 17.NOT APPLICABLE |  | 129
ITEM 18.FINANCIAL STATEMENTS |  | 129
ITEM 19. EXHIBITS |  | 129

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INTRODUCTION
References
The terms “FEMSA,” “our company,” “the Group,” “we,” “us” and “our” are used in this annual report to refer to Fomento Económico Mexicano, S.A.B. de C.V. and, except where the context otherwise requires, its subsidiaries on a consolidated basis. We refer to our subsidiary Coca-Cola FEMSA, S.A.B. de C.V. as “Coca-Cola FEMSA” and to our subsidiary FEMSA Comercio, S.A. de C.V. as “FEMSA Comercio.” FEMSA Comercio is a holding company that directly and indirectly owns our operating subsidiaries that make up the “Proximity Americas Division, “Fuel Division” and “Health Division.” The “Proximity Europe Division” refers to the small-format retail and foodvenience chains in Europe operated by Valora. The term “Digital@FEMSA” refers to our digital and financial ecosystem business.
The term “S.A.B.” stands for sociedad anónima bursátil, which is the term used in the United Mexican States (“Mexico”) to denominate a publicly traded company under the Mexican Exchange Market Law (Ley del Mercado de Valores or “Mexican Exchange Market Law”).
“U.S. dollars,” “US$,” “dollars” or “$” refer to the lawful currency of the United States of America (“United States”). “Mexican pesos,” “pesos” or “Ps.” refer to the lawful currency of Mexico. “Euros” or “€” refer to the lawful currency of the European Economic and Monetary Union (the “Euro Zone”).
As used in this annual report, “sparkling beverages” refers to non-alcoholic carbonated beverages. “Still beverages” refers to non-alcoholic non-carbonated beverages. “Waters” refers to flavored and non-flavored waters, whether or not carbonated.
Currency Translations and Estimates
This annual report contains translations of certain Mexican peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Mexican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, such U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 16.8998 to US$ 1.00, the noon buying rate for Mexican pesos on December 31, 2023, as published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates. On April 19, 2024, this exchange rate was Ps. 17.2062 to US$ 1.00.
To the extent estimates are contained in this annual report, we believe that such estimates, which are based on internal data, are reliable. Amounts in this annual report are rounded, and the totals may therefore not precisely equal the sum of the numbers presented.
Per capita growth rates, consumer price indices and population data have been taken from statistics prepared by the National Institute of Statistics, Geography and Information of Mexico (Instituto Nacional de Estadística, Geografía e Informática or “INEGI”), the U.S. Federal Reserve Board and the Mexican Central Bank (Banco de México), local entities in each country where we have operations and upon our estimates.
Forward-Looking Information
This annual report contains words such as “believe,” “expect,” “anticipate” and similar expressions that identify forward-looking statements. Use of these words reflects our views about future events and financial performance. Actual results could differ materially from those projected in these forward-looking statements as a result of various factors that may be beyond our control, including, but not limited to, effects on our company from changes in our relationship with or among our affiliated companies, fluctuation in the prices of raw materials, effects on our company’s points of sale performances from changes in economic conditions, changes or interruptions in our information technology systems, effects on our company from changes to our various suppliers’ business and demands, competition, significant developments in the countries where we operate, our ability to successfully complete or integrate mergers and acquisitions, including those we have completed in recent years and any current or future strategic projects (including the sale of certain of our subsidiaries), our ability to fund our capital expenditures, international economic, social, political or environmental conditions, health epidemics, pandemics and similar outbreaks including future outbreak of diseases and their effect on customer behavior and on economic, political, social and other conditions in the countries where we have operations and globally, and other facts described in “Item 3. Key Information—Risk Factors.” Accordingly, we caution readers not to place undue reliance on these forward-looking statements. In any event, these statements speak only as of their respective dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
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ITEMS 1-2. NOT APPLICABLE
ITEM 3. KEY INFORMATION
The selected financial information should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements, including the notes thereto appearing elsewhere in this annual report. The selected financial information as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 is derived from the consolidated statements of financial position, consolidated income statements and other comprehensive income, included in the Consolidated Financial Statements appearing elsewhere in this Annual Report. See “Item 5. Operating and Financial Review Prospectus.”
This annual report includes (under Item 18) our audited consolidated statements of financial position as of December 31, 2023 and 2022, and the related consolidated income statements, consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2023, 2022 and 2021. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
This annual report presents financial information for 2023, 2022 and 2021 in nominal terms in Mexican pesos, taking into account local inflation of any hyperinflationary economic environment pursuant to IFRS. Our non-Mexican subsidiaries maintain their accounting records in their local currency and in accordance with accounting principles generally accepted in the country where they are located. For presentation in our consolidated financial statements, we adjust these accounting records into IFRS and report in Mexican pesos under these standards.
In the case of Argentina, the economy meets the criteria under IFRS to be treated as a hyperinflationary economy based on various economic factors, including that Argentina’s cumulative inflation over the three-year period prior to December 31, 2023 exceeded 100%, according to available indexes in the country. We therefore adjust the financial information of our Argentine operations to recognize inflationary effects. Our functional currency in Argentina was converted to Mexican pesos for the periods ended December 31, 2023, 2022 and 2021 using the exchange rates at the end of such periods. See Note 3.4 to our audited consolidated financial statements.
As previously announced in February 2023, certain of our non-core operations are classified as discontinued operations for all years presented in the consolidated financial information included in this annual report. See Note 4.3 to our audited consolidated financial statements.
In 2023, as part of our FEMSA Forward strategy, we sold 13.9% of outstanding ordinary shares of Heineken N.V. and Heineken Holding N.V. (collectively, “Heineken”), retaining less than 1% of outstanding ordinary shares of Heineken. See "Item 4—Strategic Development of our Business.” In February 2023, we discontinued the use of the equity method of accounting for Heineken. As a result, in accordance with IFRS 5, Heineken’s operations are classified as discontinued operations for all years presented in the consolidated financial information included in this report. Accordingly, results for all years presented are presented in a single amount as discontinued operations in the consolidated financial information included in this annual report. Therefore, operating and financial information for all years presented herein related to Heineken are presented as discontinued operations. See Note 4.3 to our audited consolidated financial statements.
In October 2023, as part of our FEMSA Forward strategy, we merged Envoy Solutions, LLC (“Envoy Solutions”) with IFS Topco, LLC ("BradyIFS") and obtained an ownership stake of approximately 37% in the combined entity. See "Item 4—Strategic Development of our Business.” As a result, in accordance with IFRS 5, Envoy Solutions’ operations are classified as discontinued operations for all years presented in the consolidated financial information included in this report. Accordingly, results for all years presented are presented in a single amount as discontinued operations in the consolidated financial information included in this annual report. Therefore, operating and financial information presented herein related to Envoy Solutions are presented as discontinued operations, including for periods prior to the sale. See Note 4.3 to our audited consolidated financial statements.
Except when specifically indicated, information in this annual report is presented as of December 31, 2023 and does not give effect to any transaction, financial or otherwise, subsequent to that date. The financial information and results for the Proximity Europe Division for 2022 are included from the date of acquisition, for the last 23 days of October and the entirety of November and December 2022.
Dividends
We have historically declared annual dividends in respect each Series of Shares (including in the form of American Depositary Shares, or “ADSs”), subject to changes in our results and financial position, including due to extraordinary economic events and to the factors described in “Item 3. Key Information—Risk Factors” that affect our
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financial condition and liquidity. These factors may affect whether or not dividends are declared and the amount of such dividends. We do not expect to be subject to any contractual restrictions on our ability to pay dividends, although our subsidiaries may be subject to such restrictions. Because we are a holding company with no significant operations of our own, we will have distributable profits and cash to pay dividends only to the extent that we receive dividends from our subsidiaries. Accordingly, we cannot assure you that we will pay dividends or as to the amount of any dividends.
The table below sets forth the nominal amount of dividends paid per share in Mexican pesos and translated into U.S. dollars and their respective payment dates for the 2021 to 2023 fiscal years. All dividends were rounded up to the nearest whole number of ordinary shares.

|  | Fiscal Year |  | Aggregate |  |  |  |  |  |  |  |  |  |  |  |
|  | with Respect to |  | Amount |  |  |  |  |  |  |  |  |  |  |  |
|  | which Dividend |  | of Dividend |  | Per Series B Share |  | Per Series B Share |  | Per Series D Share |  | Per Series D Share
Date Dividend Paid |  | was Declared |  | Declared |  | Dividend |  | Dividend(1) |  | Dividend |  | Dividend(1)
May 6, 2021 and November 5, 2021 |  | 2020 |  | Ps. | 7,686,624,026 |  | Ps. | 0.3833 |  |  | $ | 0.0189 |  |  | Ps. | 0.4792 |  |  | $ | 0.0236 |
May 6, 2021 |  |  |  |  |  |  | Ps. | 0.1917 |  |  | $ | 0.0095 |  |  | Ps. | 0.2396 |  |  | $ | 0.0119 |
November 5, 2021 |  |  |  |  |  |  | Ps. | 0.1917 |  |  | $ | 0.0094 |  |  | Ps. | 0.2396 |  |  | $ | 0.0117 |
May 5, 2022 and November 7, 2022 |  | 2021 |  | Ps. | 11,358,251,673 |  | Ps. | 0.5660 |  |  | $ | 0.0285 |  | Ps. | 0.7085 |  |  | $ | 0.0357
May 5, 2022 |  |  |  |  |  |  | Ps. | 0.2830 |  |  | $ | 0.0145 |  | Ps. | 0.3543 |  |  | $ | 0.0175
November 7, 2022 |  |  |  |  |  |  | Ps. | 0.2830 |  |  | $ | 0.0145 |  | Ps. | 0.3543 |  |  | $ | 0.0182
May 8, 2023 and November 8, 2023 |  | 2022 |  | Ps. | 12,246,519,120 |  | Ps. | 0.6107 |  |  | $ | 0.0347 |  | Ps. | 0.7634 |  |  | $ | 0.0433
May 8, 2023 |  |  |  |  |  |  |  | 0.3054 |  |  | $ | 0.0172 |  |  | 0.3817 |  |  | $ | 0.0215
November 8, 2023 |  |  |  |  |  |  |  | 0.3054 |  |  | $ | 0.0175 |  |  | 0.3817 |  |  | $ | 0.0218

(1)Translations to U.S. dollars are based on the exchange rates on the dates the payments were made.
On March 22, 2024, during our annual ordinary general shareholders meeting ("AGM"), our shareholders approved a cash dividend to be paid in four installments on April 18, 2024, July 18, 2024, October 17, 2024 and January 16, 2025, each consisting of Ps. 0.183225 per each Series B Share outstanding on the corresponding payment date and Ps. 0.229025 per each Series D Share outstanding on the corresponding payment date, corresponding to Ps. 0.9161 per each FEMSA "B" unit outstanding on the corresponding payment date and Ps. 1.0993 per each FEMSA "BD" unit outstanding on the corresponding payment date. Additionally, on March 22, 2024, our shareholders approved an extraordinary cash dividend to be paid in four installments on April 18, 2024, July 18, 2024, October 17, 2024 and January 16, 2025, each consisting of Ps. 0.128350 per each Series B Share outstanding on the corresponding payment date and Ps. 0.1604250 per each Series D Share outstanding on the corresponding payment date, corresponding to Ps. 0.6418 per each FEMSA "B" unit outstanding on the corresponding payment date and Ps. 0.7701 per each FEMSA "BD" unit outstanding on the corresponding payment date.
Our shareholders approved our audited consolidated financial statements, together with a report by the board of directors, for the previous fiscal year at the AGM. Once the holders of Series B Shares have approved the audited consolidated financial statements, they determine the allocation of our net profits for the preceding year. Mexican law requires the allocation of at least 5% of net profits to a legal reserve, which is not subsequently available for distribution, until the amount of the legal reserve equals 20% of our paid in capital stock. As of the date of this annual report, the legal reserve of our company is fully constituted. Thereafter, the holders of Series B Shares may determine and allocate a certain percentage of net profits to any general or special reserve, including allocations for open-market purchases of our shares. On March 22, 2024, at the AGM, our shareholders approved an amount of Ps. 34,000 million that may only be used for share repurchases.The remainder of net profits is available for distribution in the form of dividends to our shareholders. Dividends may only be paid if net profits are enough to offset losses from prior fiscal years.
Our bylaws provide that dividends will be allocated among the outstanding and fully paid shares at the time a dividend is declared in such manner that each Series D-B Share and Series D-L Share receives 125% of the dividend distributed in respect of each Series B Share. Holders of Series D-B Shares and Series D-L Shares are entitled to this dividend premium in connection with all dividends paid by us other than payments in connection with the liquidation of our company. See "Item 10. Additional Information - Bylaws - Dividend Rights."
Subject to certain exceptions contained in the deposit agreement dated May 11, 2007, among FEMSA, The Bank of New York Mellon, as ADS depositary and holders and beneficial owners from time to time of our ADSs, evidenced by American Depositary Receipts (“ADRs”), any dividends distributed to holders of our ADSs will be paid to the ADS depositary in Mexican pesos and will be converted by the ADS depositary into U.S. dollars based on the conversion rate as of the date of payment. As a result, restrictions on the conversion of Mexican pesos into foreign
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currencies may affect the ability of holders of our ADSs to receive U.S. dollars, and exchange rate fluctuations may affect the U.S. dollar amount received by holders of our ADSs. See "Item 10. Additional Information - Taxation - Mexican Taxation." For a description of taxation related to dividends.
Risk Factors
Risks Related to Our Company
Coca-Cola FEMSA’s business depends on its relationship with The Coca-Cola Company, and changes in this relationship may adversely affect Coca-Cola FEMSA’s business, financial condition and results of operations.
Substantially all of Coca-Cola FEMSA’s sales are derived from sales of Coca-Cola trademark beverages. Coca-Cola FEMSA produces, markets, sells and distributes Coca-Cola trademark beverages through standard bottler agreements in the territories where it operates, which we refer to as “Coca-Cola FEMSA’s territories.” Coca-Cola FEMSA is required to purchase concentrate for all Coca-Cola trademark beverages from affiliates of The Coca-Cola Company (“TCCC”), which price is determined from time to time by TCCC in all such territories. Coca-Cola FEMSA is also required to purchase sweeteners and other raw materials only from companies authorized by TCCC. Increases in the cost, disruption of supply or shortage of ingredients for concentrate could have an adverse effect on Coca-Cola FEMSA’s business. See “Item 4. Information on the Company—Coca-Cola FEMSA—Coca-Cola FEMSA’s Territories.”
In addition, under Coca-Cola FEMSA’s bottler agreements, it is prohibited from bottling or distributing any other beverages without TCCC’s authorization or consent, and it may not transfer control of the bottler rights of any of its territories without prior consent from TCCC.
TCCC makes significant contributions to Coca-Cola FEMSA’s marketing expenses, although it is not required to contribute a particular amount. Accordingly, TCCC may discontinue or reduce such contributions at any time.
Coca-Cola FEMSA depends on TCCC to continue with its bottler agreements. Coca-Cola FEMSA’s bottler agreements are automatically renewable for ten-year terms, subject to the right of either party to give prior notice that it does not wish to renew the applicable agreement. In addition, these agreements generally may be terminated in the case of material breach. See “Item 10. Additional Information—Material Contracts—Material Contracts Relating to Coca-Cola FEMSA—Bottler Agreements.” Termination of any such bottler agreement would prevent Coca-Cola FEMSA from selling Coca-Cola trademark beverages in the affected territory. The foregoing and any other adverse changes in Coca-Cola FEMSA’s relationship with TCCC would have an adverse effect on its business, financial condition and results of operations.
The Coca-Cola Company has substantial influence on the conduct of Coca-Cola FEMSA’s business, which may result in Coca-Cola FEMSA taking actions contrary to the interests of Coca-Cola FEMSA’s shareholders other than The Coca-Cola Company.
TCCC has substantial influence on the conduct of Coca-Cola FEMSA’s business. As of the date of this report, TCCC indirectly owned 27.8% of Coca-Cola FEMSA’s outstanding capital stock, representing 32.9% of Coca-Cola FEMSA’s capital stock with full voting rights. TCCC is entitled to appoint up to five of Coca-Cola FEMSA’s maximum of 21 directors and the vote of at least two of them is required to approve certain actions by Coca-Cola FEMSA’s board of directors. As of the date of this annual report, we indirectly owned 47.2% of Coca-Cola FEMSA’s outstanding capital stock, representing 56.0% of Coca-Cola FEMSA’s capital stock with full voting rights. We are entitled to appoint up to 13 of Coca-Cola FEMSA’s 21 directors and all of Coca-Cola FEMSA’s executive officers. TCCC and us, or only us in certain circumstances, have the power to determine the outcome of all actions requiring approval by Coca-Cola FEMSA’s board of directors, and TCCC and us, or only us in certain circumstances, have the power to determine the outcome of all actions requiring approval of our shareholders. See “Item 10. Additional Information—Material Contracts—Material Contracts Relating to Coca-Cola FEMSA—Shareholders Agreements.” The interests of TCCC may be different from the interests of Coca-Cola FEMSA’s other shareholders, which may result in Coca-Cola FEMSA taking actions contrary to the interests of such other shareholders.
Proximity Americas Division may not be able to maintain its historic growth rate.
Proximity Americas Division increased the number of OXXO stores at a compound annual growth rate of 5.8% from 2021 to 2023. The growth in the number of OXXO stores has driven growth in total revenue and results of operations at Proximity Americas Division over the same period. As the overall number of stores increases, percentage growth in the number of OXXO stores is likely to slow. In addition, as small-format store penetration in Mexico grows,
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the number of viable new store locations may decrease, and new store locations may be less favorable in terms of same-store sales, average ticket, and store traffic. As a result, our future results and financial condition may not be consistent with prior periods and may be characterized by lower growth rates in terms of total revenue and results of operations. We cannot assure that the revenues and cash flows of Proximity Americas Division that come from future retail stores will be comparable with those generated by existing retail stores. See “Item 4. Information on the Company—Proximity Americas Division —Store Locations.”
The Health Division’s sales and performance may be affected by a material change in institutional sale trends in some of the markets where it has operations, and by contractual conditions with its suppliers.
In some of the markets where we have operations, the sales of the Health Division are highly dependent on institutional sales, as well as traditional, open-market sales. The institutional market involves public and private health care providers, and the performance of the Health Division could be affected by its ability to maintain and grow its client base.
Additionally, the Health Division acquires the majority of its inventories and healthcare products from a limited number of suppliers. Its ability to maintain favorable conditions in its current commercial agreements could potentially affect the Health Division’s operating and financial performance.
The Fuel Division’s performance may be affected by changes in commercial terms with suppliers, or disruptions to the industry supply chain, and the nature of the Fuel Division’s operations exposes it, and the communities in which it operates, to a range of health, safety, security and environmental risk.
The Fuel Division mainly purchases gasoline and diesel for its operations in Mexico. The fuel market in Mexico has experienced structural changes that could gradually decrease the number of suppliers. In the event of global changes in the industry, commercial terms for the Fuel Division could deteriorate in the future, adversely impacting the financial performance of the Fuel Division.
The nature of the Fuel Division’s operations exposes it to certain risks, particularly at its fuel stations. These risks include equipment failure, work accidents, fires, explosions, vapor emissions, spills and leaks at its facilities, service stations or other sites. These types of hazards and accidents may cause personal injuries or the loss of life, business interruptions and damage or contamination to the environment and the Fuel Division’s property, equipment or reputation. Further, we may be subject to litigation, compensation claims, governmental fines or penalties or other liabilities or losses in relation to such incidents and accidents and may incur significant costs as a result. Such incidents and accidents may also affect our reputation or our brands, leading to a decline in sales of our products and services, and may adversely impact our business, financial condition and results of operations.
Our business expansion strategy may not be successful and may lead to decreased profit margins.
In February 2023, we announced our FEMSA Forward strategy to focus on our core business units of retail, Coca-Cola FEMSA and Digital@FEMSA. See “Item 4. Information on the Company—Recent Developments.” In recent periods, we have entered into new markets and new lines of business through the acquisition of other businesses, and we continue to seek investment opportunities in our core businesses. These new businesses or investments may not result in the same growth rates that we have historically experienced, may experience long lead times before returns on our investment materialize or may be less profitable than our more established businesses.
Key elements to achieving the benefits and expected synergies of these acquisitions are the ability to implement our strategies for these acquisitions, the effectiveness of those strategies, the integration of acquired businesses’ operations into ours in a timely and effective manner, the funding of capital expenditures and the retention of qualified and experienced key personnel. Investments in Digital@FEMSA may also be subject to us selecting the right business to acquire or technology or platform to develop in a highly competitive and dynamic industry. We may incur in unforeseen liabilities in connection with acquiring, taking control of, or managing businesses and may encounter difficulties and unforeseen or additional costs in restructuring and integrating them into our operating structure. Past and future divestitures, such as the potential sale of certain non-core businesses, may lead to a decrease in our profits. We cannot assure you that these efforts will be successful or completed as expected, and our business, financial condition and results of operations could be adversely affected if we are unable to do so.
An erosion of our business reputation could have a material adverse effect on our brand, our ability to secure new resources and our business and results of operations.
Our reputation, trademarks and other proprietary rights are important to our competitive position. Coca-Cola FEMSA and OXXO stores, in particular, benefit from a well-recognized brand, and we are in the process of establishing our brands in Digital@FEMSA.
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If we are unsuccessful in protecting our intellectual property rights, or if another party prevails in litigation claiming any rights thereto, the value of the brands could be diminished, causing customer confusion and materially adversely impacting our business and financial results. Failure to maintain product safety and quality could materially adversely affect our brand image and reputation and lead to potential product liability claims, governmental agency investigations and damages claims.
Substantially all of Coca-Cola FEMSA’s sales are derived from sales of Coca-Cola trademark beverages owned by TCCC. Maintenance of the reputation and intellectual property rights of these trademarks is essential to Coca-Cola FEMSA’s ability to attract and retain retailers and consumers and is a key driver for its success. Failure to maintain the reputation of Coca-Cola trademarks and/or to effectively protect these trademarks could have a material adverse effect on its business, financial condition and results of operations.
Societal expectations of businesses are also increasing, with a focus on business ethics, contribution to society, safety and minimizing damage to the environment, among others. Also, there is increasing focus on the role of oil and gas and large retail businesses in the context of climate change and energy transition. If we are unable to meet society demands in this regard, our brands, reputation and price of securities could be negatively affected, thus limiting our ability to deliver our strategy, reducing consumer demand for our products, harming our ability to secure new resources and contracts and restricting its ability to access capital markets or attract employees. Many other factors, including the materialization of the risks discussed in several of the other risk factors herein, could negatively affect our reputation and could have a material adverse effect on our business, financial condition and results of operations.
Our businesses highly depend on information technology and a failure, interruption or breach of our IT systems could adversely affect them.
Our businesses rely heavily on advanced IT systems to effectively manage our data, communications, connectivity and other business processes. We invest aggressively in IT to maximize its value generation potential. The development of IT systems, hardware and software needs to keep pace with the businesses’ growth due to the high speed at which the divisions add new services and products to their commercial offerings. If these systems become obsolete or if the planning for future IT investments is inadequate, our businesses could be adversely affected, so we constantly strive to improve and protect our IT systems with advanced security measures, including in Digital@FEMSA.
In order to address risks to our IT systems, we continue to make investments in training personnel, technologies and cyber insurance. We maintain an IT risk management program which is supervised by senior management. Reports on such IT risk management program are presented to the Audit Committee of the board of directors on a quarterly basis. As part of this program, we have a cybersecurity framework, internal policies and functional surveillance and governance.
Cybersecurity incidents, system disruptions and other breaches of network or information technology security could have an adverse effect on our business and our reputation.
We use networks and information systems to operate our business, to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Some of these information systems include the Internet and third-party hosted platforms and services used for procurement, supply chain, manufacturing, invoicing and storing client and employee personal data. Because information systems are critical to many of our operating activities, our business and new acquisitions may be impacted by system shutdowns, service disruptions or security breaches, such as failures during routine operations, network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyber-attacks by hackers, criminal groups or nation-state organizations or social-activist (hacktivist) organizations, natural disasters, failures or impairments of telecommunication networks or other catastrophic events. Such incidents could result in unauthorized disclosure of material confidential information, and we could experience delays in reporting our financial results. In addition, misuse, leakage or falsification of information could result in violations of data privacy laws and regulations, damage to our reputation and credibility, loss of customers, and, therefore, could have a material adverse effect on our financial condition and results, or may require us to spend significant financial and other resources to prevent future attacks, remedy the damage caused by a security breach or to repair or replace networks and information systems.
We have adopted comprehensive policies and procedures related to our information security and privacy controls that assess compliance on these matters, including the sufficiency of the controls and procedures related to cybersecurity disclosure, through our Chief Information Security Officer as an internal consultant for the Audit Committee and board of directors.
Proximity Americas Division and Digital@FEMSA offer several financial and payments services for their customers. Cyber-security events such as the ones described above could result in unauthorized disclosure of customers’ confidential information, violations of data privacy laws and regulations, or in the total or partial loss of our customers funds, that could therefore require us to spend significant financial and other resources to prevent future attacks, remedy
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the damage caused by a security breach or to repair or replace networks and information systems. As we grow our digital business, we expect to hold more personal information of our customers. Therefore, we expect these risks to increase.
We make investments in technologies, cyber insurance and training of our personnel. We also maintain an information security program that is presented to and supervised by the Audit Committee and information security committee on a quarterly basis. As part of this information security program based on a risk approach, we have a cybersecurity framework, internal policies and cross-functional surveillance. Despite our investments and focus on risk management programs, we may be subject to unexpected security breaches, and there is no assurance that the measures we implement will be sufficient to prevent such breaches.
We are currently in the process of implementing internal protocols aimed at bolstering and standardizing disclosures pertaining to cybersecurity risk management, strategy, governance, and incidents. This endeavor is designed to enhance transparency, instill confidence among our clients and investors in our operational practices, and promote compliance with international cybersecurity standards and regulations, including applicable rules issued by the U.S. Securities and Exchange Commission (“SEC"). See "Item 16K. Cybersecurity." However, the evolving nature of cybersecurity threats presents an ongoing risk and despite our efforts, our systems may still be vulnerable to breaches or disruptions, which could adversely affect our operations and financial performance.
If we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and/or private litigation, any of which could negatively affect our business and operating results.
In the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (“personal data”), including employees, former employees, vendors, third-party personnel, customers, and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection, which may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. Our security controls over personal data and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data.
Our distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages and/or fines, all of which could negatively affect our business
and operating results. New and increased laws and regulations in this area, including self-regulation and industry standards, increased enforcement activity, and changes in interpretation of laws and regulations, could increase our cost of compliance and operation or otherwise harm our business.
Negative publicity or inaccurate information on social media could adversely affect our reputation.
In recent years, there has been a considerable increase in the use of social media and similar platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications that allow individual access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers and their goods and services, and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is virtually limitless.
Negative publicity or inaccurate information concerning or affecting us, or our brands’ trademarks may be posted at any time on traditional media outlets, social media and similar platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individual access to a broad audience of consumers and other interested persons. We may experience additional risks as we grow our Digital@FEMSA business.This information may harm our reputation without affording us an opportunity for redress or correction, which could in turn have a material adverse effect on its business, financial condition and results of operations.
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Regulatory developments in the countries where we operate may adversely affect our business, financial condition and results of operations.
The principal areas in which we are subject to laws and regulations are labor, zoning, operations, environmental and related local permits, health and safety, anti-bribery, energy, taxation, antitrust, anti-money laundering, cybersecurity, among others. We are also subject to additional regulations applicable to payment providers and fintechs in the markets where we conduct those operations. See “Item 4. Information on the Company—Regulatory Matters—Fintech Regulations.” Changes in existing laws and regulations, the adoption of new laws or regulations, or a stricter interpretation or enforcement thereof in the countries where we have operations may increase our operating and compliance costs or impose restrictions on our operations which, in turn, may adversely affect our business, financial condition and results of operations. We may also be subject to overlapping and potentially conflicting regulations in multiple jurisdictions. In addition, changes in current laws and regulations may negatively impact customer traffic, revenues, operational costs and commercial practices, which may have an adverse effect on results of our operations and financial condition.
Our business could be affected by new safety and environmental regulations enforced by governments, global environmental regulations and new energy technologies. Federal, state, and municipal laws and regulations for the installation and operation of service stations are becoming more stringent. Compliance with these laws and regulations is often difficult and costly. Global trends to reduce the consumption of fossil fuels through incentives and taxes could push sales of these fuels at service stations to slow or decrease in the future and automotive technologies, including efficiency gains in fossil fuel vehicles and increased popularity of alternative fuel vehicles, such as electric and liquefied petroleum gas (“LPG”) vehicles, have caused a reduction in fuel consumption globally. Other new technologies could further reduce the sale of fossil fuels, all of which could adversely affect results of operations and financial condition of the Fuel Division. See “Item 4. Information on the Company—Regulatory Matters—Environmental Regulations.”
Consumers’ increased concerns and changing attitudes about the solid waste streams and environmental responsibility and the related publicity could result in the adoption of such legislation or regulations. If these types of requirements are adopted and implemented on a large scale in any of our territories, they could affect our costs or require changes in our distribution model and packaging, which could reduce net operating revenues and profitability. For example, certain legislative and regulatory reforms have been proposed in some of the territories where Coca-Cola FEMSA operates to restrict the sale of single-use plastics and similar legislation or regulations may be proposed or enacted in the future, which may affect Coca-Cola FEMSA’s use of non-refillable and refillable containers. Such changes in regulations might also affect FEMSA’s ability to meet the key performance indicators required by the sustainability-linked bond. See “Item 4. Information on the Company—Coca-Cola FEMSA—Raw Materials” and “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
Energy regulatory changes may impact fuel prices and therefore adversely affect our business. The Fuel Division mainly sells gasoline and diesel through owned or leased retail service stations. Previously, the prices of these products were regulated in Mexico by the Energy Regulatory Commission (Comisión Reguladora de Energía, or “CRE”). See “Item 4. Information on the Company—Regulatory Matters—Energy Regulations.”
We are required to comply with anti-money laundering laws and regulations in the jurisdictions in which we have operations, which are particularly applicable to our retail and fintech businesses. Such laws and regulations require FEMSA to adopt and implement policies, procedures and controls designed to detect and prevent transactions with third parties involved in money laundering. Although we have such policies, procedures and controls in place, given the number of transactions made in its stores, we may be subject to the risk that our clients or third parties may misuse our services and engage in money laundering or other related illegal activities. There can be no assurance that FEMSA’s internal policies, procedures and controls will be sufficient to detect or prevent all inappropriate practices, including money laundering, fraud or other violations of law or that any person will not take actions in violation of FEMSA policies, procedures and controls. As we expand and grow our retail and fintech businesses, including Digital@FEMSA, we will be subject to additional regulations applicable to financial technology companies in various jurisdictions. See “Item 4. Information on the Company—Regulatory Matters—Fintech Regulations.”
Voluntary price restraints or statutory price controls have been imposed historically in several of the countries where we operate. See “Item 4. Information on the Company—Regulatory Matters—Price Controls.” We cannot assure you that existing or future laws and regulations in the countries where we operate relating to goods and services (in particular, laws and regulations imposing statutory price controls) will not affect our products, our ability to set prices for our products, or that we will not need to implement price restraints, which could have a negative effect on our business, financial condition and results of operations.
Unfavorable outcome of legal proceedings could have an adverse effect on our business, financial condition, and results of operations.
Our operations and the operations of our business units have from time to time been and may continue to be subject to investigations and proceedings on antitrust, tax, consumer protection, environmental, labor and commercial
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matters. We cannot assure you that these investigations and proceedings will not have an adverse effect on our business units’ business, financial condition, and results of operations. See “Item 8. Financial Information—Legal Proceedings.”
Taxes could adversely affect our business, financial condition and results of operations.
The imposition of new taxes, increases in existing taxes or changes in the interpretation of tax laws and regulations by tax authorities, may have a material adverse effect on the results of operations and financial condition of our business. The countries where we operate may adopt new tax laws or modify existing tax laws to increase taxes applicable to our business or products. See “Item 4. Information on the Company—Regulatory Matters—Tax Reforms.”
Changes in consumer preferences and public concern about health-related and environmental issues could reduce demand for some of Coca-Cola FEMSA’s products.
The beverage industry is evolving mainly because of changes in consumer preferences and regulatory actions. There have been different plans and actions adopted in recent years by governmental authorities in some of the countries where Coca-Cola FEMSA operates. These include increases in tax rates or the imposition of new taxes on the sale of certain beverages and other regulatory measures, such as restrictions on advertising for some of Coca-Cola FEMSA’s products and additional regulations concerning the labeling or sale of Coca-Cola FEMSA’s products. Moreover, researchers, health advocates and dietary guidelines encourage consumers to reduce their consumption of certain types of beverages sweetened with sugar, artificial sweeteners, and high fructose corn syrup (“HFCS”). In addition, concerns over the environmental impact of plastic may reduce the consumption of Coca-Cola FEMSA’s products sold in plastic bottles or result in additional taxes that could adversely affect consumer demand. Increasing public concern about these issues, new or increased taxes, other regulatory measures or Coca-Cola FEMSA’s failure to meet consumers’ preferences or its inability to successfully introduce new beverage products or replace plastic bottles with more environmentally friendly containers, could reduce demand for some of Coca-Cola FEMSA’s products, which would adversely affect its business, financial condition and results of operations. See “Item 4. Information on the Company—Coca-Cola FEMSA—Business Strategy.”
Competition in the markets where we have operations could adversely affect our business, financial condition and results of operations.
We face strong competition across industries in the countries where we have operations and may face competition from new market participants. The increase in competition may limit the number of new locations available or result in a reduction in revenues. Consequently, future competition may affect our results of operations and financial condition. The shift in the retail sector from brick-and-mortar retailers to online and mobile platforms could also adversely affect FEMSA’s business, results of operations and financial condition. See “Item 4. Information on the Company.” We expect the competitive environment will continue to evolve as new technologies are developed based on changing consumer behavior. Lower pricing and activities by FEMSA’s competitors may affect our business. The continuing migration and evolution of the retail sector and financial services to online and mobile-based platforms for consumers may increase competition that could adversely affect our business, results of operations and financial condition.
FEMSA competes mainly in terms of price, packaging, effective promotional activities, access to retail outlets and sufficient shelf space, customer service, product innovation and product alternatives and the ability to identify and satisfy consumer preferences. See “Item 4. Information on the Company”
Global economic conditions have and may continue to cause an increase in the prices of raw materials, supply chain disruptions or shortages of raw materials and thus increase our cost of goods sold, therefore adversely affecting our business, financial conditions and results of operations.
Our sales volumes and revenues may be affected by economic conditions in the various countries where we have operations. The prices for our raw materials are driven by market prices and local availability, the imposition of import duties and restrictions and fluctuations in exchange rates. Global economic growth slowed in 2022 and continued through 2023. Inflationary pressures first appeared in global markets in 2021 and reached a high point in 2022. Inflation has led to further increases in the costs of raw materials, utilities and services that we use to produce our products and provide services, which would adversely affect our business if we are not able to pass on the increased costs to our customers or successfully implement mitigating actions.
The effects of inflation impact each of our businesses differently. For example, in addition to water, Coca-Cola FEMSA’s most significant raw materials are concentrate, which Coca-Cola FEMSA acquires from affiliates of TCCC, sweeteners and packaging materials. Prices for Coca-Cola trademark beverages concentrate are determined by TCCC. Coca-Cola FEMSA is also required to meet all of its supply needs (including sweeteners and packaging materials) from suppliers approved by TCCC. Coca-Cola FEMSA’s most significant packaging raw material costs arise from the purchase of PET resin, the price of which is related to crude oil prices and global PET resin supply. Crude oil prices have
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a cyclical behavior and are determined with reference to the U.S. dollar; therefore, high currency volatility and inflation may affect the average price for PET resin in local currencies. Coca-Cola FEMSA cannot anticipate whether the U.S. dollar will appreciate or depreciate with respect to such local currencies in the future, and we cannot assure you that Coca-Cola FEMSA will be successful in mitigating any such fluctuations through derivative instruments or otherwise. See “Item 4. Information on the Company—Coca-Cola FEMSA—Raw Materials.”
For Proximity Americas Division and Proximity Europe Division, price variations of raw materials and supply chain disruptions caused by inflation may increase the cost of the goods sold.
Water shortages or any failure to maintain existing concessions or contracts could adversely affect Coca-Cola FEMSA’s business, financial condition, and results of operations.
Water is an essential component of all of Coca-Cola FEMSA’s products. Coca-Cola FEMSA obtains water from various sources in its territories, including springs, wells, rivers and municipal and state water companies pursuant to either concessions granted by governments in its various territories (including governments at the federal, state or municipal level) or pursuant to contracts.
Coca-Cola FEMSA obtains the vast majority of the water used in its production from municipal utility companies and pursuant to concessions to use wells, which are generally granted based on studies of the existing and projected groundwater supply. Coca-Cola FEMSA’s existing water concessions or contracts to obtain water may be terminated by governmental authorities under certain circumstances and their renewal depends on several factors, including having paid all fees in full, having complied with applicable laws and obligations and receiving approval for renewal from local and/or federal water authorities. Climate change is causing a rise in temperatures in diverse territories and, as a result, is exacerbating water scarcity and droughts. In some of Coca-Cola FEMSA’s territories, its existing water supply may not be sufficient to meet its future production needs, and the available water supply may be adversely affected by shortages or changes in governmental regulations and environmental changes.
We cannot assure that water will be available in sufficient quantities to meet Coca-Cola FEMSA’s future production needs or will prove sufficient to meet its water supply needs. Continued water scarcity in the regions where Coca-Cola FEMSA operates may adversely affect its business, financial condition and results of operations.
Increases in the cost, disruption of supply or shortage of energy or fuel could adversely affect our business and results of operations.
Our business depends heavily on energy and fuel to maintain operations across segments.
An increase in the price, disruption of supply or shortage of fuel and other energy sources in the countries where we operate, which may be caused by increased demand, natural disasters, power outages or government regulations, taxes, policies or programs, including programs designed to reduce greenhouse gas emissions to address climate change, could increase our operating costs and negatively impact our business and results of operations. Changes in government regulations in the countries where we have operations, including reforms related to transmission, sanctions, distribution, and other costs, could lead to a substantial increase in our electricity cost. See “Item 4. Information on the Company—Regulatory Matters.” The price of fuel has also increased not only as a result of inflation and increases in energy demand, but also as a result of the conflict in Ukraine and Russia and subsequent economic sanctions imposed on Russia, which may continue to impact us throughout 2024, particularly in Europe, and may continue to impact us in the future.
Coca-Cola FEMSA’s bottling operations operate large fleets of trucks and other motor vehicles to distribute and deliver beverage products to its business partners and customers. In addition, Coca-Cola FEMSA uses a significant amount of electricity, natural gas and other energy sources to operate its bottling plants and distribution facilities. An increase in the price, disruption of supply or shortage of fuel and other energy sources in the countries where Coca-Cola FEMSA operates, which may be caused by increased demand, natural disasters, power outages or government regulations, taxes, policies or programs, including programs designed to reduce greenhouse gas emissions to address climate change, could increase our operating costs and negatively impact Coca-Cola FEMSA’s business and results of operations.
The performance of FEMSA’s points of sale would be adversely affected by increases in the price of utilities on which the stores and stations depend, such as electricity. Electricity prices could potentially increase further as a result of inflation, shortages, interruptions in supply, changes in the regulatory framework and its interpretation or other reasons, and such an increase could adversely affect the results of operations and financial condition of our business.
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We are subject to risks related to pandemics and public health crises that may materially and adversely affect our business.
Public health crises such as pandemics, tainted food, food-borne illnesses, food tampering, tampering with or failure of water supply may negatively affect our business, and demand for our products and services. We cannot predict whether there will be future pandemic outbreaks in the future in any of the markets where we operate. A global pandemic could also impact our non-consolidated entities and cause significant volatility in financial markets, undermining investors’ confidence in the growth of countries and businesses. In addition, the longer-term economic effects of a global pandemic may include increased inflation rates, supply-chain disruptions, exchange rates volatility in the countries where we have operations and reduced demand for the products we sell or a shift to lower margin products. These lingering effects could be exacerbated by any additional pandemics or health crises.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business.
There is increasing concern that a gradual rise of global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, and corn, which are important sources of ingredients for Coca-Cola FEMSA’s products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of Coca-Cola FEMSA’s beverage products. Initiatives to address climate change may be aimed at discouraging the use of traditional fuels, which could materially impact the Fuel Division’s business, financial conditions, and results of operations.
We expect increasing levels of regulation, disclosure-related and otherwise, with respect to environmental, social and governance ("ESG”) matters in Mexico, the U.S., and other countries where we operate. For example, on March 6, 2024, the SEC adopted final rules to enhance and standardize climate-related disclosures by requiring registrants to disclose certain climate-related information in registration statements and annual reports. The final rules are subject to challenges in the U.S., and the outcome of ongoing litigation is currently unknown. If the rules become effective and are not overturned, we will be required to provide the enhanced climate-related disclosures. Compliance with these new rules, or similar rules or requirements imposed in other countries where we operate, may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls, processes and procedures regarding matters that have not been subject to in the past, and impose increased oversight obligations on our management and board of directors. We may also be subject to overlapping and potentially conflicting ESG disclosure requirements in multiple jurisdictions. Additionally, many of our suppliers, business partners and others in our value chain may be subject to similar expectations, which may increase or create additional risks, including risks that may not be known to us. For these reasons, increased levels of ESG disclosure requirements could increase our operating costs and negatively impact our business and results of operations.
In addition, from time to time, we establish and publicly announce goals and commitments to reduce our carbon footprint by increasing our use of recycled packaging materials and participating in environmental and sustainability programs and initiatives organized or sponsored by non-governmental organizations and other groups to reduce greenhouse gas emissions industry wide. If we fail to achieve these goals due to restrictions to access or short supply of energy from renewable sources or improperly report on its progress toward achieving our carbon footprint reduction goals and commitments, the resulting negative publicity could adversely affect consumer preference and demand for our products.
Weather conditions and natural disasters may adversely affect our business, financial condition and results of operations.
Lower temperatures, higher rainfall and other adverse weather conditions such as hurricanes, natural disasters such as earthquakes, torrential rains, hurricanes and floods in the countries in which we operate may negatively impact consumer patterns, which may result in reduced sales of our products and at points of sale. Additionally, such adverse weather conditions and natural disasters may affect plant installed capacity, road infrastructure, personnel, assets and points of sale in the territories where we operate. Such events, or the containment measures to prevent or control them could also trigger increases in costs, disruption of supply, shortages of products, or consumer behavior changes including a decrease in an overall consumer mobility, thus affecting our business, financial condition, and results of operations. If any of these events becomes significant in duration, severity and frequency, our financial condition and results of operations could be materially adversely affected. FEMSA’s points of sales and facilities have been affected by hurricanes and other weather events in the past, which have resulted in temporary closures and losses. Also, any of these
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events could force us to increase our capital expenditures to put our assets back in operation. See “Item 4. Information on the Company—Insurance.”
Risks Related to Mexico and the Other Countries Where We Operate
Adverse economic conditions in Mexico may adversely affect our financial position and results.
We are a Mexican corporation, and our Mexican operations are our single most important geographic territory. For the year ended December 31, 2023, 65% of our consolidated total revenues were attributable to Mexico. During 2023 and 2022, Mexican gross domestic product (“GDP”) increased by approximately 3.2% and 3.1%, respectively, on an annualized basis compared to the previous year as published by the INEGI. We cannot assure that such conditions will be maintained or continue to increase in the future or will not have a material effect on our business, results of operations and financial condition going forward. The Mexican economy continues to be heavily influenced by the U.S. economy, and therefore, deterioration in economic conditions in, or delays in the recovery of, the U.S. economy may hinder any recovery. In the past, Mexico has experienced both prolonged periods of weak economic conditions and deterioration in economic conditions that have had a negative impact on our results.
Our business may be significantly affected by the general condition of the Mexican economy, or by the rate of inflation in Mexico, interest rates in Mexico and exchange rates for, or exchange controls affecting, the Mexican peso. Decreases in the growth rate of the Mexican economy, periods of negative growth and/or increases in inflation or interest rates may result in lower demand for the products we carry in our stores, lower real pricing of products, a shift to lower margin products or decrease in store traffic. Because a large percentage of our costs and expenses are fixed, we may not be able to reduce costs and expenses upon the occurrence of any of these events and our profit margins may suffer as a result.
In addition, an increase in interest rates in Mexico would increase the cost of our debt and would cause an adverse effect on our financial position and results. Mexican peso-denominated debt (including currency hedges) represented 52.5% of our total debt as of December 31, 2023. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Geopolitical conditions could negatively impact our financial results.
Financial uncertainties in our major markets and unstable geopolitical conditions or events in certain markets, including civil unrest, acts of war, terrorism or governmental changes could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products.
Geopolitical conflicts, including escalation of ongoing conflicts and the ongoing military conflict involving Russia and Ukraine and the resulting economic sanctions imposed on Russia and certain Russian citizens and enterprises, could also cause volatility in commodity markets and significant disruptions in supply chains across the world, which may increase the cost of some of our raw materials and therefore have an adverse effect on our business, financial condition and results of operations. Our presence in Europe through the Valora acquisition positions FEMSA in closer proximity to the conflict in Russia and Ukraine and thus our European operations may be more significantly affected.
Volatility in other regions in which we have operations may also impact our financial results and operations. There can be no assurance that future developments in emerging market countries and in the United States, over which we have no control, will not have a material adverse effect on our financial condition and results.
Foreign exchange rate volatility of the Mexican peso and of our other local currencies could adversely affect our financial position and results.
Foreign exchange rate volatility of the Mexican peso and of our other local currencies increases the cost of a portion of the raw materials we acquire, the price of which is paid in or determined with reference to U.S. dollars, and of our debt obligations denominated in U.S. dollars, and thereby negatively affects our financial position and results. A severe devaluation or depreciation of the Mexican peso, which is our main operating currency, may result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert Mexican pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our U.S. dollar-denominated debt or obligations in other currencies. The Mexican peso is a free-floating currency and, as such, it experiences exchange rate fluctuations relative to the U.S. dollar over time. As of December 31, 2023, the Mexican peso appreciated relative to the U.S. dollar by approximately 13.3% compared to 2022. As of December 31, 2022 and 2021, the Mexican peso experienced fluctuations relative to the U.S. dollar consisting of appreciation of 5.0% and depreciation of 3.1%, respectively, compared to the prior year. Through April 19, 2024, the Mexican peso has depreciated 1.8% since December 31, 2023.
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While the Mexican government does not currently restrict, and since 1982 has not restricted, the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer other currencies out of Mexico, the Mexican government could impose restrictive exchange rate policies in the future, as it has done in the past. Currency fluctuations may have an adverse effect on our financial position, results, and cash flows in future periods.
When the financial markets are volatile, as they have been in recent periods, our results may be substantially affected by variations in exchange rates and commodity prices and, to a lesser degree, interest rates. These effects include foreign exchange gain and loss on assets and liabilities denominated in U.S. dollars, fair value gain and loss on derivative financial instruments, commodities prices and changes in interest income and interest expense. These effects can be much more volatile than our operating performance and our operating cash flows. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk.”
The devaluation of the local currencies against the U.S. dollar can increase the operating costs for Coca-Cola FEMSA, and depreciation of the local currencies against the Mexican peso can negatively affect the translation of Coca-Cola FEMSA's results. Future currency devaluation or the imposition of exchange controls in any of these countries, or in Mexico, would have an adverse effect on their financial position and results.
Generally, future currency devaluations or the imposition of exchange controls in any of the countries where we have operations may potentially increase our operating costs, which could have an adverse effect on our results of operations and financial condition. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk.”
Political, social and security events and conditions in Mexico and other countries in which we operate could adversely affect our operations.
Mexican political events may significantly affect our operations. We cannot predict whether potential changes in Mexican governmental and economic policy could adversely affect economic conditions in Mexico or the sector in which we operate. The Mexican president and Congress have a strong influence over new policies and governmental actions regarding the Mexican economy, and the current federal administration could implement substantial changes in law, policy and regulations in Mexico, including reforms to the Constitution, which could negatively affect our business, results of operations and financial condition. In response to these actions, opponents of the administration could react with, among other things, riots, protests and looting that could negatively affect our operations.
As of the date of this annual report, the Morena Political Party, in conjunction with its allied political parties, holds a simple majority in the Senate and in the Chamber of Deputies and a strong influence in various local legislatures. We cannot provide any assurances that political developments in Mexico, such as the election of new administrations, changes in laws, public policy or regulations, political disagreements or civil disturbances, over which we have no control, will not have an adverse effect on our business, results of operations and financial condition. Furthermore, national presidential, state government and/or legislative elections took place in 2023 or are scheduled to take place in 2024 in several of the countries where we operate, including Argentina, Panama, Mexico and Uruguay. These countries are or may be facing changes of government, which could introduce potential risks associated with shifts in political leadership and changes in public policies. Uncertainty surrounding the new administration's agenda, regulatory reforms, and economic policies could impact our operations and financial performance.
Mexico has experienced periods of increasing criminal activity and particularly homicide rates, primarily due to organized crime. This poses a risk to our business and might negatively impact business continuity. An increase in crime rates could negatively affect our sales and customer traffic, increase our security expenses, affect our hours of operation and result in higher turnover of personnel or damage to the perception of our brands. Furthermore, this could adversely impact our business and financial results because consumer habits and patterns adjust to the increased perceived and real security risks, as people refrain from going out as much and gradually shift some on-premises consumption to off-premises consumption of food and beverages on certain occasions.
Other countries in which we operate have also experienced periods of increased criminal activity and other security incidents. We cannot assure you that political or social developments in the countries where we operate or elsewhere, such as the election of new administrations, changes in laws, public policy or regulations, political disagreements, civil disturbances and the rise in violence and perception of such rise in violence, over which we have no control, will not have a corresponding adverse effect on the local or global markets or on our business, financial condition and results of operations.
Economic conditions in Mexico and other countries in which we operate could adversely affect our operations.
The markets in which we operate are highly sensitive to economic conditions because a decline in consumer purchasing power is often a consequence of an economic slowdown which, in turn, results in a decline in the overall
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consumption of main product categories. During periods of economic slowdown, our points of sale may experience a decline in same-store traffic and average ticket per customer, which may result in a decline in overall performance. See “Item 5. Operating and Financial Review and Prospects—Overview of Events, Trends and Uncertainties.”
Many countries worldwide, including Mexico, have suffered significant economic volatility in recent years, and this may occur again in the future. Global instability has been caused by many different factors, including substantial fluctuations in economic growth, high levels of inflation, changes in currency values, changes in governmental economic or tax policies and regulations and overall political, social, and economic instability. We cannot assure you that such conditions will not return or that such conditions will not have a material adverse effect on our financial condition and results.
The Mexican economy and the market value of securities issued by Mexican issuers may be, to varying degrees, affected by economic and market conditions in other emerging market countries and in the United States. Furthermore, economic conditions in Mexico have been highly correlated with economic conditions in the United States primarily as a result of the United States-Mexico-Canada Agreement (“USMCA”), which came into force on July 1, 2020.
Adverse economic conditions in the United States or other related events could have an adverse effect on the Mexican economy. Although economic conditions in other emerging market countries and in the United States may differ significantly from economic conditions in Mexico, investors’ reactions to developments in other countries may have an adverse effect on the market value of securities of Mexican issuers or of Mexican assets.
Risks Related to Our Principal Shareholders and Capital Structure
A majority of our voting shares are held by a voting trust, which effectively controls the management of our company, and the interests of which may differ from those of other shareholders.
As of March 22, 2024 the voting trust owned 38.69% of our capital stock and 74.86% of our capital stock with full voting rights, consisting of Series B Shares. Consequently, the voting trust has the power to elect a majority of the members of our board of directors and to play a significant or controlling role in the outcome of substantially all matters to be decided by our board of directors or our shareholders. The interests of the voting trust may differ from those of our other shareholders. See “Item 7. Major Shareholders and Related-Party Transactions” and “Item 10. Additional Information— Bylaws—Voting Rights and Certain Minority Rights.”
Holders of Series D-B and D-L Shares have limited voting rights.
Holders of Series D-B and D-L Shares have limited voting rights and are only entitled to vote on specific matters, such as certain changes in the form of our corporate organization, dissolution or liquidation, a merger with a company with a distinct corporate purpose, a merger in which we are not the surviving entity, a change of our jurisdiction of incorporation, the cancellation of the registration of the Series D-B and D-L Shares and any other matters that expressly require approval from such holders under the Mexican Securities Market Law. As a result of these limited voting rights, Series D-B and D-L holders will not be able to influence our business or operations. See “Item 7. Major Shareholders and Related-Party Transactions—Major Shareholders” and “Item 10. Additional Information—Bylaws—Voting Rights and Certain Minority Rights.”
Holders of ADSs may not be able to vote at our shareholder meetings.
Our shares are traded on the New York Stock Exchange (“NYSE”) in the form of ADSs. We cannot assure that holders of our shares in the form of ADSs will receive notice of shareholders’ meetings from our ADS depositary in sufficient time to enable such holders to return voting instructions to the ADS depositary in a timely manner. If instructions are not received with respect to any shares underlying ADSs, the ADS depositary will, subject to certain limitations, grant a proxy to a person designated by us in respect of these shares. If this proxy is not granted, the ADS depositary will vote these shares in the same manner as the majority of the shares of each class for which voting instructions are received.
Holders of BD Units in the United States and holders of ADSs may not be able to participate in any future preemptive rights offering and as a result may be subject to dilution of their equity interests.
Under applicable Mexican law, if we issue new shares for cash as a part of a capital increase, other than in connection with a public offering of newly issued shares or treasury stock, we are generally required to grant our shareholders the right to purchase enough shares to maintain their existing ownership percentage. Rights to purchase shares in these circumstances are known as preemptive rights. By law, we may not allow holders of our shares or ADSs who are in the United States to exercise any preemptive rights in any future capital increases unless (1) we file a registration statement with the SEC with respect to that future issuance of shares or (2) the offering qualifies for an exemption from the registration requirements of the U.S. Securities Act of 1933. At the time of any future capital
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increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC, as well as the benefits of preemptive rights to holders of our shares in the form of ADSs in the United States and any other factors that we consider important in determining whether to file a registration statement.
We may decide not to file a registration statement with the SEC to allow holders of our shares or ADSs who are located in the United States to participate in a preemptive right offering. In addition, under current Mexican law, the sale by the ADS depositary of preemptive rights and the distribution of the proceeds from such sales to the holders of our shares in the form of ADSs is not possible. As a result, the equity interest of holders of our shares in the form of ADSs would be diluted proportionately. See “Item 10. Additional Information—Preemptive Rights.”
The protections afforded to non-controlling shareholders in Mexico are different from those afforded to non-controlling shareholders in the United States.
Under Mexican law, the protections afforded to non-controlling shareholders are different from, and may be less than, those afforded to minority shareholders in the United States. Mexican laws do not provide a remedy to shareholders relating to violations of fiduciary duties. There is no procedure for class actions as such actions are conducted in the United States and there are different procedural requirements for bringing shareholder lawsuits against directors for the benefit of companies. Therefore, it may be more difficult for non-controlling shareholders to enforce their rights against us, our directors or our controlling shareholders than it would be for non-controlling shareholders of a United States company.
Investors may experience difficulties in enforcing civil liabilities against us or our directors, officers and controlling persons.
FEMSA is organized under the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. In addition, nearly all or a substantial portion of our assets and the assets of our subsidiaries are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States on such persons or to enforce judgments against them, including any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.
The failure or inability of our subsidiaries to pay dividends or other distributions to us may adversely affect us and our ability to pay dividends to holders of ADSs.
We are a holding company. Accordingly, our cash flows are principally derived from dividends, interest and other distributions made to us by our subsidiaries. Currently, our subsidiaries do not have contractual obligations that require them to pay dividends to us. In addition, debt and other contractual obligations of our subsidiaries may in the future impose restrictions on our subsidiaries’ ability to make dividend or other payments to us, which in turn may adversely affect our ability to pay dividends to shareholders and meet our debt and other obligations. As of April 23, 2024, we had no restrictions on our ability to pay dividends.
ITEM 4. INFORMATION ON THE COMPANY
Introduction
FEMSA is a leading company that participates in the following businesses:
•In the beverage industry, through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world by sales volume, based on publicly available filings and information of Coca-Cola FEMSA main competitors;
•In the retail industry, through the following divisions: (1) Proximity Americas Division, operating the OXXO small-format store chain in Latin America, (2) Proximity Europe Division, a small-format retail and foodvenience chains in Europe operated by Valora, (3) the Fuel Division, operating the OXXO Gas chain of retail service stations and (4) the Health Division, which includes pharmacy services locations and related operations.
•In Digital@FEMSA, leveraging the competitive advantages and strong market position of our businesses to build innovative digital solutions in the financial services industry to address the financial needs of our customers and business partners, with an efficient and comprehensive value proposition. Additionally, we are developing and growing digitally-enabled loyalty initiatives leveraged on strategic partnership and our businesses.
•In other non-core businesses, including our logistics and distribution business, point-of-sale refrigeration, food processing equipment and plastics solutions, which are classified as assets held for sale and discontinued operations in this annual report.
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Corporate Information
Our company was incorporated under the laws of Mexico on May 30, 1936 for a duration of 99 years. The duration can be extended indefinitely by resolution of our shareholders. We are organized as a sociedad anónima bursátil de capital variable under the laws of Mexico. Our legal name is Fomento Económico Mexicano, S.A.B. de C.V., and in commercial and business contexts we frequently refer to ourselves as “FEMSA.” Our principal headquarters are located at General Anaya No. 601 Pte., Colonia Bella Vista, Monterrey, Nuevo León 64410, Mexico. Our telephone number at this location is (+52-81) 8328-6000.
Any filings we make electronically are available to the public over the internet at our website www.femsa.com. This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this annual report. The SEC maintains an internet site that contains reports and other information regarding issuers that file electronically with the SEC at www.sec.gov. See “Item 10. Additional Information—Documents on Display.”
Corporate History and Information
FEMSA traces its origins to the establishment of Mexico’s first brewery, Cervecería Cuauhtémoc, S.A. (“Cervecería Cuauhtémoc”), which was established in 1890. Descendants of certain of the founders of Cervecería Cuauhtémoc are participants of the voting trust that controls our company.
Strategic Development of our Businesses
The following paragraphs describe certain key transactions and developments of FEMSA in the past three years.
In February 2021, Coca-Cola FEMSA entered into a distribution agreement with Heineken Brazil that replaced its previous distribution agreement with Heineken Brazil. Pursuant to this distribution agreement, Coca-Cola FEMSA continues to sell and distribute Kaiser, Bavaria and Sol beer brands in Brazil and added the premium brand Eisenbahn and other premium international brands to its portfolio and has ceased to sell and distribute Heineken and Amstel beer brands in most of its territories. In addition, Coca-Cola FEMSA now has the right to produce and distribute alcoholic beverages and other beers in Brazil based on a certain proportion of Heineken’s portfolio in Brazil. The distribution agreement has a five-year term and may be automatically renewed for an additional five-year term subject to certain conditions. After entering into this new distribution agreement, Coca-Cola FEMSA withdrew from a then-existing legal proceeding with Heineken and Heineken Brazil asserting the right to distribute the beer Kirin and waived all rights with respect to any awards or judgments resulting from such legal proceeding.
In January 2022, Coca-Cola FEMSA, through its Brazilian subsidiary, acquired CVI, a Brazilian bottler of Coca-Cola trademark products with operations in the state of Rio Grande do Sul in Brazil.
In February 2022, we closed the transaction we entered into in October 2020 pursuant to which FEMSA Comercio acquired the OK Market store chain, with 134 locations, from SMU, S.A., a leading Chilean retailer, based on internal information of our main competitors.
In October 2022, we acquired a controlling stake in Valora Holding AG, a European leading public company in the foodvenience market, through a public tender offer launched in July, 2022. We acquired the remaining non-controlling interest effective in March 2023.
In February 2023, we announced the FEMSA Forward strategy, which was the result of a thorough strategic review of our business platform, including the bottom-up definition of long-range plans for each business unit, as well as the top-down analysis of FEMSA’s corporate and capital structure. Consistent with this vision, we have determined that the best way to maximize long-term value creation is to focus on our core business verticals with the highest strategic relevance, growth potential, and financial and competitive strengths: our retail business, Coca-Cola FEMSA, and our digital solutions business.
In March 2023, we acquired the remaining 85.18% shares of Net Pay, S.A.P.I. de C.V., a merchant aggregator that offers several payment services and solutions to micro, small and medium-sized businesses in Mexico.
In February 2023, we completed a sale of ordinary shares of Heineken in an amount of approximately to €3.2 billion and completed an offering of senior unsecured exchangeable bonds for a principal amount of €500 million through a wholly owned subsidiary, exchangeable into existing issued ordinary shares of Heineken Holding N.V. As a
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result of this transaction, FEMSA's appointed directors resigned from Heineken's Board of Directors and, thus, we lost significant influence over Heineken. In May 2023, we completed a sale of ordinary shares of Heineken in an amount of approximately to €3.3 billion. Following the completion of these transactions, we reduced our combined economic interest in Heineken from 14.76% to 0.91%.
In June 2023, we successfully finalized the divestment of our interest in Jetro Restaurant Depot. As a result of this transaction, we expect to receive a total cash consideration of US$1.4 billion, of which approximately US$467 million was paid in June, 2023, with the remaining balance to be paid over the subsequent two years.
In October 2023, we created a new platform within the facility care, foodservice disposables and packaging distribution industries in the United States, merging Envoy Solutions with BradyIFS in a highly complementary combination, positioned to serve and provide value to its customers and suppliers effectively and efficiently across the country. Following the completion of this transaction, we received approximately US$1.5 billion in cash and retained economic interest of 37% in the combined entity.
For more information, see “Item 4. Information on the Company” and “Item 10. Additional Information—Material Contracts.”
Recent Developments
March 2023 Tender Offer. In March 2023, we completed a tender offer to purchase for cash certain of our notes outstanding, totaling US$2,500,000,000 principal amount of 3.500% Senior Notes due 2050, US$700,000,000 principal amount outstanding of 4.375% Senior Notes due 2043, €700,000,000 principal amount of 0.500% Senior Notes due 2028, and €500,000,000 principal amount of 1.000% Senior Notes due 2033. As a result of this offer, we acquired approximately US$943,054,000 principal amount of 3.500% Senior Notes due 2050, US$147,170,000 principal amount of 4.375% Senior Notes due 2043, €406,531,000 principal amount of 0.500% Senior Notes due 2028, and €259,188,000 principal amount of 1.000% Senior Notes due 2033.
November 2023 Tender Offer. On November 9, 2023, we completed a tender offer to purchase for cash any and all of our outstanding 4.375% Senior Notes due 2043 denominated in US dollars. As a result of this offer, we acquired U.S.-dollar denominated bonds totaling approximately US$ 117 million. The purpose of the tender offer was to reduce our indebtedness.
Accelerated Share Repurchase Agreement. On March 15, 2024, we entered into an accelerated share repurchase ("ASR") agreement with a financial institution in the U.S. to repurchase certain of our shares through the acquisition of ADSs. Under the terms of the ASR agreement, we agreed to repurchase from such financial institution an aggregate amount of US $400 million of our ADS. On March 19, 2024, we received an initial delivery of approximately 20% of the ADSs subject to the ASR agreement. The total number of ADSs ultimately repurchased under the ASR agreement will be based on the daily volume-weighted average price of our ADSs during the term of the ASR agreement, subject to certain limitations. The final settlement of the ASR agreement is expected to be completed no later than the third quarter of 2024.
Stock Repurchase Program. On March 22, 2024, our shareholders authorized the purchase of up to Ps. 34,000 million of our common stock during the fiscal year 2024, amount which did not exceed the total balance of the Company's net income, including retained earnings, as of such date.
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C. Ownership Structure
We conduct our business through our principal subsidiary companies as shown in the following diagram and table:
Ownership Structure of Significant Subsidiaries as of December 31, 2023

(1)Compañía Internacional de Bebidas, S.A. de C.V., which we refer to as "CIBSA".
(2)Percentage of issued and outstanding capital stock owned by CIBSA (56% of Coca-Cola FEMSA’s capital stock with full voting rights). See “Item 4. Information on the Company—Coca-Cola FEMSA—Capital Stock.”
(3)Includes Proximity Americas Division, the Health Division and the Fuel Division. See “Item 4. Information on the Company.”
(4)Grupo Industrial Emprex, S. de R.L. de C.V., which we refer to as “Emprex.”
Significant Subsidiaries
The following table sets forth our significant subsidiaries as of December 31, 2023:

Name of Company |  | Jurisdiction of Establishment |  | Percentage Owned |
CIBSA: |  | Mexico |  | 100.0 | %
Coca-Cola FEMSA |  | Mexico |  | 47.2 | %
Emprex (1): |  | Mexico |  | 100.0 | %
FEMSA Comercio |  | Mexico |  | 100.0 | %

(1) Grupo Industrial Emprex, S. de R.L. de C.V.
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The following table presents an overview of our operations by relevant reportable segment and by geographic area:
Operations by Segment—Overview
Year Ended December 31, 2023 and % of growth (decrease) vs. previous year

| Coca-Cola FEMSA |  | Proximity Americas Division |  | Proximity Europe Division |  | Fuel Division |  | Health Division |  | Discontinued operations |  | Others & Consolidation Adjustments
| (in millions of Mexican pesos, except for employees and percentages)
Total revenues | Ps. | 245,088 | 8 | % |  | Ps. | 278,520 | 19 | % |  | Ps. | 43,552 | 344 | % |  | Ps. | 58,499 | 13 | % |  | Ps. | 75,358 | 1 | % |  | Ps. | — | — | % |  | Ps. | 1,675 | — | %
Gross profit | 110,860 | 11 | % |  | 117,062 | 20 | % |  | 18,622 | 305 | % |  | 7,344 | 12 | % |  | 22,499 | 2 | % |  | — | — | % |  | 3,120 | (70) | %
Total assets | 273,512 | (2) | % |  | 176,836 | 22 | % |  | 39,833 | 3 | % |  | 25,124 | 4 | % |  | 64,888 | 7 | % |  | 25,819 | (86) | % |  | 199,844 | 171 | %
Employees | 117,364 | 21 | % |  | 185,905 | 10 | % |  | 6,234 | 24 | % |  | 6,398 | (1) | % |  | 33,705 | 3 | % |  | 24,583 | (10) | % |  | 18,743 | 13 | %

Total Revenues Summary by Segment

|  | Year Ended December 31,
|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
|  | (in millions of Mexican pesos)
Coca-Cola FEMSA |  | Ps. | 245,088 |  | Ps. | 226,740 |  | Ps. | 194,804
Proximity Americas Division |  |  | 278,520 |  |  | 233,958 |  |  | 198,586
Proximity Europe Division |  |  | 43,552 |  |  | 9,809 |  |  | —
Health Division |  |  | 75,358 |  |  | 74,800 |  |  | 73,027
Fuel Division |  |  | 58,499 |  |  | 51,813 |  |  | 39,922
Other Businesses |  |  | 56,875 |  |  | 21,280 |  |  | 19,365
Consolidation adjustments |  |  | (55,200) |  |  | (21,392) |  |  | (20,244)
Consolidated total revenues |  | Ps. | 702,692 |  | Ps. | 597,008 |  | Ps. | 505,460

Business Strategy
Our objective is to generate economic and social value through our business units. We generate economic value by designing, building and scaling mass business models, which enables us to meet our customers’ daily needs in a distinguished and efficient manner. We generate social value by contributing to the improvement of the communities we serve through our actions, the comprehensive development of our employees, and the value proposals that generate well-being.
Everything we do across our three core businesses — retail, beverages and digital — is motivated and inspired by our commitments to our people, our community and our planet, underscored by strong governance practices. Our strategic framework is comprised of six priorities:
•Continued growth: We work to achieve balanced and sustainable growth by capitalizing on new and existing opportunities to create value within our core businesses. We have also increased our capabilities to operate and succeed in other geographic regions by improving management skills to obtain a precise understanding of local consumer needs. Going forward, we intend to use those capabilities to accelerate our expansion and maximize our value creation potential, focusing on our core businesses: retail, beverages and digital.
•Going digital: We are harnessing the power of technology to increase our businesses' efficiency while also exploring new business opportunities through Digital@FEMSA. We are leveraging the competitive advantages and strong market position of our businesses to build innovative digital businesses in the financial services industry to address the financial needs of our customers and business partners, with an efficient and comprehensive value proposition. Additionally, we are developing and growing digitally-enabled loyalty initiatives leveraged on strategic partnerships and our businesses.
•Think Global: Our mindset is global. We believe that the competencies that our businesses have developed can be replicated in other geographic regions. This underlying principle guides our consolidation and growth efforts, which have led to our current footprint. We currently operate in Mexico, Central America, South
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America, Europe and in the United States, including some of the most populous metropolitan areas in Latin America. Our global presence provides us with opportunities to create value through an improved ability to execute our strategies in complex and developed markets.
•Rooted Sustainability: Sustainability is embedded in everything we do and it is central to the way we do business. Our strategic sustainability framework is composed of three pillars, supported by corporate governance best practices:
◦Our People: Our people’s well-being, dignified work and professional growth
◦Our Community: Development and well-being within the communities where we operate
◦Our Planet: Harmony with the environment and sustainable use of natural resources
•Talent & Culture: Our people are integral to our business and their well-being is our highest priority. Our organizational culture is evolving, and we are finding new ways of working together collaboratively. We prioritize diversity, equity and inclusion within our corporate culture and hiring practices, including promoting the labor inclusion of minority groups and those in vulnerable situations.
•Proactive Engagement with our Audiences: We aim to facilitate open, clear, proactive, transparent and tailored dialogues with all of our stakeholders, using accessible tools and mediums of engagement. This is essential to understanding internal and external expectations and concerns so we can respond accordingly, and, in turn, strengthen our levels of credibility and trust, more easily navigate challenges, identify new opportunities, and ultimately drive continuous improvement across our business.
Moreover, we are convinced that a robust corporate governance is vital to the responsible management and operation of our business, ensuring the accountability and alignment with our stakeholders to create long-term value through strong economic and social performance. Our governance structure is the foundation for our value creation. We aim to have the right leaders, teams, tools, policies and feedback mechanisms in place across the organization, with tiered levels of accountability. Our Board of Directors is responsible for establishing the company’s corporate strategy, and is supported by its committees that are focused on driving sustainable stakeholder value growth.
Coca-Cola FEMSA
Overview
Coca-Cola FEMSA is leader in the beverage market in most of the countries where it operates, being the largest franchise bottler of Coca-Cola trademark products in the world by sales volume, based on publicly available filings and information of its main competitors. In 2023, its sales volume represented approximately 12.2% of the total sales volume of the Coca-Cola system in the world. Coca-Cola FEMSA produces and distributes Coca-Cola trademark beverages, offering a wide portfolio of brands to approximately 272 million consumers each day. With more than 86,000 employees, it markets and sells approximately 4.0 million unit cases per year through more than 2.1 million points of sale. Coca-Cola FEMSA operates 56 bottling plants and 251 distribution centers. It is committed to generating economic, social and environmental value for all of its stakeholders throughout the value chain. Coca-Cola FEMSA is a member of the Dow Jones MILA Pacific Alliance Sustainability Index, FTSE4Good Emerging Index, the IPC and Social Responsibility and Sustainability Indexes of the BMV, among others.
Coca-Cola FEMSA operates in territories in the following countries:
•Mexico—a substantial portion of central Mexico, the southeast and northeast of Mexico.
•Guatemala.
•Nicaragua.
•Costa Rica.
•Panama.
•Colombia—most of the country.
•Brazil—a major part of the states of São Paulo and Minas Gerais, the states of Parana, Santa Catarina, Mato Grosso do Sul and Rio Grande do Sul and part of the states of Rio de Janeiro and Goias.
•Argentina—Buenos Aires and surrounding areas.
•Uruguay.
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Coca-Cola FEMSA also operates in Venezuela through its investment in Coca-Cola FEMSA de Venezuela, S.A., or KOF Venezuela.
Coca-Cola FEMSA was organized on October 30, 1991 as a stock corporation with variable capital (sociedad anónima de capital variable) under the laws of Mexico for a term of 99 years. On December 5, 2006, as required by amendments to the Mexican Exchange Market Law, Coca-Cola FEMSA became a publicly traded stock corporation with variable capital (sociedad anónima bursátil de capital variable). Coca-Cola FEMSA’s legal name is Coca-Cola FEMSA, S.A.B. de C.V. Coca-Cola FEMSA’s principal executive offices are located at Calle Mario Pani No. 100, Colonia Santa Fe Cuajimalpa, Alcaldía Cuajimalpa de Morelos, 05348, Mexico City, Mexico. Coca-Cola FEMSA’s telephone number at this location is (52-55) 1519-5000. Coca-Cola FEMSA's website is www.coca-colafemsa.com.
The following is an overview of Coca-Cola FEMSA’s operations by consolidated reporting segment in 2023.
Operations by Consolidated Reporting Segment—Overview Year Ended December 31, 2023

|  | Total Revenues |  | Gross Profit |
|  | (in millions of Mexican pesos) |
Mexico and Central America (1) |  | Ps. | 149,362 |  | 60.9 |  | % | Ps. | 71,665 |  | 64.6 |  | %
South America (2) |  |  | 95,726 |  | 39.1 |  | % |  | 39,195 |  | 35.4 |  | %
Consolidated |  |  | 245,088 |  |  |  |  | 110,860 |  |  |

(1)Includes Mexico, Guatemala, Nicaragua, Costa Rica and Panama.
(2)Includes Colombia, Brazil, Argentina and Uruguay.
Capital Stock
On April 11, 2019, Coca-Cola FEMSA completed an eight-for-one stock split, whereby (a) for each Series A share, holders of Series A shares received eight new Series A shares, (b) for each Series D share, holders of Series D shares received eight new Series D shares and (c) for each Series L share, holders of Series L shares received one unit (each consisting of 3 Series B shares (with full voting rights) and 5 Series L shares (with limited voting rights)). Effective on April 11, 2019, Coca-Cola FEMSA’s units were listed for trading on the Mexican Stock Exchange and ADSs, each representing 10 units, were listed for trading on the NYSE.
As of the date of this annual report, (1) FEMSA indirectly owned Series A shares equal to 47.2% of Coca-Cola FEMSA’s capital stock (56.0% of Coca-Cola FEMSA’s capital stock with full voting rights), and (2) TCCC indirectly owned Series D shares equal to 27.8% of Coca-Cola FEMSA’s capital stock (32.9% of Coca-Cola FEMSA’s capital stock with full voting rights). Series L shares with limited voting rights constituted 15.6% of Coca-Cola FEMSA’s
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capital stock, and Series B shares constituted the remaining 9.4% of Coca-Cola FEMSA’s capital stock (the remaining 11.1% of Coca-Cola FEMSA’s capital stock with full voting rights).
Business Strategy
Coca-Cola FEMSA is transforming our company by focusing on implementing a long-term sustainable growth model. Coca-Cola FEMSA’s purpose is to refresh the world anytime, anywhere. Coca-Cola FEMSA’s vision evolved during 2023 to emphasize their commitment to their customers, and sustainable development. To this end, Coca-Cola FEMSA’s refreshed vision is to be the customers’ and partners’ preferred commercial platform and ally for growth, fostering a sustainable future.
Coca-Cola FEMSA has strengthened their longstanding relationship with TCCC by together updating and enhancing the following main objectives: (i) growth principles, (ii) relationship economics, (iii) potential new businesses and ventures and (iv) digital strategy.
To consolidate Coca-Cola FEMSA’s position as a global leader in the industry and strengthen their value proposition for their retail clients and end consumers, Coca-Cola FEMSA is leveraging their strengths, their rights-to-win, and working on the following six strategic priorities as their guiding principles: (i) grow the core, (ii) be the preferred commercial platform, (iii) strategic M&A (iv) de-bottleneck our infrastructure & digitize the enterprise, (v) strengthen our customer-centric culture and (vi) foster a sustainable future.
(i)Grow the core. More runway to grow Coca-Cola FEMSA’s core business by a focus on capturing growth opportunities for the Coca-Cola portfolio across markets and channels; accelerating the growth of Coca-Cola Zero Sugar across our territories; developing growth opportunities in low per-capita markets; and accelerating growth of profitable noncarbonated beverage categories.
(ii)Be the preferred commercial platform. Aim to continue growing Coca-Cola FEMSA’s total and digital client base across our markets with our omnichannel commercial platform Juntos+, leveraging a curated portfolio of brands together with The Coca-Cola Company and a multi-category portfolio.
(iii)Strategic M&A. Pursue value-enhancing acquisitions, leveraging a disciplined approach.
(iv)De-bottleneck our infrastructure and digitize the enterprise. Aim to increase manufacturing and distribution capacity, while implementing best-in-class logistics and distribution enablers.
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(v)Strengthen our customer-centric culture. Aim to promote a growth mindset, building a multiplier leadership style, empowering leaders to develop our people, and foster a workplace that provides psychological safety within our teams.
(vi)Foster a sustainable future. Aim not only to reinforce Coca-Cola FEMSA’s environmental initiatives, but also to bolster our social and governance agenda, including community development programs and diversity and inclusion.
Coca-Cola FEMSA’s view on sustainable development is a comprehensive part of their business strategy. Coca-Cola FEMSA bases their efforts on three aspects (i) Ethics and Governance, (ii) Human Rights, Diversity, Equity and Inclusion, and (iii) Culture, while focusing on seven pillars: (i) Water stewardship, (ii) World Without Waste, (iii) Climate action, (iv) Product portfolio, (v) Sustainable sourcing, (vi) Integral Employee Well-being, (vii) Community Development.
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Coca-Cola FEMSA’s Territories
The following map shows Coca-Cola FEMSA’s territories, giving estimates in each case of the population to which Coca-Cola FEMSA offers products and the number of retailers carrying its beverages as of December 31, 2023:
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Coca-Cola FEMSA’s Products
Coca-Cola FEMSA produces, markets, sells and distributes mainly TCCC trademark beverage portfolio. These include sparkling beverages (colas and flavored sparkling beverages), waters and other non-carbonated beverages (including juice drinks, coffee, teas, milk, value-added dairy, sports drinks, energy drinks, certain alcoholic beverages, such as Topo Chico hard seltzer and plant-based drinks).
In addition, through certain distribution agreements, Coca-Cola FEMSA distributes and sells Monster products in all the countries where it operates and Heineken-owned brand beer products, Estrella Galicia beer products, Therezópolis beer products, Campari alcoholic beverages and Perfetti confectionary and chewing gum in its Brazilian territories.
Since 2021, Coca-Cola FEMSA has been testing distributing alcoholic beverages and consumer products in some of its territories. From its ongoing tests, Coca-Cola FEMSA has been learning new shopper and consumption trends, and gathering necessary insights to strengthen its value proposition for retailers and consumers in the market. This has allowed Coca-Cola FEMSA to complement its reach and joint consumer value proposition and provide its partners with a unique edge to communicate with target consumers. As these are ongoing tests, further details will be provided in due course.
The following table sets forth the trademarks of the main products Coca-Cola FEMSA distributed in 2023:
Colas:
Coca-Cola
Coca-Cola Sin Azúcar
Coca-Cola Light

Flavored Sparkling Beverages: |  |
Crush | Kuat | Schweppes
Fanta | Mundet | Sprite
Fresca | Quatro | Yoli

Still Beverages: |  |  |
AdeS | Fuze Tea | Leão |
Cepita | Hi-C | Monster | Santa Clara
Del Valle | Kapo | Powerade | Valle Frut

Water: |  |  |
Alpina | Brisa | Dasani | Shangri-la
Aquarius | Ciel | Manantial | Topo Chico
Bonaqua | Crystal | Kin | Vitale

Packaging
Coca-Cola FEMSA produces, markets, sells and distributes Coca-Cola trademark beverages in each of its territories in containers authorized by TCCC, which consist primarily of a variety of returnable and non-returnable presentations in the form of glass bottles, cans and plastic bottles mainly made of PET resin. Coca-Cola FEMSA uses the term presentation to refer to the packaging unit in which Coca-Cola FEMSA sells its products. Presentation sizes for Coca-Cola FEMSA’s Coca-Cola trademark beverages range from a 6.5-ounce personal size to a 3-liter multiple serving size. For all of Coca-Cola FEMSA’s products excluding water, Coca-Cola FEMSA considers a multiple serving size as equal to, or larger than, 1.0 liter. In general, personal sizes have a higher price per unit case as compared to multiple serving sizes. Coca-Cola FEMSA offers both returnable and non-returnable presentations, which allow it to offer portfolio alternatives based on convenience and affordability to implement sales strategies and to target specific distribution channels and population segments in its territories. In addition, Coca-Cola FEMSA sells some Coca-Cola trademark beverage syrups in containers designed for soda fountain use, which Coca-Cola FEMSA refers to as fountain. Coca-Cola FEMSA also sells bottled water products in bulk sizes, which refer to presentations equal to or larger than 5.0 liters and up to 20.0 liters, which have a much lower average price per unit case than its other beverage products.
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In addition, Coca-Cola FEMSA informs their consumers through front labeling on the nutrient composition and caloric content of their beverages in accordance with local laws and regulations. Coca-Cola FEMSA voluntarily adheres to national and international codes of conduct in advertising and marketing, including communications targeted to minors who are developed based on the Responsible Marketing policies and Global School Beverage Guidelines of The Coca-Cola Company, achieving full compliance with all such codes, regulations and guidelines in all of the countries where Coca-Cola FEMSA operates.
Sales Volume and Transactions Overview
Coca-Cola FEMSA measures total sales volume in terms of unit cases and number of transactions. “Unit case” refers to 192 ounces of finished beverage product (24 eight-ounce servings) and, when applied to soda fountains, refers to the volume of syrup, powders and concentrate that is required to produce 192 ounces of finished beverage product. “Transactions” refers to the number of single units (e.g. a can or a bottle) sold, regardless of their size or volume or whether they are sold individually or in multipacks, except for fountain which represents multiple transactions based on a standard 12 ounce serving.
Except when specifically indicated, “sales volume” in this annual report refers to sales volume in terms of unit cases.
Coca-Cola FEMSA’s most important brand, Coca-Cola, together with its line of low-calorie products, accounted for 60.2%, 61.2%, and 62.6% of Coca-Cola FEMSA’s total sales volume in 2023, 2022 and 2021, respectively.
The following table illustrates historical sales volume and number of transactions for each of Coca-Cola FEMSA’s consolidated reporting segments, as well as its unit case and transaction mix by category.

|  | Sales Volume |  | Transactions |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
|  | (Millions of unit cases or millions of single units, except percentages) |
Mexico |  | 2,052.9 |  |  | 1,888.9 |  |  | 9,729.0 |  |  | 9,276.4 |  |
Central America (1) |  | 341.9 |  |  | 299.5 |  |  | 2,615.9 |  |  | 2,356.8 |  |
Mexico & Central America |  | 2,394.8 |  |  | 2,188.4 |  |  | 12,344.9 |  |  | 11,633.2 |  |
Growth |  | 9.4 |  | % | 6.3 |  | % | 6.1 |  | % | 9.6 |  | %
Colombia |  | 347.6 |  |  | 330.1 |  |  | 2,656.5 |  |  | 2,503.7 |  |
Brazil (2) |  | 1,075.1 |  |  | 1,016.2 |  |  | 7,523.9 |  |  | 7,014.5 |  |
Argentina |  | 178.7 |  |  | 173.9 |  |  | 974.4 |  |  | 939.5 |  |
Uruguay |  | 51.7 |  |  | 46.6 |  |  | 243.9 |  |  | 224.2 |  |
South America |  | 1,653.1 |  |  | 1,566.8 |  |  | 11,398.3 |  |  | 10,681.9 |  |
Growth |  | 5.5 |  | % | 11.9 |  | % | 6.7 |  | % | 20.3 |  | %
Total |  | 4,047.8 |  |  | 3,755.2 |  |  | 23,743.2 |  |  | 22,315.1 |  |
Growth |  | 7.8 |  | % | 8.6 |  | % | 6.4 |  | % | 14.5 |  | %

(1)Includes sales volume and transactions from Guatemala, Nicaragua, Costa Rica and Panama.
(2)Excludes beer sales volume and transactions.
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The following table illustrates the multiple serving presentations and returnable packaging mix for sparkling beverages volume:

|  | Multiple Serving Presentations |  | Returnable packaging |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Mexico |  | 69.0 |  | % | 69.1 |  | % | 38.3 |  | % | 43.4 |  | %
Central America (1) |  | 61.3 |  | % | 55.2 |  | % | 36.0 |  | % | 31.3 |  | %
Colombia |  | 70.4 |  | % | 60.1 |  | % | 26.5 |  | % | 20.0 |  | %
Brazil (2) |  | 75.7 |  | % | 67.0 |  | % | 18.3 |  | % | 15.7 |  | %
Argentina |  | 80.1 |  | % | 76.5 |  | % | 20.7 |  | % | 17.3 |  | %
Uruguay |  | 81.3 |  | % | 81.0 |  | % | 20.1 |  | % | 17.0 |  | %
Total |  | 71.0 |  | % | 66.7 |  | % | 30.1 |  | % | 31.5 |  | %

(1)Includes sales volume and transactions from Guatemala, Nicaragua, Costa Rica and Panama.
(2)Excludes beer sales volume and transactions.
The following table illustrates Coca-Cola FEMSA’s historical sales volume and number of transactions performance by category for each of its operations and its consolidated reporting segments for 2023 as compared to 2022:

|  | Year Ended December 31, 2023 |
|  | Sparkling |  | Stills |  | Water |  | Bulk Water |  | Total |
Sales Volume Growth |  |  |  |  |  |  |  |  |  |  |
Mexico |  | 4.4 |  | % | 8.0 |  | % | 16.6 |  | % | 25.3 |  | % | 8.7 |  | %
Central America (1) |  | 14.0 |  | % | 6.0 |  | % | 22.7 |  | % | 287.6 |  | % | 14.2 |  | %
Mexico and Central America |  | 6.0 |  | % | 7.6 |  | % | 17.2 |  | % | 25.9 |  | % | 9.4 |  | %
Colombia |  | 4.0 |  | % | 2.3 |  | % | 15.5 |  | % | 11.5 |  | % | 5.3 |  | %
Brazil (2) (3) |  | 5.6 |  | % | 3.4 |  | % | 13.1 |  | % | (4.6) |  | % | 5.8 |  | %
Argentina |  | (3.1) |  | % | 14.8 |  | % | 31.1 |  | % | 50.7 |  | % | 2.7 |  | %
Uruguay |  | 3.3 |  | % | 46.2 |  | % | 52.4 |  | % | — |  |  | 10.9 |  | %
South America (3) |  | 4.3 |  | % | 5.0 |  | % | 18.0 |  | % | 10.7 |  | % | 5.5 |  | %
Total |  | 5.2 |  | % | 6.5 |  | % | 17.6 |  | % | 24.6 |  | % | 7.8 |  | %

(1)Includes sales volume and transactions from Guatemala, Nicaragua, Costa Rica and Panama.
(2)Excludes beer sales volume and transactions.
(3)Includes sales volume and transactions of CVI from February 2022.

|  | Year Ended December 31, 2023 |
|  | Sparkling |  | Stills |  | Water |  | Bulk |  | Total |
Number of Transactions Growth |  |  |  |  |  |  |  |  |  |  |
Mexico |  | 3.5 |  | % | 6.2 |  | % | 17.2 |  | % | — |  | 4.9 |  | %
Central America (1) |  | 11.7 |  | % | 2.2 |  | % | 27.4 |  | % | — |  | 11.0 |  | %
Mexico and Central America |  | 5.2 |  | % | 5.2 |  | % | 18.2 |  | % | — |  | 6.1 |  | %
Colombia |  | 5.9 |  | % | (1.8) |  | % | 13.9 |  | % | — |  | 6.1 |  | %
Brazil (2) (3) |  | 7.5 |  | % | 2.8 |  | % | 12.6 |  | % | — |  | 7.3 |  | %
Argentina |  | (3.3) |  | % | 22.4 |  | % | 30.2 |  | % | — |  | 3.7 |  | %
Uruguay |  | 1.8 |  | % | 38.8 |  | % | 45.9 |  | % | — |  | 8.6 |  | %
South America (3) |  | 6.1 |  | % | 3.9 |  | % | 15.5 |  | % | — |  | 6.7 |  | %
Total |  | 5.6 |  | % | 4.5 |  | % | 16.7 |  | % | — |  | 6.4 |  | %

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(1)Includes sales volume and transactions from Guatemala, Nicaragua, Costa Rica and Panama.
(2)Excludes beer sales volume and transactions.
(3)Includes sales volume and transactions of CVI from February 2022.
The following table illustrates Coca-Cola FEMSA’s unit case mix by category for each of its operations and its consolidated reporting segments for 2023 as compared to 2022:

|  | Sparkling Beverages |  | Stills |  | Water(3) |
|  | Years Ended December 31, |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Unit Case Mix by Category |  |  |  |  |  |  |  |  |  |  |  |  |
Mexico |  | 68.6 | % | 71.4 | % | 7.1 |  | % | 7.2 |  | % | 24.3 |  | % | 21.4 |  | %
Central America (1) |  | 86.0 | % | 86.1 | % | 9.2 |  | % | 9.9 |  | % | 4.8 | % | 4.0 | %
Mexico and Central America |  | 71.1 | % | 73.4 | % | 7.4 |  | % | 7.5 |  | % | 21.5 |  | % | 19.1 |  | %
Colombia |  | 76.2 | % | 77.1 | % | 8.5 |  | % | 8.8 |  | % | 15.3 | % | 14.1 | %
Brazil (2) |  | 83.9 | % | 84.1 | % | 8.1 |  | % | 8.3 |  | % | 7.9 |  | % | 7.6 |  | %
Argentina |  | 75.6 | % | 80.2 | % | 9.4 |  | % | 8.4 |  | % | 15.0 |  | % | 11.4 |  | %
Uruguay |  | 78.5 | % | 84.2 | % | 4.6 |  | % | 3.5 |  | % | 16.9 |  | % | 12.3 |  | %
South America (4) |  | 81.2 | % | 82.2 | % | 8.2 |  | % | 8.3 |  | % | 10.5 |  | % | 9.5 |  | %
Total |  | 75.2 | % | 77.1 | % | 7.7 | % | 7.8 | % | 17.0 |  | % | 15.1 |  | %

(1)Includes sales volume and transactions from Guatemala, Nicaragua, Costa Rica and Panama.
(2)Excludes beer sales volume and transactions.
(3)Includes bulk water volume and transactions.
(4)Includes sales volume and transactions from CVI from February 2022.
Seasonality
Sales of Coca-Cola FEMSA’s products are seasonal in all the countries where it operates, as Coca-Cola FEMSA’s sales volumes generally increase during the summer of each country and during the year-end holiday season. In Mexico, Central America and Colombia, Coca-Cola FEMSA typically achieves its highest sales during the months of April through August as well as during the year-end holidays in December. In Brazil, Uruguay and Argentina, Coca-Cola FEMSA’s highest sales levels occur during the summer months of October through March, including the year-end holidays in December.
Marketing
Coca-Cola FEMSA, in conjunction with TCCC, has developed a marketing strategy to promote the sale and consumption of Coca-Cola FEMSA’s products. Coca-Cola FEMSA relies extensively on advertising, sales promotions and retailer support programs to target the particular preferences of its consumers. Coca-Cola FEMSA's consolidated marketing expenses in 2023 were Ps. 4,691 million.
Retailer Support Programs. Support programs include providing retailers with point-of-sale display materials and consumer sales promotions, such as contests, sweepstakes and the giveaway of product samples.
Coolers. Coolers play an integral role in Coca-Cola FEMSA’s clients’ plans for success. Increasing both cooler coverage and the number of cooler doors among Coca-Cola FEMSA’s retailers is important to ensure that its wide variety of products are properly displayed, while strengthening its merchandising capacity in its distribution channels to significantly improve its point-of-sale execution.
Advertising. Coca-Cola FEMSA advertises in all major communications media. Coca-Cola FEMSA focuses its advertising efforts on increasing brand recognition by consumers and improving its customer relations. National advertising campaigns are designed and proposed by TCCC’s local affiliates in the countries where Coca-Cola FEMSA operates, with its input at the local or regional level. Point-of-sale merchandising and advertising efforts are proposed and implemented by Coca-Cola FEMSA, with a focus on increasing its connection with customers and consumers.
Marketing in Coca-Cola FEMSA’s Distribution Channels. In order to provide more dynamic and specialized marketing of its products, Coca-Cola FEMSA’s strategy is to classify its markets and develop targeted efforts for each consumer segment or distribution channel. Coca-Cola FEMSA’s principal channels are small retailers, “on-
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premise” accounts, such as restaurants and bars, supermarkets and third-party distributors. Presence in these channels entails a comprehensive and detailed analysis of the purchasing patterns and preferences of various groups of beverage consumers in each of the different types of locations or distribution channels. In response to this analysis, Coca-Cola FEMSA tailors its product, price, packaging and distribution strategies to meet the particular needs of and exploit the potential of each channel.
Multi-Segmentation. Coca-Cola FEMSA has implemented a multi-segmentation strategy in all of its markets. These strategies consist of the definition of a strategic market cluster or group and the implementation and assignment of different product/price/package portfolios and service models to such market cluster or group. These clusters are defined based on consumption occasion, competitive environment, income level, and types of distribution channels.
Product Sales and Distribution
The following table provides an overview of Coca-Cola FEMSA’s distribution centers and the retailers to which Coca-Cola FEMSA sold its products:

|  | As of December 31, 2023
|  | Mexico and |  |
|  | Central America(1)(3) |  | South America(2)
Distribution centers |  | 173 |  |  | 79
Retailers |  | 1,097,318 |  | 1,056,722

(1)Includes Mexico, Guatemala, Nicaragua, Costa Rica and Panama.
(2)Includes Colombia, Brazil, Argentina and Uruguay.
(3)For purposes of this table, Coca-Cola FEMSA has considered owned and third-party distribution centers managed by Coca-Cola FEMSA.
Coca-Cola FEMSA continuously evaluates its distribution model in order to fit with the local dynamics of the marketplace and analyze the way it goes to market, recognizing different service needs from its customers, while looking for more efficient distribution models. As part of this strategy, Coca-Cola FEMSA is rolling out a variety of new distribution models throughout its territories looking for improvements in its distribution network.
Coca-Cola FEMSA uses several sales and distribution models depending on market, geographic conditions and the customer’s profile: (i) the pre-sale system, which separates the sales and delivery functions, permitting trucks to be loaded with the mix of products that retailers have previously ordered, thereby increasing both sales and distribution efficiency; (ii) the conventional truck route system, in which the person in charge of the delivery makes immediate sales from inventory available on the truck; (iii) sales through digital platforms to access technologically enabled customers; (iv) the telemarketing system, which could be combined with pre-sales visits; and (v) sales through third-party wholesalers and other distributors of Coca-Cola FEMSA’s products.
As part of the pre-sale system, sales personnel also provide merchandising services during retailer visits, which Coca-Cola FEMSA believes enhance the shopper experience at the point-of-sale. Coca-Cola FEMSA believes that an adequate number of service visits to retailers and frequency of deliveries are essential elements in an effective selling and distribution system of its products.
Coca-Cola FEMSA continues to reinforce its presence in its digital sales channels, such as food aggregators, digital platforms, e-commerce websites and mobile device applications, in an effort to address the growing demand from its business partners through such sales channels. This reinforcement is aligned with Coca-Cola FEMSA’s overall digitization and omnichannel strategies.
In 2023, no single customer accounted for more than 10.0% of Coca-Cola FEMSA’s consolidated total sales.
Coca-Cola FEMSA’s distribution centers range from large warehousing facilities to small cross-docking facilities. In addition to its fleet of trucks, Coca-Cola FEMSA distributes its products in certain locations through electric carts and hand-trucks in order to comply with local environmental and traffic regulations. In some of its territories, Coca-Cola FEMSA relies on third parties to transport its finished products from its bottling plants to its distribution centers and, in some cases, directly to its customers.
Mexico. From the distribution centers, Coca-Cola FEMSA distributes its finished products to retailers mainly through its own fleet of trucks. In designated areas in Mexico, third-party distributors deliver Coca-Cola FEMSA’s products to retailers and consumers, allowing Coca-Cola FEMSA to access these areas on a cost-effective basis.
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In Mexico, Coca-Cola FEMSA sells a majority of its beverages through its traditional distribution channel, which consists of sales at small retail stores to consumers who may take the beverages for consumption at home or elsewhere. Coca-Cola FEMSA also sells products through modern distribution channels, the “on-premise” consumption segment, home delivery routes, supermarkets and other locations. Modern distribution channels include large and organized chain retail outlets such as wholesale supermarkets, discount stores and convenience stores that sell fast-moving consumer goods, where retailers can buy large volumes of products from various producers. The “on-premise” consumption segment consists of sales through points-of-sale where products are consumed at the establishment from which they were purchased. This includes retailers such as restaurants and bars as well as stadiums, auditoriums and theaters.
Brazil. In Brazil, Coca-Cola FEMSA distributes its finished products to retailers through a combination of its own fleet of trucks and third-party distributors, while maintaining control over the selling activities. In designated zones in Brazil, third-party distributors purchase Coca-Cola FEMSA’s products and resell them to retailers. In Brazil, Coca-Cola FEMSA sells a majority of its beverages at small retail stores. Coca-Cola FEMSA also sells products through modern distribution channels and “on-premise” consumption. Modern distribution channels in Brazil include large and organized chain retail outlets such as wholesale supermarkets and discount stores that sell fast-moving consumer goods.
Territories other than Mexico and Brazil. Coca-Cola FEMSA distributes its finished products to retailers through a combination of its own fleet of trucks and third-party distributors. In most of Coca-Cola FEMSA’s territories, an important part of its total sales volume is sold through small retailers.
Principal Competitors
Coca-Cola FEMSA’s principal competitors are local Pepsi bottlers and other bottlers and distributors of local beverage brands. Coca-Cola FEMSA also faces competition in many of its territories from producers of low-price beverages, commonly referred to as “B brands.” A number of Coca-Cola FEMSA’s competitors in Central America, Brazil, Argentina and Colombia offer beer in addition to sparkling beverages, still beverages and water, which may enable them to achieve distribution efficiencies that other competitors who do not offer an integrated portfolio may not be able to achieve.
While competitive conditions are different in each of its territories, Coca-Cola FEMSA competes mainly in terms of price, packaging, effective promotional activities, access to retail outlets and sufficient shelf space, customer service, product innovation and product alternatives and the ability to identify and satisfy consumer preferences. Coca-Cola FEMSA competes by seeking to offer products at an attractive price in the different segments in its markets and by building on the value of its brands. Coca-Cola FEMSA believes that the introduction of new products and new presentations has been a significant competitive advantage that allows Coca-Cola FEMSA to increase demand for its products, provide different options to consumers and increase new consumption opportunities. See “Item 4. Information on the Company—Coca-Cola FEMSA—Coca-Cola FEMSA’s Products” and “Item 4. Information on the Company—Coca-Cola FEMSA—Packaging.”
Mexico and Central America. Coca-Cola FEMSA’s principal competitors in Mexico are bottlers of Pepsi products. Coca-Cola FEMSA competes with Organización Cultiba, S.A.B. de C.V., a joint venture formed by Grupo Embotelladoras Unidas, S.A.B. de C.V., the former Pepsi bottler in central and southeast Mexico, a subsidiary of PepsiCo and Empresas Polar, S.A., a beer distributor and Pepsi bottler. Coca-Cola FEMSA’s main competition in the juice category in Mexico is Grupo Jumex. In the water category, Coca-Cola FEMSA’s main competitor is Bonafont, a water brand owned by Danone. In addition, Coca-Cola FEMSA competes with Cadbury Schweppes in sparkling beverages and with other local brands in its Mexican territories, as well as “B brand” producers, such as Ajemex, S.A. de C.V. (Big Cola bottler) and Consorcio AGA, S.A. de C.V. (Red Cola bottler), that offer various presentations of sparkling and still beverages.
In the countries that comprise Coca-Cola FEMSA’s Central America region, its main competitors are Pepsi and Big Cola bottlers. In Guatemala, Coca-Cola FEMSA competes with a joint venture between AmBev and The Central American Bottler Corporation, who also has a regional joint venture with AmBev to produce, distribute and sell beer; Cerveceria Centroamericana S.A. who is focused in beer and still categories; and AJE Group. In Nicaragua, Coca-Cola FEMSA's principal competitor is AJE Group. Coca-Cola FEMSA also competes with the joint venture between The Central American Bottler Corporation and AmBev. In Costa Rica, Coca-Cola FEMSA’s principal competitor is Florida Bebidas S.A., subsidiary of Florida Ice and Farm Co. and Cooperativa de Productores de Leche Dos Pinos R.L. in juices. In Panama, Coca-Cola FEMSA’s main competitor is Cervecería Nacional, S.A., followed by AJE Group. Coca-Cola FEMSA also faces competition from “B brands” offering multiple serving size presentations in some Central American countries.
South America. Coca-Cola FEMSA’s principal competitor in Colombia is Postobón, a local bottler (Manzana Postobón, Uva Postobón and Colombiana), still beverages (Hit Juice) and water (Crystal). Postobón sells Pepsi products and is a vertically integrated producer, the owners of which hold other significant commercial and industrial interests in
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Colombia. Coca-Cola FEMSA also competes with low-price producers, such as Ajecolombia S.A., the producers of Big Cola, which principally offer multiple serving size presentations in the sparkling and still beverage industry.
In Brazil, Coca-Cola FEMSA competes against AmBev, a company that distributes Pepsi brands, local brands with flavors such as guarana, and proprietary beer brands. Coca-Cola FEMSA also competes against “B brands” or “Tubainas,” which are small, local producers of low-cost sparkling beverages that represent a significant portion of the sparkling beverage market.
In Argentina, Coca-Cola FEMSA’s main competitor is Buenos Aires Embotellador S.A. (BAESA), a Pepsi bottler, which is owned by Argentina’s principal brewery, Quilmes Industrial S.A., and indirectly controlled by AmBev. In the water category, Levité, Villavicencio and Villa del Sur are water brands owned by Danone, which is Coca-Cola FEMSA’s main competition. In addition, Coca-Cola FEMSA competes with a number of producers offering “B brands,” low-priced sparkling beverages, as well as many other generic products and private label proprietary supermarket brands that are gaining importance in the market. Manaos, a brand owned by Refres Now S.A. is Coca-Cola FEMSA’s main competitor in this segment, followed by the brands Cunnington and Secco pursuing similar low-price strategies.
In Uruguay, Coca-Cola FEMSA’s main competitor is Salus, a water brand owned by Danone. Coca-Cola FEMSA also competes against Fábricas Nacionales de Cerveza S.A. (FNC), a Pepsi bottler and distributor that is partially owned by Argentina’s principal brewery, Quilmes Industrial S.A., and indirectly controlled by AmBev. In addition, Coca-Cola FEMSA competes with CCU Inversiones II Ltda, a water, soft drinks and brewery company and finally, with some low-priced regional producers.
Raw Materials
Pursuant to Coca-Cola FEMSA’s bottler agreements, Coca-Cola FEMSA is authorized to manufacture, sell and distribute Coca-Cola trademark beverages within specific geographic areas, and Coca-Cola FEMSA is required to purchase concentrate for all Coca-Cola trademark beverages in all of its territories from affiliates of TCCC and sweeteners and other raw materials from companies authorized by TCCC. Concentrate prices for Coca-Cola trademark beverages are determined as a percentage of the weighted average retail price in local currency net of applicable taxes. Although TCCC has the right to set the price of concentrates, in practice this percentage has historically been set pursuant to periodic negotiations with TCCC. See “Item 10. Additional Information—Material Contracts—Material Contracts Relating to Coca-Cola FEMSA—Bottler Agreements.”
Historically, TCCC has increased concentrate prices for Coca-Cola trademark beverages in some of the countries where Coca-Cola FEMSA operates. For example, TCCC recently increased concentrate prices for certain Coca-Cola trademark beverages in Mexico in 2021, 2022 and in 2023. TCCC may increase concentrate prices in the future, and we may not be successful in negotiating or implementing measures to mitigate the negative effect this may have on the prices of our products or our results. See “Item 10. Additional Information—Material Contracts—Material Contracts Relating to Coca-Cola FEMSA—Cooperation Framework with The Coca-Cola Company.”
In addition to concentrate, Coca-Cola FEMSA purchases sweeteners, carbon dioxide, PET resin and preforms to make plastic bottles, finished plastic and glass bottles, cans, caps and fountain containers, as well as other packaging materials and raw materials. Coca-Cola FEMSA’s bottler agreements provide that these materials may be purchased only from suppliers approved by TCCC. Prices for certain raw materials, including those used in the bottling of Coca-Cola FEMSA’s products, mainly PET resin, finished plastic bottles, aluminum cans, HFCS and certain sweeteners, are paid in or determined with reference to the U.S. dollar, and therefore local prices in a particular country may increase based on changes in the applicable exchange rates. Coca-Cola FEMSA’s most significant packaging raw material costs arise from the purchase of PET resin, the price of which is related to crude oil prices and global PET resin supply. The average price that Coca-Cola FEMSA paid for PET resin in U.S. dollars in 2023 increased 32.5% as compared to 2022 in all Coca-Cola FEMSA’s territories. In addition, given that high currency volatility has affected and continues to affect most of Coca-Cola FEMSA’s territories, the average price for PET resin in local currencies was higher in all of its territories. In addition, given that high currency volatility has affected and continues to affect most of its territories, the average price for PET resin in local currencies was higher in all of its territories. In 2023, Coca-Cola FEMSA purchased certain raw materials in advance, negotiated and locked-in prices in advance and entered into certain derivative transactions which helped them capture opportunities with respect to raw material costs and currency exchange rates.
Under its agreements with TCCC, Coca-Cola FEMSA may use raw or refined sugar, artificial sweeteners and HFCS in its products. Sugar prices in all of the countries where Coca-Cola FEMSA operates, other than Brazil, are subject to local regulations and other barriers to market entry that, in certain countries, often cause Coca-Cola FEMSA to pay for sugar in excess of international market prices. In recent years, international sugar prices experienced significant volatility. Across Coca-Cola FEMSA’s territories, its average price for sugar in U.S. dollars, taking into account its financial hedging activities, increased by approximately 16.4% in 2023 as compared to 2022.
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Coca-Cola FEMSA considers water as a raw material in its business. Coca-Cola FEMSA obtains water for the production of some of its natural spring water products, such as Manantial in Colombia and Crystal in Brazil, from spring water pursuant to concessions granted.
None of the materials or supplies that Coca-Cola FEMSA uses is presently in short supply, although the supply of specific materials could be adversely affected by strikes, weather conditions, governmental controls, national emergency situations, water shortages or the failure to maintain Coca-Cola FEMSA’s existing water concessions.
Mexico and Central America. In Mexico, Coca-Cola FEMSA mainly purchases PET resin from Indorama Ventures Polymers México, S. de R.L. de C.V. and DAK Resinas Americas Mexico, S.A. de C.V., which Alpla México, S.A. de C.V., known as Alpla, and Envases Universales de México, S.A.P.I. de C.V. manufacture into non-returnable plastic bottles for us. Also, Coca-Cola FEMSA has introduced into its business Asian global suppliers, such as Far Eastern New Century Corp., known as FENC, SFX – Jiangyin Xingyu New Material Co. Ltd. and Hainan Yisheng Petrochemical Co. Ltd., which support its PET resin strategy and are known as the top PET global suppliers.
Coca-Cola FEMSA purchases all of its cans from Crown Envases México, S.A. de C.V., formerly known as Fábricas de Monterrey, S.A. de C.V., and Envases Universales de México, S.A.P.I. de C.V. Coca-Cola FEMSA mainly purchases its glass bottles from Owens America, S. de R.L. de C.V., FEVISA Industrial, S.A. de C.V., known as FEVISA, and Glass & Silice, S.A. de C.V., and in 2021, Coca-Cola FEMSA introduced glass bottles from Middle East suppliers such as Saudi Arabian Glass Co. Ltd known as SAGCO.
Coca-Cola FEMSA purchases sugar from, among other suppliers, PIASA, Beta San Miguel, S.A. de C.V. or Beta San Miguel and Ingenio La Gloria, S.A., all of them sugar cane producers. As of the date of this annual report, Coca-Cola FEMSA held a 36.4% and 2.7% equity interest in PIASA and Beta San Miguel, respectively. Coca-Cola FEMSA purchases HFCS from Ingredion México, S.A. de C.V., Cargill de Mexico S.A. de C.V. and Almidones Mexicanos, S.A. de C.V., known as Almex.
Sugar prices in Mexico are subject to local regulations and other barriers to market entry that often cause Coca-Cola FEMSA to pay higher prices than those paid in the international market. As a result, prices in Mexico have no correlation to international market prices. In 2023, sugar prices in local currency in Mexico increased approximately 42.1% as compared to 2022.
In Central America, the majority of Coca-Cola FEMSA’s raw materials such as glass and non-returnable plastic bottles are purchased from several local suppliers. Coca-Cola FEMSA purchases its cans from Envases Universales Ball de Centroamérica, S.A. and Envases Universales de México, S.A.P.I. de C.V. Sugar is available from suppliers that represent several local producers. In Costa Rica, Coca-Cola FEMSA acquires plastic non-returnable bottles from Alpla C.R. S.A., and in Nicaragua Coca-Cola FEMSA acquires such plastic bottles from Alpla Nicaragua, S.A.
South America. In Colombia, Coca-Cola FEMSA uses sugar as a sweetener in all its caloric beverages, which Coca-Cola FEMSA buys from several domestic sources. Sugar prices in Colombia increased by 11.0% in U.S. dollars and increased 12.2% in local currency, as compared to 2022. Coca-Cola FEMSA purchases non-returnable plastic bottles from Amcor Rigid Plastics de Colombia, S.A. and Envases de Tocancipa S.A.S. (affiliate of Envases Universales de México, S.A.P.I. de C.V.). Coca-Cola FEMSA has historically purchased all of its non-returnable glass bottles from O-I Peldar and other global suppliers in the Middle East. Coca-Cola FEMSA purchases all of its cans from Crown Envases México, S.A. de C.V. and Crown Colombiana, S.A. Grupo Ardila Lulle (owners of Coca-Cola FEMSA’s competitor Postobón) owns a non-controlling interest in certain of Coca-Cola FEMSA’s suppliers, including O-I Peldar and Crown Colombiana, S.A.
In Brazil, Coca-Cola FEMSA also uses sugar as a sweetener in all of its caloric beverages. Sugar is available at local market prices, which historically have been similar to international prices. Sugar prices in Brazil increased approximately 17.7% in U.S. dollars and increased 13.4% in local currency as compared to 2022. Taking into account Coca-Cola FEMSA's financial hedging activities, sugar prices in Brazil increased 24.0% in U.S. dollars and 19.9% in local currency as compared to 2022. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk.” Coca-Cola FEMSA purchases non-returnable glass bottles, plastic bottles and cans from several domestic and international suppliers. Coca-Cola FEMSA mainly purchases PET resin from local suppliers such as Indorama Ventures Polímeros S.A.
In Argentina, Coca-Cola FEMSA mainly uses HFCS that it purchases from several different local suppliers as a sweetener in its products. Coca-Cola FEMSA purchases glass bottles and other raw materials from several domestic sources. Coca-Cola FEMSA purchases plastic preforms at competitive prices from Andina Empaques S.A., a local subsidiary of Embotelladora Andina, S.A., a Coca-Cola bottler with operations in Chile, Argentina, Brazil and Paraguay, Alpla Avellaneda, S.A., AMCOR Argentina, and other local suppliers.
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In Uruguay, Coca-Cola FEMSA also uses sugar as a sweetener in all of its caloric beverages, which is available at Brazil’s local market prices. Sugar prices in Uruguay increased approximately 36.7% in U.S. dollars and 13.0% in local currency as compared to 2022. Coca-Cola FEMSA’s main supplier of sugar is Nardini Agroindustrial Ltda., which is based in Brazil. Coca-Cola FEMSA purchases PET resin from several Asian suppliers, such as SFX – Jiangyin Xingyu New Material Co. Ltd. and India Reliance Industry (a joint venture with DAK Resinas Americas Mexico, S.A. de C.V.), and Coca-Cola FEMSA purchases non-returnable plastic bottles from global PET converters, such as Cristalpet S.A. (affiliate of Envases Universales de México, S.A.P.I. de C.V.).
Proximity Americas Division
Overview
Proximity Americas Division operates a chain of small-format stores with 22,866 locations as of December 31, 2023, under the trade name OXXO.
Proximity Americas Division—Overview
Year Ended December 31, 2023

|  | (in millions of Mexican pesos, except percentages) |
|  | Total Revenues |  | Gross Profit |
|  | 2023 |  | 2023 vs.2022 |  | 2023 |  | 2023 vs.2022 |
Proximity Americas Division |  | Ps. | 278,520 |  | 19.0 |  | % | Ps. | 117,062 |  | 20.0 |  | %

Business Strategy
Proximity Americas Division intends to continue increasing its store base in all of its territories while capitalizing on the retail business and market knowledge gained through its existing network of stores. Proximity Americas Division intends to open new stores in locations where it believes there is high growth potential or unsatisfied demand, while also increasing customer traffic and average ticket per customer in existing stores. Proximity Americas Division' expansion focuses on both entering new markets and strengthening its presence in Mexico, Colombia, Chile, Brazil and Peru. A fundamental element of Proximity Americas Divisions’ business strategy is to leverage its retail store formats, know-how, technology, and operational practices to continue growing in a cost-effective and profitable manner. This scalable business platform has provided a strong foundation for continued organic growth in Mexico, improving traffic and average ticket sales at our existing stores and facilitating entry into new small-format retail industries. To further increase customer traffic into Proximity Americas Division's stores, Proximity Americas Division has incorporated additional services to its value proposition in Mexico, such as utility bill payments, deposits into bank accounts held at our correspondent bank partners, remittances, payment of mobile phone fees and charges and other financial services, and it seeks to constantly increase the services it offers.
Beyond Mexico, Proximity Americas Division seeks to increase its scale while continuing its expansion in Colombia, Chile, Peru and Brazil. In Brazil, Proximity Americas Division's growth is accelerating through Raízen Conveniências, commercially known as Grupo Nós (“Grupo Nós”), our joint venture with Raízen Combustíveis S.A., which operates OXXO’s value proposition while continuing to evolve with trends, and which continues to grow its legacy format, Shell Select. As of December 31, 2023, there were 440 OXXO stores in the Campinas and Sao Paulo areas. As of the end of 2023, Grupo Nós had 1,243 franchised and 33 self-operated Shell Select locations through Raizen’s service station network.
Proximity Americas Division has developed proprietary models to assist in identifying appropriate store locations, store formats and product categories. These models utilize location-specific demographic data and Proximity Americas Division's experience in similar locations to fine-tune store formats, product price ranges and product offerings to the target market. Market segmentation is becoming an important strategic tool that is expected to allow Proximity Americas Division to improve the operating efficiency of each location, cover a wider array of consumption occasions and increase its overall profitability.
Proximity Americas Division continues to improve its information-gathering and processing systems to allow it to connect with its customers at all levels and anticipate and respond efficiently to their changing demands and preferences. Most of the products carried through OXXO stores are bar-coded, and all OXXO stores are equipped with point-of-sale systems integrated into a company-wide computer network. Proximity Americas Division created a department in charge of product category management, for products such as beverages, fast food and perishables, responsible for analyzing data gathered to better understand our customers, develop integrated marketing plans and
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allocate resources more efficiently. This department utilizes a technology platform supported by an enterprise resource planning (“ERP”) system, as well as other technological solutions such as merchandising and point-of-sale systems, which allow Proximity Americas Division to redesign and adjust its key operating processes and certain related business decisions. Our IT system also allows us to manage each store’s working capital, inventories and investments in a cost-effective way while maintaining high sales volume and store quality. Supported by continued investments in IT, our supply chain network allows us to optimize working capital requirements through inventory rotation and reduction, reducing out-of-stock days and other inventory costs.
Proximity Americas Division maintains innovative promotional strategies in order to increase store traffic and sales. In particular, OXXO stores sell high-frequency items such as beverages, snacks and cigarettes at competitive prices. Proximity Americas Division's ability to implement this strategy profitably is partly attributable to the size of the OXXO chain, and its ability to work together with its suppliers to implement sales strategies such as differentiated promotions. OXXO stores’ national and local marketing and promotional strategies are an effective revenue driver and a means of reaching new segments of the population while strengthening the OXXO brand. For example, the organization has refined its expertise in executing cross promotions (discounts on multi-packs or sales of complementary products at a special price) and targeted promotions to attract new customer segments by expanding the offerings in the grocery product category in certain stores.
Another fundamental element of Proximity Americas Division's strategy consists of leveraging Proximity Americas Division's reputation for quality and the position of the OXXO brand in the minds of its customers to expand its offering of private-label products. Proximity Americas Division's private-label products represent an alternative for value-conscious consumers, which, combined with its market position, allows Proximity Americas Division to increase sales and margins, strengthen customer loyalty and bolster its bargaining position with suppliers.
Historically, Proximity Americas Division has represented an effective distribution channel for its beverage products, as well as a rapidly-growing point of contact with its consumers. Based on the belief that location plays a major role in the long-term success of a small-format store retail operation, as well as a role in Proximity Americas Division's ability to accelerate and streamline the new store development process, Proximity Americas Division has focused on a strategy of rapid, profitable growth.
Finally, Proximity Americas Division seeks to leverage its scale, operating efficiency and customer knowledge to develop innovative value propositions to address the needs of the traditional trade channel in Mexico while simultaneously offering end customers price conscious retail formats such as "Bara."
Store Locations
Proximity Americas Division operates the largest small-format store chain in the Americas, measured by number of stores, based on publicly available filings and information of our main competitors. As of December 31, 2023, there are 21,970 OXXO stores in Mexico, 411 OXXO stores in Colombia, 343 stores in Chile and 142 stores in Peru. Proximity Americas Division expanded its operations by opening 1,408 new OXXO stores in Mexico, Colombia, Chile and Peru during 2023.
Additionally, as of December 31, 2023, Grupo Nós operated 440 OXXO stores and 33 Shell Select locations in Brazil, and managed 1,243 Shell Select stores operated by independent franchisees.
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OXXO Stores
Regional Allocation in Mexico
as of December 31, 2023
Historically, Proximity Americas Division has rapidly expanded the number of OXXO stores. During 2023 and 2022, Proximity Americas Division stabilized its organic rate of expansion after a challenging consumer and operating environment driven by the COVID-19 pandemic in 2021 and 2020. Proximity Americas Division expects to gradually increase its expansion pace and growth strategy by emphasizing growth in areas of high economic potential in existing markets and by expanding in underserved and unexploited markets, while adjusting for post-pandemic changes in consumer behavior.
OXXO Stores
Total Growth

|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021 |
Total OXXO stores |  | 22,866 |  | 21,458 |  | 20,431 |
Store growth (% change over previous year) |  | 6.6 |  | % | 5.0 |  | % | 4.4 |  | %

Most of the OXXO stores in Mexico are operated under lease agreements, which are conducted in Mexican pesos and adjusted annually to an inflation index. This approach provides Proximity Americas Division the flexibility to adjust locations as cities grow and effectively adjust its footprint based on stores’ performance.
Both the identification of locations and the pre-opening planning to optimize the results of new OXXO stores are important elements in Proximity Americas Division's growth plan. Proximity Americas Division continuously reviews store performance against certain operating and financial benchmarks to optimize the overall performance of the chain. Stores of Proximity Americas Division that are unable to maintain benchmark standards are generally closed. Between December 31, 2021 and 2023 the total number of OXXO stores increased by 2,435, which resulted from the opening of 2,608 new stores and the closing of 173 stores.
Competition
Proximity Americas Division, mainly through OXXO stores, competes in the retail market, which is highly competitive. OXXO stores face competition from small-format stores such as 7-Eleven and Circle K in Mexico, Tiendas D1, Ara and Tostao in Colombia, upa! in Chile, and Tambo Mas in Peru, as well as from other numerous retail and
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grocery chains (such as Wal-Mart, H-E-B, Soriana, La Comer and Chedraui, among others) to small informal neighborhood stores across the markets where they operate. In addition, as more services and products are offered in OXXO stores, the number and type of competitors have also increased, including banks and fast-food outlets, among others. OXXO stores compete not only for consumers and new store locations but also for human resources to operate those stores. Proximity Americas Division has more presence in Mexico than any of its competitors, with operations in every state, and it also operates in Colombia, Chile and Peru.
Additionally, OXXO competes with delivery aggregators and express delivery services such as Rappi, Uber Eats, and PedidosYa, among others.
In Brazil, Grupo Nós competes in a fragmented traditional market and with institutional convenience store operators, such as BR Distribuidora and Ipiranga, among others.
Market and Store Characteristics
Market Characteristics
Proximity Americas Division is placing increased emphasis on market segmentation and store format differentiation to more appropriately serve the needs of customers on a location-by-location basis. The principal segments include residential neighborhoods, commercial office locations and stores near schools, universities and other types of specialized locations.
In Mexico, approximately 63% of OXXO stores’ customers are between the ages of 15 and 35. Proximity Americas Division also segments the market according to demographic criteria, including income level.
OXXO Store Characteristics
The average size of an OXXO store is approximately 105 square meters of selling space, excluding space dedicated to refrigeration, storage or parking. The average constructed area of a store is approximately 193 square meters and, when parking areas are included, the average store size is approximately 411 square meters. In 2023, a typical OXXO store carried an average of 3,352 different stock keeping units (SKUs) in 30 main product categories. Additionally, a typical OXXO store offers approximately 8,000 different electronic and individual payment services, such as account deposits and cash withdrawals, including those offered by Spin by OXXO, remittances, and money transfers between stores, as well as bill payment services, such as household electricity bills, cable television, among others. These revenues are accounted for as a fee income stream in Proximity Americas Division's revenues, as Proximity is acting as an agent in these transactions.
Proximity Americas Division—Operating Indicators

|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021 |
|  | (Percentage change compared to previous year)
Total revenues |  | 19.0 |  | % | 17.8 |  | % | 9.5 | %
OXXO same-store sales(1) |  | 14.2 |  | % | 14.3 |  | % | 7.7 | %

(1)Same-store sales increase is calculated by comparing the sales of stores for each year that have been in operation for more than 12 months with the sales of those same stores during the previous year.
Beer, cigarettes, soft drinks and other beverages and snacks continue to represent the main product categories for OXXO stores. In the past, OXXO stores in Mexico only carried beer brands produced and distributed by Heineken Mexico. However, following certain modifications to the terms of our existing commercial relationship with Heineken Mexico and our commercial relationship with Grupo Modelo starting in 2019, Proximity Americas Division now sells the beer brands of Grupo Modelo across Mexico.
Approximately 23% of OXXO stores in Mexico are operated by independent managers responsible for all aspects of store operations. The store managers are commission agents and are not employees of Proximity Americas Division. Each store manager is the legal employer of the store’s staff, which typically numbers six people per store. Proximity Americas Division continually invests in on-site operating personnel, with the objective of promoting loyalty, customer service and reducing personnel turnover in the stores.
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Advertising and Promotion
Proximity Americas Division's marketing efforts for OXXO stores include both specific product promotions and image advertising campaigns. These strategies are designed to increase store traffic, increase sales and continue to promote the OXXO brand and market position.
Proximity Americas Division manages its advertising for OXXO stores on three levels depending on the nature and scope of the specific campaign: (1) local or store-specific, (2) regional and (3) national. Store-specific and regional campaigns are closely monitored to ensure consistency with the overall corporate image of OXXO stores and to avoid conflicts with national campaigns. Proximity Americas Division primarily uses point-of-purchase materials, flyers, handbills and print and radio media for promotional campaigns, although television is used occasionally for the introduction of new products and services. OXXO stores’ image and brand name are presented consistently across all stores, irrespective of location.
Inventory and Purchasing
Proximity Americas Division has placed considerable emphasis on improving operating performance. As part of these efforts, Proximity Americas Division continues to invest in extensive information management systems to improve inventory management.
Management believes that the OXXO store chain’s scale of operations provides Proximity Americas Division with a competitive advantage in its ability to realize strategic alliances with suppliers. General category offerings are determined on a national level, although purchasing decisions are implemented on a local, regional or national level, depending on the nature of the product category. In Mexico, given the fragmented nature of the retail industry in general, Mexican producers of beer, soft drinks, bread, dairy products, snacks and other high-frequency products have established proprietary distribution systems with extensive direct distribution routes. As a result, approximately 50% of the OXXO store chain’s total sales in Mexico consist of products that are delivered directly to the stores by suppliers. Other products with longer shelf lives are distributed to stores by Proximity Americas Division's Mexican distribution system, which includes 21 regional warehouses located in Guadalajara, Mexicali, Merida, Leon, Obregon, Puebla, Queretaro, Chihuahua, Reynosa, Saltillo, Tampico, Tijuana, Toluca, Veracruz, Villahermosa, Culiacan, Baja California, two in Mexico City and two in Monterrey. Additionally, there is a warehouse in each of Colombia, Chile, Peru and Brazil. Our logistics services subsidiary operates a fleet of approximately 1,054 trucks in Mexico dedicated to OXXO that make deliveries from the distribution centers to each store approximately two times per week.
Seasonality
OXXO stores in Mexico traditionally experience periods of high demand in December, as a result of the holidays, and in July and August, as a result of increased consumption of beer and soft drinks during these hot summer months. The months of November and February are generally the weakest sales months for OXXO stores. In general, the colder weather during these months reduces store traffic and cold beverage consumption overall.
Proximity Europe Division
Overview
Proximity Europe Division has two main businesses, retail and food service. As of December 31, 2023, Proximity Europe Division had 2,808 multi-format outlets in Switzerland, Germany, Austria, Luxembourg and the Netherlands, with thirteen different sales formats. Most of Proximity Europe Division's outlets are organized as franchises and agencies.
The agency model is an entrepreneurial business model. Agency partners are independently responsible for the POS operations. Valora pays a commission to the agent for running the shop and paying the staff, i.e. there is no staff for agencies on Valora’s payroll. In contrast to franchise stores, the inventory of agencies is owned by Valora and sales are recognized in Valora’s books (for franchise stores only a franchise fee is booked in Valora’s revenue).
The following is a summary of the key brands under which Proximity Europe Division is operated:
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| Brand | # of Outlets as of December 31, 2023 | Switzerland | Germany | Austria | Luxembourg | Netherlands | Predominant Model
Retail | avec | 346 | ✓ | ✓ |  |  |  | Agency
ServiceStore DB | 87 |  | ✓ |  |  |  | Owned
U-Store | 25 |  | ✓ |  |  |  | Franchise
k kiosk | 1,047 | ✓ | ✓ |  | ✓ |  | Agency
cigo | 393 |  | ✓ |  |  |  | Franchise
Press & Books | 192 | ✓ | ✓ | ✓ | ✓ |  | Owned
Total | 2,090 | ✓ | ✓ | ✓ | ✓ |  |

| Brand | # of Outlets as of December 31, 2023 | Switzerland | Germany | Austria | Luxembourg | Netherlands | Predominant Model
Food Service | BackWerk (including Back-Factory) | 406 | ✓ | ✓ | ✓ |  | ✓ | Franchise
Brezelkönig | 60 | ✓ |  | ✓ |  |  | Agency
Ditsch | 175 |  | ✓ |  |  |  | Agency
Caffé Spettacolo | 31 | ✓ |  |  | ✓ |  | Owned
Super Guud | 2 | ✓ |  |  |  |  | Owned
Frittenwerk | 44 |  | ✓ |  |  |  | Owned
Total | 718 | ✓ | ✓ | ✓ | ✓ | ✓ |

Additionally, Proximity Europe Division provides financial services on a digital platform through its fintech bob Finance and has seventeen pretzel production lines in Germany, the United States and Switzerland.
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Business Strategy
A fundamental element of Proximity Europe Division’s business strategy is to provide the best comprehensive "foodvenience" retail concepts offering in the geographies where it operates: nearby, quick, convenient and fresh products and services. Proximity Europe Division intends to move closer to its vision of having the best food and convenience concepts, focusing on five strategic pillars: (i) growth, (ii) efficiency, (iii) innovation, (iv) performance-oriented culture and (v) sustainability.
(i) Growth: Proximity Europe Division seeks to further expand its network of sales outlets, focusing on growing both its retail and food service network, leveraging its strong brand portfolio to expand in selected geographies while constantly evolving its value proposition to increase the contribution of higher-margin food categories, especially fresh products. Additionally, Proximity Europe Division aims to further expand its range of digital and other services.
(ii) Efficiency: Proximity Europe Division seeks to continue increasing its efficiency through automation, retail analytics and efficient working procedures as well as enhanced cooperation within its operations, in addition to enabling know-how transfer with Proximity Americas Division and other FEMSA businesses.
(iii) Innovation: Proximity Europe Division aims to access new income sources through innovation in order to remain competitive. Its objective is to launch fresh food and new concepts and products. It also uses new technologies to develop software-based solutions for customers, its own operations and the organization.
(iv) Performance-oriented culture: The Proximity Europe Division relies on entrepreneurial operators and motivated staff to implement its strategy. It plans to further expand the franchise and agency model.
(v) Sustainability: The Proximity Europe Division pursues a comprehensive approach to sustainability in line with FEMSA’s sustainability strategy.
Store Formats
Proximity Europe Division uses thirteen sales formats, which are principally small-scale points of sale that Proximity Europe Division seeks to locate at highly frequented locations.
Retail
k kiosk is a market leader in the convenience kiosk business, based on internal information of our main competitors; mainly supplying tobacco, lottery products, snacks and press. It also has a growing share of food, fresh products and a varied range of digital services offerings. As of December 31, 2023, k kiosk had 789 sales outlets in Switzerland, 192 sales outlets in Germany and 66 in Luxembourg, including own outlets, agencies and franchise stores.
cigo is a tobacco retailer also offering press products and a range of services for people on the move. As of December 31, 2023, cigo had 393 sales outlets in Germany, including own outlets and franchise stores.
avec provides a modern convenience format at highly frequented locations, for example train or service stations, with an extensive offering of fresh food and regional products. As of December 31, 2023, avec had 343 sales outlets in Switzerland and 3 sales outlets in Germany, including own outlets, agencies and franchise stores.
ServiceStore DB and U-Store are convenience formats located at Deutsche Bahn and U-Bahn (underground) as well as in major bus stations. As of December 31, 2023, ServiceStore DB had 87 sales outlets and U-Store had 25 sales outlets, both of them operated in Germany as own and franchise stores.
Press & Books is a market leader in the German railway station bookshop market with an extensive press and selected book offering complemented by a range of services for people on the move, including an online shop with store pick up. As of December 31, 2023, Press & Books had 21 sales outlets in Switzerland, 156 sales outlets in Germany, and 6 in Luxembourg and 9 in Austria, including own outlets and agencies.
Food Service
BackWerk (which includes Back-Factory) is Germany's largest food service bakery concept with a broad and flexible range of snacks and a growing offering of fresh products. As of December 31, 2023, BackWerk (including Back-Factory) had 1 sales outlet in Switzerland, 330 sales outlets in Germany, 20 in Austria and 55 in the Netherlands, which are mainly franchise stores.
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Ditsch provides pretzels and other snacks at highly frequented locations in Germany. Brezelkönig sells high-end lye bread products, such as pretzels, baguettes, croissants, hot dogs and selected sandwich snacks. Super Guud provides a small snacking concept for the urban commuter. As of December 31, 2023, Ditsch had 175 sales outlets in Germany, mainly in agency format; Brezelkönig had 58 sales outlets in Switzerland and 2 in Austria, in agency and franchise format; and Super Guud had 2 own sales outlets in Switzerland.
Caffè Spettacolo is an Italian-themed coffee bar concept with its own locations and an integrated coffee module concept for other Proximity Europe Division formats. As of December 31, 2023, Caffè Spettacolo had 29 sales outlets in Switzerland and 2 in Luxembourg.
Frittenwerk is a leading fast-casual dining format in Germany focusing on modern interpretations of Canada’s snack bar classic, poutine, with a fully developed self-service concept. As of December 31, 2023, Frittenwerk had 44 sales outlets in Germany, including owned outlets and franchise stores.
Proximity Europe Division is also one of the world’s leading producers of pretzels, based on internal information of our main competitors. It operates seventeen production lines in Germany, the US and Switzerland. It primarily supplies a number of third-party food service customers as well as the retail and wholesale markets in addition to its own Ditsch, BackWerk and Back-Factory sales outlets in Germany, Brezelkönig branches in Switzerland and other Proximity Europe Division formats.
Competition
Proximity Europe Division competes in the highly competitive and fragmented retail and food service markets. Competitors include small scale stores or food services operations, grocery stores and retail locations and small informal neighborhood stores in the markets where Proximity Europe Division operates. Proximity Europe Division competes on product and service offering, convenience of locations and price.
Advertising and Promotion
Proximity Europe Division aims to further consolidate its position as a preferred marketing platform. The direct customer contact in the Proximity Europe Division formats allows partner companies to present their products and strengthen their brand value. Notable examples include promotions for food, tobacco products and press articles.
Inventory and Purchasing
Proximity Europe Division sources their inventory from international and local suppliers. Management constantly seeks to improve inventory management. The purchase process varies across the different business models and formats. For point of sales, the purchase process is largely decentralized, as the individual stores place their main orders under centralized supply contracts. In franchise formats, inventory is owned and managed by the franchisee.
Seasonality
Given the number of formats and locations in which Proximity Europe Division operates, the business has not historically experienced significant seasonality. Typically, between 45% and 50% of Proximity Europe Division's net revenues are generated in the first half of the year, while the remaining 50% to 55% is generated in the second half of the year.
Health Division
Overview
The Health Division operates pharmacy services locations and related operations with 4,474 points of sale in Mexico, Chile, Ecuador and Colombia as of December 31, 2023.
Furthermore, in 2023, the Health Division initiated the implementation of its new business-operations model. The initial phase involved designating Chile and Uruguay as strategic hubs for transitioning towards a regional approach to fulfill the Health Division's objectives across all countries. This transition entails centralizing strategic and business decisions for the entire division in Chile, while also establishing a new office in Uruguay to serve as a purchasing center for all countries. Through this strategic planning, the Health Division expects to leverage its spending capacity.
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Health Division—Overview
Year Ended December 31, 2023

|  | (in millions of Mexican pesos, except percentages) |
|  | Total Revenues |  | Gross Profit |
|  | 2023 |  | 2023 vs.2022 |  | 2023 |  | 2023 vs.2022 |
Health Division |  | Ps. | 75,358 |  | 2.4 |  | % | Ps. | 22,499 |  | 1.1 |  | %

Business Strategy
The Health Division’s vision focuses on two main priorities. First, the Health Division aims to gain relevant scale by building a Latin American health platform, operating across several countries and markets. Second, the Health Division strives to constantly improve its value proposition and service by being closer to its customers through more stores and distribution agreements, a digital platform and customer loyalty programs, and by giving its customers access to a broader assortment, better options and availability of medicines, personal care, beauty and relevant health and wellness products and services. To achieve this vision, the Health Division is working on leveraging strong capability sets: (i) the health-industry knowledge, marketing and operational skills acquired through the incorporation of Chile-based Socofar and (ii) the skills that the Proximity Americas Division has developed in the operation and growth of other small retail formats, particularly in Mexico. These capabilities include commercial, marketing and production skills as well as site selection, logistics, business processes, human resources, inventory and supplier management.
The Health Division has maintained its growth even under a challenging macroeconomic environment and on top of a demanding comparison base, showing its strength and resiliency. The Health Division sees that the health services markets in Mexico and Colombia are still fragmented, and it believes it is well equipped to create value by continuing to grow in these markets and by assuming a value-creating role in its long-term consolidation. Furthermore, the Health Division gives FEMSA the opportunity to pursue a regional strategy across South America from a solid platform anchored in the Chilean market and with compelling growth opportunities in Colombia, Ecuador and beyond.
Locations
As of December 31, 2023, the Health Division operated 4,474 locations, including 1,759 in Mexico, 950 in Chile, 950 in Ecuador and 815 in Colombia.
During 2023, the Health Division expanded its operations by 379 additional locations on top of the 4,095 locations operating in 2022, highlighting a less challenging environment in Chile, Colombia and Mexico, that allowed the Health Division to re-accelerate its growth strategy.
The average investment required to open a new location varies, depending on location and whether the location is opened in an existing commercial building or requires construction of a new one. The Health Division expects to continue implementing its expansion strategy by emphasizing growth in markets where it currently operates and by expanding in underserved and unexploited markets. Most of the pharmacy services-related real estate is operated under lease agreements.
Competition
The Health Division competes in the overall pharmacy services market, which we believe is highly competitive. Our pharmacy services face competition from other pharmacy services chains, independent pharmacies and supermarkets, online retailers and convenience stores. The biggest chains in Mexico competing with the Health Division are Farmacias Similares, Farmacias Guadalajara, Farmacias del Ahorro and Farmacias Benavides, while in Chile, the biggest chains are Farmacias Ahumada and Salcobrand. In Colombia, La Rebaja, Unidrogas, Olimpica, Cafam, Colsubsidio and Farmatodo are relevant players. In Ecuador, Grupo Difare and Farmaenlace are the main competitors.
Market and Location Characteristics
Market Characteristics
The pharmacy services locations market in Mexico is highly fragmented among national and regional chains as well as independent pharmacies, supermarkets and other informal neighborhood drugstores. There are 50,616 pharmacy
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services locations and health-related points of sale in Mexico; however, the Health Division only represents 3.48% of the total number of pharmacy services locations in Mexico with a presence in 18 of 32 states in the country.
The market in Colombia is slightly less fragmented and in general includes national and regional chains. The national healthcare system in Colombia covers a large amount of the country’s population and operates through Health Promoting Entities (Entidades Promotoras de Salud) in the private and public sectors to provide healthcare services to the Colombian population. Dispensing medicine to such Health Promoting Entities’ clients as well as to the consumer retail market with medicines and health or personal care products represent growth opportunities in Colombia.
In Chile, the market is more concentrated and our Health Division through Cruz Verde is the leading pharmacy services locations operator in the country. Our Health Division, through Socofar S.A., Agencia en Chile, is also the largest distributor of pharmaceuticals in the country. The Chilean market, where our operation’s healthcare services are sold to both institutional and personal consumers, continues to represent an attractive growth opportunity.
In Ecuador, the market is highly competitive, and our Health Division, through Corporación GPF, is among the leading operators in the country, along with Difare and Farmaenlace. The market continues to experience steady organic growth, and we and our competitors participate in retail, franchises and distribution, all of which present attractive growth opportunities for the Health Division.
The Health Division is placing increased emphasis on market segmentation and differentiation of pharmacy services location formats to more appropriately serve the needs of customers on a location-by-location basis, selecting sites with the greatest proximity to the customers.
In the Health Division, 64% of the customers are between the ages of 25 and 54, 57% of which are female. Customers are segmented by sociodemographic and transactional variables, such as the type of products, amount and frequency of purchases, in order to generate a more personalized value offer through specialty programs, communication and targeted campaigns. Additionally, the Health Division began incorporating predictive data models to their segmentation strategies to further enhance its value proposition.
Location Characteristics
The Health Division’s pharmacy services locations are operated under the following trade names: Farmacias YZA, Farmacias Moderna and Farmacias Farmacon in Mexico; Fybeca and Sana Sana in Ecuador; Farmacias Cruz Verde in Chile and Colombia; and beauty stores under the trade name Maicao in Chile. The average size of the Health Division’s locations is 77 square meters in Mexico, 191 square meters in Chile, 80 square meters in Colombia and 113 meters in Ecuador, including selling space and storage area. On average, each pharmacy service location has between 3 and 13 employees depending on the size of and traffic into the location. Patented and generic pharmaceutical drugs, beauty products, medical supplies, wellness, and personal care products are the main products sold at the Health Division’s locations.
The Health Division’s locations also offer different value-added services, product delivery services and medical examinations.
Advertising and Promotion
The Health Division’s marketing efforts for its pharmacy services location include both specific product promotions and image advertising campaigns. These strategies are designed to increase location traffic and to reach people with low-cost medicines to reinforce the brands and market positions. In Chile, sanitary law forbids advertising of pharmaceutical products through mass media. Nevertheless, it is possible to advertise over-the-counter products using point-of-purchase materials, flyers and print catalogs. Television, radio, newspapers and digital media are used in seasonal and promotional campaigns.
Inventory and Purchasing
The South American operations of our Health Division seek to align the purchasing and logistics process with consumer needs. A key competitive advantage is the Health Division's strong logistics chain, which relies on an integrated view of the supply chain. In Chile, the Health Division operates three distribution centers, the largest of which is a modern distribution center with advanced technology that services locations and healthcare institution customers throughout the country. In Colombia the Health Division operates three distribution centers and in Ecuador it operates with one distribution center that distributes products to all its locations throughout each country.
In Mexico, the Health Division has made progress to integrate its acquired companies into a single model of operation and has inaugurated new distribution centers in Puebla during 2023 to enhance product availability and
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operational efficiency. The Health Division currently operates three distribution centers throughout Mexico. One distribution center serves a significant portion of the needs of its pharmacy services locations located in the northeast of Mexico, while a second distribution center serves the southwest region, and a third distribution center is designated for Mexico City and its surrounding areas. The Health Division still relies on third-party distributors for some products in Mexico.
Seasonality
The Health Division’s sales can be seasonal in nature with pharmaceutical drug sales affected by the timing and severity of the cough, cold and flu season. Revenues tend to be higher during the winter season but can be offset by extreme weather due to the rainy season in certain regions of Mexico in December and January. Revenues from the Health Division's operations in Chile, Colombia and Ecuador tend to be higher during December, mainly due to an increase in the purchase of beauty and personal care products for gift-giving during the holidays; otherwise, early in the year during January and February, revenues tend to fall slightly after the holiday period.
Fuel Division
Overview
The Fuel Division operates retail service stations for fuels, motor oils and other car care products. As of December 31, 2023, the Fuel Division operated 571 service stations located in 17 states throughout Mexico, concentrated mainly in the northern region of Mexico.
Fuel Division—Overview
Year Ended December 31, 2023

|  | (in millions of Mexican pesos, except percentages) |
|  | Total Revenues |  | Gross Profit |
|  | 2023 |  | 2023 vs.2022 |  | 2023 |  | 2023 vs.2022 |
Fuel Division |  | Ps. | 58,499 |  | 12.9 |  | % | Ps. | 7,344 |  | 12.0 |  | %

Business Strategy
The Fuel Division aims to strengthen its services in its retail gas stations in Mexico to fulfill consumers’ needs and increase traffic in those service stations while developing and maintaining an attractive value proposition to draw potential customers in a competitive environment. Furthermore, although Proximity Americas Division and Fuel Divisions operate as separate businesses, the Fuel Division’s service stations often have an OXXO store on the premises, strengthening the OXXO brand and complementing the value proposition. Despite market volatility and a gradually recovering mobility that was still impacted by the COVID-19 pandemic, the Fuel Division remains focused on improving its customer value proposition and enhancing underlying profitability by fine-tuning our business model, revenue management capabilities and adjusting its pricing strategies in an increasingly competitive market.
The Fuel Division also seeks to increase its exposure to institutional customers to supply fuel and related products to third-parties.
Service Station Locations
As of December 31, 2023, the Fuel Division operated 571 service stations, concentrated in the northern region of the country but with a presence in 17 states throughout Mexico.
Competition
Despite the existence of other groups competing in this sector, the Fuel Division’s main competitors continue to be small retail service station chains owned by regional family businesses, which compete in the aggregate with the Fuel Division in total sales, new station locations and labor. The biggest chains competing with the Fuel Division in terms of number of service stations are regional chains such as Petro-7 (operated by 7-Eleven Mexico), Corpo Gas, G500, Hidrosina, international players operating in Mexico, such as British Petroleum, Mobil, Repsol and Shell and hard discount chains such as Good Price, Cargo Gas and Gulf.
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Market and Store Characteristics
Market Characteristics
The retail service station market in Mexico has approximately 13,500 service stations and is highly fragmented. The majority of the retail service stations in the country are either owned by small regional family businesses or are other regional chains such as Petro-7 and G500. In recent years, however, international players such as British Petroleum, Mobil and Repsol have increased their network of franchised service stations, and now also represent significant competition.
Service Station Characteristics
Each service station under the “OXXO Gas” trade name comprises offices, parking lots, a fuel service area and an area for storage of gasoline in underground tanks.
The average size of the fuel service dispatch area is 216 square meters. On average, each service station has 10 employees.
Gasoline, diesel, oil and additives are the main products sold at OXXO Gas service stations.
Advertising and Promotion
Through promotional activities, the Fuel Division seeks to provide additional value to customers by offering, along with gasoline, oils and additives, quality products and services at affordable prices. The best tool for communicating these promotions has been coupon promotions in partnership with third parties, including cross-promotional strategies jointly with OXXO stores.
Inventory and Purchasing
The distribution, mainly from gasoline and diesel, for the supply of our operations in the Fuel Division is mainly carried out directly between our supplier and our service stations. Since we do not have storage facilities, the product delivery is made daily according to a supply and logistics plan, which considers the capacity and inventory levels as well as the behavior of the demand of each one of our service stations; ensuring a continuous and sufficient supply to serve the markets where we operate.
Seasonality
Traditionally, the Fuel Division experiences especially high demand during the months of May and August. The lowest demand is in January and December due to the year-end holiday period, because most service stations are not located on highways to holiday destinations.
Other Businesses
Digital@FEMSA
Digital@FEMSA is FEMSA’s tech and innovation business unit focused on building a value-added digital and financial ecosystem for end customers and businesses, while enabling and leveraging the strategic assets of FEMSA’s core business verticals. Digital@FEMSA’s value proposition aims to help people and businesses to solve their daily needs and do more with their money, through hyper-personalized products, services, and experiences. This includes solutions such as:
•Fintech for Consumers: Spin by OXXO is a digital wallet that seeks to offer frictionless payments solutions to Mexicans, making their day-to-day transactions seamless and efficient. This product provides a wide variety of payments solutions, enabling customers to be efficient and providing them with financial control on a daily basis.
•Digital Solutions for Businesses: Payment method solutions for micro, small, and medium sized businesses and independent merchants in Mexico. Such solutions to be offered in addition to value-added financial services to consolidate and develop an holistic value proposition based on client needs.
•Loyalty: Our strategy seeks to further develop the OXXO Premia program by building a coalition program between FEMSA’s main businesses, like OXXO and OXXO GAS, and other external businesses,
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rewarding their millions of customers for their day-to-day spending across this network of affiliated partners.
Furthermore, Digital@FEMSA actively explores other related tech-enabled business and innovation opportunities that strengthen its ecosystem.
During 2023, Digital@FEMSA did not meet the quantitative thresholds according with IFRS 8 in relation with FEMSA's consolidated financial results to be considered as a separate reportable segment, therefore, its financial results were included in the Other Businesses segment.
Bara
Bara is a proximity hard discount grocery business whose value proposition is based on a low-cost model to provide consumers with a selection of national and private label products at the most competitive prices. As of 2023 Bara operated 359 stores across the states of Jalisco, Guanajuato, Aguascalientes, Queretaro and San Luis Potosi in Mexico.
Description of Property, Plant and Equipment
As of December 31, 2023, Coca-Cola FEMSA owned 56 bottling plants. By country, as of such date, Coca-Cola FEMSA had 28 bottling plants in Mexico, seven in Central America, seven in Colombia, 11 in Brazil, 2 in Argentina and one in Uruguay. As of December 31, 2023, Coca-Cola FEMSA operated 251 distribution centers, approximately 54.0% of which were in its Mexican territories. As of such date, Coca-Cola FEMSA owned 83.0% of these distribution centers and leased the remainder. This calculation considers owned and third-party distribution centers managed by Coca-Cola FEMSA in Mexico.
Proximity Americas Division owns approximately 13% of OXXO store properties, while the remaining stores are located on leased properties and substantially all of its distribution centers are under long-term lease arrangements with third parties.
As of December 31, 2023, Proximity Europe Division owned four manufacturing facilities to produce bakery products, mainly pretzels.
The Health Division leases ten distribution centers, three of which are in Chile, three in Mexico, three in Colombia and one in Ecuador, and it also has one manufacturing facility for pharmaceuticals in Chile. Most of the Health Division’s locations are under lease arrangements with third parties.
Insurance
We maintain an “all risk” insurance policy covering our properties (owned and leased), machinery and equipment and inventories as well as losses due to business interruptions. The policy covers damages caused by natural disasters, including hurricanes, hail, earthquakes and damages caused by human acts, including explosions, fire, vandalism and riots. We also maintain a freight transport insurance policy that covers damages to goods in transit. In addition, we maintain a liability insurance policy that covers product liability. We purchase our insurance coverage through an insurance broker. In 2023, the policies for “all risk” property insurance were issued by AXA Seguros, S.A. de C.V., policies for liability insurance were issued by Chubb Seguros México, S.A. and the policy for freight transport insurance was issued by AXA Seguros, S.A. de C.V. Our “all risk” coverage was partially reinsured in the international reinsurance market. We believe that our coverage is consistent with the coverage maintained by similar companies.
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Capital Expenditures
Our consolidated capital expenditures, net of disposals for the years ended December 31, 2023, 2022 and 2021 were Ps. 38,611, Ps. 34,410, and Ps. 24,055 million, respectively, which were primarily funded with cash from operations generated by our subsidiaries. These amounts were invested in the following manner:

|  | Year Ended December 31,
|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
|  |  | (in millions of Mexican pesos)
Coca-Cola FEMSA |  | Ps. | 21,396 |  | Ps. | 19,665 |  | Ps. | 13,865
Proximity Americas Division |  |  | 13,387 |  |  | 9,957 |  |  | 7,179
Proximity Europe Division |  |  | 1,654 |  |  | 544 |  |  | —
Health Division |  |  | 1,750 |  |  | 2,868 |  |  | 2,049
Fuel Division |  |  | 186 |  |  | 157 |  |  | 243
Discontinued operations |  |  | — |  |  | 1,140 |  |  | 557
Other (1) |  |  | 238 |  |  | 79 |  |  | 162
Total (2) |  | Ps. | 38,611 |  | Ps. | 34,410 |  | Ps. | 24,055

(1)Includes consolidation adjustments.
(2)The disposals of property, plant and equipment for 2023, 2022 and 2021 are for Ps. 400, Ps. 308 and Ps.208, respectively.
Coca-Cola FEMSA
In 2023, 2022 and 2021 Coca-Cola FEMSA focused its capital expenditures on investments in (i) increasing production capacity; (ii) placing coolers with retailers; (iii) returnable bottles and cases; (iv) improving the efficiency of our distribution infrastructure; and (v) information technology.
Proximity Americas Division
Proximity Americas Division's principal investment activity is the construction and opening of new stores and refurbishment of existing stores, which are mostly OXXO Stores. During 2023, Proximity Americas Division opened 1,475 new stores and permanently closed 67, resulting in 1,408 net new OXXO stores. These numbers reflect the effects that the consumer behavior changes in connection with the COVID-19 pandemic had on Proximity Americas Division's overall performance.
Proximity Americas Division invested Ps. 13,387 million in 2023 in the addition of new stores, warehouses and improvements to leased properties, renewal of equipment and information technology related investments.
Proximity Europe Division
Proximity Europe Division’s principal investment activity is the construction and opening of new stores and refurbishment of existing stores across Europe, as well as expansion and major maintenance of the production facilities.
Health Division
The Health Division’s principal investment activity is the construction and opening of new locations in the countries where it has operations. During 2023, the Health Division opened 184 net new locations in Mexico and 182 net new locations in Chile, Colombia and Ecuador. The Health Division invested Ps. 1,750 million in 2023 in the addition of new locations, warehouses and improvements to leased properties and information technology investments.
Fuel Division
During 2023, the Fuel Division invested Ps. 186 million on capital expenditures, mainly in major maintenance and remodeling of service stations, and IT systems.
Regulatory Matters
We are subject to different regulations in each of the territories where we have operations. The adoption of new laws or regulations or changes in existing laws or regulations in the countries where we have operations may increase our operating and compliance costs, our liabilities or impose restrictions on our operations which, in turn, may adversely affect our business financial condition, and financial results. This section addresses the regulations most relevant to
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FEMSA and its business units, however, we are subject to many other applicable laws in the countries in which we operate.
Regulatory matters related to Coca-Cola FEMSA are included in Item 4, pages 29-38, of Coca-Cola FEMSA’s Form 20-F filed on April 12, 2024, which pages in relevant part are hereby incorporated by reference.
Tax Reforms
Mexico
In April 2021, the Mexican government amended the Federal Labor Law, the Mexican Federal Tax Code and other laws that regulate labor benefits with the purpose of prohibiting the subcontracting of personnel, except in activities such as specialized works or services that are not part of a company's core business and that are provided by service providers registered with the Ministry of Labor and Social Welfare. As a result of this tax reform, the deduction of expenses related to subcontracting is prohibited, as well as the possibility of crediting the value added tax generated by expenses related to subcontracting and in extreme cases, the subcontracting of personnel can qualify as tax fraud. This reform entered into effect on September 1, 2021.
Pursuant to the amendments to Mexican tax laws effective January 1, 2022, Mexican issuers are jointly and severally liable for taxes payable on gains arising from the sale or disposition of their shares or securities representing their shares, as ADSs, by majority shareholders who are not residents of Mexico and do not have a permanent establishment in Mexico for tax purposes. To other Mexican non-residents who do not have a permanent establishment in Mexico for tax purposes, to the extent that such Mexican issuer fails to provide certain information regarding such sale or disposition to Mexican tax authorities. For the purposes of this rule, "majority shareholders" shall be understood as shareholders who are identified in the reports submitted by the Mexican issuer to the CNBV annually as (i) directors or officers who directly or indirectly own 1.0% or more of the Mexican issuer's share capital, (ii) shareholders who directly or indirectly own 5.0% or more of the Mexican issuer's share capital, or (iii) within the ten largest shareholders of the Mexican share capital of the Mexican issuer. issuer based on direct ownership of the shares of the share capital. Although in some cases the Mexican tax authorities have indicated that this reporting obligation would only apply to transfers of shares or securities representing shares that result in a change of control, there are no established criteria or general interpretations in this regard issued by the Mexican tax authorities. There is currently no obligation on the part of Mexican non-residents to report to Mexican issuers their sales or disposals of shares or securities representing shares, which limits our ability to comply with our reporting obligations to Mexican tax authorities. Therefore, the amount of a potential tax liability is uncertain and difficult to determine given the inherent mechanisms and procedures, including the application of any available tax treaty, applicable to the trading of publicly traded securities.
Argentina
On December 13, 2023, the Argentine government issued an executive decree (Decree 29/2023) setting the tax rate of the PAIS (Program for an Inclusive and Solidary Argentina) at 17.5%, applicable to the import of goods (excluding goods from the basic food basket, fuels, lubricants, and other goods related to power generation). This tax is applicable to foreign currency transactions carried out on or after December 13, 2023, and represents an additional cost for Argentine operations. This tariff is also applicable to cargo services and other transportation services for the import or export of goods, or when such services are acquired in Argentina and provided by non-residents.
Colombia
In August 2021, a new tax reform came into force in Colombia. This reform increased the income tax rate from 30.0% to 35.0% for 2022 and limited the ability to deduct or deduct municipal sales taxes against income taxes to 50.0%.
In December 2022, a new tax reform was approved in Colombia, which began to be applied during 2023.
The main changes are as follows:
•Introduction of an excise duty on beverages with added sugar based on the following timetable:
◦From November 1, 2023 to December 30, 2023, a tax of 18 Colombian pesos (approximately Ps.0.08 as of December 31, 2023) was applied to beverages containing 6 to 10 grams of added sugar per 100
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ml and a tax of 35 Colombian pesos (approximately Ps.0.15 as of December 31, 2023) for beverages with more than 10 grams of added sugar per 100 ml;
◦From January 1, 2024 to December 30, 2024, a tax of 28 Colombian pesos (approximately Ps.0.12 as of December 31, 2023) for beverages containing 6 to 10 grams of added sugar per 100 ml and a tax of 55 Colombian pesos (approximately Ps.0.24 as of December 31, 2023) for beverages with more than 10 grams of added sugar per 100 ml;
◦From January 1, 2025 to December 30, 2025, a tax of 38 Colombian pesos (approximately Ps.0.17 as of December 31, 2023) for beverages containing between 5 grams and 9 grams of added sugar per 100 ml and a tax of 65 Colombian pesos (approximately Ps.0.29 as of December 31, 2023) for beverages with more than 9 grams of added sugar per 100 ml;
◦From 2026, the corresponding tax will be increased annually by the same percentage as the UVT (Tax Value Unit).
•Introduction of a new tax on single-use plastics, with a rate of 0.00005 on the Tax Value Units per gram of plastic. One Tax Value Unit is equivalent to 42,412 Colombian pesos (approximately Ps.187.46 as of December 31, 2023). This new tax is applicable to our products that are not considered part of the market basket of goods (currently two of our products fall into this category). However, this tax can be waived with a circular economy certification that will be issued in case recycled resin is incorporated into the packaging. Through legal resolution C-526/23, it was indicated that the responsible for the tax is the producer of single-use plastics.
•Increase in the income tax rate as of January 1, 2023, from 20.0% to 35.0% on taxable income obtained from free zones within Colombia. This change will go into effect on January 1, 2026 if a free zone company can demonstrate a 60.0% revenue increase in 2022 compared to fiscal year 2019. Despite this, the Supreme Court ruled that this law is not applicable to entities that have obtained its approval before December 13, 2022.
•The possibility of taking municipal sales taxes as a tax deduction against income tax was eliminated.
•Increase in the occasional income tax rate from 10.0% to 15.0% applicable to sales of fixed assets and introduction of a stamp duty at a rate between 0.0% and 3.0%, on the sale price of real estate and other assets.
•Introduction of a minimum income tax rate of 15%, which must be calculated considering an adjusted income (“UD”). The Adjusted Tax Rate (“TTD”) will be the result of dividing an Adjusted Tax (“ID”) by the UD.
Costa Rica
Until December 31, 2022, the producer or importer was responsible for collecting value-added taxes on carbonated beverages from supply chain participants, with an effective value-added tax rate for carbonated beverages of 15.8%. On January 1, 2023, a new tax reform came into effect to reintroduce the standard debt and credit system for producers, wholesalers, and retailers with a tax rate of 13.0%, so our Costa Rican subsidiary is no longer responsible for collecting such tax along the entire supply chain.
Brazil
In early 2017, the Brazilian Federal Supreme Court ruled that the value-added tax would not be used as the basis for calculating the federal sales tax, resulting in a reduction of the federal sales tax. Coca-Cola FEMSA’s Brazilian subsidiaries commenced legal proceedings to ascertain their ability to calculate federal sales tax without using the value-added tax as a basis by the Supreme Court’s first ruling and obtained a final favorable resolution in 2019. However, the Brazilian tax authorities appealed the Brazilian Federal Supreme Court’s decision and such appeal was denied in May 2021. In 2023, federal sales and production taxes together resulted in an average tax of 14.6% on net sales.
In recent years, the rate of excise duty on concentrate in Brazil has undergone recurring temporary fluctuations. The excise tax rate was increased from 4% to 8.0% from February 1, 2021 to February 24, 2022, decreased to 6.0% from February 25, 2022 to April 30, 2022, and increased again to 8.0% on May 1, 2022. The tax credit that we may recognize
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in our Brazilian operations in connection with concentrate purchases in the Manaus Free Trade Zone has been affected accordingly.
In December 2022, the Brazilian government published the new transfer pricing rules that will come into effect from January 1, 2024. The new transfer pricing rules aim to align the Brazilian transfer pricing system with the transfer pricing guidelines recommended by the Organization for Economic Co-operation and Development (OECD). During 2023, the Brazilian government issued specific regulatory instructions to regulate this new tax legislation and transfer pricing methods. In 2024, greater regulation of intangibles and the obligations to file transfer pricing tax returns is expected.
In March 2023, the value-added tax rate in the state of Paraná increased from 16.0% to 18.0%. As of January 1, 2024, the value-added tax rate in the state of Rio Grande do Sul is 18%. As of January 1, 2024, the state of Minas Gerais began applying an additional 2.0% charge on sales as a contribution to a poverty eradication fund.
In December 2023, the Brazilian government published a Provisional Measure, to establish that the amount of the credit of a final and unappealable judicial decision, which exceeds the value of R$ 10 million (approximately Ps. 34.9 million as of December 31, 2023) subject to compensation against tax debts, must observe the monthly limitation of 1/60 of the total value of the credit. While taxpayers must observe this regulation as of January 1, 2024, this Interim Measure must become law during the following months; otherwise, this command is revoked.
In December 2023, the Brazilian government published a new law to tax investment subsidies granted by municipalities or states of the federation as of January 1, 2024. These subsidies will be taxed by Income Tax and Social Contribution at the combined tax rate of 34% and will be subject to other contributions at the combined tax rate of 9.25%. On the other hand, the Federal Government will grant an income tax credit of 25% of the municipal or state subsidy, limited to the amount of depreciation of such assets applied to approved development or expansion projects that caused such subsidy, provided that certain conditions are met.
In addition, also in December 2023, a Constitutional Amendment was published to implement a comprehensive tax reform in Brazil that will replace the current indirect tax system with a new one, which will be progressively implemented from January 1, 2026 until its full adoption in 2033.Municipal (“ISSQN”), state (“ICMS”) and federal (PIS and COFINS) taxes will be replaced by a double VAT (“CBS” and “IBS”). Double VAT will apply to all tangible or intangible goods, duties and services; it must be taxed according to the amount charged in the place where it is consumed; It will not be considered in itself in its own taxable base (the tax will not be taxed), and gives the right to record the input tax credit of the previous transaction (without a cumulative system).
There will be a standard rate for all goods and services, with exceptions for certain sectors such as education, health, medicine, public transport, food for human consumption, agricultural products and some others, which will be entitled to tax reductions of 100%, 70% or 40% of the rate yet to be defined. In addition, there will be specific rules for sectors such as fuels and lubricants, automotive, financial services, real estate transactions, health plans, tourism and leisure businesses, among others. During the following months, the executive and legislative branches must enact a series of laws and acts to regulate and detail all procedures, obligations and the double VAT rate.
In addition, from 2027 a special tax (“IS”) will also be applied on the production, extraction, marketing or import of services or goods harmful to health and the environment. This tax will be applied only once, does not generate a subsequent credit (it is subject to the so-called single-phase system) and will be part of the taxable base of the other tax applied to sales of services and goods. The current excise duty (IPI) will be reduced to zero, except for those products produced in the Manaus Free Trade Zone, in order to maintain the competitiveness and development of the incentivized zone. As in the previous case, a series of laws and acts are expected to regulate and detail all the procedures, obligations and the list of IS rates.
Finally, as of January 1, 2024, new rules will apply to exclusive financial investment funds, investments and foreign currency assets located abroad, held by Brazilian taxpayers. Due to these changes, the government offered the option to Brazilian tax residents to increase the cost of the tax on foreign assets and investments to the current market value by paying a reduced rate on such difference, for those who choose to anticipate potential profits in this gap, by collecting the corresponding income tax with such reduced income tax rate instead of the regular rate on capital gains. For those who opt for this option, the current market value will be your new tax cost basis and a future capital gain, if and when it occurs, will be calculated from this point, rather than the original tax cost basis.
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Uruguay
On December 31, 2021, the Uruguayan government issued an executive decree that increased the excise tax on energy drinks from 19.0% to 22.0%. This increase went into effect as of January 2022.
Antitrust Legislation
The Federal Antitrust Law (Ley Federal de Competencia Económica) regulates monopolistic and anti-competitive practices in Mexico and requires approval of certain mergers and acquisitions that exceed certain amounts or that may have anti-competition effects. The Federal Antitrust Law subjects the activities of certain Mexican companies, including us, to regulatory scrutiny. The Federal Antitrust Commission (Comisión Federal de Competencia Económica) (“COFECE”) is the Mexican antitrust authority, which has constitutional autonomy. COFECE can regulate essential facilities, order the divestment of assets and eliminate barriers to competition, set higher fines for violations of the Federal Antitrust Law, implement important changes to rules governing mergers and anti-competitive behavior and limit the availability of legal defenses against the application of the law.
We are subject to antitrust legislation in the countries where we operate. Certain relevant acquisitions or divestitures of businesses may be subject to the requirement to obtain certain authorizations from the relevant authorities.
Price Controls
Voluntary price restraints or statutory price controls have been imposed historically in several of the countries where we operate. Currently, there are no price controls on our products in any of the territories where we operate, except for Argentina. In 2020, the Argentine government imposed statutory price restraints with respect to certain of our products and the list of products to which the voluntary price restraints applies was expanded. Any changes to applicable law affecting prices could have an adverse effect on our business. See “Item 3. Key Information—Risk Factors—Risks Related to Our Company—Regulatory developments in the countries where we operate may adversely affect our business, financial condition and results of operations.”
Environmental Regulations
We have an Environmental Management System (EMS) that includes environmental policies and procedures that intend to identify, address and minimize environmental risks, as well as to implement appropriate strategies for the use of clean and renewable energy, efficient use of water and waste management throughout the value chain of all of our operations. We have programs that seek to reduce energy use and diversify our portfolio of clean and renewable energy sources to reduce greenhouse gas emissions and contribute to the fight against climate change. In addition, we establish short-, medium-, and long-term goals and indicators for the use, management and confinement of energy, air emissions, water discharges, solid waste and disposal of hazardous materials.
In 2023, 56.9% of Proximity Americas Division’s total energy requirements in Mexico were obtained from renewable energy sources.
In all of the countries where we have operations, we are subject to federal and state laws and regulations relating to the protection of the environment. In Mexico, the principal legislation is the Federal General Law for Ecological Equilibrium and Environmental Protection (Ley General de Equilibrio Ecológico y Protección al Ambiente, or the Mexican Environmental Law), and the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos) which are enforced by the Ministry of the Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales, or SEMARNAT). SEMARNAT can bring administrative and criminal proceedings against companies that violate environmental laws, and it also has the power to close non-complying facilities. Under the Mexican Environmental Law, rules have been promulgated concerning water, air and noise pollution and hazardous substances.
Energy Regulations
In 2013, the Mexican government approved a decree containing amendments and additions to the Mexican Constitution in matters of energy (the “Mexican Energy Reform”). The Mexican Energy Reform opened the Mexican energy market to the participation of private parties including companies with foreign investment, allowing for FEMSA to participate directly in the retail of fuel products. Secondary legislation and regulation of the approved Mexican Energy Reform was implemented during 2016 and 2017. Prior 2017, fuel retail prices were established by the Mexican executive power by decree by end of 2017 retail prices were fully deregulated and freely determined by market conditions. As part of the secondary legislation in connection with the Mexican Energy Reform, the Security, Energy and Environment Agency (the Agencia de Seguridad, Energia y Ambiente, or “ASEA”) was created as a decentralized administrative body of SEMARNAT. ASEA is responsible for regulating and supervising industrial and operational safety and environmental protection in the installations and activities of the hydrocarbons sector, which includes all our
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Fuel Division operations. Additionally, the CRE is the regulatory body responsible for the authorization of sale of fuel to the public at gas stations. We believe that the Fuel Division is in material compliance with the relevant ASEA and CRE regulations and administrative provisions.
Effective as of July 2020, the Mexican Energy Regulatory Commission (Comisión Reguladora de Energía) (“CRE”) approved an increase to transmission fees payable by entities that generate energy from renewable sources or efficient cogeneration sources. While this increase applies directly to the energy producers of such projects, end-users, such as ourselves, may face increases in our costs for energy consumption from such energy producers. A number of legal recourses against this increase were filed by the energy producers (including our energy providers). The matter was resolved in a definitive manner in favor of the energy producers, and, as a result, the increase to the transmission fees was not and will not be applied.
In October 2020, the CRE approved resolution RES/1094/2020, which modifies the existing rules for the amendment or assignment of power generation and permits. This resolution limits the incorporation of new consumption centers to self-supply schemes, which was previously done in order to receive electric power from clean renewable sources at competitive prices. We have filed a legal recourse against this resolution, which is pending resolution. If our legal recourse is unsuccessful, this resolution could have an adverse impact on our business and results of operations in Mexico. Although this legal process remains ongoing in the collegiate courts, some companies have succeeded in getting the CRE to modify the permits by adding companies and load points, through injunctions or nullity suits.
We are aware that the CRE launched investigations against certain private power generators that could result in the cancellation of such generators’ power supply permits. In the event any of those proceedings affect us due to the revocation of power supply permits from our energy suppliers, we would consider pursuing any available legal recourses. To date, through the appropriate legal remedies, we have managed to contain an attempt by the CRE in one of the facilities of one of our energy suppliers.
In March 2021, the Mexican government approved changes to the Mexican Electricity Law to, among other things, modify the order in which the energy of the National Electric System (Sistema Eléctrico Nacional) is dispatched; condition the granting of permits to conform with the planning criteria of the National Electric System; and allow the authorities to revoke energy self-supply permits, such as those granted to certain companies that supply us with electricity. Such changes were challenged by different market participants and its effectiveness has been suspended by the courts until the legal proceedings are definitively resolved. We have filed a legal recourse against these amendments, which is pending resolution. If our legal recourse is unsuccessful, this resolution could have an adverse impact on our business and results of operations in Mexico.
In September 2021, the Mexican President submitted a proposal to Congress to amend the Mexican Constitution seeking comprehensive changes to the Mexican electricity sector. This reform intended to cancel the power supply permits to the private sector and to give absolute control to the Federal Electricity Commission (Comisión Federal de Electricidad) over energy generation and supply in the country, among other changes to the sector. This proposed reform did not reach the necessary votes for its approval.
Health Regulations
México
General Health Law
On March 30, 2022, Articles 225 and 226 Bis 1 of the General Health Law were modified and now provides that the prescribers of medication are obliged to prescribe medication by generic names, avoiding the prescription of brand-name medication when a generic option is available in the market. While these modifications could potentially boost the sales of generic controlled (scheduled) medication, which is typically sold at lower retail prices, as of December 31, 2023, the Mexican government has yet to issue the necessary regulations required for the implementation of these amendments.
Colombia
Health Reform Bill
Currently, the Congress of Colombia is discussing a health care bill which would substantially modify the conditions of their national health system and the operation framework of pharmacy centers. This bill includes a radical overhaul of the public healthcare insurance sector, and it eliminates the role of the Health Promoting Entities (Entidades Promotoras de Salud, or “EPS”) as intermediaries. The draft of the bill includes extensive measures to shift the focus of
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the health system towards primary and preventative care, particularly in rural and suburban areas of the country that are currently underserved. The EPS function as insurers, managing the patient care, but also enrolling the susceptible population, collecting resources, and managing the resources assigned thereto. All these functions would be assumed by the Colombian government.
Regulations on the Pharmaceutical Operators (Gestores Farmacéuticos)
Colombia intends to pass regulations directed at governing the legal framework of pharmaceutical operators, establishing financial portfolio, asset and management requirements.
Medicine Shortage
In Colombia, shortages of different types of medicines have been documented for several years. The evidence of an acute shortage or unsatisfied demand in the institutional sales channel, since 2022, is especially worrying. The causes of this shortage are varied and require different short- and long-term strategies to be resolved.
Intersectoral roundtables led by the Colombian Ministry of Health have been held with all those involved in the logistics medicine supply chain to identify the causes of these shortages in more detail and to establish a well-planned interventionist agenda.
Chile
Health System Reform
The Chilean administration is contemplating a reform of its national health system. This includes the creation of a universal health fund that would be financed with a 7% mandatory contribution reduced from worker’s salaries, which would imply that all Social Security Institutions (ISAPRES) cease to exist. Voluntary private “second floor” insurance (supplementary and complementary) may be contracted, nonetheless.
Pharmaceutical Bill II
A bill that modifies the Chilean Health Code to further regulate and update regulations on generic bioequivalent drugs, also known as Pharmaceutical Bill II, has been in the Senate since March 2020. It puts forward a change in the model of marketing for medicines, with a focus on health centers. It would also prevent the vertical integration between health centers and pharmaceutical laboratories.
The Senate commission in charge of passing the bill dismissed the draft in March 2022, however, the Senate made the decision not to conclude the process and to summon a new commission for discussion, replacing parliamentarians who ceased to perform their duties. This bill would bring several important challenges to manufacturers, distributors, health centers, health professionals and patients.
Fintech Regulations
Our digital business initiatives are regulated through the Law to Regulate Financial Technology Institutions (“Fintech Law”) enacted on March 2018, which establishes a regulatory framework for financial technology institutions that offer financial products through digital means and aims to promote financial inclusion, protect consumers, and foster competition in the Mexican financial sector. These services contemplate the issuance, administration and redemption of electronically registered money balances to make payments and transfers. Providing these services require an express authorization issued by the National Banking and Securities Commission together with the Ministry of Finance and Public Credit and the Banco de México.
Anti-Bribery Regulations
In recent years, several governments in the countries where we have operations have enacted regulations addressing corporate policies for the prevention of money laundering and finance of terrorism, as well as cross-border anti-bribery programs. In compliance with such regulations, we have implemented internal policies including know-your-counterparty procedures, anti-money laundering and finance of terrorism clauses in agreements and reporting of suspicious operations and established anti-bribery programs to comply with the basic requirements set forth in these
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regulations, such as performing due diligence in merger and acquisition transactions and including clauses regarding delivery of gifts, remuneration to contractors, political contributions, donations, whistleblowing channels and anti–corruption in agreements.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion should be read in conjunction with, and is entirely qualified by reference to, our audited consolidated financial statements and the notes to those financial statements. Our consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Overview of Events, Trends and Uncertainties
Management currently considers the following events, trends and uncertainties to be important to understanding our results and financial position during the periods discussed in this section:
•On February 15, 2023, FEMSA announced its FEMSA Forward strategy, which will allow it to continue creating value through a structure that focuses on its core businesses: retail, including the Health Division, beverages, and digital. We believe these businesses have proven capabilities, financial strength and dynamic avenues for growth.
•Coca-Cola FEMSA's results were affected by changes in economic conditions in Mexico, Brazil and in the other countries where it has operations. Some of these economies are influenced by the U.S. economy, and therefore, deterioration in economic conditions in the U.S. economy may affect those economies. Deterioration or prolonged periods of weak economic conditions in the countries where Coca-Cola FEMSA conducts operations may have, and in the past have had, a negative effect on the company on its results and financial condition. Coca-Cola FEMSA's business may also be significantly affected by the interest rates, inflation rates and exchange rates of the local currencies of the countries where it operates. Decreases in growth rates, periods of negative growth and/or increases in inflation or interest rates may result in lower demand for Coca-Cola FEMSA products, lower real pricing of its products or a shift to lower margin products. In addition, an increase in interest rates would increase the cost to Coca-Cola FEMSA of variable rate funding, which would have an adverse effect on its financial position.
•Proximity Americas Division benefited from the continuous recovery of consumer mobility throughout 2023, coupled with an increase in the average consumer ticket, restating the strong performance of the gathering-related consumer categories such as beer, beverages and snacks, among others. This resulted in a strong top line growth for OXXO operations in Mexico on top of the robust growth of same-store sales. Furthermore, Proximity Americas Division increased its pace of expansion across its operations in South America adding new stores in Colombia, Chile and Peru. As of December 31, 2023 in Brazil, Proximity Americas Division's joint venture with Raízen, Grupo Nós, accelerated its pace of expansion reaching over 1,716 stores in Brazil, including 440 company-owned and -operated OXXO stores.
•Proximity Europe Division benefited from the continuous recovery of consumer mobility throughout 2023, as well as positive pricing initiatives, reflecting a robust top line growth and positive operating leverage. Growth in our food products, foodservice and B2B business have resulted in better performance for stores, given their structurally higher margin. As of December 31, 2023, the Proximity Europe Division had reached 2,808 points of sale.
•The Fuel Division benefited from a sustained increase in consumer mobility coupled with volume growth across Mexico, which resulted in a strong growth of same-station sales during 2023. This increase, coupled with growth in our institutional and wholesale customer network, had a positive impact on the top line for the year. The Fuel Division will continue to seek growth opportunities in Mexico while keeping a disciplined approach to expense management, capital deployment and efficiency.
•The Health Division delivered stable consolidated results as it faced a challenging macroeconomic environment in its markets and a competitive environment in Mexico. In Colombia and Ecuador, the Health Division continued its pace of growth while maintaining relevant competitive positions in both
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markets. This performance was offset by foreign currency exchange effects against the Mexican peso, a negative price-mix effect, and a charge for uncollectible accounts in Colombia during 2023. The Health Division will continue to seek opportunities to leverage its integrated scale to drive profitability while further accelerating its pace of expansion in Mexico, Colombia and Ecuador, while maintaining its relevant market position in Chile.
•Digital@FEMSA continued advancing its different business initiatives. Spin by OXXO continued to accelerate its user growth across Mexico and operated as a financial payments entity in Mexico, which allowed Spin by OXXO to continue evolving its financial services value proposition and reach new potential users. It also signed an agreement to acquire all of the outstanding shares of Net Pay, a merchant aggregator that offers several payment services and solutions to micro, small and medium-sized businesses in Mexico, that we believe will become a building block for Digital@FEMSA B2B fintech business vertical. Digital@FEMSA also continued evolving its customer loyalty program initiative by leveraging the strong market acceptance and growth pace of OXXO Premia, while developing a multi-partner coalition loyalty program with external partnership agreements. This program will allow customers of OXXO, and potentially other Digital@FEMSA partners, to accrue and redeem rewards across the network of affiliated businesses. We expect Digital@FEMSA to constitute a larger portion of our operations in future periods.
•In 2023, as part of our FEMSA Forward strategy, we sold 13.9% of outstanding ordinary shares of Heineken, retaining less than 1% of outstanding ordinary shares of Heineken. See "Item 4—Strategic Development of our Business.”
•In October 2023, as part of our FEMSA Forward strategy, we merged Envoy Solutions with BradyIFS and retained an ownership stake of approximately 37% in the combined entity. See "Item 4—Strategic Development of our Business.”
•We expect to divest our interests in Solística and other non-core businesses within a year from the date of this annual report, which will consequently reduce its contribution to our consolidated results of operations.
•Our results and financial position are affected by the economic and market conditions in the countries where our subsidiaries conduct their operations, particularly in Mexico. Changes in these conditions are influenced by a number of factors, including those discussed in “Item 3. Key Information—Risk Factors.”
Effects of Changes in Economic Conditions
Our results are affected by changes in economic conditions in Mexico, Brazil, the United States and the other countries where we have operations. For the years ended December 31, 2023, 2022 and 2021, 65.0%, 62.05%, and 64.0% respectively, of our total sales were attributable to Mexico. Other than Venezuela and the United States, the participation of these other countries as a percentage of our total sales has not changed significantly during the last five years.
Our results are affected by the economic conditions in the countries where we conduct operations. Some of these economies continue to be influenced by the U.S. economy, and therefore, deterioration in the U.S. economy may affect the economies in which we operate. Deterioration or prolonged periods of weak economic conditions in the countries where we conduct operations may have, and in the past have had, a negative effect on our company and a material adverse effect on our results and financial condition. Our business may also be significantly affected by the interest rates, inflation rates and exchange rates of the currencies of the countries where we operate. Decreases in growth rates, periods of negative growth and/or increases in inflation or interest rates may result in lower demand for Coca-Cola FEMSA’s products or the other products we carry in our stores, our services, lower real pricing of products or a shift to lower margin products, or a decrease in store traffic or average ticket. In addition, an increase in interest rates would increase the cost to us of variable rate funding, which would have an adverse effect on our financial position.
Beginning in the fourth quarter of 2022 and through 2023, the exchange rate between the Mexican peso and the U.S. dollar fluctuated from a low of Ps. 16.66 per US$ 1.00, to a high of Ps. 20.13 per US$ 1.00. At December 31, 2023, the exchange rate (noon buying rate) was Ps. 16.8998 per US$ 1.00. On April 19, 2024 this exchange rate was Ps. 17.2062 per US$ 1.00. A depreciation of the Mexican peso or local currencies in the countries where we operate relative to the U.S. dollar increases our cost of raw materials priced in U.S. dollars, including raw materials whose prices are set with reference to the U.S. dollar. In addition, a depreciation of the Mexican peso or local currencies in the countries where we operate relative to the U.S. dollar will increase our U.S. dollar-denominated debt obligations, which could negatively affect our financial position and results. However, this effect could be offset by a corresponding appreciation of our U.S. dollar-denominated cash position.
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Operating Leverage
Companies with structural characteristics that result in margin expansion in excess of sales growth are referred to as having high “operating leverage.”
The operating subsidiaries of Coca-Cola FEMSA are engaged, to varying degrees, in capital-intensive activities. The high utilization of the installed capacity of the production facilities results in better fixed cost absorption, as increased output results in higher revenues without additional fixed costs. Absent significant increases in variable costs, gross profit margins will expand when production facilities are operated at higher utilization rates. Alternatively, higher fixed costs will result in lower gross profit margins in periods of lower output.
In addition, the commercial operations of Coca-Cola FEMSA are carried out through extensive distribution networks, the principal fixed assets of which are warehouses and trucks and are designed to handle large volumes of beverages. Fixed costs represent an important proportion of the total distribution expense of Coca-Cola FEMSA. Generally, the higher the volume that passes through the distribution system, the lower the fixed distribution cost as a percentage of the corresponding revenues. As a result, operating margins improve when the distribution capacity is operated at higher utilization rates. Alternatively, periods of decreased utilization because of lower volumes will negatively affect our operating margins.
Proximity Americas Division, Proximity Europe Division, the Health Division and the Fuel Division operations are characterized by low margins and relatively high fixed costs. These two characteristics make these segments businesses with an operating margin that might be affected more easily by a change in sales levels.
Critical Accounting Judgments and Estimates
For a description of the critical accounting judgments and estimates made, see Note 2.3 to our consolidated financial statements.
Future Impact of Recently Issued Accounting Standards not yet in Effect
For a description of the new IFRS and amendments to IFRS adopted during 2023, see Note 2.4 to our consolidated financial statements. In addition, for a description of the recently issued accounting standards, see Note 29 to our audited consolidated financial statements.
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Operating Results
The following table sets forth our consolidated income statement under IFRS for the years ended December 31, 2023, 2022 and 2021.

|  |  |  |  | Year Ended December 31,
|  | 2023⁽¹⁾ |  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
|  | (in millions of U.S. dollars and Mexican pesos)
Net sales |  | $ | 41,399 |  |  | Ps. | 699,640 |  |  | Ps. | 595,543 |  |  | Ps. | 504,122 |
Other operating revenues |  |  | 181 |  |  |  | 3,052 |  |  |  | 1,465 |  |  |  | 1,338 |
Total revenues |  |  | 41,580 |  |  |  | 702,692 |  |  |  | 597,008 |  |  |  | 505,460 |
Cost of goods sold |  |  | 25,041 |  |  |  | 423,185 |  |  |  | 355,490 |  |  |  | 299,276 |
Gross profit |  |  | 16,539 |  |  |  | 279,507 |  |  |  | 241,518 |  |  |  | 206,184 |
Administrative expenses |  |  | 1,912 |  |  |  | 32,307 |  |  |  | 28,077 |  |  |  | 22,935 |
Selling expenses |  |  | 11,168 |  |  |  | 188,732 |  |  |  | 149,145 |  |  |  | 129,057 |
Other income |  |  | 775 |  |  |  | 13,102 |  |  |  | 1,051 |  |  |  | 5,566 |
Other expenses |  |  | 370 |  |  |  | 6,252 |  |  |  | 2,896 |  |  |  | 3,725 |
Interest expense |  |  | 883 |  |  |  | 14,916 |  |  |  | 15,853 |  |  |  | 16,630 |
Interest income |  |  | 1,042 |  |  |  | 17,609 |  |  |  | 3,769 |  |  |  | 1,488 |
Foreign exchange (loss) gain, net |  |  | (583) |  |  |  | (9,849) |  |  |  | (3,696) |  |  |  | 1,321 |
Gain on monetary position for subsidiaries in hyperinflationary economies |  |  | 6 |  |  |  | 94 |  |  |  | 531 |  |  |  | 740 |
Market value (loss) gain on financial instruments |  |  | (26) |  |  |  | (440) |  |  |  | (706) |  |  |  | 38 |
Income before income taxes and share in the profit of equity method accounted investees |  |  | 3,420 |  |  |  | 57,816 |  |  |  | 46,496 |  |  |  | 42,990 |
Income taxes |  |  | 768 |  |  |  | 12,971 |  |  |  | 13,275 |  |  |  | 13,566 |
Share in the (loss) profit of equity method accounted investees, net of income taxes |  |  | (24) |  |  |  | (406) |  |  |  | 99 |  |  |  | (10) |
Net income from continuing operations |  |  | 2,628 |  |  |  | 44,439 |  |  |  | 33,320 |  |  |  | 29,414 |
Net income from discontinued operations |  |  | 1,908 |  |  |  | 32,238 |  |  |  | 1,423 |  |  |  | 8,264 |
Consolidated Net Income |  | $ | 4,536 |  |  | Ps. | 76,677 |  |  | Ps. | 34,743 |  |  | Ps. | 37,678 |
Attributable to: |  |  |  |  |  |  |  |  |  |  |  |
Equity holders of the parent |  |  | 3,886 |  |  |  | 65,689 |  |  |  | 23,909 |  |  |  | 28,495 |
Non-controlling interest |  |  | 650 |  |  |  | 10,988 |  |  |  | 10,834 |  |  |  | 9,183 |
Consolidated Net Income |  | $ | 4,536 |  | Ps. | 76,677 |  | Ps. | 34,743 |  | Ps. | 37,678

(1) Translation to U.S. dollar amounts at an exchange rate of Ps. 16.8998 to US$ 1.00, provided solely for the convenience of the reader.
The following table sets forth certain operating results, including intercompany transactions, by reportable segment under IFRS for each of our segments for the years ended December 31, 2023, 2022 and 2021.

|  | Year Ended December 31, |
|  | 2023 |  | 2022 |  | 2021 |  | 2023 vs 2022 |  | 2022 vs 2021 |
|  | (in millions of Mexican pesos, |  | Percentage Growth |
|  | except margins) |  | (Decrease) |
Net sales |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  | Ps. | 244,264 |  |  | Ps. | 226,222 |  |  | Ps. | 193,899 |  |  | 8.0 |  | % | 16.7 |  | %
Proximity Americas Division |  |  | 278,443 |  |  |  | 233,886 |  |  |  | 198,066 |  |  | 19.1 |  | % | 18.1 |  | %
Proximity Europe Division |  |  | 43,552 |  |  |  | 9,809 |  |  |  | — |  |  | 344.0 |  | % | — |  | %
Health Division |  |  | 75,357 |  |  |  | 74,800 |  |  |  | 73,027 |  |  | 0.7 |  | % | 2.4 |  | %
Fuel Division |  |  | 58,437 |  |  |  | 51,759 |  |  |  | 39,871 |  |  | 12.9 |  | % | 29.8 |  | %

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Total revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 245,088 |  |  |  | 226,740 |  |  |  | 194,804 |  |  | 8.1 |  | % | 16.4 |  | %
Proximity Americas Division |  |  | 278,520 |  |  |  | 233,958 |  |  |  | 198,586 |  |  | 19.0 |  | % | 17.8 |  | %
Proximity Europe Division |  |  | 43,552 |  |  |  | 9,809 |  |  |  | — |  |  | 344.0 |  | % | — |  | %
Health Division |  |  | 75,358 |  |  |  | 74,800 |  |  |  | 73,027 |  |  | 0.7 |  | % | 2.4 |  | %
Fuel Division |  |  | 58,499 |  |  |  | 51,813 |  |  |  | 39,922 |  |  | 12.9 |  | % | 29.8 |  | %
Cost of goods sold |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 134,228 |  |  |  | 126,441 |  |  |  | 106,206 |  |  | 6.2 |  | % | 19.1 |  | %
Proximity Americas Division |  |  | 161,458 |  |  |  | 136,372 |  |  |  | 114,390 |  |  | 18.4 |  | % | 19.2 |  | %
Proximity Europe Division |  |  | 24,930 |  |  |  | 5,210 |  |  |  | — |  |  | 378.5 |  | % | — |  | %
Health Division |  |  | 52,859 |  |  |  | 52,817 |  |  |  | 51,291 |  |  | 0.1 |  | % | 3.0 |  | %
Fuel Division |  |  | 51,155 |  |  |  | 45,253 |  |  |  | 34,653 |  |  | 13.0 |  | % | 30.6 |  | %
Gross profit |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 110,860 |  |  |  | 100,300 |  |  |  | 88,598 |  |  | 10.5 |  | % | 13.2 |  | %
Proximity Americas Division |  |  | 117,062 |  |  |  | 97,586 |  |  |  | 84,196 |  |  | 20.0 |  | % | 15.9 |  | %
Proximity Europe Division |  |  | 18,622 |  |  |  | 4,599 |  |  |  | — |  |  | 304.9 |  | % | — |  | %
Health Division |  |  | 22,499 |  |  |  | 21,983 |  |  |  | 21,736 |  |  | 2.3 |  | % | 1.1 |  | %
Fuel Division |  |  | 7,344 |  |  |  | 6,560 |  |  |  | 5,269 |  |  | 12.0 |  | % | 24.5 |  | %
Gross margin (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 45.2 |  | % |  | 44.2 |  | % |  | 45.5 |  | % | 1.0 |  | p.p | (1.3) |  | p.p
Proximity Americas Division |  |  | 42.0 |  | % |  | 41.7 |  | % |  | 42.4 |  | % | 0.3 |  | p.p | (0.7) |  | p.p
Proximity Europe Division |  |  | 42.8 |  | % |  | 46.9 |  | % |  | — |  |  | (4.1) |  | p.p | — |  | p.p
Health Division |  |  | 29.9 |  | % |  | 29.4 |  | % |  | 29.8 |  |  | 0.5 |  | p.p | (0.4) |  | p.p
Fuel Division |  |  | 12.6 |  | % |  | 12.7 |  | % |  | 13.2 |  |  | (0.1) |  | p.p | (0.5) |  | p.p
Administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 12,820 |  |  |  | 11,263 |  |  |  | 9,012 |  |  | 13.8 |  | % | 25.0 |  | %
Proximity Americas Division |  |  | 6,514 |  |  |  | 6,066 |  |  |  | 6,145 |  |  | 7.4 |  | % | (1.3) |  | %
Proximity Europe Division |  |  | 3,231 |  |  |  | 1,294 |  |  |  | — |  |  | 149.7 |  | % | — |  | %
Health Division |  |  | 2,788 |  |  |  | 2,918 |  |  |  | 3,255 |  |  | (4.5) |  | % | (10.4) |  | %
Fuel Division |  |  | 299 |  |  |  | 227 |  |  |  | 290 |  |  | 31.7 |  | % | (21.7) |  | %
Selling expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 63,278 |  |  |  | 57,718 |  |  |  | 51,708 |  |  | 9.6 |  | % | 11.6 |  | %
Proximity Americas Division |  |  | 84,543 |  |  |  | 67,842 |  |  |  | 59,542 |  |  | 24.6 |  | % | 13.9 |  | %
Proximity Europe Division |  |  | 14,371 |  |  |  | 3,112 |  |  |  | — |  |  | 361.8 |  | % | — |  | %
Health Division |  |  | 16,404 |  |  |  | 15,139 |  |  |  | 14,620 |  |  | 8.4 |  | % | 3.5 |  | %
Fuel Division |  |  | 4,548 |  |  |  | 4,084 |  |  |  | 3,571 |  |  | 11.4 |  | % | 14.4 |  | %
Share of the profit of associates and joint ventures accounted for using the equity method, net of taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA |  |  | 215 |  |  |  | 386 |  |  |  | 88 |  |  | (44.3) |  | % | 338.6 |  | %
Proximity Americas Division |  |  | (611) |  |  |  | (276) |  |  |  | (120) |  |  | 121.4 |  | % | 130.0 |  | %

(1)Gross margin is calculated as gross profit divided by total revenues.
(2)As used herein, p.p. refers to a percentage point increase (or decrease) contrasted with a straight percentage increase (or decrease).
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Results from our Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
FEMSA Consolidated
FEMSA’s consolidated total revenues increased 17.7 % to Ps. 702,692 million in 2023 compared to Ps. 597,008 million in 2022 reflecting growth across all of our business units. Coca-Cola FEMSA’s total revenues increased 8.1% to Ps. 245,088 million. Proximity Americas Division's revenues increased 19.0% to Ps. 278,520 million, driven by an average increase of 14.2% in same-store sales and the addition of 1,408 net new stores during the year. Proximity Europe Division's revenues amounted to Ps. 43,552 million for the consolidated period of 2023. The Health Division’s revenues increased 0.7% to Ps. 75,358 million reflecting the addition of 379 net locations across the Health Division's territories, and an increase of 6.1% in same-store sales, partially offset by currency translation effects. The Fuel Division’s revenues increased 12.9% to Ps. 58,499 million in 2023, driven by a 7.8% increase in same-station sales.
Consolidated gross profit increased 15.7% to Ps. 279,507 million in 2023 compared to Ps. 241,518 million in 2022. Gross margin decreased 70 basis points to 39.8% of total revenues compared to 2022, reflecting gross margin contraction at the Fuel Division, as well as the consolidation of Proximity Europe.
Consolidated administrative expenses increased 15.1% to Ps. 32,307 million in 2023 compared to Ps. 28,077 million in 2022. As a percentage of total revenues, consolidated administrative expenses decreased 10 basis points, from 4.7% in 2022, to 4.6% in 2023.
Consolidated selling expenses increased 26.5% to Ps. 188,732 million in 2023 as compared to Ps. 149,145 million in 2022. As a percentage of total revenues, selling expenses increased 190 basis points, from 25.0% in 2022 to 26.9% in 2023.
Some of our subsidiaries pay management fees to us in consideration for corporate services we provide to them. These fees are recorded as administrative expenses in the respective business segments. Our subsidiaries’ payments of management fees are eliminated in consolidation and, therefore, have no effect on our consolidated operating expenses.
Other income mainly reflects the gains on the sale of long-lived assets, recoveries of prior years and dividends from investments in shares. During 2023, other income increased to Ps. 13,102 million from Ps. 1,051 million in 2022, mainly driven by the divestment of FEMSA´s minority stake in Jetro Restaurant Depot and dividends received from our remaining Heineken shares. See Note 20 of our Consolidated Financial Statements.
During 2023, other expenses increased to Ps. 6,252 million from Ps. 2,896 million in 2022. This increase reflects higher impairments of long-lived assets. Additionally, other expenses include donations, disposals of long-lived assets, recovery from prior years, severance payments and contingencies associated with prior acquisitions. See Note 20 of our Consolidated Financial Statements.
Foreign exchange loss was Ps. 9,849 million in 2023 as compared to a loss of Ps. 3,696 million recorded during the same period of 2022, related to the effect of FEMSA's US Dollar-denominated cash position impacted by the appreciation of the Mexican peso during 2023. In addition, we recognized a lower gain in monetary position recording Ps. 94 million in 2023, compared to a Ps. 531 million during the previous year. The market value of financial instruments registered a loss of Ps. 440 million during 2023, as compared to a loss of Ps. 706 million in 2022. Net interest income in 2023 was Ps. 2,693 million, compared to a net interest expense of Ps. 12,084 million in 2022, mainly driven by an increase in interest income from our cash position as a result of higher interest rates and lower interest expense and gains due to the pre-payment of debt during 2023.
Our provision for income taxes in 2023 was Ps. 27,290 million which includes the provision for income taxes from continued operations of Ps. 12,971 million, and Ps. 14,319 million from discontinued operations. The effective tax rate from continued operations in 2023 was 22.7%, compared to 33.0% in 2022 mainly explained by higher deductible taxes driven by a tax deductible component resulting from an exchange loss related to our cash position in dollars. The effective tax rate from discontinued operations was 3.6% in 2023. See Note 25.8 of our Consolidated Financial Statements.
Share in the loss of equity accounted investees, net of taxes, resulted in a loss of Ps. 406 million in 2023 compared to Ps. 99 million in 2022, reflecting a non-recurring loss in Grupo Nós, our JV in Brazil .
Consolidated net income was Ps. 76,677 million in 2023 compared to Ps. 34,743 million in 2022, reflecting (i) higher net income from discontinued operations of Ps. 32,238 million, mainly reflecting the divestiture of FEMSA’s
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investment in Heineken, as part of the FEMSA Forward strategy announced on February 15, 2023. Also, the accounting re-measurement from equity method to fair value of FEMSA’s investment in Heineken, Solistica and other non-core businesses, (ii) higher other income net, of Ps.6,850 million mainly resulting from the recognition of Heineken dividends in the change on accounting method, and the divestment of FEMSA’s minority stake in Jetro Restaurant Depot; these were partially offset by other expenses related to impairments of long-lived assets. Consolidated net income was partially offset by a Ps. 9,849 non-cash foreign exchange loss, related to FEMSA’s U.S. dollar-denominated cash position as impacted by the appreciation of the Mexican peso.
Coca-Cola FEMSA
The comparability of Coca Cola FEMSA's financial and operating performance in 2023 as compared to 2022 was affected by the following factors: (1) translation effects from fluctuations in exchange rates; (2) Coca-Cola FEMSA's results in Argentina, whose economy meets the criteria to be considered a hyperinflationary economy and (3) the ongoing integration of mergers and acquisitions completed in recent years, specifically the acquisitions of CVI in Brazil in January 2022. To translate the full-year results of Argentina for the years ended December 31, 2023 and 2022, Coca-Cola FEMSA's used the exchange rate at December 31, 2023 of 808.45 Argentine pesos per U.S. dollar and the exchange rate at December 31, 2022 of 177.16 Argentine pesos per U.S. dollar. The depreciation of the exchange rate of the Argentine peso at December 31, 2023, as compared to the exchange rate at December 31, 2022, was 356.3%. In addition, the average appreciation of currencies used in Coca-Cola FEMSA's main operations relative to the U.S. dollar in 2023, as compared to 2022, was 3.3% for the Brazilian real and 11.7% for the Mexican peso, and a depreciation of 1.6% for the Colombian peso relative to the U.S. dollar.
Coca-Cola FEMSA’s consolidated total revenues increased by 8.1% to Ps.245,088 million in 2023 as compared to 2022, mainly as a result of volume growth, revenue management initiatives and favorable mix effects. These effects were partially offset by unfavorable currency translation effects from most of Coca Cola FEMSA's operating currencies into Mexican pesos..
Total sales volume increased by 7.8% to 4,047.8 million unit cases in 2023 as compared to 2022, driven mainly by growth in all of Coca Cola FEMSA's territories, including a strong performance in Mexico, Brazil, Colombia and Guatemala in 2023.
•In 2023, sales volume of Coca Cola FEMSA's sparkling beverage portfolio increased by 5.2%, sales volume of Coca Cola FEMSA's colas portfolio increased by 6.1%, and sales volume of Coca-Cola FEMSA’s flavored sparkling beverage portfolio increased by 2.0%, in each case as compared to 2022.
•Sales volume of Coca Cola FEMSA's still beverage portfolio increased by 6.5% in 2023 as compared to 2022.
•Sales volume of Coca Cola FEMSA's bottled water category, excluding bulk water, increased by 17.6% in 2023 as compared to 2022.
•Sales volume of Coca-Cola FEMSA’s bulk water category increased by 24.6% in 2023 as compared to 2022.
Consolidated average price per unit case decreased by 0.4% to Ps.58.54 in 2023, as compared to Ps.58.75 in 2022, mainly as a result of the negative translation effect resulting from the depreciation of most of Coca-Cola FEMSA's operating currencies relative to the Mexican peso. This was partially offset by favorable price-mix effects and revenue management initiatives.
Coca-Cola FEMSA's gross profit increased by 10.5% to Ps.110,860 million in 2023 as compared to 2022, with a gross margin increase of 100 basis points as compared to 2022 to reach 45.2% in 2023. This gross margin increase was mainly driven by Coca-Cola FEMSA’s top-line growth, declining packaging costs, and favorable raw material hedging initiatives. These effects were partially offset by higher sweetener costs across Coca-Cola FEMSA’s territories.
The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to Coca Cola FEMSA's production facilities, wages and other labor costs associated with labor force employed at Coca-Cola FEMSA’s production facilities and certain overhead costs.
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Concentrate prices are determined as a percentage of the retail price of Coca Cola FEMSA's products in local currency, net of applicable taxes. Packaging material purchases, mainly PET resin and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars.
Coca-Cola FEMSA's administrative and selling expenses increased by 10.3% to Ps.76,098 million in 2023 as compared to 2022. Coca-Cola FEMSA's administrative and selling expenses as a percentage of total revenues increased by 60 basis points to 31.0% in 2023 as compared to 2022, mainly driven by increased marketing, maintenance and labor expenses. These effects were partially offset by an operating foreign exchange gain in Mexico as a result of the appreciation of the Mexican Peso. In 2023, Coca-Cola FEMSA’s continued investing across its territories to support marketplace execution, increase its cooler coverage, and increase its production capacity.
Coca-Cola FEMSA recorded other expenses net of Ps.1,272 million in 2023 as compared to Ps.983 million in 2022, this increase was mainly as a result of an increase in provisions for contingencies and a lower gain on sales of long-lived asset compared to 2022. For more information, see Notes 19 and 25.6 to Coca-Cola FEMSA's consolidated financial statements.
Coca-Cola FEMSA's interest expense in 2023 was Ps.7,102 million as compared to Ps.6,500 million in 2022. This 9.3% increase was mainly driven by increases in interest rates that were partially offset by repayments of debt in Mexican Pesos and U.S. dollars.
Coca-Cola FEMSA's interest income in 2023 was Ps. 3,188 million as compared to Ps.2,411 million in 2022. This was mainly driven by an increase in interest rates.
Coca-Cola FEMSA recorded a foreign exchange loss of Ps.1,046 million as compared to a loss of Ps.324 million recorded during the same period in 2022, as Coca-Cola FEMSA's cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso. In addition, Coca-Cola FEMSA recognized a lower gain in monetary position in inflationary subsidiaries, recording Ps.93 million during 2023, as compared to a gain of Ps.536 million during the previous year. This decrease was driven mainly by the significant depreciation of the Argentine Peso during 2023.
Coca-Cola FEMSA recorded a gain in the market value of financial instruments of Ps.169 million during 2023, as compared to a loss of Ps.672 million during 2022. This effect was driven mainly by declining interest rates in Brazil as applied to our floating rate financial instruments.
In 2023, Coca-Cola FEMSA's effective income tax rate increased to 30.50%, as compared to Coca-Cola FEMSA's effective income tax rate of 25.4% in 2022 mainly as a result of lower favorable effects in 2023 in the deferred tax, compared to the favorable effects that were recognized in the previous year. For more information, see Note 24.1 to Coca-Cola FEMSA's consolidated financial statements.
In 2023, Coca-Cola FEMSA recorded a gain of Ps.215 million in the share in the profit of equity accounted investees, net of taxes, mainly due to the results of Jugos del Valle, Coca-Cola FEMSA's associate in Mexico and Fountain Agua Mineral LTDA, as compared to a gain of Ps.386 million registered during the previous year.
Coca-Cola FEMSA reported a net controlling interest income of Ps.19,536 million in 2023, as compared to Ps.19,034 million in 2022. This 2.6% increase was mainly driven by operating income growth, partially offset by an increase in Coca-Cola FEMSA's effective tax rate during the year.
Proximity Americas Division
Proximity Americas Division's total revenues increased 19.0% to Ps. 278,520 million in 2023 compared to Ps. 233,958 million in 2022, reflecting an average increase in same-store sales of 14.2%, resulting from strong performance of the gathering consumer goods category, including beer, snacks and spirits, as well as the sustained recovery of mobility-driven occasions, and the addition of 1,408 net new stores. As of December 31, 2023, there were a total of 22,866 OXXO stores. As referenced above, OXXO same-store sales increased an average of 14.2% compared to 2022, driven by a 8.0% increase in average ticket, and by a 5.8% increase in same-store traffic.
Cost of goods sold increased 18.4% to Ps. 161,458 million in 2023, compared to Ps. 136,372 million in 2022. Gross margin increased 30 basis points to reach 42.0% of total revenues. This increase reflects higher income from
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financial services, and a healthy commercial income dynamic. As a result, gross profit increased 20.0% to Ps. 117,062 million in 2023 compared with 2022.
Administrative expenses increased 7.4% to Ps. 6,514 million in 2023, compared to Ps. 6,066 million in 2022. As a percentage of sales, administrative expenses decreased to 2.3% in 2023, from 2.6% in 2022. . This decrease reflects administrative enduring expense efficiencies and tight expense control. Selling expenses increased 24.5% to Ps. 84,493 million in 2023 compared with Ps. 67,842 million in 2022. As a percentage of sales, selling expenses increased to 30.4% in 2023 from 28.9% in 2022. This was driven by an increase in labor expenses resulting from labor reforms implemented in Mexico during 2023, partially offset by efficiencies within the store operations.
Proximity Europe Division
Proximity Europe Division's total revenues for 2023 amounted to Ps. 43,552 million. As of December 31, 2023, the Proximity Europe Division network was comprised of 2,808 points of sale.
Cost of goods sold amounted to Ps. 24,930 million in 2023. Gross margin was 42.8% of total revenues. As a result, gross profit amounted to Ps. 18,622 million in the consolidated period of 2023.
Administrative expenses amounted to Ps. 3,231 million in 2023. As a percentage of sales, administrative expenses amounted to 7.4% in 2023. Selling expenses amounted to Ps. 14,371 million in 2023. As a percentage of sales, selling expenses amounted to 33.1%.
Health Division
Health Division total revenues increased 0.7% to Ps. 75,358 million compared to Ps. 74,800 million in 2022, reflecting the addition of 379 net new locations during the period. This was driven by a same-store sale increase of 6.1%, reflecting positive trends in our operations in Colombia and Ecuador and stable trends at our Chilean and Mexican operations, partially offset by: i) a foreign currency exchange effect against the Mexican peso; ii) a demanding comparison base in Mexico and Chile; and iii) a challenging competitive environment in Mexico. As of December 31, 2023, there were a total of 4,474 drugstores in Mexico, Chile, Colombia and Ecuador.
Cost of goods sold increased 0.1% to Ps. 52,859 million in 2023, compared with Ps. 52,817 million in 2022. Gross margin increased 50 basis points to reach 29.9% of total revenues. This was mainly driven by: (i) increased promotional activities in our operations in South America; and (ii) improved efficiency and more effective collaboration and execution with key supplier partners in Mexico, partially offset by a negative price-mix effect resulting from an increase in the contribution of our institutional sales channel in Colombia. Gross profit increased 2.3% to Ps. 22,499 million in 2023 compared with 2022.
Administrative expenses decreased 4.5% to Ps. 2,788 million in 2023, compared with Ps. 2,918 million in 2022. As a percentage of sales, administrative expenses decreased to 3.7% in 2023 from 3.9% in 2022. This decrease was driven by cost efficiencies and tight expense control throughout our territories. Selling expenses increased 8.3% to Ps. 16,402 million in 2023 compared with Ps. 15,139 million in 2022. As a percentage of sales, selling expenses reached 21.8% in 2023 from 20.2% in 2022. This increase was mainly driven by the organic growth in Mexico and South America.
Fuel Division
Fuel Division total revenues increased 12.9% to Ps. 58,499 million in 2023 compared to Ps. 51,813 in 2022, reflecting a 7.8% average increase in same-station sales driven by increases in our institutional and wholesale customers and growth in volume and price throughout the year. As of December 31, 2023, there were a total of 571 OXXO Gas service stations. As referenced above, same-station sales increased an average of 7.8% compared to 2022, reflecting a 3.5%, increase in the average price per liter, coupled with a 4.1% increase in average volume, which reflects a gradual recovery of overall consumer mobility.
Cost of goods sold increased 13.0% to Ps. 51,155 million in 2023, compared to Ps. 45,253 million in 2022. Gross margin decreased 10 basis points to reach 12.6% of total revenues. This decrease reflects a negative mix impact driven by volume growth in our institutional and wholesale customer network, partially offset by more favorable supply terms. Gross profit increased 12.0% to Ps. 7,344 million in 2023 compared with 2022.
Administrative expenses increased 31.7% to Ps. 299 million in 2023, compared to Ps. 227 million in 2022. As a percentage of sales, administrative expenses slightly increased to 0.5% in 2023 compared to 0.4% in 2022. The slight increase in administrative expenses reflects Oxxo Gas organic expansion, offset by tight expense control and increased
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expense efficiencies. Selling expenses increased 11.4% to Ps. 4,548 million in 2023 compared with Ps. 4,084 million in 2022. As a percentage of sales, selling expenses decreased 20 basis points to 7.8% in 2023. This reflects a positive operating leverage.
Results from our Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
FEMSA Consolidated
The comparability of our financial and operating performance in 2022 as compared to 2021 was affected by the following factors: (1) translation effects from fluctuations in exchange rates; (2) the ongoing divestment of non-core business which were reclassified into discontinued operations.
FEMSA’s consolidated total revenues increased 18.1% to Ps. 597,008 in 2022 compared to Ps. 505,460 million in 2021 reflecting growth across all of our business units. Coca-Cola FEMSA’s total revenues increased 16.4% to Ps. 226,740 million. Proximity Americas Division's revenues increased 17.8% to Ps. 233,958 million, driven by an average increase of 14.3% in same-store sales and the addition of 1,027 net new stores during the year. Proximity Europe Division's revenues amounted to Ps. 9,809 million for the consolidated period of 2022, which consisted of 23 days of October and the entirety of November and December. The Health Division’s revenues increased 2.4% to Ps. 74.800 million reflecting the addition of 434 net locations across the Health Division's territories, offset by a decrease of 1.0% in same-store sales. The Fuel Division’s revenues increased 29.8% to Ps. 51,813 million in 2022, driven by a 22.4% increase in same-station sales.
Consolidated gross profit increased 17.1% to Ps. 241,518 million in 2022 compared to Ps. 206,184 million in 2021. Gross margin decreased 30 basis points to 40.5% of total revenues compared to 2021, reflecting gross margin contractions in most of FEMSA's business units.
Consolidated administrative expenses increased 22.4% to Ps. 28,077 million in 2022 compared to Ps. 22,935 million in 2021. As a percentage of total revenues, consolidated administrative expenses increased 20 basis points, from 4.5% in 2021, to 4.7% in 2022.
Consolidated selling expenses increased 15.6% to Ps. 149,145 million in 2022 as compared to Ps. 129,057 million in 2021. As a percentage of total revenues, selling expenses decreased 50 basis points, from 25.5% in 2021 to 25.0% in 2022.
Some of our subsidiaries pay management fees to us in consideration of the corporate services we provide to them. These fees are recorded as administrative expenses in the respective business segments. Our subsidiaries’ payments of management fees are eliminated in consolidation and, therefore, have no effect on our consolidated operating expenses.
Other income mainly reflects the gains on the sale of long-lived assets, recoveries of prior years and dividends from investments in shares. During 2022, other income decreased to Ps. 1,051 million from Ps. 5,566 million in 2021, driven by a demanding comparison base, which included dividends from Jetro Restaurant Depot received during 2021.
During 2022, other expenses decreased to Ps. 2,896 million from Ps. 3,725 million in 2021. This decrease reflects an undemanding comparison base which included impairments of long-lived assets reflecting the effect that the COVID-19 pandemic had on our Health Division operations in Ecuador in 2021. Additionally, other expenses include donations, disposal of long-lived assets and contingencies associated with prior acquisitions.
Foreign exchange loss was Ps. 3,696 million in 2022 as compared to a gain of Ps. 1,321 million recorded during the same period of 2021, related to the effect of FEMSA's US Dollar-denominated cash position impacted by the appreciation of the Mexican peso during 2022. In addition, we recognized a lower gain in monetary position recording Ps. 531 million in 2023, compared to a Ps. 740 million during the previous year. The market value of financial instruments registered a loss of Ps. 706 million during 2022, as compared to a gain of Ps. 38 million in 2021. Net interest expense in 2022 was Ps. 12,084 million, compared to Ps. 15,142 million in 2021, mainly driven by an increase in interest income from our cash position as a result of higher interest rates and lower interest expenses.
Our provision for income taxes in 2022 was Ps. 13,275 million, as compared to Ps. 13,566 million in 2021, resulting in an effective tax rate of 28.6% in 2022, as compared to 31.6% in 2021.
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Share of the profit of equity accounted investees, net of taxes, which mainly reflects our participation in Heineken’s results, resulted in an income of Ps. 7,359 million in 2022 compared to Ps. 10,775 million in 2021, reflecting a non-recurring gain reflecting a fair value adjustment from one of Heineken's investments.
Consolidated net income was Ps. 34,743 million in 2022 compared to Ps. 37,678 million in 2021, reflecting (i) higher income from operations across our business units and (ii) a decrease in net interest expense. These were offset by, (i) a Ps. 3,696 non-cash, negative swing in foreign exchange losses, related to FEMSA’s U.S. dollar denominated cash position as impacted by the appreciation of the Mexican peso, (ii) a Ps. 3,831 negative swing in other non-operating expenses which reflect a demanding comparison base that included dividends received from our investment in Jetro Restaurant Depot, and; iii) by a decrease in our participation in associates’ results, which mainly reflects the results of our investment in Heineken.
Coca-Cola FEMSA
The comparability of Coca Cola FEMSA´s financial and operating performance in 2022 as compared to 2021 was affected by the following factors: (1) translation effects from fluctuations in exchange rates; (2) Coca Cola FEMSA´s results in Argentina, whose economy meets the criteria to be considered a hyperinflationary economy and (3) the ongoing integration of mergers and acquisitions completed in recent years, specifically the acquisitions of CVI in Brazil in January 2022. To translate the full-year results of Argentina for the years ended December 31, 2022 and 2021, Coca Cola FEMSA used the exchange rate at December 31, 2022 of 177.16 Argentine pesos per U.S. dollar and the exchange rate at December 31, 2021 of 102.72 Argentine pesos per U.S. dollar. The depreciation of the exchange rate of the Argentine peso at December 31, 2022, as compared to the exchange rate at December 31, 2021, was 72.5%. In addition, the average appreciation of currencies used in Coca Cola FEMSA´s main operations relative to the U.S. dollar in 2022, as compared to 2021, was 4.3% for the Brazilian real and 0.8% for the Mexican peso, and a depreciation of 13.7% for the Colombian peso relative to the U.S. dollar.
Coca Cola FEMSA´s consolidated total revenues. increased by 16.4% to Ps. 226,740 million in 2022 as compared to 2021, mainly as a result of volume growth, revenue management initiatives, and favorable price-mix effects. These effects were partially offset by a decline in beer revenues related to the transition of the beer portfolio in Brazil and unfavorable currency translation effects from most of Coca Cola FEMSA´s operating currencies into Mexican pesos. In addition, for 2021, this line included other operating revenues due to a favorable determination from the Brazilian tax authorities, which allowed recognition of a deferred tax credit in Brazil for Ps. 254 million
Total sales volume increased by 8.6% to 3,755.2 million unit cases in 2022 as compared to 2021, driven mainly by a resilient consumer environment and market share gains in key territories, including double digit volume increases in Brazil, Colombia, Argentina and Guatemala, coupled with solid performances in Mexico and Uruguay.
•In 2022, sales volume of Coca Cola FEMSA´s sparkling beverage portfolio increased by 6.4%, sales volume of Coca Cola FEMSA´s colas portfolio increased by 6.1%, and sales volume of Coca Cola FEMSA´s flavored sparkling beverage portfolio increased by 7.5%, in each case as compared to 2021.
•Sales volume of Coca Cola FEMSA´s still beverage portfolio increased by 21.7% in 2022 as compared to 2021.
•Sales volume of Coca Cola FEMSA´s bottled water category, excluding bulk water, increased by 29.0% in 2022 as compared to 2021.
•Sales volume of Coca Cola FEMSA´s bulk water category increased by 5.8% in 2022 as compared to 2021.
Consolidated average price per unit case increased by 10.9% to Ps.58.75 in 2022, as compared to Ps.52.99 in 2021, mainly as a result of favorable price-mix effects and revenue management initiatives. This was partially offset by the negative translation effect resulting from the depreciation of most of Coca Cola FEMSA´s operating currencies relative to the Mexican peso.
Coca Cola FEMSA´s gross profit increased by 13.2% to Ps.100,300 million in 2022 as compared to 2021, with a gross margin decrease of 130 basis points as compared to 2021 to reach 44.2% in 2022. This gross margin decrease was mainly driven by a tough comparison base due to the recognition of an extraordinary profit of Ps.1,083 million during the second quarter of 2021, related to credits on concentrate purchased from the Manaus Free Trade Zone in
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Brazil, higher concentrate costs in Mexico, and higher raw material costs, mainly PET resin and sweeteners. These effects were partially offset by top-line growth and favorable raw material hedging initiatives.
The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to Coca Cola FEMSA´s production facilities, wages and other labor costs associated with labor force employed at Coca Cola FEMSA´s production facilities and certain overhead costs. Concentrate prices are determined as a percentage of the retail price of our products in local currency, net of applicable taxes. Packaging material purchases, mainly PET resin and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars.
Coca Cola FEMSA´s administrative and selling expenses increased by 13.6% to Ps.68,981 million in 2022 as compared to 2021. Coca Cola FEMSA´s administrative and selling expenses as a percentage of total revenues decreased by 80 basis points to 30.4% in 2022 as compared to 2021, mainly driven by efficiencies in marketing and labor expenses, partially offset by higher fuel and maintenance expenses. In 2022, Coca Cola FEMSA continued investing across their territories to support marketplace execution, increase cooler coverage, and bolster returnable presentation base.
Coca Cola FEMSA recorded other expenses net of Ps.983 million in 2022 as compared to Ps. 807 million in 2021, this increase was mainly as a result of an increase in tax contingencies in Brazil. For more information, see Notes 19 and 25.6 to Coca Cola FEMSA´s consolidated financial statements.
Coca Cola FEMSA´s interest expense in 2022 was to Ps. 6,500 million, as compared to Ps. 6,192 million in 2021, mainly driven by increases in interest rates and partially offset by the tender offer of senior notes completed during the third quarter of 2022.
Coca Cola FEMSA´s interest income in 2022 was Ps. 2,411 million, as compared to Ps. 932 million in 2021. This was mainly driven by increases in interest rates.
Coca Cola FEMSA´s recorded a foreign exchange loss of Ps. 324 million as compared to a gain of Ps. 227 million recorded during the same period in 2021, as Coca Cola FEMSA´s cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso.
Coca Cola FEMSA´s recorded a lower gain in monetary position in inflationary subsidiaries of Ps. 536 million during 2022, as compared to a gain of Ps.734 million during the previous year, mainly resulting from a decrease on the net liability position of Coca Cola FEMSA´s subsidiary in Argentina.
Coca Cola FEMSA´s recognized a loss in the market value of financial instruments of Ps.672 million, as compared to a gain of Ps.80 million during 2021. This effect was driven mainly by an increase in interest rates as applied to Coca Cola FEMSA´s floating rate financial instruments.
In 2022, Coca Cola FEMSA´s effective income tax rate decreased to 25.4%, as compared to an effective income tax rate of 28.9% in 2021 mainly as a result of favorable deferred tax credits. For more information, see Note 24.1 to Coca Cola FEMSA´s consolidated financial statements.
In 2022, Coca Cola FEMSA´s recorded a gain of Ps.386 million in the share in the profit of equity accounted investees, net of taxes, mainly due to the results of Jugos del Valle, Coca Cola FEMSA´s associate in Mexico, as compared to a gain of Ps.88 million registered during the previous year.
Coca Cola FEMSA´s reported a net controlling interest income of Ps. 19,034 million in 2022, as compared to Ps. 15,708 million in 2021. This 21.2% increase was mainly driven by operating income growth, coupled with a decline in Coca Cola FEMSA´s effective tax rate during the year.
Proximity Americas Division
Proximity Americas Division's total revenues increased 17.8% to Ps. 233,958 million in 2022 compared to Ps. 198,586 million in 2021, reflecting an average increase in same-store sales of 14.3%, reflecting the strong performance of the gathering consumer goods category, including beer, snacks and spirits, as well as the sustained recovery of mobility-driven occasions, and the addition of 1,027 net new stores. As of December 31, 2022, there were a total of 21,458 OXXO stores. As referenced above, OXXO same-store sales increased an average of 14.3% compared to 2021, driven by a 10.7% increase in average ticket, and by a 3.6% increase in same-store traffic.
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Cost of goods sold increased 19.2% to Ps. 136,372 million in 2022, compared to Ps. 114,390 million in 2021. Gross margin decreased 70 basis points to reach 41.7% of total revenues. This decrease reflects the impact from OXXO’s fast-growing loyalty program, and a decrease of the contribution of financial services, partially offset by a more dynamic commercial income activity and promotional programs with our key supplier partners. As a result, gross profit increased 15.9% to Ps. 97,586 million in 2022 compared with 2021.
Administrative expenses decreased 1.3% to Ps. 6,066 million in 2022, compared to Ps. 6,145 million in 2021. As a percentage of sales, administrative expenses decreased to 2.6% in 2022. This decrease reflects administrative enduring expense efficiencies and tight expense control. Selling expenses increased 13.9% to Ps. 67,842 million in 2022 compared with Ps. 59,542 million in 2021. As a percentage of sales, selling expenses decreased to 28.9% in 2022 from 29.9% in 2021. This was driven by our continued but gradual shift from commission-based store teams to employee-based teams, partially offset by increased operating leverage.
Proximity Europe Division 1
Proximity Europe Division's total revenues for the consolidated period amounted to Ps. 9,809 million in 2022. As of December 31, 2022, the Proximity Europe Division network was comprised of 2,766 points of sale.
Cost of goods sold amounted to Ps. 5,210 million in 2022. Gross margin was 46.9% of total revenues. As a result, gross profit amounted to Ps. 4,599 million in the consolidated period of 2022.
Administrative expenses amounted to Ps. 1,294 million in 2022. As a percentage of sales, administrative expenses amounted to 13.2% in 2022. Selling expenses amounted to Ps. 3,112 million in 2022. As a percentage of sales, selling expenses amounted to 31.7%.
Health Division
Health Division total revenues increased 2.4% to Ps. 74,800 million compared to Ps. 73,027 million in 2021, reflecting the addition of 434 net new locations during the period. This was offset by: i) a same-store sale decrease of 1.0%, reflecting positive trends in our operations in Mexico, Colombia and Ecuador and stable trends at our Chilean operations offset by the depreciation of the Chilean and Colombian pesos, against the Mexican peso, and; ii) a demanding comparison base driven by COVID-19 economic relief with extraordinary liquidity programs granted by the government in Chile during 2020 and 2021. As of December 31, 2022, there were a total of 4,095 drugstores in Mexico, Chile, Colombia and Ecuador.
Cost of goods sold increased 3.0% to Ps. 52,817 million in 2022, compared with Ps. 51,291 million in 2021. Gross margin decreased 40 basis points to reach 29.4% of total revenues. This was mainly driven by: (i) higher institutional sales in our operations in Chile and Colombia; and (ii) increased promotional activities in our operations in South America. These were offset by improved efficiency and more effective collaboration and execution with key supplier partners in Mexico. Gross profit increased 1.1% to Ps. 21,983 million in 2022 compared with 2021.
Administrative expenses decreased 10.4% to Ps. 2,918 million in 2022, compared with Ps. 3,255 million in 2021 As a percentage of sales, administrative expenses decreased to 3.9% in 2022 from 4.5% in 2021. This decrease was driven by cost efficiencies and tight expense control throughout our territories. Selling expenses increased 3.5% to Ps. 15,139 million in 2022 compared with Ps. 14,620 million in 2021 As a percentage of sales, selling expenses reached 20.2% in 2022 from 20.0% in 2021. This increase was mainly driven by the organic growth in Mexico and South America.
Fuel Division
Fuel Division total revenues increased 29.8% to Ps. 51,813 million in 2022 compared to Ps. 39,922 in 2021, reflecting a 22.4% average increase in same-station sales. As of December 31, 2022, there were a total of 568 OXXO Gas service stations. As referenced above, same-station sales increased an average of 22.4% compared to 2021, reflecting a 6.2%, increase in the average price per liter, coupled with a 15.2% increase in average volume, which reflects a gradual recovery of overall consumer mobility.
Cost of goods sold increased 30.6% to Ps. 45,253 million in 2022, compared to Ps. 34,653 million in 2021. Gross margin decreased 50 basis points to reach 12.7% of total revenues. This decrease reflects a negative mix impact
1 Representing 2 months and 23 days of Valora’s financial results, except for points of sale.
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driven by volume growth in our institutional and wholesale customer network, partially offset by more favorable supply terms. Gross profit increased 24.5% to Ps. 6,560 million in 2022 compared with 2021.
Administrative expenses decreased 21.7% to Ps. 227 million in 2022, compared to Ps. 290 million in 2021. As a percentage of sales, administrative expenses decreased to 0.4% in 2022 from 0.7% in 2021. The decrease in administrative expenses reflects tight expense control and increased expense efficiencies. Selling expenses increased 14.4% to Ps. 4,084 million in 2022 compared with Ps. 3,571 million in 2021. As a percentage of sales, selling expenses decreased 100 basis points to 8.0% in 2022. This reflects a positive operating leverage.
Liquidity and Capital Resources
Liquidity
Each of our operating subsidiaries generally finances its operational and capital requirements on an independent basis. As of December 31, 2023, 55% of our outstanding consolidated total indebtedness was at the level of our operating subsidiaries. This structure is attributable, in part, to the inclusion of third parties in the capital structure of Coca-Cola FEMSA. We have historically raised indebtedness at FEMSA in connection with significant acquisitions or capital expenditures or other transactions at our operating subsidiaries other than Coca-Cola FEMSA.
Our principal source of liquidity has been cash flows from our operations. We have traditionally been able to rely on cash generated from the sales of Coca-Cola FEMSA and Proximity Americas Division, as well as the Health and Fuel Divisions which are either on a cash or short-term credit basis. For the year ended December 31, 2023, our net cash flow from operating activities before changes in working capital was Ps. 90,935 million. We always try to maintain sufficient cash flow to meet our short-term operating costs and short-term debt obligations by using our resources efficiently. For the year ended December 31, 2023, we had a decrease in working capital cash flow of Ps. 3,043 million. Further, this is related with supplier credit net of increase in accounts receivable due to seasonality and inventory purchases, in order to meet growth in anticipated sales, which is a significant cash requirement in operation. We expect our working capital to be sufficient for our current operating cash requirements. However, our operating subsidiaries generally incur short-term indebtedness if they are temporarily unable to finance operations or meet any capital requirements with cash from operations.
Other major cash requirements include obligations to support our ongoing operation, which consist primarily of salary and commissions expenses for employees and contractual obligations for our lease agreements mainly in Proximity Americas Division and Health Division. Additionally, we must face the repayment obligations with our debtholders through periodic payments, which include both principal and interest. We disclose the maturity dates associated with our short- term and long-term financial liabilities as of December 31, 2023, in Note 19 of our audited consolidated financial statements. We generally make payments associated with our financial obligations with cash generated from our operations.
Other principal uses of cash have generally been for capital expenditures, acquisitions, and dividend payments. We continuously evaluate opportunities to pursue acquisitions or engage in joint ventures or other transactions. We would expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness, and capital stock.
If existing cash and cash generated from operations are insufficient to satisfy our liquidity requirements, we expect to continue financing our operations and capital requirements (e.g., acquisitions, investments or capital expenditures) with domestic funding at the level of our operating subsidiaries. Other than in these instances, it is generally more convenient that our foreign operations be financed directly through us because of the more favorable terms of our financing market conditions. Nonetheless, operating subsidiaries may decide to incur indebtedness in the future to finance their operations and capital requirements of our subsidiaries or significant acquisitions, investments, or capital expenditures. As a holding company, we depend on dividends and other distributions from our subsidiaries to service our indebtedness.
A major decline in the business of any of our operating subsidiaries may affect the operating subsidiaries’ ability to fund our capital requirements. A significant and prolonged deterioration of the economies in which we operate or in our businesses may affect our ability to obtain short-term and long-term credit or to refinance existing indebtedness on terms satisfactory to our management.
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The following is a summary of the principal sources and uses of cash for the years ended December 31, 2023, 2022 and 2021 from our consolidated statement of cash flows:
Principal Sources and Uses of Cash
Years ended December 31, 2023, 2022 and 2021
(in millions of Mexican pesos)

|  | 2023 |  | 2022 |  | 2021
Net cash generated by operating activities |  | Ps. | 49,679 |  | Ps. | 72,576 |  | Ps. | 73,090 |
Net cash generated (used in) investing activities |  |  | 132,292 |  |  |  | (46,432) |  |  |  | (46,175) |
Net cash used in financing activities |  |  | (92,552) |  |  |  | (35,898) |  |  |  | (36,989) |
Dividends paid |  |  | (18,798) |  |  |  | (17,506) |  |  |  | (13,399) |

Principal Sources and Uses of Cash for the Year ended December 31, 2023 Compared to the Year Ended December 31, 2022
Our net cash generated by operating activities decreased Ps. 22,897 million to Ps. 49,679 million in 2023 compared to Ps. 72,576 million in 2022. This was primarily the result of:
•A negative change in trade receivables of Ps. 6,440 million due to lower collection to clients as compared to 2022.
•A negative change in income taxes paid of Ps. 11,203 million due to higher payments as compared to 2022; and
•Cash decrease of Ps. 5,903 million related with discontinued operations as compared to 2022.
Our net cash generated by investing activities was Ps. 132,292 million for the year ended December 31, 2023, compared to Ps. 46,432 million used in investing activities for the year ended December 31, 2022, an overall increase in cash outflows related to investing activities of Ps. 178,724 million. This was primarily the result of:
•Higher cash outflows of Ps. 48,555 million due to purchases of cash investments in 2023, as well as proceeds from maturities of cash investments in 2022;
•Lower cash outflows of Ps. 19,972 million due to lower business acquisitions in 2023, as compared to 2022;
•Higher cash inflows of Ps. 165,657 million due to business disposals; and
•Cash inflows of Ps. 42,410 million related with discontinued operations as compared to 2022.
Our net cash used in financing activities was Ps. 92,552 million for the year ended December 31, 2023, compared to Ps. 35,898 million used by financing activities for the year ended December 31, 2022, an overall increase in cash outflows related to financing activities of Ps. 56,654 million. This was primarily due to:
•Lower cash inflows of Ps. 4,617 million mainly due to lower proceeds from bank loans and notes payable in 2023 of Ps. 11,238 million as compared to Ps. 15,855 million in 2022;
•Higher cash outflows of Ps. 33,539 million due to higher payments of bank loans and notes payable in 2023 of Ps. 43,421 million, as compared to Ps. 9,882 million in 2022; and
•Cash outflows of Ps. 19,500 million related with discontinued operations as compared to 2022.
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Principal Sources and Uses of Cash for the Year ended December 31, 2022 Compared to the Year Ended December 31, 2021
This analysis can be found in Item 5 of our annual report on Form 20-F for fiscal year 2022.
Consolidated Total Indebtedness
Our consolidated total indebtedness as of December 31, 2023 was Ps. 136,824 million compared to Ps. 191,741 million in 2022. Short-term debt (including maturities of long-term debt) and long-term debt were Ps. 8,451 million and Ps. 128,373 million, respectively, as of December 31, 2023, as compared to Ps. 18,341 million and Ps. 173,400 million, respectively, as of December 31, 2022 . Cash and cash equivalents were Ps. 165,112 million as of December 31, 2023, as compared to Ps. 83,439 million as of December 31, 2022.
In March and November 2023, we completed tender offers to reduce our indebtedness. As a result of these offers, we acquired Euro and U.S.-dollar denominated bonds, issued by the Company totaling approximately US$ 1,207.2 million and approximately 665.7 million Euros. See "Item 4. Information on the Company—Recent Developments."
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Contractual Obligations
The table below sets forth our contractual obligations as of December 31, 2023.

|  | Maturity
|  | Less than |  |  |  |  |  |  |  | In excess |  |  |
|  | 1 year |  | 1-3 years |  | 3-5 years |  | of 5 years |  | Total
|  | (in millions of Mexican pesos)
Short-Term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  | Ps. | 979 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | 979
Euro |  |  | 15 |  |  | — |  |  | — |  |  | — |  |  | 15
Chilean pesos |  |  | 1,386 |  |  | — |  |  | — |  |  | — |  |  | 1,386
Argentine pesos |  |  | 73 |  |  | — |  |  | — |  |  | — |  |  | 73
Long-Term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  | 594 |  |  | 4,778 |  |  | 20,476 |  |  | 13,925 |  |  | 39,773
Brazilian reais |  |  | 27 |  |  | 8 |  |  | — |  |  | — |  |  | 35
U.S. dollars |  |  | 1,968 |  |  | 115 |  |  | — |  |  | 69,635 |  |  | 71,718
Euro |  |  | 2,316 |  |  | 9,064 |  |  | 5,641 |  |  | 4,731 |  |  | 21,752
Swiss franc |  |  | 1,066 |  |  | — |  |  | — |  |  | — |  |  | 1,066
Chilean pesos |  |  | 27 |  |  | — |  |  | — |  |  | — |  |  | 27
Interest payments (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  | 181 |  |  | 630 |  |  | 1,571 |  |  | 1,360 |  |  | 3,742
Brazilian reais |  |  | — |  |  | 3 |  |  | — |  |  | — |  |  | 3
U.S. dollars |  |  | 71 |  |  | 8 |  |  | — |  |  | 2,359 |  |  | 2,438
Argentine pesos |  |  | 95 |  |  | — |  |  | — |  |  | — |  |  | 95
Chilean pesos |  |  | 133 |  |  | — |  |  | — |  |  | — |  |  | 133
Euro |  |  | 91 |  |  | 238 |  |  | 31 |  |  | 51 |  |  | 411
Swiss franc |  |  | 16 |  |  | — |  |  | — |  |  | — |  |  | 16
Interest rate swaps and cross currency swaps (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  | 1,202 |  |  | 3,128 |  |  | 2,863 |  |  | 3,805 |  |  | 10,998
U.S. dollars |  |  | 786 |  |  | 1,559 |  |  | 890 |  |  | 2,247 |  |  | 5,482
Colombian pesos |  |  | 152 |  |  | 61 |  |  | — |  |  | — |  |  | 213
Argentine pesos |  |  | — |  |  | 3 |  |  | — |  |  | — |  |  | 3
Brazilian reals |  |  | 1,410 |  |  | 2,407 |  |  | 1,411 |  |  | 696 |  |  | 5,924
Chilean pesos |  |  | — |  |  | 133 |  |  | — |  |  | — |  |  | 133
Euro |  |  | 3 |  |  | 88 |  |  | 250 |  |  | 7 |  |  | 348
Swiss franc |  |  | — |  |  | 16 |  |  | — |  |  | — |  |  | 16
Commodity price contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sugar (3) |  |  | 2,593 |  |  | 745 |  |  | — |  |  | — |  |  | 3,338
Aluminum (3) |  |  | 647 |  |  | — |  |  | — |  |  | — |  |  | 647
Expected benefits to be paid for pension and retirement plans, seniority premiums, post-retirement medical services and post-employment |  |  | 1,078 |  |  | 1,345 |  |  | 1,599 |  |  | 5,200 |  |  | 9,222
Lease liabilities |  |  | 24,267 |  |  | — |  |  | 57,694 |  |  | 58,807 |  |  | 140,768
Other long-term liabilities (4) |  |  | — |  |  | — |  |  | — |  |  | 18,605 |  |  | 18,605

(1)Interest was calculated using long-term debt outstanding and interest rates in effect on December 31, 2023 without considering interest rate swap agreements. The debt and applicable interest rates in effect are shown in Note 19 to our audited consolidated financial statements. Liabilities denominated in U.S. dollars were translated to Mexican pesos at an exchange rate of Ps. 16.8998 per US$ 1.00, the exchange rate quoted to us by Banco de México for the settlement of obligations in foreign currencies on December 31, 2023.
(2)Reflects the amount of future payments that we would be required to make. The amounts were calculated by applying the rates giving effect to interest rate swaps and cross-currency swaps applied to long-term debt as of December 31, 2023, and the market value of the unhedged cross-currency swaps.
(3)Reflects the notional amount of the futures and forward contracts used to hedge sugar, aluminum and PX + MEG cost with a fair value asset of Ps. 25 million. See Note 21.5 to our audited consolidated financial statements.
(4)Other long-term liabilities include provisions and others, but not deferred taxes. Other long-term liabilities additionally reflect those liabilities whose maturity date is undefined and depends on a series of circumstances out of our control; therefore, these liabilities have been considered to have a maturity of more than five years.
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As of December 31, 2023, Ps. 8,451 million of our total consolidated indebtedness was short-term debt (including maturities of long-term debt).
As of December 31, 2023, our consolidated average cost of borrowing, after giving effect to the cross-currency and interest rate swaps, was approximately 7.1%, as compared to 4.8% at December 31, 2022 (the total amount of debt used in the calculation of this percentage was obtained by converting only the units of investment debt for the related cross-currency swap, and it also includes the effect of related interest rate swaps). As of December 31, 2023, after giving effect to cross-currency swaps, approximately 52.5% of our total consolidated indebtedness was denominated and payable in Mexican pesos, 26.3% in U.S. dollars, 10.3% in Brazilian reais, 8.5% in euros, 0.6% in Colombian pesos, 0.7% in Swiss franc, 1.0% in Chilean pesos and the remaining 0.1% in Argentine pesos.
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Overview of Debt Instruments
The following table shows the allocations of total debt of our company as of December 31, 2023:

|  | Total Debt Profile of the Company
|  | FEMSA and |  | Coca-Cola |  | Proximity |  | Proximity |  | Health |  | Total |
|  | Others |  | FEMSA |  | Americas |  | Europe |  | Division |  | Debt |
|  | In millions of Mexican pesos
Short-term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  | Ps. | — |  | Ps. | — |  | Ps. | 979 |  | Ps. | — |  | Ps. | — |  | Ps. | 979 |
Chilean pesos: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank Loans |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,386 |  |  | 1,386 |
Argentine pesos: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  | 73 |  |  | — |  |  | — |  |  | — |  |  | 73 |
Euros: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  | 15 |  |  | — |  |  | — |  |  | — |  |  | 15 |
Long-term Debt (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  | — |  |  | 1,909 |  |  | — |  |  | — |  |  | 1,909 |
Senior notes |  |  | 9,260 |  |  | 28,599 |  |  | — |  |  | — |  |  | — |  |  | 37,859 |
U.S. dollars: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 4 |  |  | 140 |  |  | — |  |  | — |  |  | 1,943 |  |  | 2,087 |
Senior Notes |  |  | 33,284 |  |  | 36,352 |  |  | — |  |  | — |  |  | — |  |  | 69,636 |
Brazilian reais: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank Loans |  |  | — |  |  | 35 |  |  | — |  |  | — |  |  | — |  |  | 35 |
Chilean pesos: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank Loans |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27 |  |  | 27 |
Euros: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes |  |  | 18,988 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18,988 |
Promissory notes |  |  | — |  |  | — |  |  | — |  |  | 2,764 |  |  | — |  |  | 2,764 |
Swiss franc: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  |  | — |  |  | — |  |  | — |  |  | 1,066 |  |  | — |  |  | 1,066 |
Total Debt |  | Ps. | 61,536 |  | Ps. | 65,214 |  | Ps. | 2,888 |  | Ps. | 3,830 |  | Ps. | 3,356 |  | Ps. | 136,824 |
Average Cost (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  | 9.1 | % |  | 8.8 | % |  | 28.2 | % |  | — |  |  | — |  |  | 9.1 | %
U.S. dollars |  |  | 2.9 | % |  | 4.6 | % |  | — |  |  | — |  |  | 3.6 | % |  | 3.4 | %
Euros |  |  | 2.6 | % |  | 17.6 | % |  | — |  |  | 3.6 | % |  | — |  |  | 2.9 | %
Brazilian reais |  |  | — |  |  | 9.6 | % |  | — |  |  | — |  |  | — |  |  | 9.6 | %
Colombian pesos |  |  | — |  |  | 6.3 | % |  | — |  |  | — |  |  | — |  |  | 6.3 | %
Chilean pesos |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9.4 | % |  | 9.4 | %
Swiss franc |  |  | — |  |  | — |  |  | — |  |  | 1.5 | % |  | — |  |  | 1.5 | %
Total |  |  | 5.7 | % |  | 8.4 | % |  | 12.8 | % |  | 3.0 | % |  | 6.0 | % |  | 7.1 | %

(1)Includes the Ps. 5,998 million current portion of long-term debt.
(2)Includes the effect of cross-currency and interest rate swaps. Average cost is determined based on interest rates as of December 31, 2023.
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Summary of Significant Debt Instruments

Issue Year |  | Maturity |  | Amount Issued |  | Amount Outstanding |  | Rate
2022 |  | 2027 |  | Ps. 827 million |  | Ps. 827 million |  | 28-day TIIE + 0.10%
2022 |  | 2032 |  | Ps. 8,446 million |  | Ps. 8,446 million |  | 9.65 | %
2021 |  | 2033 |  | EUR€ 500 million |  | EUR€ 241 million |  | 1.00 | %
2021 |  | 2028 |  | EUR€ 700 million |  | EUR€ 293 million |  | 0.500 | %
2020 |  | 2050 |  | US$ 2,500 million |  | US$ 1,557 million |  | 3.500 | %
2013 |  | 2043 |  | US$ 700 million |  | US$ 426 million |  | 4.375 | %
2023 |  | 2026 |  | EUR€ 500 million |  | EUR€ 500 million |  | 2.625 | %

Restrictions Imposed by Debt Instruments
Generally, the covenants contained in the credit agreements and other instruments governing indebtedness entered into by us or our operating subsidiaries include limitations on the incurrence of any additional debt based on debt service coverage ratios or leverage tests. These credit agreements also generally include restrictive covenants applicable to our company, our operating subsidiaries and their subsidiaries.
We and our operating subsidiaries are in compliance with all of our covenants. A significant and prolonged deterioration in our consolidated results could cause us to cease to be in compliance under certain indebtedness in the future. We can provide no assurances that we will be able to incur indebtedness or to refinance existing indebtedness on similar terms in the future.
Summary of Liquidity
We believe that the funds of cash and cash equivalents, in addition to the cash generated by our operations, are sufficient to meet our operating requirements.
The following is a summary and description of our liquidity as of December 31, 2023:
Coca-Cola FEMSA
•Coca-Cola FEMSA’s total indebtedness was Ps. 65,214 million as of December 31, 2023, as compared to Ps. 78,669 million as of December 31, 2022. Short-term debt and long-term debt were Ps. 140 million and Ps. 65,074 million, respectively, as of December 31, 2023, as compared to Ps. 8,524 million and Ps. 70,145 million, respectively, as of December 31, 2022. Total indebtedness decreased Ps. 13,455 million in 2023, as compared to year-end 2022. As of December 31, 2023, Coca-Cola FEMSA’s cash and cash equivalents were Ps. 31,060 million, as compared to Ps. 40,277 million as of December 31, 2022. Coca-Cola FEMSA had cash outflows in 2023 mainly resulting from dividend payments and repayment of debt. As of December 31, 2023, Coca-Cola FEMSA’s cash and cash equivalents were comprised of 51.8% U.S. dollars, 14.7% Mexican pesos, 22.9% Brazilian reais, 3.2% Colombian pesos, 1.6% Argentine pesos and 5.8% other legal currencies. Coca-Cola FEMSA believes that these funds, in addition to the cash generated by its operations, are sufficient to meet their own operating requirements.
Proximity Americas Division
•As of December 31, 2023, Proximity Americas Division had a total outstanding debt of Ps 2,887 million. Short-term debt (including the current portion of long-term debt) and long-term debt were Ps. 978 million and Ps. 1,909 million, respectively. As of December 31, 2023 and 2022, cash and cash equivalents were Ps. 12,487 and Ps. 8,828 million, respectively.
Proximity Europe Division
•As of December 31, 2023, Proximity Europe Division had a total outstanding debt of Ps. 3,830 million. Short-term debt (including the current portion of long-term debt) and long-term debt were Ps. 3,382 million and Ps. 448 million, respectively. As of December 31, 2023, cash and cash equivalents were Ps. 2,330 million.
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Health Division
•As of December 31, 2023, Health Division had a total outstanding debt of Ps. 3,356 million. Short-term debt (including the current portion of long-term debt) and long-term debt were Ps. 1,387 million and Ps. 1,969 million, respectively. As of December 31, 2023 and 2022, cash and cash equivalents were Ps. 3,694 and Ps. 3,085 million, respectively.
Other Businesses
•As of December 31, 2023, FEMSA and other businesses had a total outstanding debt of Ps. 61,536 million, , which is composed of Ps. 4 million of bank debt in other legal currencies, Ps. 7,121 million of senior notes due 2043, Ps. 26,162 million of senior notes due 2050, Ps. 9,924 million of Senior Unsecured Notes due 2028 and 2033, Ps. 9,260 million of senior notes due 2027 and 2032 and Ps. 9,064 million of Senior Unsecured Notes due 2026. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Liquidity.” FEMSA and other businesses’ average cost of debt, after giving effect to interest rate swaps and cross-currency swaps, as of December 31, 2023, was 9.1% in Mexican pesos. As of December 31, 2023 and 2022, cash and cash equivalents were Ps. 113,045 and Ps. 25,595 million, respectively.
Contingencies
We have various loss contingencies, for which reserves have been recorded in those cases where we believe an unfavorable resolution is probable and can be reasonably quantified. See “Item 8. Financial Information—Legal Proceedings.” Any amounts required to be paid in connection with these loss contingencies would be required to be paid from available cash.
The following table presents the nature and amount of loss contingencies recorded as of December 31, 2023:

|  | Loss Contingencies
|  | As of December 31,
|  | 2023
|  | (in millions of Mexican pesos)
Taxes, primarily indirect taxes |  | Ps. | 1,649
Legal |  |  | 1,104
Labor |  |  | 1,570
Total |  | Ps. | 4,323

In Brazil, Coca-Cola FEMSA has been required by the relevant tax authorities to collateralize tax contingencies currently in litigation amounting to Ps.13,692, Ps.13,728 million and Ps.10,721 million as of December 31, 2023, 2022 and 2021, respectively, by pledging fixed assets or providing bank guarantees.
We have other contingencies that, based on a legal assessment of their risk of loss, have been classified by our internal legal counsel as more than remote but less than probable. These contingencies have a financial impact that is disclosed as loss contingencies in Note 26.7 of the audited consolidated financial statements. These contingencies, or our assessment of them, may change in the future, and we may record reserves or be required to pay amounts in respect of these contingencies. As of December 31, 2023, the aggregate amount of such contingencies for which we had not recorded a reserve was Ps.140,462 million.
Capital Expenditures and Divestitures
For the past five years, we have had significant capital expenditure programs, which for the most part were financed with cash from operations. Capital expenditures, net of disposals were Ps. 38,611 million in 2023, compared to Ps. 34,410 million in 2022, an increase of 12.2%. The amount invested in 2023 was driven by additional investments mainly related to the opening of new stores, drugstores and retail service stations. The principal components of our capital expenditures have been investments in increasing production capacity, placing coolers with retailers, returnable bottles and cases and distribution network expansion at Coca-Cola FEMSA and expansion of Proximity Americas Division, Proximity Europe Division, the Health Division and the Fuel Division, as mentioned above. See “Item 4. Information on the Company—Capital Expenditures and Divestitures.”
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Expected Capital Expenditures for 2024
Our capital expenditure budget for 2024 is expected to be Ps. 51,354 million (US$ 2,982 million). The following discussion is based on each of our sub-holding companies’ internal budgets. The capital expenditure plan for 2024 is subject to change based on market and other conditions, and our subsidiaries’ results and financial resources.
Coca-Cola FEMSA has budgeted approximately Ps. 24,359 million (US$ 1,415 million) for its capital expenditures in 2024, which amount will primarily focus on strengthening its infrastructure, especially returnable bottles and cases, investments in information technology and investments in assets that increase its presence in the market. As is customary, this amount will depend on market and other conditions.
Coca-Cola FEMSA has budgeted capital expenditures in an amount ranging between 8.0% and 9.0% of total revenues for 2024, which amount will primarily focus on strengthening infrastructure, especially returnable bottles and cases, investments in information technology and investments in assets that increase its presence in the market. As is customary, this amount will depend on market and other conditions, including the further development of the COVID-19 pandemic across its territories.
Coca-Cola FEMSA estimates that of its projected capital expenditures for 2024, approximately 36.7% will be for its Mexican territories and the remaining will be for its non-Mexican territories. Coca-Cola FEMSA believes that internally generated funds will be sufficient to meet its budgeted capital expenditure for 2024.
Proximity Americas Division’s capital expenditures budget in 2024 is expected to total Ps. 20,527 million (US$ 1,192 million) and will be allocated to the opening of new OXXO stores and the refurbishing of existing OXXO stores. In addition, investments are planned for IT systems, ERP software updates and transportation equipment.
Proximity Europe Division’s capital expenditures budget in 2024 is expected to total Ps. 3,226 million (US$ 187 million) and will be allocated to opening of new stores and the refurbishing of stores.
The Health Division’s capital expenditures budget in 2024 is expected to total Ps. 2,302 million (US$ 134 million) and will be allocated to the opening of new locations and, to a lesser extent, the refurbishing of existing locations. In addition, investments are planned in warehouses, IT hardware and ERP software updates.
The Fuel Division’s capital expenditures budget in 2024 is expected to total Ps. 554 million (US$ 32 million) and will be allocated to the opening of new service stations, to the refurbishing of existing OXXO Gas service stations and to adding vapor recovery units on the service stations.
Our capital expenditures budget in 2024 for Other Businesses is expected to total Ps. 385 million (US$ 22 million) and will be allocated to the opening of new Bara stores and others.
Divestitures
As part of our FEMSA Forward strategy: (1) in May 2023, we sold 13.9% of outstanding ordinary shares of Heineken, retaining less than 1% of outstanding ordinary shares of Heineken, (2) in June 2023, we successfully finalized the divestment of our interest in Jetro Restaurant Depot, and (3) in October 2023, we merged Envoy Solutions with BradyIFS and retained an ownership stake of 37% in the combined entity. See "Item 4—Strategic Development of our Business.”
We expect to divest our interests in Solistica and other non-core businesses within a year from the date of this annual report.
Hedging Activities
In the ordinary course of business we may enter into derivative instruments to hedge our exposure to market risks related to changes in interest rates, foreign currency exchange rates and commodity price risk. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
The following table provides a summary of the fair value and maturity of derivative financial instruments as of December 31, 2023. If such instruments are not traded in a formal market, fair value is determined by applying
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techniques based upon technical models we believe are supported by sufficient, reliable and verifiable market data, recognized in the financial sector.

|  | Fair Value At December 31, 2023
|  | Maturity |  |  |  |  |  |  |  | Maturity |  | Fair Value
|  | less than |  | Maturity |  | Maturity |  | in excess of |  | Asset
|  | 1 year |  | 1-3 years |  | 3-5 years |  | 5 years |  | (Liability)
|  | (in millions of Mexican pesos)
Derivative financial instruments position |  | Ps. | (307) |  | Ps. | (874) |  | Ps. | (1,293) |  | Ps. | (2,478) |  | Ps. | (4,952)

Off-balance sheet arrangements
We do not have any off balance sheet arrangements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
Management of our business is vested in the board of directors and in our chief executive officer. Our bylaws provide that the board of directors will consist of no more than 21 directors and their corresponding alternate directors elected by our shareholders at the AGM. Directors are elected for a term of one year. Alternate directors are authorized to serve on the board of directors in place of their specific directors who are unable to attend meetings and may participate in the activities of the board of directors. Our bylaws provide that the holders of the Series B Shares elect at least nine directors and that the holders of the Series D Shares elect five directors. See “Item 10. Additional Information—Bylaws.”
In accordance with our bylaws and article 24 of the Mexican Exchange Market Law, at least 25% of the members of our board of directors must be independent (as defined by the Mexican Exchange Market Law).
The board of directors may appoint interim directors in the event that a director is absent or an elected director and corresponding alternate are unable to serve. Such interim directors shall serve until the next, at which the shareholders shall ratify or elect a replacement.
Our bylaws provide that the board of directors shall meet at least once every three months and actions by the board of directors must be approved by at least a majority of the directors present and voting. The chairman of the board of directors, the chairman of our audit or corporate practices and nominating committee or at least 25% of our directors may call a board of directors’ meeting and include matters in the meeting agenda.
Our board of directors was elected at the AGM held on March 22, 2024, and currently comprises fifteen directors, out of which ten were elected by Series B shareholders and five were elected by Series D shareholders, and fourteen alternate directors, out of which ten were elected by Series B shareholders and four were elected by Series D shareholders. The following table sets forth the current members of our board of directors:
Series B Directors

José Antonio Fernández Carbajal(1)(2)(8) Executive Chairman of the Board |  | Born: |  | 1954
|  | Appointed to the Board: |  | 1984 as board member.
|  |  | 2001 as chairman of the board.
| Term expires: |  | 2025
| Principal occupation: |  | Executive Chairman of the board of directors of Fomento Economico Mexicano, S.A.B. de C.V. ("FEMSA") and Chief Executive Officer of FEMSA.
|  | FEMSA Committees: |  | Chairman of the Operations and Strategy Committee.

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|  | Public Companies Directorships |  | Executive chairman of the board of directors of FEMSA and chairman of the board of directors of Coca-Cola FEMSA. Member of the board of directors of Industrias Peñoles, S.A.B. de C.V. (“Peñoles”).
|  | Other Directorships: |  | Chairman of the board of directors of Fundación FEMSA, A.C. (“Fundación FEMSA”) and member of the boards of directors of Massachusetts Institute of Technology (“MIT”), of Instituto Tecnológico y de Estudios Superiores de Monterrey (“ITESM”), and member of the board of global advisors of the Council for Foreign Relations.
|  | Business experience and expertise: |  | Joined FEMSA in 1988 holding positions of Deputy Chief Executive Officer, Chief Operating Officer of FEMSA, Commercial Vice-President of Cerveceria Cuauhtémoc Moctezuma, Chief Executive Officer of Cadena Comercial OXXO and Strategic Planning Manager of Grupo Visa. In 1995 he was named Chief Executive Officer of FEMSA and, in 2001, Chairman of the board of directors of the Company, both positions held until December 2013. His extensive background and experience brings to the board a stategic vision, conscientious leadership, deep industry knowledge, talent attraction skills, culture and governance enhancement, as well as a strong understanding of Latin American markets.
|  | Education: |  | Holds a degree in Industrial Engineering and a Master’s degree in Business Administration (“MBA”) from ITESM.
|  | Alternate director: |  | Francisco Javier Fernández Carbajal(2)
Bárbara Garza Lagüera Gonda(3)(6) |  | Born: |  | 1959
Director |  | Appointed to the Board: |  | 1998
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Private investor.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA. Fresnillo PLC ("Fresnillo") Grupo Aeroportuario del Sureste, S.A.B. de C.V.

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|  | Other directorships: |  | Member of the boards of directors of ITESM, Inmobiliaria Valmex, S.A. de C.V. (“Valmex”), Peñitas, S.A. de C.V. ("Peñitas"), Desarrollo Inmobiliario la Sierrita, S.A. de C.V. ("Desarrollo Inmobiliario la Sierrita"), Refrigeración York, S.A. de C.V. ("Refrigeración York"), Controladora Pentafem, S.A.P.I. de C.V., BECL, S.A. de C.V., Board of Trustees of the International Council of the Museum of Modern Art, Board of Trustees of Museo de Arte Contemporáneo, A.C., Board of Trustees of Fondo para la Paz IAP and Board of Trustees of the Franz Mayer Museum.
|  | Business experience and expertise: |  | She serves as Chairwoman of the Acquisition Committee of the FEMSA Collection. She is a member of the boards of several companies, that allow her to have broad financial, corporate governance and cultural knowledge that provides strategic focus and leadership in the decision making process.
|  | Education: |  | Holds a Business Administration degree from ITESM and an MBA from ITESM.
|  | Alternate director: |  | Javier Gerardo Astaburuaga Sanjinés.
Mariana Garza Lagüera Gonda(3)(6) |  | Born: |  | 1970
Director |  | Appointed to the Board: |  | 2005
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Private Investor.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA.
|  | Other directorships: |  | Member of the board of directors of ITESM, Board of Trustees of Museo de Historia Mexicana, A.C., Board of Trustees of Hospital Metropolitano de Monterrey, A.C., Patronage Instituto Renace, A.B.P., Valmex, Desarrollo Inmobiliario la Sierrita, Refrigeración York, Peñitas, and Monte Serena, S.A. de C.V.
|  | Business experience and expertise: |  | She is a solid contributor with a high level of expertise in finance and corporate governance, she also provides extensive philanthropic, cultural and leadership knowledge, contributing to the fulfillment of strategic objectives and decision making.
|  | Education: |  | Holds a Industrial Engineering degree from ITESM and a Master's degree in International Management from Thunderbird American School of Global Management.
|  | Alternate director: |  | José Antonio Fernández Garza Lagüera.(8)
Francisco José Calderón Rojas(4) |  | Born: |  | 1966
Director |  | Appointed to the Board: |  | 2023
|  | Term expires: |  | 2025

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|  | Principal occupation: |  | President of Regio Franca, S.A. de C.V.
|  | Public Companies Directorships: |  | Member of the boards of directors of FEMSA and Alpek, S.A.B. de C.V.
|  | Other Directorships: |  | Regio Franca, S.A. de C.V. ("Regio Franca") Chairman and Executive Officer, member of the board of directors of Universidad de Monterrey and of the Regional Council of BBVA Bancomer.
|  | Business experience and expertise: |  | He served as Chairman and former Director of Planning and Finance of Regio Franca, as well as Chairman of Franca Servicios and Director of Planning and Finance of Servicios Administrativos de Monterrey, S.A. de C.V. His knowledge and solid experience in the financial and planning sectors provide optimal economic strategies in several sectors or lines of business, such as banking, investment management and global markets.
|  | Education: |  | Holds a degree in Economics from ITESM and an MBA from the University of California, L.A. (UCLA).
|  | Alternate director: |  | Diego Eugenio Calderon Rojas(4)
Alfonso Garza Garza(5)(6) Director |  | Born: |  | 1962
| Appointed to the Board: |  | 2016
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Private investor.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA.
|  | Other Directorships: |  | Member of the boards of directors of ITESM, Grupo Nutec, S.A. de C.V., Chairman of Fondo Ambiental Metropolitano de Monterrey, A.C. (FAMM), Fundación FEMSA, Board of Trustees of Parque Ecológico Chipinque A.B.P., and Asociación Nacional Pro Superación Personal, A.C.
|  | Business experience and expertise: |  | He has extensive track record, having served as Vice President of Strategic Businesses and Vice President of Human Resources at FEMSA, as well as Chief Executive Officer of FEMSA Empaques and Grafo Regia. During his tenure at Cervecería Cuauhtémoc Moctezuma, he held positions as Director of Procurement, Exports Manager, Procurement Manager and Exports Executive. With his experience he provides a broad focus in the fast-moving consumer goods (FMCG) industry, corporate governance, innovation and technology, highlighting his leadership and strategic vision.
|  | Education: |  | Holds an Industrial Engineering degree from ITESM and a MBA from Instituto Panamericano de Alta Dirección de Empresa (“IPADE”).
|  | Alternate director: |  | Juan Carlos Garza Garza(5)(6)
Bertha Paula Michel González(7) |  | Born: |  | 1964
Director |  | Appointed to the Board: |  | 2020

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|  | Term expires: |  | 2025
|  | Principal occupation: |  | Chairwoman of Casa Córdoba.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA.
|  | Other Directorships: |  | Member of the boards of directors of French Circle of Mexico, A.C. and ITESM.
|  | Business experience and expertise: |  | Currently chairs Casa Córdoba, a philantropic initiative that seeks to create networks of collaboration and support for organizations that carry out social impact work. She also has an extensive trajectory as teacher and researcher. She was a professor at the Faculty of Sciences of the Universidad Autónoma de México ("UNAM"), and Associate Researcher at the Institute of Physiology. In addition, she has a Postdoctoral fellowship at Harvard Medical School. With her experience in areas of research, innovation and technology, she offers a global impact approach- that enables the expansion of projects and creation of solutions.
|  | Education: |  | Holds a degree in Basic Biomedical Research from UNAM, and Master’s degree in Basic Biomedical Reseach from UNAM and a doctorate in Biotechnology from UNAM.
|  | Alternate director: |  | Maximino José Michel González(7)
Alejandro Bailléres Gual |  |  |  |
Director |  | Born: |  | 1960
| Appointed to the Board: |  | 2019
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Chairman of the Board of Governors of the Instituto Tecnológico y Autónomo de México ("ITAM"), and Chairman of the board of directors of Fundación Alberto Bailleres, A.C.
|  | Public Companies Directorships: |  | Member of the boards of directors of FEMSA, Chairman of the board of directors of Peñoles, Chairman of the board of directors of Grupo Nacional Provincial, S.A.B. (“GNP”), Chairman of the board of directors of Fresnillo plc (“Fresnillo”), Chairman and Chief Executive Officer of Grupo Palacio de Hierro, S.A.B. de C.V. (“Palacio de Hierro”), and Chairman and Chief Executive Officer of Grupo Profuturo, S.A.B. de C.V.
|  | Other directorships: |  | Chairman of the board of directors of Profuturo Pensiones, S.A. de C.V., Profuturo Afore, S.A. de C.V., Tane, S.A. de C.V., ElectroBal, S.A. de C.V., Energía Bal, S.A. de C.V., and member of the board of directors of Valores Mexicanos Casa de Bolsa, S.A. de C.V.

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|  | Business experience and expertise: |  | He is currently Chairman of the Board of Governors of the ITAM, Chairman of the board of directors of the Fundación Alberto Bailleres, A.C. and former Chief Executive Officer of GNP. He has extensive experience in public companies, with in-depth knowledge in risk management, corporate governance and Latin American markets.
|  | Education: |  | Executive Program from Stanford University.
|  | Alternate director: |  | Arturo Fernández Pérez
Paulina Garza Lagüera Gonda(3)(6) |  | Born: |  | 1972
| Appointed to the Board: |  | 2004
Director |  | Term expires: |  | 2025
|  | Principal occupation: |  | Private Investor.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA.
|  | Business experience and expertise: |  | As a private investor, she has a high level of business and leadership knowledge and contributes to decision making from a strategic and financial perspective.
|  | Education: |  | Holds a Business Administration degree from ITESM.
|  | Alternate director: |  | Eva María Garza Lagüera Gonda.(1)(3)(6)(8)
Olga González Aponte Independent Director |  |  |  |
|  | Born: |  | 1966
| Appointed to the Board: |  | 2024
| Term expires: |  | 2025
|  | Principal occupation: |  | Executive Chairman and Chief Executive Officer of Wild Fork US.
|  | FEMSA Committees: |  | Audit Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA, and WM Technology, Inc.
|  | Business experience and expertise: |  | She is currently Chief Executive Officer and president of Wild Fork US. Former Senior Vice President and Chief Financial Officer of Walmart México and Central America. She has held international internal audit and CFO roles for Walmart, Inc., with assignments in Chile and México. She has experience in public companies having served on the board of directors of Walmart of Mexico and Central America. She has extensive knowledge in finance and auditing, risk management, corporate governance, as well as Latin American markets.
|  | Education: |  | Holds an accounting degree from the Pontificia Universidad Católica de Puerto Rico and a MBA from Florida International University.
|  | Alternate director: |  | Enrique F. Senior Hernández.

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Michael Larson |  | Born: |  | 1959
Independent Director |  | Appointed to the Board: |  | 2011
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Chief Investment Officer of Cascade Asset Management Company (William H. Gates III).
|  | FEMSA Committees: |  | Operations and Strategy Committee.
|  | Public Companies Directorships: |  | Member of the boards of directors of FEMSA, Ecolab, Inc., Republic Services, Inc., and Western Asset Funds.
|  | Business experience and expertise: |  | He has more than 40 years of portfolio management experience, a deep investment expertise and a broad understanding of capital markets, business cycles and capital allocation and efficiency practices. He has also served on other public company boards providing him with relevant corporate governance experience.
|  | Education: |  | Holds a Bachelor of Arts degree from Claremont McKenna College and an MBA from the University of Chicago.
|  | Alternate director: |  | Ricardo Guajardo Touché

Series D Directors

Ricardo Ernesto Saldívar Escajadillo Independent Director |  | Born: |  | 1952
| Appointed to the Board: |  | 2015
| Term expires: |  | 2025
|  | Principal occupation: |  | Private Investor.
|  | FEMSA Committees: |  | Chairman of the Corporate Practices and Nominating Committee and the Operations and Strategy Committee.
|  | Public Companies Directorships: |  | Member of the boards of directors of FEMSA, Axtel, S.A.B. de C.V., and Grupo Industrial Saltillo, S.A.B. de C.V.
|  | Other Directorships: |  | Chairman of the board of directors of ITESM, and member of the board of directors of Sigma Alimentos, S.A. de C.V.
|  | Business experience and expertise: |  | Held position as Chief Executive Officer and Chairman of the board of directors of The Home Depot México. He previously held various executive positions at Grupo Alfa as well as serving as Chairman of the board of directors of Universidad Tecmilenio. His leadership and vision bring a clear understanding of the retail industry, complemented by extensive knowledge in management, innovation and technology and management, as well as experience in public companies, corporate governance and Latin American markets.
|  | Education: |  | Holds a Mechanical Engineering Administrator degree from ITESM, a Master’s degree in Systems Engineering from Georgia Tech Institute and a diploma in Business Administration from IPADE.

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Víctor Alberto Tiburcio Celorio |  | Born: |  | 1951
Independent Director and Financial Expert |  | Appointed to the Board: |  | 2019
|  | Term expires: |  | 2025
|  | Principal occupation: |  | Independent Consultant.
|  | FEMSA Committees: |  | Chairman of the Audit Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA, Coca-Cola FEMSA, Palacio de Hierro, Fresnillo, and GNP.
|  | Other directorships: |  | Member of the board of directors of Profuturo Afore, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, S.A., de C.V., Governing board of Instituto Tecnológico Autónomo de México and governing council of Transparencia Mexicana.
|  | Business experience and expertise: |  | He was previously a partner at Mancera, S.C. (Ernst & Young Mexico) (“Mancera”) as well as its managing director for 13 years. He is qualified as "financial expert" under the Sarabens-Oxley Act. Due to his extensive background, he provides a broad knowledge in financial reporting, auditing, corporate governance, regulatory compliance and risk prevention to ensure the sustainable value of the organization. In addition, he has experience in the financial sector, consumer goods, consulting and Latin American markets through his involvement as consultant to public and private companies.
|  | Education |  | Holds a Public Accountant degree from Universidad Iberoamericana and an MBA from the ITAM.
Daniel Alegre |  | Born: |  | 1968
Independent Director |  | Appointed to the Board: |  | 2023
|  | Term expires: |  | 2025
|  | Principal Occupation: |  | Investor, advisor and board member of Yuga Labs, Inc.
|  | FEMSA Committees: |  | Member of the Operation and Strategy Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA and Sleep Number Corporation.
|  | Business experience and expertise: |  | Former Chief Executive Officer of Yuga Labs, Inc. He began his career in executive positions at Bertelsmann and BMG Music. In 2004, he joined Google as Vice President, leading the launch of operations in Latin America, and later served as president of the Asia-Pacific region, global president of strategic alliances, and president of commerce, procurement and payments. In April 2020, he was appointed as president and Chief Operating Officer of the gaming company Activision Blizzard. He has an extensive career in commerce, innovation and technology. His professional background provides him with leadership and management skills, as well as extensive experience in global markets and marketing.

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|  | Education: |  | Holds a Bachelor of Arts degree from The Princeton School of Public and International Affairs, an MBA from Harvard Business School and a Juris Doctor Degree from Harvard Law School.
Gibu Thomas |  | Born: |  | 1971
Independent Director |  | Appointed to Board: |  | 2023
|  | Term expires: |  | 2025
|  | Principal Occupation: |  | Executive Vice President and President, Online, of The Estée Lauder Companies, Inc.
|  | FEMSA Committees: |  | Member of the Operations and Strategy Committee and the Corporate Practices and Nominating Committee.
|  | Business experience and expertise: |  | He is currently the Executive Vice President and President, Online, for Estée Lauder Companies, Inc., where he leads the company's global online business including e-commerce, technology infrastructure, digital media, mobile and omnichannel. He was previously the Senior Vice President, Head of Global E-commerce at PepsiCo, Inc.where he was responsible of the holistic strategic direction and execution of the company's global e-commerce business. He also served as Senior Vice President mobile and digital and Senior Vice President Strategy, Global E-Commerce for Walmart, Inc. Earlier in his career, he was a serial entrepreneur in Silicon Valley, helping to build multiple innovative startups. He is a highly talented and respected e-commerce and digital transformation expert, with leadership and management skills and broad knowledge of sales, innovation and technology.
|  | Education: |  | Holds a Bachelor of Technology degree in Computer Science from the College of Engineering, Trivandrum, and an MBA from the Stanford School of Business.
Elane Stock Independent Director |  | Born: |  | 1965
| Appointed to the Board: |  | 2024
| Term expires: |  | 2025
|  | Principal occupation: |  | Independent Consultant.
|  | FEMSA Committees: |  | Operations and Strategy Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of FEMSA and Reckitt, PLC.

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|  | Business experience and expertise: |  | She previously served as Chief Executive Officer of ServiceMaster Brands. She is a former Group President of Kimberly-Clark International and was also Group President of the Kimberly-Clark Professional. Earlier in her career, she was partner and managing director at McKinsey & Company in the United States and Ireland. She has experience in public companies, having served on the boards of directors of Yum! Brands, Equifax and Kimberly-Clark de México. She has extensive knowledge in global consumer industries, strategy and geographic expansion, as well as extensive experience in strategic and leadership positions.
|  | Education: |  | Holds a degree in Political Sciences from the University of Illinois and a Master in Business Administration in finance from the Wharton School of the University of Pennsylvania.

Series D Alternate Directors

Michael Kahn |  | Born: |  | 1981
Independent Alternate Director |  | Principal occupation: |  | Founder and Managing Partner of Triavera Capital.
|  | FEMSA Committees: |  | Operations and Strategy Committee
|  | Public Companies Directorships: |  | None
|  | Business experience and expertise: |  | He is the founder and managing partner of Triavera Capital, an investment firm based in Larkspur, California. Prior to founding Triavera Capital, he was a founding member of Valiant Capital Management, a global investment firm based in San Francisco, California, that invests in public and private companies. At Valiant, he was a partner and senior member of the Investment Committee for 15 years. He led public and private investments globally, with a focus on the consumer technology and business service industries. Prior to joining Valiant, he was a private investor at Silver Lake and an investment banker at Morgan Stanley. His experience includes extensive knowledge of the capital markets, finance, technology and consumer industries.
|  | Education: |  | Bachelor of Arts from Dartmouth College and holds an MBA from the Stanford University School of Business.
Francisco Zambrano Rodríguez |  | Born: |  | 1953
Independent Alternate Director |  | Principal Occupation |  | Independent consultant and Co-Chief Executive Officer of Desarrollo Inmobiliario y de Valores, S.A. de C.V. (“Desarrollo Inmobiliario”), Corporativo Zeta DIVASA, S.A.P.I. de C.V. (“Corporativo Zeta DIVASA”), and IPFC Inmuebles, S.A.P.I. de C.V. (“IPFC Inmuebles”).

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|  | FEMSA Committees |  | Member of the Audit Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of Coca- Cola FEMSA.
|  | Other Directorships: |  | Member of the boards of directors of Desarrollo Inmobiliario, Corporativo Zeta DIVASA, and IPFC Inmuebles. Member of the Audit and Risk Control Committee of ITESM.
|  | Business experience and expertise: |  | He is currently an independent consultant and Co-Chief Executive Officer of Desarrollo Inmobiliario Corporativo Zeta DIVASA”), and IPFC Inmuebles. Has extensive knowledge of the financial sector, banking and private investment services, development and management of real estate projects and private investment funds in the real estate sector, as well as experience as an estate planning consultant. He contributes extensively by providing a financial approach to strategic decision making, leadership and management, as well as a good understanding of corporate governance,
|  | Education: |  | Holds a degree in Chemical Engineering Administration from ITESM and an MBA from The University of Texas at Austin.
Alfonso González Migoya |  | Born: |  | 1945
Independent Alternate Director |  | Principal Occupation: |  | Business Consultant.
|  | FEMSA Committees: |  | Audit Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of Coca- Cola FEMSA, Controladora Vuela Compañía de Aviación, S.A.B. de C.V., Regional, S.A.B. de C.V., and Servicios Corporativos JAVER, S.A.B. de C.V.
|  | Other Directorships: |  | Member of the board of directors or Invercap Holdings, S.A.P.I. de C.V.
|  | Business experience and expertise: |  | He is a business consultant with extensive experience in advising public companies. Former Chief Executive Officer of Grupo Industrial Saltillo, S.A.B. de C.V. and Senior Vice President of Finance, Planning and Human Resources of Alfa, S.A.B. de C.V. With his extensive experience and years of leadership as Chief Executive Officer, Chairman and board member in public companies, he brings a vast knowledge of financial management, corporate governance, public company management and Latin American markets.
|  | Education: |  | Holds a Mechanical and Electrical Engineering degree from ITESM and an MBA from Stanford Graduate School of Business.
Jaime A. El Koury |  | Born: |  | 1953

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Independent Alternate Director |  | Principal Occupation: |  | General Counsel of the Financial Oversight and Management Board for Puerto Rico.
|  | FEMSA Committees: |  | Member of the Corporate Practices and Nominating Committee.
|  | Public Companies Directorships: |  | Member of the board of directors of Grupo Bimbo, S.A.B. de C.V.
|  | Business experience and expertise: |  | He was a partner at Cleary Gottlieb Steen & Hamilton, LLP a leading international law firm. He has extensive experience in the international corporate and financial sector and has been involved in numerous relevant transactions. His extensive background provides the Board with extensive knowledge of the industry, banking and finance, risk prevention, corporate governance, regulatory compliance and Latin American markets.
|  | Education: |  | Holds a Bachelor degree in Economics from Yale University and a Law degree from Yale Law School.

(1)José Antonio Fernández Carbajal and Eva María Garza Lagüera Gonda are spouses.
(2)José Antonio Fernández Carbajal and Francisco Javier Fernández Carbajal are siblings.
(3)Mariana Garza Lagüera Gonda, Eva María Garza Lagüera Gonda, Paulina Garza Lagüera Gonda and Bárbara Garza Lagüera Gonda are siblings.
(4)Francisco José Calderón Rojas and Diego Eugenio Calderón Rojas are siblings.
(5)Alfonso Garza Garza and Juan Carlos Garza Garza are siblings.
(6)Juan Carlos Garza Garza and Alfonso Garza Garza are cousins of Eva María Garza Lagüera Gonda, Mariana Garza Lagüera Gonda, Paulina Garza Lagüera Gonda and Bárbara Garza Lagüera Gonda.
(7)Bertha Michel González and Maximino José Michel González are siblings.
(8)José Antonio Fernández Carbajal and Eva María Garza Lagüera Gonda are parents of José Antonio Fernández Garza Lagüera
Senior Management
The names and positions of the members of our current senior management and that of our core businesses, their dates of birth and information on their principal business activities both within and outside of FEMSA are as follows:
FEMSA

José Antonio Fernández Carbajal Executive Chairman of the Board of Directors and Chief Executive Officer of FEMSA |  | Born: |  | 1954 |
| Joined FEMSA: |  | 1988 |
| Appointed to current position: |  | 2023 (Chief Executive Officer) |
|  | Principal occupation: |  | Chief Executive Officer of FEMSA. |

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|  | Public Companies Directorships: |  | Executive chairman of the board of directors of FEMSA and chairman of the board of directors of Coca-Cola FEMSA. Member of the board of directors of Industrias Peñoles, S.A.B. de C.V. (“Peñoles”). |
|  | Other Directorships: |  | Chairman of the board of directors of Fundación FEMSA and member of the boards of directors of MIT, of ITESM, and member of the board of global advisors of the Council for Foreign Relations. |
|  | Business experience and expertise: |  | Joined FEMSA in 1988 holding positions of Deputy Chief Executive Officer, Chief Operating Officer of FEMSA, Commercial Vice-President of Cerveceria Cuauhtémoc Moctezuma, Chief Executive Officer of Cadena Comercial OXXO and Strategic Planning Manager of Grupo Visa. In 1995 he was named Chief Executive Officer of FEMSA and, in 2001, Chairman of the board of directors of the Company, both positions held until December 2013. His extensive background and experience brings to the board a strategic vision, conscientious leadership, deep industry knowledge, talent attraction skills, culture and governance enhancement, as well as a strong understanding of Latin American markets. |
|  | Education: |  | Holds a degree in Industrial Engineering and an MBA from ITESM. |
José Antonio Fernández Garza Lagüera Chief Executive Officer, FEMSA Proximity and Health Division |  | Born: |  | 1982 |
| Joined FEMSA: |  | 2013 |
| Appointed to current position: |  | 2023 |
| Business experience and expertise: |  | Was Chief Executive Officer of Digital@FEMSA since 2022, after holding the position of Head of Strategic Planning for OXXO México in 2018 and previously he was head of Coca-Cola FEMSA’s Central American division from 2015 to 2018. Was Chief Executive Officer at Plásticos Técnicos Mexicanos, S.A. de C.V. (FEMSA’s plastic division) and held the positions of head of sales and operations at Heineken Mexico, in Mexico City. Prior to joining Heineken, he was co-founder and director of Vestige Capital, a Mexico-based research fund dedicated to acquiring and operating small and medium-sized companies in Mexico. While at Vestige, he co-led the acquisition of BOMI Group de Mexico, an outsourced logistics provider to the Mexican healthcare industry. |
| Education: |  | Holds a degree in Industrial Engineering from ITESM and an MBA from Stanford University Graduate School of Business. |

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Ian Marcel Craig García Chief Executive Officer, Coca-Cola FEMSA |  | Born: |  | 1972 |
| Joined FEMSA: |  | 2003 |
| Appointed to current position: |  | 2023 |
| Business experience and expertise: |  | Joined Coca-Cola FEMSA in 2003. With over 27 years of experience in the beverage industry, previously served in several senior management positions at Coca-Cola FEMSA, including as Director of Operations for the Brazil Division from 2016 to 2022, and previously Chief Operating Officer of Argentina, CFO and Strategic Planning Director of South America Division, CFO, Planning and Corporate Affairs Director of Mercosur Region, and Corporate Finance and Treasury Director of Coca-Cola FEMSA. |
| Education: |  | Holds Bachelor’s degree in Industrial Engineering from Tecnológico de Monterrey, an MBA from the University of Chicago Booth School of Business, and a Master’s degree in International Commercial Law from ITESM. |
Juan Carlos Guillermety |  | Born: |  | 1978 |
Chief Executive Officer of Digital@FEMSA |  | Joined FEMSA: |  | 2023 |
|  | Appointed to current position: |  | 2023 |
|  | Business experience and expertise: |  | Has held executive and management roles in planning, business development and innovation, among others. He also has experience at consulting, banking and investment with BCG and JPMorgan. He was Vice President and General Manager of Nu plus and Marketplace at Nubank for more than four years. He previously spent more than ten years in key management roles at VISA, including key Director of Emerging Digital Markets in Latin America and Vice President of Products and Innovation. |
|  | Education: |  | Graduated from Purdue University and from Universidad de los Andes with a degree in Industrial Engineering. Holds an MBA from Northwestern University's Kellogg School of Management, and has completed executive studies at Harvard Business School. |
Roberto Campa Cifrián Corporate Affairs Officer |  | Born: |  | 1957 |
| Joined FEMSA: |  | 2019 |
| Appointed to current position |  | 2019 |
| Business experience and expertise: |  | Has an extensive professional career in the public, private and social sectors. His positions include those of Secretary of Labor and Social Welfare of the Federal Government, Undersecretary of the Interior, Federal Consumer Attorney, representative in the Legislative Assembly of the Federal District and Federal Deputy. |
| Education: |  | Holds a Law degree from Universidad Anahuac with studies in Economics from ITAM. |

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Gerardo Estrada Attolini Administration and Corporate Control Officer |  | Born: |  | 1957 |
| Joined FEMSA: |  | 2000 |
| Appointed to current position: |  | 2020 |
| Business experience and expertise: |  | Held the position of Director of Corporate Finance of FEMSA from 2006 to 2020, Chief Financial Officer of FEMSA Cerveza from 2001 to 2006, Director of Corporate Finance of FEMSA from 2000 to 2001, and was Director of Corporate Finance of Grupo Financiero Bancomer from 1995 to 2000. |
| Education: |  | Holds a degree in accounting and an MBA from ITESM. |
Enrique González Zorrilla (effective as of May 1, 2024) |  | Born: |  | 1966 |
Vice President of Projects of FEMSA |  | Joined FEMSA: |  | 2000 |
|  | Appointed to current position: |  | 2024 |
|  | Business experience and expertise: |  | Joined FEMSA in the year 2000, after a consultant career. He has been involved in distribution operations in the Proximity Americas Division, the OXXO stores, the development of the pharmacy services locations platform, as well as the development of Envoy Solution, LLC's distribution platform in the U.S. |
|  | Education: |  | Holds a degree in Mechanical Engineering from ITESM and an MBA from the Wharton School of the University of Pennsylvania. |
Jessica Ponce de León Gaitán (effective as of May 1, 2024) |  | Born: |  | 1974 |
Chief Sustainability Officer of |  | Joined FEMSA: |  | 2015 |
FEMSA |  | Appointed to current position: |  | 2024 |
|  | Business experience and expertise: |  | With over 20 years of experience, she has worked in the logistics, as well as in the mass consumer products industries and in projects in different countries in Latin America, both in FEMSA and other companies. She has held different roles including commercial, operations, human resources, strategic planning and supply chain areas. Her most recent responsibilities were at Solistica, a logistics operator with presence in 7 Latin American countries and with more than 22,000 employees, where she held the position of Global Transportation Director from 2020 to 2022, and in January 2022 she assumed the position of Chief Executive Officer of the business. |
|  | Education: |  | Holds a degree in Industrial Engineering from ITESM. |

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Raymundo Yutani Vela Vice-President of Human Resources |  | Born: |  | 1958 |
| Joined FEMSA: |  | 1994 |
| Appointed to current position: |  | 2018 |
| Business experience and expertise: |  | Joined FEMSA Comercio in 1994 as Director of Human Resources, a position held until 2014. Subsequently, between 2014 and 2018, served as Director of Human Resources at Coca-Cola FEMSA. Prior to joining the company, held position as Director of Human Resources North at Banca Serfin, now Santander. |
| Education: |  | Graduated from Universidad Regiomontana with a degree in Public Accounting and an MBA and completed the AD1 program at IPADE. |
Eugenio Garza y Garza* |  | Born: |  | 1971 |
Chief Financial Officer of FEMSA (until April 30, 2024) |  | Joined FEMSA: |  | 2018 |
|  | Appointed to current position: |  | 2020 |
|  | Business experience and expertise: |  | Joined FEMSA in 2018 as Director of Strategic Planning and Corporate Development. From 2008 to 2016, served as Chief Financial Officer and later Chief Executive Officer of Servicios Corporativos Javer, S.A.B. de C.V. Additionally, has held executive and managerial roles in investment banking with Lazard, Merrill Lynch from 2005 to 2008, and Goldman Sachs in New York and Mexico, from 1997 to 2005. |
|  | Other Directorships: |  | Advisory Council Member of the Stanford University Graduate School of Business and member (Treasurer) of the board of American School Foundation of Monterrey, A.C. Member of the board of directors of Servicios Cuprum, S.A. de C.V. and Pinturas Berel, S.A. de C.V. |
|  | Education: |  | Holds a Chemical Engineering degree from ITESM and an MBA from the Stanford University Graduate School of Business. |
* Effective as of May 1, 2024, Mr. Martin Felipe Arias Yaniz will replace Mr. Garza y Garza as Chief Financial Officer of FEMSA. |
Alejandro Gil Ortíz General Counsel and Secretary of the Board of Directors |  | Born: |  | 1980 |
|  | Joined FEMSA: |  | 2007 |
|  | Appointed to current position: |  | 2022 |
|  | Position: |  | Secretary of the board of directors of FEMSA, and Coca-Cola FEMSA. |
|  | Business experience and expertise: |  | Held positions of International Legal Director at FEMSA. International and Operations Legal Manager at FEMSA Cerveza and International Legal Manager at Gruma, S.A.B. de C.V. |

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|  | Education: |  | Holds a Law degree from ITESM, an LLM from Harvard Law School and an MBA from IPADE. |

Compensation of Directors and Senior Management
The compensation of Directors is approved at the AGM. For the year ended December 31, 2023, the aggregate compensation paid by FEMSA to its directors was approximately Ps. 71 million. In addition, in the year ended December 31, 2023, Coca-Cola FEMSA paid approximately Ps. 1,949 million in aggregate compensation to the Directors and executive officers of FEMSA who also serve as directors on the board of Coca-Cola FEMSA.
For the year ended December 31, 2023, the aggregate compensation paid to executive officers and senior management of FEMSA and its subsidiaries was approximately Ps. 5,674 million. See Note 15 to the Consolidated Financial Statements. Aggregate compensation includes bonuses we paid to certain members of senior management and payments in connection with the EVA stock incentive plan described in the section below and in Note 18 to our audited consolidated financial statements. Our senior management and executive officers participate in our benefit plan and post-retirement medical services plan on the same basis as our other employees. Members of our board of directors do not participate in our benefit plan and post-retirement medical services plan, unless they are retired employees of our company. As of December 31, 2023, amounts set aside or accrued for all employees under these retirement plans were Ps. 18,101 million, of which Ps. 14,279 million is already funded.
EVA Stock Incentive Plan
In 2004, we, along with our subsidiaries, commenced a new stock incentive plan for the benefit of our senior executives, which we refer to as the EVA stock incentive plan. This plan uses as its main evaluation metric the Economic Value Added (“EVA”) framework developed by Stern Value Management, a compensation consulting firm. Under the EVA stock incentive plan, eligible employees are entitled to receive a special cash bonus, which will be used to purchase shares of FEMSA (in the case of employees of FEMSA) or of both FEMSA and Coca-Cola FEMSA (in the case of employees of Coca-Cola FEMSA). Under the plan, it is also possible to provide stock options of FEMSA or Coca-Cola FEMSA to employees; however, since the plan’s inception, only shares have been granted.
Under this plan, each year, our Chief Executive Officer together with the Corporate Governance Committee of our board of directors, together with the Chief Executive Officer of the respective operating subsidiary, determines the employees eligible to participate in the plan. A bonus formula is then created for each eligible employee, using the EVA framework, which determines the number of shares to be received by such employee. The terms and conditions of the share-based payment arrangement are then agreed upon with the eligible employee, such that the employee can begin to accrue shares under the plan. The shares vested ratably over a three-year period. We account for the EVA stock incentive plan as an equity-settled share-based payment transaction, as we will ultimately settle our obligations with our employees by issuing our own shares or those of our subsidiary, Coca-Cola FEMSA.
The bonus amount is determined based on each eligible participant’s level of responsibility and based on the EVA generated by the applicable business unit the employee works for. The formula considers the employees’ level of responsibility within the organization, the employees’ evaluation and competitive compensation in the market. The bonus is granted to the eligible employee on an annual basis after withholding applicable taxes.
The shares are administered by a trust for the benefit of the eligible executives (the “Administrative Trust”). We created the Administrative Trust with the objective of administering the purchase of FEMSA and Coca-Cola FEMSA shares, so that the shares can then be assigned to the eligible executives participating in the EVA stock incentive plan. The Administrative Trust’s objectives are to acquire shares of FEMSA or of Coca-Cola FEMSA and to manage the shares granted to the individual employees based on instructions set forth by the Technical Committee of the Administrative Trust. Once the shares are acquired following the Technical Committee’s instructions, the Administrative Trust assigns to each participant their respective rights. As the trust is controlled and therefore consolidated by FEMSA, shares purchased in the market and held within the Administrative Trust are presented as treasury stock (as it relates to FEMSA’s shares) or as a reduction of the non-controlling interest (as it relates to Coca-Cola FEMSA’s shares). Should an employee leave prior to their shares vesting, they would lose the rights to such shares, which would then remain within the Administrative Trust and be able to be reallocated to other eligible employees as determined by us. The incentive plan target is expressed in months of salary, and the final amount payable is computed based on a percentage of compliance with the goals established every year.
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All shares held in the Administrative Trust are considered outstanding for diluted earnings per share purposes, and dividends on shares held by the trusts are charged to retained earnings.
As of April 23, 2024, the trust that manages the EVA stock incentive plan held a total of 6,975,556 BD Units of FEMSA and 2,133,928 BL Units of Coca-Cola FEMSA, each representing 0.32% and 0.05% of the total number of shares outstanding of FEMSA and of Coca-Cola FEMSA, respectively.
Insurance Policies
We maintain life insurance policies for all of our employees. These policies mitigate the risk of having to pay benefits in the event of an industrial accident, natural or accidental death within or outside working hours and total and permanent disability. We maintain a directors’ and officers’ insurance policy covering all directors and certain key executive officers for liabilities incurred in their capacities as directors and officers.
Ownership by Management
Several of our directors are participants of a voting trust. Each of the trust participants of the voting trust is deemed to have beneficial ownership with shared voting power over the shares deposited in the voting trust. As of March 8, 2024, 6,922,134,985 Series B Shares representing 74.90% of the outstanding Series B Shares were deposited in the voting trust. See “Item 7. Major Shareholders and Related Party Transactions.”
The following table shows the Series B Shares, Series D-B Shares and Series D-L Shares as of March 8, 2024 beneficially owned by our directors and alternate directors who are participants in the voting trust, other than shares deposited in the voting trust:

|  | Series B |  | Series D-B |  | Series D-L |
|  |  |  | Percent of |  |  |  | Percent of |  |  |  | Percent of |
Beneficial Owner |  | Shares |  | Class |  | Shares |  | Class |  | Shares |  | Class |
Eva María Garza Lagüera Gonda |  | 2,832,490 |  | 0.03 | % | 5,470,960 |  | 0.13 | % | 5,470,960 |  | 0.13 | %
José Antonio Fernández Garza Lagüera |  | 33,000 |  | 0.00 | % | 66,000 |  | 0.00 | % | 66,000 |  | 0.00 | %
Mariana Garza Lagüera Gonda |  | 2,877,990 |  | 0.03 | % | 5,630,960 |  | 0.13 | % | 5,630,960 |  | 0.13 | %
Bárbara Garza Lagüera Gonda |  | 2,727,990 |  | 0.03 | % | 5,330,960 |  | 0.12 | % | 5,330,960 |  | 0.12 | %
Paulina Garza Lagüera Gonda |  | 2,727,990 |  | 0.03 | % | 5,330,960 |  | 0.12 | % | 5,330,960 |  | 0.12 | %
Alejandro Bailleres Gual |  | 9,095,762 |  | 0.10 | % | 12,003,874 |  | 0.28 | % | 12,003,874 |  | 0.28 | %
Alfonso Garza Garza |  | 24,073,305 |  | 0.26 | % | 9,842,490 |  | 0.23 | % | 9,842,490 |  | 0.23 | %
Juan Carlos Garza Garza |  | 21,401,156 |  | 0.23 | % | 4,536,592 |  | 0.11 | % | 4,536,592 |  | 0.11 | %
Maximino Michel González and Bertha Paula Michel González |  | 17,362,545 |  | 0.19 | % | 34,725,090 |  | 0.81 | % | 34,725,090 |  | 0.81 | %
Francisco José Calderón Rojas and Diego Eugenio Calderón Rojas(1) |  | 8,389,104 |  | 0.09 | % | 16,583,458 |  | 0.38 | % | 16,583,458 |  | 0.38 | %

(1)Shares beneficially owned through various family-controlled entities.
To our knowledge, no other director or officer is the beneficial owner of more than 1% of any class of our capital stock.
Board Practices
Our bylaws state that the board of directors will meet at least once every three months following the end of each quarter to discuss our operating results and the advancement in the achievement of strategic objectives. Our board of directors can also hold extraordinary meetings. See “Item 10. Additional Information—Bylaws.”
Under our bylaws, directors serve one-year terms, although they continue in office even after the term for which they were appointed ends for up to 30 calendar days, as set forth in article 24 of Mexican Exchange Market Law. None of our directors or senior managers of our subsidiaries has service contracts providing for benefits upon termination of
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employment, other than post-retirement medical services plans and post-retirement pension plans for our senior managers on the same basis as our other employees.
Our board of directors is supported by committees, which are working groups that analyze issues and provide recommendations to the board of directors regarding their respective areas of focus. The executive officers interact periodically with these committees to address management issues. Each committee has a secretary who attends meetings but is not a member of the committee. The following are the three committees of the board of directors, the members of which were elected at our AGM on March 22, 2024:
•Audit Committee. The Audit Committee is responsible for (i) reviewing our quarterly and annual financial statements in accordance with accounting, regulatory, internal control and auditing requirements applicable to us, as well as reviewing our accounting policies and principles, (ii) supervising our internal control over financial reporting and establishing risk mitigation and control policies, as well as overseeing the internal audit function and ensuring that it is objective and competent, (iii) recommending the hiring and compensation of our external audit firm, as well as evaluating and supervising its performance and independence, (iv) reviewing the audit plan and its results, as well as any findings or recommendations, (v) overseeing the internal audit function and ensuring that it is objective and competent, (vi) overseeing compliance, ethics and whistleblower programs, and ensuring that they are aligned with our Code of Ethics, and (vii) identifying and following-up on contingencies and legal proceedings. The Audit Committee has implemented procedures for receiving, retaining and addressing complaints regarding accounting, internal control and auditing matters, including the submission of confidential, anonymous complaints from employees regarding questionable accounting or auditing matters. Pursuant to the Mexican Securities Market Law, the chairman of the audit committee is elected by the shareholders at the AGM. The chairman of the Audit Committee submits a quarterly and an annual report to the board of directors of the Audit Committee’s activities performed during the corresponding fiscal year, and the annual report is submitted at the AGM for approval. The current Audit Committee members are: Víctor Alberto Tiburcio Celorio (chairman and financial expert), Olga González Aponte, Francisco Zambrano Rodríguez, and Alfonso González Migoya. Each member of the Audit Committee is an independent director, as required by the Mexican Exchange Market Law and applicable U.S. securities laws and applicable NYSE listing standards.
•Operations and Strategy Committee. The Operations and Strategy Committee’s responsibilities include making recommendations to our Board of Directors regarding (i) the annual operating plans and strategic projects of FEMSA's business units, and (ii) on annual operation plans and strategic projects for our business units, as well as their growth alternatives and long-term plans, and supervising transformational initiatives, (iii) evaluating our investment, risk management and financing policies, (iv) reviewing and, if appropriate, recommending to the Board of Directors, the dividends policy, for subsequent approval by the shareholders in our AGM, and (v) providing support in the review of strategic projects that are explicitly requested by our Board of Directors. The current Operations and Strategy Committee members are: José Antonio Fernández Carbajal (chairman), Francisco Javier Fernández Carbajal, Javier Gerardo Astaburuaga Sanjines, José Antonio Fernández Garza Lagüera, Michael Larson, Enrique F. Senior Hernández, Ricardo Saldívar Escajadillo, Michael Kahn, Daniel Alegre, Gibu Thomas and Elane Stock.
•Corporate Practices and Nominations Committee. The Corporate Practices and Nominations Committee is responsible for (i) reviewing and approving the compensation scheme for the Chief Executive Officer and our senior management, (ii) conducting searches, evaluations and nominations of Series D and independent directors with appropriate qualifications and experience to support corporate decisions, (iii) proposing to the Board of Directors and the Series D shareholders, new independent directors, informing of their qualifications and experience, and providing shareholders with a summary of the election process, (iv) supporting our Board of Directors in the succession processes of the Chief Executive Officer and our senior management, and providing the Board of Directors with an opinion regarding their selection, and (v) reviewing and approving internal policies in connection with use of assets and related party transactions.The committee may call a shareholders’ meeting and include matters on the agenda for that meeting that it may deem appropriate, approve policies on the use of our company’s assets or related-party transactions, approve the compensation of the Chief Executive Officer and relevant officers and support our board of directors in the elaboration of reports on accounting practices. Pursuant to the Mexican Exchange Market Law, the chairman of the Corporate Practices and Nominations Committee is elected by the shareholders at the AGM. The chairman of the Corporate Practices and Nominations Committee submits a quarterly and an annual report to the board of directors of the Corporate Practices and Nominations Committee’s activities performed during the corresponding fiscal year, and the annual report is submitted at the AGM for approval. The members of the Corporate Practices and Nominations Committee are: Ricardo Saldívar Escajadillo (chairman), Jaime A. El Koury, Ricardo Guajardo Touché and Gibu Thomas. Each member of the Corporate Practices and Nominations Committee is an independent director.
•
Employees
As of December 31, 2023, our headcount by geographic region was as follows: 284,066 in Mexico, 9,800 in Central America, 24,734 in Colombia, 41,890 in Brazil, 4,365 in Argentina, 221 in the United States, 4,512 in Ecuador,
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1,105 in Peru, 1,718 in Uruguay, 14,450 in Chile, 1,663 in Switzerland, 4,097 in Germany, 91 in Austria, 45 in Luxembourg, 151 in the Netherlands and 24 in other countries. The table below sets forth headcount for the years ended December 31, 2023, 2022 and 2021:

|  | 2023 |  | 2022 |  | 2021
|  | Non-union |  | Union |  | Total |  | Non-union |  | Union |  | Total |  | Non-union |  | Union |  | Total
Sub-holding company: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Coca-Cola FEMSA (1) |  | 60,226 |  | 57,138 |  | 117,364 |  | 46,673 |  | 50,538 |  | 97,211 |  | 37,815 |  | 45,939 |  | 83,754
Proximity Americas Division (1)(2) |  | 60,458 |  | 125,447 |  | 185,905 |  | 61,150 |  | 107,710 |  | 168,860 |  | 68,881 |  | 91,437 |  | 160,318
Proximity Europe Division (3) |  | 4,451 |  | 1,783 |  | 6,234 |  | 2,996 |  | 2,051 |  | 5,047 |  | — |  | — |  | —
Fuel Division (1) |  | 1,091 |  | 5,307 |  | 6,398 |  | 1,094 |  | 5,375 |  | 6,469 |  | 1,097 |  | 5,753 |  | 6,850
Health Division (1) |  | 24,747 |  | 8,958 |  | 33,705 |  | 5,469 |  | 27,333 |  | 32,802 |  | 5,350 |  | 24,832 |  | 30,182
Other (1) |  | 17,328 |  | 25,998 |  | 43,326 |  | 22,493 |  | 21,427 |  | 43,920 |  | 21,330 |  | 18,318 |  | 39,648
Total |  | 168,301 |  | 224,631 |  | 392,932 |  | 139,875 |  | 214,434 |  | 354,309 |  | 134,473 |  | 186,279 |  | 320,752

(1)Includes employees of third-party distributors, who are not our employees, amounting to 33,637, 21,690 and 14,308 in 2023, 2022 and 2021.
(2)Includes non-management store employees, who are not our employees, amounting to 35,510, 42,344 and 51,734 in 2023, 2022 and 2021.
(3)Excludes employees of franchises.
As of December 31, 2023, approximately 69% of our employees, most of whom are employed in Mexico, were members of labor unions. We had 766 separate collective bargaining agreements with 247 labor unions. In general, we have good relationships with the labor unions throughout our operations.
The table below sets forth the number of collective bargaining agreements and unions for our employees:
Collective Bargaining Labor Agreements between
Sub-holding Companies and Unions
As of December 31, 2023

|  | Collective |  |
|  | Bargaining |  | Labor
Sub-holding Company |  | Agreements |  | Unions
Coca-Cola FEMSA |  | 246 |  |  | 110 |
Proximity Americas Division (1) |  | 114 |  |  | 7 |
Proximity Europe Division |  | 6 |  | 6
Fuel Division |  | 40 |  | 3
Health Division |  | 46 |  | 17
Other Businesses |  | 314 |  |  | 104 |
Total |  | 766 |  |  | 247 |

(1)Does not include non-management store employees, who are employed directly by each individual store.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table identifies each owner of more than 5% of any class of our shares known to our company as of March 8, 2024. Except as described below, we are not aware of any holder of more than 5% of any class of our shares. Only the Series B Shares have full voting rights under our bylaws.
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Ownership of Capital Stock as of March 8, 2024

|  |  |  |  |  |  |  |  |  |  |  |  |  | Total |
|  | Series B Shares(1) |  | Series D-B Shares(2) |  | Series D-L Shares(3) |  | Shares |
|  |  |  |  |  |  |  |  |  |  |  |  |  | of FEMSA |
|  |  |  | Percent |  |  |  | Percent |  |  |  | Percent |  | Capital |
|  | Shares Owned |  | of Class |  | Shares Owned |  | of Class |  | Shares Owned |  | of Class |  | Stock |
Shareholder |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Technical Committee and Trust Participants under the Voting Trust(4) |  | 6,922,134,985 |  |  | 74.90 |  | % |  |  |  |  |  |  |  |  | 38.74 |  | %
William H. Gates III(5) |  | 278,873,490 |  |  | 3.02 | % | 557,746,980 |  |  | 12.9 | % | 557,746,980 |  |  | 12.9 | % | 7.79 | %

(1)As of March 8, 2024, there were 2,156,157,378 Series B Shares outstanding.
(2)As of March 8, 2024, there were 4,312,314,756 Series D-B Shares outstanding.
(3)As of March 8, 2024, there were 4,312,314,756 Series D-L Shares outstanding.
(4)As a consequence of the voting trust’s internal procedures, the following trust participants are deemed to have beneficial ownership with shared voting power of the shares deposited in the voting trust:
Banco Invex, S.A., as Trustee under Trust No. 3763 (controlled by the Garza Lagüera Gonda Family), Max Brittingham, Maia Brittingham, Bárbara Braniff Garza Lagüera, Eugenia Braniff Garza Lagüera, Lorenza Braniff Garza Lagüera, Paula Treviño Garza Lagüera, Inés Treviño Garza Lagüera, Eugenio Fernández Garza Lagüera, Daniela Fernández Garza Lagüera, Eva María Fernández Garza Lagüera, José Antonio Fernández Garza Lagüera, Consuelo Garza Lagüera de Garza, Alepage, S.A. (controlled by the Garza Garza Family), BBVA Bancomer Servicios, S.A. as Trustee under Trust No. F/411245 (controlled by the Garza Garza family), Alfonso Garza Garza, Juan Pablo Garza García, Alfonso Garza García, María José Garza García, Eugenia María Garza García, Patricio Garza Garza, Viviana Garza Zambrano, Patricio Garza Zambrano, Marigel Garza Zambrano, Ana Isabel Garza Zambrano, Juan Carlos Garza Garza, José Miguel Garza Celada, Gabriel Eugenio Garza Celada, Ana Cristina Garza Celada, Juan Carlos Garza Celada, Eduardo Garza Garza, Eduardo Garza Páez, Balbina Consuelo Garza Páez, Eugenio Andrés Garza Páez, Eugenio Garza Garza, Camila Garza Garza, Ana Sofía Garza Garza, Celina Garza Garza, Marcela Garza Garza, Carolina Garza Garza, María Teresa Gual y Aspe, Alejandro Baillères Gual, Raúl Baillères Gual, Xavier Baillères Gual, Juan Pablo Baillères Gual, María Teresa Baillères Gual, Corbal, S.A. de C.V. (controlled by the Baillères Family), BBVA Bancomer Servicios, S.A., as Trustee under Trust No. F/29490-0 (controlled by the Baillères Family), Max David Michel, Juan Maria Pedro David Michel, Monique Berthe Michele Madeleine David Michel, Magdalena María Guichard Michel, Rene Cristobal Guichard Michel, Juan Bautista Guichard Michel, Miguel Graciano José Guichard Michel, Graciano Mario Juan Guichard Michel, Banco Invex, S.A., as Trustee under Trust No. F/4165 (controlled by the Michel González Family), BBVA Bancomer Servicios, S.A. as Trustee under Trust No. F/408262-4 (controlled by the Michel González family). Franca Servicios, S.A. de C.V. (controlled by the Calderón Rojas family), and BBVA Bancomer Servicios, S.A. as Trustee under Trust No. F/29013-0 (controlled by the Calderón Rojas family).
(5)Includes aggregate shares beneficially owned by Cascade Investments, LLC, calculated as of March 31, 2023, over which William H. Gates III has sole voting and dispositive power.
As of March 31, 2024, there were 41 holders of record of ADSs in the United States, which represented approximately 47.55% of our outstanding BD Units. Since a substantial number of ADSs are held in the name of nominees of the beneficial owners, including the nominee of The Depository Trust Company, the number of beneficial owners of ADSs is substantially greater than the number of record holders of these securities.
Related-Party Transactions
Voting Trust
The trust participants, who are our major shareholders, agreed on May 6, 1998 to deposit a majority of their shares, which we refer to as the trust assets, of FEMSA into the voting trust, and later entered into an amended agreement on August 8, 2005, following the substitution by Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero as trustee to the voting trust, which agreement was subsequently renewed on August 30, 2019. The primary purpose of the voting trust is to permit the trust assets to be voted as a block, in accordance with the instructions of the technical committee of the voting trust. The trust participants are separated into seven trust groups, and the technical committee comprises one representative appointed by each trust group. The number of B Units corresponding with each trust group (the proportional share of the shares deposited in the trust of such group) determines the number of votes that each trust representative has on the technical committee. Most matters are decided by a simple majority of the trust assets.
The trust participants agreed to certain transfer restrictions with respect to the trust assets. The trust is irrevocable, for a term that will conclude on December 31, 2030 (subject to additional ten-year renewal terms), during
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which time trust assets may be transferred by trust participants to spouses and immediate family members and, subject to certain conditions, to companies that are 100% owned by trust participants, which we refer to as the permitted transferees, provided in all cases that the transferee agrees to be bound by the terms of the voting trust. In the event that a trust participant wishes to sell part of its trust assets to someone other than a permitted transferee, the other trust participants have a right of first refusal to purchase the trust assets that the trust participant wishes to sell. If none of the trust participants elects to acquire the trust assets from the selling trust participant, the technical committee will have a right to nominate (subject to the approval of technical committee members representing 75% of the trust assets, excluding trust assets that are the subject of the sale) a purchaser for such trust assets. In the event that none of the trust participants or a nominated purchaser elects to acquire trust assets, the selling trust participant will have the right to sell the trust assets to a third party on the same terms and conditions that were offered to the trust participants. Acquirors of trust assets will only be permitted to become parties to the voting trust upon the affirmative vote by the technical committee of at least 75% of the trust shares, which must include trust shares represented by at least three trust group representatives. In the event that a trust participant holding a majority of the trust assets elects to sell its trust assets, the other trust participants have “tag along” rights that will enable them to sell their trust assets to the acquiror of the selling trust participant’s trust assets.
Because of their ownership of a majority of the Series B Shares, the trust participants may be deemed to control our company. Other than as a result of their ownership of the Series B Shares, the trust participants do not have any voting rights that are different from those of other shareholders.
Interest of Management in Certain Transactions
The following is a summary of: (i) the main transactions we have entered into with entities for which members of our board of directors or management serve as a member of the board of directors or management, (ii) the main transactions our subsidiaries have entered into with entities for which members of their board of directors or management serve as members of the board of directors or management, and (iii) the main transactions our subsidiaries have entered into with related entities. Each of these transactions was entered into in the ordinary course of business, and we believe each is on terms comparable to those that could be obtained in arm’s length negotiations with unaffiliated third parties. Under our bylaws, transactions entered with related parties not in the ordinary course of business are subject to the approval of our board of directors, subject to the prior opinion of the corporate practices committee.
José Antonio Fernández Carbajal, the Executive Chairman of our board, and Francisco Camacho Beltrán, our former Chief Corporate Officer, served as members of the Heineken Holding Board and the Heineken Supervisory Board until 2023. In February 2023, in connection with our announcement of the FEMSA Forward strategy, both José Antonio Fernández Carbajal and Francisco Camacho Beltrán resigned from their positions on the supervisory board of Heineken, N.V. and board of directors of Heineken Holding, N.V. We made purchases of beer and raw materials in the ordinary course of business from Heineken in the amount of Ps. 16,006 million in 2022 and Ps. 19,552 million in 2021. We also supplied logistics and administrative services to subsidiaries of Heineken Mexico for a total of Ps. 3,796 million in 2022 and Ps. 2,530 million in 2021. As of the end of December 31, 2022 and 2021, our net balance due to Heineken amounted to Ps. 759 and Ps. 1,143 million, respectively.
We, along with certain of our subsidiaries, regularly engage in financing and insurance coverage transactions, including entering into loans and bond offerings in the local capital markets, with subsidiaries of Grupo Financiero BBVA Bancomer, a financial services holding company of which Ricardo Guajardo Touché, who is also a director of FEMSA and Coca-Cola FEMSA, is a director. We made interest expense payments and fees paid to Grupo Financiero BBVA Bancomer in respect of these transactions of Ps. 215, Ps. 472 million and Ps. 72 million as of December 31, 2023, 2022 and 2021, respectively. The total amount due to Grupo Financiero BBVA Bancomer as of the end of December 31, 2023, 2022 and 2021 was Ps. 1,651, Ps. 2,317 million and Ps. 1,847 million respectively. We also had a receivable balance with Grupo Financiero BBVA Bancomer of Ps. 5,233, Ps. 3,891 and Ps. 8,076 million, respectively, as of December 31, 2023, 2022 and 2021, and interest revenues of Ps. 3,346, Ps. 2,297 million and Ps. 2,146 million as of December 31, 2023, 2022 and 2021, respectively.
We, along with certain of our subsidiaries, spent Ps. 196, Ps. 123 million and Ps. 167 million in the ordinary course of business in 2023, 2022 and 2021, respectively, in publicity and advertisement purchased from Televisa, a media corporation in which our alternate director and director of Coca-Cola FEMSA, Enrique F. Senior Hernández, serves as director.
Proximity Americas Division, in its ordinary course of business, purchased Ps 7,264, Ps. 6,101 million and Ps. 4,417 million in 2023, 2022 and 2021 respectively, in baked goods and snacks for its stores from subsidiaries of Bimbo, of which Ricardo Guajardo Touché, one of FEMSA’s alternate directors, and Jaime A. El Koury, one of our alternate directors and alternate director of Coca-Cola FEMSA, are directors. Proximity Americas Division also purchased Ps. 1,582, Ps. 1,754 million and Ps. 1,183 million in 2023, 2022 and 2021, respectively, in juices from subsidiaries of Jugos del Valle.
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José Antonio Fernández Carbajal, Bárbara Garza Lagüera Gonda, Eva Maria Garza Lagüera Gonda, Mariana Garza Lagüera Gonda, Bertha Paula Michele González, Alfonso Garza Garza and Ricardo Saldívar Escajadillo, who are directors or alternate directors of FEMSA or Coca-Cola FEMSA, are also members of the board of directors of ITESM, which is a prestigious university system with headquarters in Monterrey, Mexico that routinely receives donations from FEMSA and its subsidiaries. For the years ended December 31, 2023, 2022 and 2021 donations to ITESM amounted to Ps. 237, Ps. 371 million, Ps. 208 million, respectively.
José Antonio Fernández Carbajal, Jessica Ponce de León, Eva Garza Fernández, Ian Craig García, and Roberto Rafael Campa Cifrán, who are directors, alternate directors or senior officers of FEMSA or Coca-Cola FEMSA, are also members of the board of directors of Fundación FEMSA, A.C., which is a social investment instrument for communities in Latin America. For the years ended December 31, 2023, 2022 and 2021 donations to Fundación FEMSA, A.C. amounted to Ps. 309 million, Ps. 232 million, Ps. 144 million, respectively.
Business Transactions between Coca-Cola FEMSA, FEMSA and The Coca-Cola Company
Coca-Cola FEMSA regularly engages in transactions with TCCC and its affiliates. Coca-Cola FEMSA purchases all of its concentrate requirements for Coca-Cola trademark beverages from affiliates of TCCC. Total expenses charged to Coca-Cola FEMSA by TCCC for concentrates were Ps. 46,461, Ps. 43,717 million, Ps. 37,213 million in 2023, 2022 and 2021, respectively. Coca-Cola FEMSA and TCCC develop an annual marketing strategy to promote the sale and consumption of products. In order to implement this strategy, Coca-Cola FEMSA and TCCC first develop an allocation of marketing expenditures amongst themselves, which Coca-Cola FEMSA monitors and tracks during the year. At the end of the year, Coca-Cola FEMSA reviews the actual marketing expenditures and pays or receives a reimbursement from TCCC in accordance with the agreed-upon allocation. Marketing reimbursements from TCCC were Ps. 2,450 million, Ps. 1,170 million and Ps. 2,437 million in 2023, 2022 and 2021, respectively. TCCC also makes contributions to Coca-Cola FEMSA that Coca-Cola FEMSA generally uses for initiatives that promote volume growth of Coca-Cola trademark beverages.
In Argentina, Coca-Cola FEMSA purchases plastic preforms, as well as returnable plastic bottles, at competitive prices from Andina Empaques S.A., a local subsidiary of Embotelladora Andina S.A., a bottler of TCCC with operations in Argentina, Chile, Brazil and Paraguay in which TCCC has a substantial interest.
Coca-Cola FEMSA purchases products from Jugos del Valle, a joint business acquired together with TCCC, in the amount of Ps. 3,718, Ps. 3,234 million and Ps. 2,918 million in 2023, 2022 and 2021, respectively, which is mainly related to certain juice-based beverages and dairy products that are part of Coca-Cola FEMSA’s product portfolio. As of April 23, 2024, Coca-Cola FEMSA held a 28.2% interest in Jugos del Valle.
Coca-Cola FEMSA purchases products from Leão Alimentos, a business acquired together with TCCC, in the amount of Ps. 181 million, Ps. 215 million, and Ps. 1,320 million in 2023, 2022 and 2021, respectively, which is mainly related to certain juice-based beverages and teas that are part of Coca-Cola FEMSA’s product portfolio. As of April 23, 2024, Coca-Cola FEMSA held a 25.1% indirect interest in Leão Alimentos.
ITEM 8. FINANCIAL INFORMATION
Consolidated Financial Statements
See “Item 18. Financial Statements” on pages F-1 through F-202, incorporated herein by reference.
Dividend Policy
For a discussion of our dividend policy, See “Item 3. Key Information—Dividends” and “Item 10. Additional Information.”
Legal Proceedings
We are party to various legal proceedings in the ordinary course of business. Other than as disclosed in this annual report, we are not currently involved in any litigation or arbitration proceeding, including any proceeding that is pending or threatened of which we are aware, which we believe will have, or has had, a material adverse effect on our company. Other legal proceedings that are pending against or involve us and our subsidiaries are incidental to the conduct of our and their business. We believe that the ultimate resolution of such other proceedings individually or on an aggregate basis will not have a material adverse effect on our consolidated financial condition or results.
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Coca-Cola FEMSA
Tax Proceeding against Coca-Cola FEMSA Costa Rica. In 2013, the Costa Rican National Institute of Rural Development (Instituto Nacional de Desarrollo Rural or the INDER) questioned Coca-Cola FEMSA’s Costa Rican subsidiary’s method of calculating the contribution to the INDER (excise tax) for the period from 2009 to 2012. Prior to a change in law on November 29, 2012, which specifically provided how to calculate this excise tax (by multiplying a fixed amount in Costa Rican colones by the milliliters of products sold), Coca-Cola FEMSA’s Costa Rican subsidiary calculated the excise tax based on production costs. However, the INDER’s interpretation is that the excise tax had to be calculated based on the sales price, including the profit margin, of the products. As a result, the INDER requested the payment of the unpaid contribution amounts for the 2009-2012 period. Coca-Cola FEMSA filed, through an administrative procedure, an appeal against such requirement, which was denied. Coca-Cola FEMSA has contested this claim through a legal proceeding, which is still pending resolution and has filed a motion for a stay of execution until the legal proceeding is finally resolved, through which Coca-Cola FEMSA deposited a guarantee in an escrow account in favor of the INDER. Coca-Cola FEMSA obtained a favorable resolution in such motion.
For a description of other unsettled lawsuits with tax authorities and other parties, see Note 26.6 to our consolidated financial statements.
Significant Changes
Except as disclosed under "Information on the Company" in Item 4, no significant changes have occurred since the date of the annual financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
Description of Securities
We have three series of capital stock, each with no par value:
•Series B Shares (“Series B Shares”);
•Series D-B Shares (“Series D-B Shares”); and
•Series D-L Shares (“Series D-L Shares”).
Series B Shares have full voting rights, and Series D-B and D-L Shares have limited voting rights. The shares of our company are not separable and may be transferred only in the following forms:
•B Units, consisting of five Series B Shares; and
•BD Units, consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares.
The following table sets forth information regarding our capital stock issued as of March 8, 2024.

|  |  |  |  |  | Percentage of |
|  |  |  | Percentage of |  | Full Voting |
|  | Number |  | Capital |  | Rights |
Class |  |  |  |  |  |  |
Series B Shares (no par value) |  | 9,246,420,270 |  | 51.68 | % | 100.00 | %
Series D-B Shares (no par value) |  | 4,322,355,540 |  | 24.16 | % | — | %
Series D-L Shares (no par value) |  | 4,322,355,540 |  | 24.16 | % | — | %
Total Shares |  | 17,891,131,350 |  | 100.00 | % | 100.00 | %
Units |  |  |  |  |  |  |
BD Units |  | 2,161,177,770 |  | 60.40 | % | 23.47 | %
B Units |  | 1,417,048,500 |  | 39.60 | % | 76.63 | %
Total Units |  | 3,578,226,270 |  | 100.00 | % | 100.00 | %

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Trading Markets
Since May 11, 1998, ADSs representing BD Units have been listed on the NYSE, and the BD Units and the B Units have been listed on the Mexican Stock Exchange. Each ADS represents 10 BD Units deposited under the deposit agreement with the ADS depositary. As of March 31, 2024, approximately 47.55% of BD Units traded in the form of ADSs.
The NYSE trading symbol for the ADSs is “FMX” and the Mexican Stock Exchange trading symbols are “FEMSA UBD” for the BD Units and “FEMSA UB” for the B Units.
Fluctuations in the exchange rate between the Mexican peso and the U.S. dollar have affected the U.S. dollar equivalent of the Mexican peso price of our shares on the Mexican Stock Exchange and, consequently, have also affected the market price of our ADSs.
Trading on the Mexican Stock Exchange
The Mexican Stock Exchange, located in Mexico City, is currently the principal stock exchange in Mexico. Founded in 1907, it is organized as a sociedad anónima bursátil de capital variable. Trading on the Mexican Stock Exchange takes place principally through automated systems and is open between the hours of 9:30 a.m. and 4:00 p.m. Eastern Time, each business day. Trades in securities listed on the Mexican Stock Exchange can also be effected off the exchange. The Mexican Stock Exchange operates a system of automatic suspension of trading in shares of a particular issuer as a means of controlling excessive price volatility, but under current regulations this system does not apply to securities such as the BD Units that are directly or indirectly (for example, in the form of ADSs) quoted on a stock exchange (including for these purposes the NYSE) outside Mexico.
Settlement is effected three business days after a share transaction on the Mexican Stock Exchange. Deferred settlement, even by mutual agreement, is not permitted without the approval of the Comisión Nacional Bancaria y de Valores (“CNBV”). Most securities traded on the Mexican Stock Exchange, including ours, are on deposit with S.D. Indeval Institución para el Depósito de Valores S.A. de C.V., which we refer to as “Indeval,” a privately owned securities depositary that acts as a clearinghouse for Mexican Stock Exchange transactions.
ITEM 10. ADDITIONAL INFORMATION
Bylaws
The following is a summary of the material provisions of our bylaws and applicable Mexican law. Our bylaws were last amended on March 31, 2023. For a description of the provisions of our bylaws relating to our board of directors and executive officers, see “Item 6. Directors, Senior Management and Employees.”
Organization and Registry
We are a publicly listed company with variable capital (sociedad anónima bursátil de capital variable) organized in Mexico under the Mexican General Corporations Law (Ley General de Sociedades Mercantiles) and the Mexican Exchange Market Law (Ley del Mercado de Valores). We were incorporated in 1936 under the name Valores Industriales, S.A., as a sociedad anónima, and our current corporate name is Fomento Económico Mexicano, S.A.B. de C.V. We are registered in the Public Registry of Property and Commerce (Registro Público de la Propiedad y del Comercio) of Monterrey, Nuevo León.
Voting Rights and Certain Minority Rights
Each Series B Share entitles its holder to one vote at any of our ordinary or extraordinary general shareholders meetings. Our bylaws state that the board of directors must be composed of no more than 21 members, at least 25% of whom must be independent. Holders of Series B Shares are entitled to elect at least nine members of our board of directors. Holders of Series D Shares are entitled to elect five members of our board of directors. Our bylaws also contemplate that, should a conversion of the Series D-L Shares to Series L Shares occur pursuant to the vote of our Series D-B and Series D-L shareholders at special and extraordinary shareholders meetings, the holders of Series D-L shares (who would become holders of newly issued Series L Shares) will be entitled to elect two members of the board of directors. None of our shares has cumulative voting rights, which is a right not regulated under Mexican law.
Under our bylaws, the holders of Series D Shares are entitled to vote at extraordinary shareholders meetings called to consider any of the following limited matters: (i) the transformation from one form of corporate organization to another, other than from a company with variable capital stock to a company without variable capital stock or vice versa, (ii) any merger in which we are not the surviving entity or with other entities whose principal corporate purposes are different from those of our company or our subsidiaries, (iii) change of our jurisdiction of incorporation, (iv) dissolution
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and liquidation and (v) the cancellation of the registration of the Series D Shares or Series L Shares in the Mexican Stock Exchange or in any other foreign stock market where listed, except in the case of the conversion of these shares as provided for in our bylaws.
Holders of Series D Shares are also entitled to vote on the matters that they are expressly authorized to vote on by the Mexican Exchange Market Law and at any extraordinary shareholders meeting called to consider any of the following matters:
•To approve a conversion of all of the outstanding Series D-B Shares and Series D-L Shares into Series B shares with full voting rights and Series L Shares with limited voting rights, respectively.
•To agree to the unbundling of their share Units.
This conversion and/or unbundling of shares would become effective two years after the date on which the shareholders agreed to such conversion and/or unbundling.
Under Mexican law, holders of shares of any series are entitled to vote as a class in a special meeting governed by the same rules that apply to extraordinary shareholders meetings on any action that would have an effect on the rights of holders of shares of such series. There are no procedures for determining whether a particular proposed shareholder action requires a class vote, and Mexican law does not provide extensive guidance on the criteria to be applied in making such a determination.
The Mexican Exchange Market Law, the Mexican General Corporations Law and our bylaws provide for certain minority shareholder protections. These minority protections include provisions that permit:
•holders of at least 10% of our outstanding capital stock entitled to vote, including in a limited or restricted manner, to require the chairman of the board of directors or of the Audit or Corporate Practices and Nominations Committees to call a shareholders’ meeting;
•holders of at least 5% of our outstanding capital stock, including limited or restricted vote, may bring an action for liabilities against our directors, the secretary of the board of directors or certain key officers (as a shareholder derivative suit, for our benefit, as opposed to the benefit of shareholders initiating the action);
•holders of at least 10% of our outstanding capital stock who are entitled to vote, including limited or restricted vote, at any shareholders meeting to request that resolutions with respect to any matter on which they considered they were not sufficiently informed be postponed;
•holders of 20% of our outstanding capital stock to oppose any resolution adopted at a shareholders meeting in which they are entitled to vote, including limited or restricted vote, and file a petition for a court order to suspend the resolution temporarily within 15 days following the adjournment of the meeting at which the action was taken, provided that (i) the challenged resolution violates Mexican law or our bylaws, (ii) the opposing shareholders neither attended the meeting nor voted in favor of the challenged resolution and (iii) the opposing shareholders deliver a bond to the court to secure payment of any damages that we may suffer as a result of suspending the resolution in the event that the court ultimately rules against the opposing shareholder; and
•holders of at least 10% of our outstanding capital stock who are entitled to vote, including limited or restricted vote, to appoint one member of our board of directors and one alternate member of our board of directors.
Shareholders Meetings
General shareholders meetings may be ordinary meetings or extraordinary meetings. Extraordinary meetings are those called to consider certain matters specified in Article 182 and 228 BIS of the Mexican General Corporations Law, Articles 53 and 108(ii) of the Mexican Exchange Market Law and in our bylaws. These matters include: amendments to our bylaws, liquidation, dissolution, merger, spin-off and transformation from one form of corporate organization to another, issuance of preferred stock and increases and reductions of the fixed portion of our capital stock. In addition, our bylaws require a general shareholders’ extraordinary meeting to consider the cancellation of the registration of shares with the Mexican Registry of Securities (“RNV”) or with other foreign stock exchanges on which our shares may be listed, the amortization of distributable earnings into capital stock, and an increase in our capital stock in terms of the Mexican Exchange Market Law. General meetings called to consider all other matters, including increases or decreases affecting the variable portion of our capital stock, are ordinary meetings. An ordinary meeting must be held at least once each year within the first four months following the end of the preceding fiscal year. Holders of BD Units or B Units are
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entitled to attend all shareholders meetings of the Series B Shares and Series D Shares and to vote on matters that are subject to the vote of holders of the underlying shares.
The quorum for an ordinary shareholders meeting on first call is more than 50% of the Series B Shares, and action may be taken by a majority of the Series B Shares represented at the meeting. If a quorum is not available, a second or subsequent meeting may be called and held by whatever number of Series B Shares is represented at the meeting, at which meeting action may be taken by a majority of the Series B Shares that are represented at the meeting.
The quorum for an extraordinary shareholders meeting is at least 75% of the shares entitled to vote at the meeting, and action may be taken by a vote of the majority of all the outstanding shares that are entitled to vote. If a quorum is not available, a second meeting may be called, at which the quorum will be the majority of the outstanding capital stock entitled to vote, and actions will be taken by holders of the majority of all the outstanding capital stock entitled to vote.
Shareholders meetings may be called by the board of directors, the audit committee or the corporate practices committee and, under certain circumstances, a Mexican court. Additionally, holders of 10% or more of our capital stock may require the chairman of the board of directors, or the chairman of the audit or corporate practices committees to call a shareholders meeting. A notice of meeting and an agenda must be published in the electronic system of the Secretary of Economy (Secretaría de Economía) and in the Official State Gazette of Nuevo León (Periódico Oficial del Estado de Nuevo León) or a newspaper of general distribution in Monterrey, Nuevo León, Mexico at least 15 days prior to the date set for the meeting. Notices must set forth the place, date and time of the meeting and the matters to be addressed and must be signed by whoever convened the meeting. Shareholders meetings will be deemed validly held and convened without a prior notice or publication only to the extent that the required quorum representing our capital stock are fully represented. All relevant information relating to the shareholders meeting must be made available to shareholders starting on the date of publication of the notice involving such shareholders meeting. To attend a meeting, shareholders must deposit their shares with our company or with Indeval or an institution for the deposit of securities prior to the meeting as indicated in the notice. If entitled to attend a meeting, a shareholder may be represented by an attorney-in-fact.
In addition to the provisions of the Mexican General Corporations Law, the ordinary shareholders meeting shall be convened to approve any transaction that, in a fiscal year, represents 20% or more of the consolidated assets of our company as of the immediately prior quarter, whether such transaction is executed in one or several operations, to the extent that, according to the nature of such transactions, they may be deemed the same. All shareholders shall be entitled to vote on in such ordinary shareholders meeting, including those with limited or restricted voting rights.
Dividend Rights
At the AGM, the board of directors submits the financial statements of our company for the previous fiscal year, together with a report thereon by the board of directors. Once the holders of Series B Shares have approved the financial statements, they determine the allocation of our net profits for the preceding year. Mexican law requires the allocation of at least 5% of net profits to a legal reserve, which is not subsequently available for distribution, until the amount of the legal reserve equals 20% of our capital stock. Thereafter, the holders of Series B Shares may determine and allocate a certain percentage of net profits to any general or special reserve, including a reserve for buyback programs of our shares. The remainder of net profits is available for distribution in the form of dividends to the shareholders. Dividends may only be paid if net profits are enough to offset losses from prior fiscal years.
Our bylaws provide that dividends will be allocated among the shares outstanding and fully paid at the time a dividend is declared in such manner that each Series D-B Share and Series D-L Share receives 125% of the dividend distributed in respect of each Series B Share. Holders of Series D-B Shares and Series D-L Shares are entitled to this dividend premium in connection with all dividends paid by us.
Change in Capital
Our outstanding capital stock consists of both a fixed and a variable portion. The fixed portion of our capital stock may be increased or decreased only by an amendment of the bylaws adopted by an extraordinary shareholders meeting. The variable portion of our capital stock may be increased or decreased by resolution of an ordinary shareholders meeting. Capital increases and decreases must be recorded in our share registry and book of capital variations, if applicable.
A capital stock increase may be effected through the issuance of new shares for payment in cash or in kind, or by capitalization of indebtedness or of certain items of stockholders’ equity. Treasury stock may only be sold pursuant to a public offering.
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Any increase or decrease in our capital stock or any redemption or repurchase will be subject to the following limitations: (i) Series B Shares will always represent at least 51% of our outstanding capital stock and the Series D-L Shares and Series L Shares will never represent more than 25% of our outstanding capital stock; and (ii) the Series D-B, Series D-L and Series L Shares will not exceed, in the aggregate, 49% of our outstanding capital stock.
Preemptive Rights
Under Mexican law, except in limited circumstances which are described below, in the event of an increase in our capital stock, a holder of record generally has the right to subscribe shares of a series held by such holder enough to keep such holder’s existing proportionate holding of shares of that series. Preemptive rights must be exercised during a term fixed by the shareholders at the meeting declaring the capital increase, which term must last at least 15 days following the publication of notice of the capital increase in the Official State Gazette. As a result of applicable United States securities laws, holders of ADSs may be restricted in their ability to participate in the exercise of preemptive rights under the terms of the deposit agreement. Shares subject to a preemptive rights offering, with respect to which preemptive rights have not been exercised, may be sold by us to third parties on the same terms and conditions previously approved by the shareholders or the board of directors. Under Mexican law, preemptive rights cannot be waived in advance or be assigned, or be represented by an instrument that is negotiable separately from the corresponding shares.
Our bylaws provide that shareholders will not have preemptive rights to subscribe shares in the event of a capital stock increase or listing of treasury stock in any of the following events: (i) merger of our company; (ii) conversion of obligations (conversión de obligaciones) in terms of the Mexican General Credit Instruments and Credit Operations Law (Ley General de Títulos y Operaciones de Crédito); (iii) public offering made according to the terms of articles 53, 56 and related provisions of the Mexican Exchange Market Law; and (iv) capital increase made through the payment in kind of the issued shares or through the cancellation of debt of our company.
Limitations on Share Ownership
Ownership of shares of Mexican companies by non-Mexican residents is regulated by the Foreign Investment Law and its regulations. The Foreign Investment Commission is responsible for the enforcement of the Foreign Investment Law and its regulations.
As a general rule, the Foreign Investment Law allows foreign holdings of up to 100% of the capital stock of Mexican companies, except for those companies engaged in certain specified restricted industries. The Foreign Investment Law and its regulations require that Mexican shareholders retain the power to determine the administrative control and the management of corporations in industries in which special restrictions on foreign holdings are applicable. Foreign investment in our shares is not limited under either the Foreign Investment Law or its regulations.
Management of our Company
Management of our company is entrusted to the board of directors and also to the chief executive officer, who is required to follow the strategies, policies and guidelines approved by the board of directors and the authority, obligations and duties expressly authorized in the Mexican Exchange Market Law.
At least 25% of the members of the board of directors shall be independent. Independence of the members of the board of directors is determined by the shareholders meeting, subject to the CNBV’s challenge of such determination. In the performance of its responsibilities, the board of directors will be supported by a corporate practices committee and an audit committee. The corporate practices committee and the audit committee consist solely of independent directors. Each committee is formed by at least three board members appointed by the shareholders or by the board of directors. The chairmen of said committees are appointed (taking into consideration their experience, capacity and professional prestige) and removed exclusively by a vote in a shareholders meeting.
Surveillance
Surveillance of our company is entrusted to the board of directors, which shall be supported in the performance of these functions by the corporate practices committee, the audit committee and our external auditor. The external auditor may be invited to attend board of directors meetings as an observer, with a right to participate but without voting rights.
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Authority of the Board of Directors
The board of directors is our legal representative and is authorized to take any action in connection with our operations not expressly reserved to our shareholders. Pursuant to the Mexican Exchange Market Law, the board of directors must approve, observing at all moments their duty of care and duty of loyalty, among other matters:
•any related-party transactions which are deemed to be outside the ordinary course of our business;
•significant asset transfers or acquisitions;
•material guarantees or collateral;
•internal policies; and
•other material transactions.
Meetings of the board of directors are validly convened and held if a majority of the members are present. Resolutions passed at these meetings will be valid if approved by a majority of members of the board of directors present at the meeting. If required, the chairman of the board of directors may cast a tie-breaking vote.
Redemption
We may redeem part of our shares for cancellation with distributable earnings pursuant to a decision of an extraordinary shareholders meeting. Only shares subscribed and fully paid for may be redeemed. Any shares intended to be redeemed shall be purchased on the Mexican Stock Exchange in accordance with the Mexican General Corporations Law and the Mexican Exchange Market Law. No shares will be redeemed, if as a consequence of such redemption, the Series D and Series L Shares in the aggregate exceed the percentages permitted by our bylaws or if any such redemption will reduce our fixed capital below its minimum.
Repurchase of Shares
According to our bylaws, subject to the provisions of the Mexican Exchange Market Law and under rules issued by the CNBV, we may repurchase our shares at any time at the then prevailing market price. The maximum amount available for repurchase of our shares must be approved at the AGM and may not exceed retained earnings. The economic and voting rights corresponding to such repurchased shares may not be exercised while our company owns the shares.
In accordance with the Mexican Exchange Market Law, our subsidiaries may not purchase, directly or indirectly, shares of our capital stock or any security that represents such shares.
Forfeiture of Shares
As required by Mexican law, our bylaws provide that non-Mexican holders of BD Units, B Units or shares (i) are considered to be Mexican with respect to such shares that they acquire or hold and (ii) may not invoke the protection of their own governments in respect of the investment represented by those shares. Failure to comply with our bylaws may result in a penalty of forfeiture of a shareholder’s capital stock in favor of the Mexican state. In the opinion of Alejandro Gil Ortiz, our general counsel, under this provision, a non-Mexican shareholder (including a non-Mexican holder of ADSs) is deemed to have agreed not to invoke the protection of its own government by asking such government to interpose a diplomatic claim against the Mexican state with respect to its rights as a shareholder, but is not deemed to have waived any other rights it may have, including any rights under the United States securities laws, with respect to its investment in our company. If a shareholder should invoke governmental protection in violation of this agreement, its shares could be forfeited to the Mexican state.
Duration
The bylaws provide that the duration of our company is 99 years, commencing on May 30, 1936, unless extended by a resolution of an extraordinary shareholders meeting.
Appraisal Rights
Whenever the shareholders approve a change of corporate purpose, change of jurisdiction of incorporation or the transformation from one form of corporate organization to another, any shareholder entitled to vote on such change that has voted against it, may withdraw as a shareholder of our company and have its shares redeemed by FEMSA at a
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price per share calculated as specified under applicable Mexican law (based on the specific book value in our balance sheet last approved by our shareholders), provided that it exercises its right within 15 days following the adjournment of the meeting at which the change was approved. Under Mexican law, the amount which a withdrawing shareholder is entitled to receive is equal to its proportionate interest in our capital stock or according to our most recent balance sheet approved by an ordinary general shareholders meeting.
Delisting of Shares
In the event of a cancellation of the registration of any of our shares with the RNV, whether by order of the CNBV or at our request with the prior consent of 95% of the holders of our outstanding capital stock, our bylaws and the new Mexican Exchange Market Law require us to make a public offer to acquire these shares prior to their cancellation.
Liquidation
Upon the dissolution of our company, one or more liquidators must be appointed by an extraordinary general meeting of the shareholders to wind up its affairs. All fully paid and outstanding shares of capital stock will be entitled to participate equally in any distribution upon liquidation.
Actions Against Directors
Shareholders (including holders of Series D-B and Series D-L Shares) representing, in the aggregate, not less than 5% of our capital stock may directly bring an action against directors.
In the event of actions derived from any breach of the duty of care and the duty of loyalty, liability is exclusively in favor of our company. The Mexican Exchange Market Law establishes that liability may be imposed on the members and the secretary of the board of directors, as well as to the relevant officers.
Notwithstanding, the Mexican Exchange Market Law provides that the members of the board of directors will not incur, individually or jointly, liability for damages and losses caused to our company, when their acts were made in good faith, in any of the following events: (i) the directors complied with the requirements of the Mexican Exchange Market Law and with our company’s bylaws; (ii) the decision making or voting was based on information provided by the relevant officers, the external auditor or the independent experts, whose capacity and credibility do not offer reasonable doubt; (iii) the negative economic effects could not have been foreseen, based on the information available; and (iv) they comply with the resolutions of the shareholders’ meeting when such resolutions comply with applicable law.
Fiduciary Duties—Duty of Care
The Mexican Securities Market Law provides that the directors shall act in good faith and in our best interest and in the best interest of our subsidiaries. In order to fulfill its duty, the board of directors may:
•request information about us or our subsidiaries that is reasonably necessary to fulfill its duties;
•require our officers and certain other persons, including the external auditors and independent experts, to appear at board of directors’ meetings to report or provide information to the board of directors;
•postpone board of directors’ meetings for up to three days when a director has not been given sufficient notice of the meeting or in the event that a director has not been provided with the information provided to the other directors; and
•require a matter be discussed and voted upon by the full board of directors in the presence of the secretary of the board of directors.
Our directors may be liable for damages for failing to comply their duty of care if such failure causes economic damage to us or our subsidiaries and the director (i) failed to attend board of directors’ or committee meetings and as a result of such failure, the board of directors was unable to take action, unless such absence is approved by the shareholders meeting, (ii) failed to disclose to the board of directors or the committees material information necessary for the board of directors to reach a decision, unless legally or contractually prohibited from doing so in order to maintain confidentiality and (iii) failed to comply with the duties imposed by the Mexican Exchange Market Law or our bylaws.
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Fiduciary Duties—Duty of Loyalty
The Mexican Exchange Market Law provides that the directors and secretary of the board of directors shall keep confidential any non-public information and matters about which they have knowledge as a result of their position. Also, directors should abstain from participating, attending or voting at meetings related to matters where they have a conflict of interest.
The directors and secretary of the board of directors will be deemed to have violated the duty of loyalty, and will be liable for damages, when they obtain an economic benefit by virtue of their position. Further, the directors will fail to comply with their duty of loyalty if they:
•vote at a board of directors’ meeting or take any action on a matter involving our assets where there is a conflict of interest;
•fail to disclose a conflict of interest during a board of directors’ meeting;
•enter into a voting arrangement to support a particular shareholder or group of shareholders against the other shareholders;
•approve of transactions without complying with the requirements of the Mexican Exchange Market Law;
•use company property in violation of the policies approved by the board of directors;
•unlawfully use material non-public information; and
•usurp a corporate opportunity for their own benefit or the benefit of third parties, without the prior approval of the board of directors.
Limited Liability of Shareholders
The liability of shareholders for our company’s losses is limited to their shareholdings in our company.
Taxation
The following summary contains a description of certain U.S. federal income and Mexican federal tax consequences of the purchase, ownership and disposition of our ADSs, but it does not purport to be a description of all of the possible tax considerations that may be relevant to a decision to purchase, hold or dispose of ADSs. For purposes of this summary, the term “U.S. holder” means a holder that is a citizen or resident of the United States, a U.S. domestic corporation or a person or entity that otherwise will be subject to U.S. federal income tax on a net income basis in respect of our ADSs. In particular, this discussion does not address all Mexican or U.S. federal income tax considerations that may be relevant to a particular investor, nor does it address the special tax rules applicable to certain categories of investors, such as banks, dealers, traders who elect to mark to market, tax-exempt entities, insurance companies, certain short-term holders of ADSs or investors who hold our ADSs as part of a hedge, straddle, conversion or integrated transaction, partnerships that hold ADSs or partners therein, nonresident aliens present in the United States for more than 182 days in a taxable year, or investors who have a “functional currency” other than the U.S. dollar. This summary deals only with U.S. holders that hold or will hold our ADSs as capital assets and does not address the tax treatment of a U.S. holder that owns or is treated as owning 10% or more of the shares by vote or value (including ADSs) of our company.
This summary is based upon the federal tax laws of the United States and Mexico as in effect on the date of this annual report, including the provisions of the income tax treaty between the United States and Mexico which we refer to as the Tax Treaty, which are subject to change. The summary does not address any tax consequences under the laws of any state or locality of Mexico or the United States or the laws of any taxing jurisdiction other than the federal laws of Mexico and the United States. Holders of our ADSs should consult their tax advisors as to the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of ADSs, including, in particular, the effect of any foreign, state or local tax laws.
Mexican Taxation
For purposes of this summary, the term “non-resident holder” means a holder that is not a resident of Mexico for tax purposes and that does not hold our ADSs in connection with the conduct of a trade or business through a permanent establishment for tax purposes in Mexico. For purposes of Mexican taxation, an individual is a resident of Mexico if he or she has established his or her home in Mexico, or if he or she has another home outside Mexico, but his
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or her Center of Vital Interests (Centro de Intereses Vitales) (as defined in the Mexican Tax Code) is located in Mexico and, among other circumstances, when more than 50% of that person’s total income during a calendar year comes from sources within Mexico. A legal entity is a resident of Mexico if it has either its principal place of business or its place of effective management in Mexico. A Mexican citizen is presumed to be a resident of Mexico unless he or she can demonstrate that the contrary is true. If a legal entity or an individual is deemed to have a permanent establishment in Mexico for tax purposes, all income attributable to the permanent establishment will be subject to Mexican taxes, in accordance with applicable tax laws.
Taxation of Dividends. Under Mexican income tax law, dividends, either in cash or in kind, paid with respect to our shares represented by our ADSs are not subject to Mexican withholding tax if such dividends were distributed from the net taxable profits generated before 2014. Dividends distributed from the net taxable profits account (CUFIN) generated after or during 2014 will be subject to Mexican withholding tax at a rate of 10%.
Taxation of Dispositions of ADSs. Gains from the sale or disposition of ADSs by non-resident holders will not be subject to Mexican tax, if the disposition is carried out through a stock exchange recognized under applicable Mexican tax law and the transferor is resident of a country with which Mexico has entered into a tax treaty for the avoidance of double taxation; if the transferor is not a resident of such a country, the gain will be taxable at the rate of 10% or higher, in which case the tax will be withheld by the financial intermediary.
In compliance with certain requirements, gains on the sale or other disposition of ADSs made in circumstances different from those set forth in the prior paragraph generally would be subject to Mexican tax, at the general rate of 25% of the gross income, regardless of the nationality or residence of the transferor. However, under the Tax Treaty, a holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition of our ADSs in a transaction that is not carried out through the Mexican Stock Exchange or other approved securities markets, so long as the holder did not own, directly or indirectly, 25% or more of our outstanding capital stock (including shares represented by our ADSs) within the 12-month period preceding such sale or other disposition. Deposits of shares in exchange for ADSs and withdrawals of shares in exchange for our ADSs will not give rise to Mexican tax.
Other Mexican Taxes. There are no Mexican inheritance, gift, succession or value added taxes applicable to the ownership, transfer, exchange or disposition of our ADSs. There are no Mexican stamp, issue, registration or similar taxes or duties payable by holders of our ADSs.
United States Taxation
Tax Considerations Relating to the ADSs
In general, for U.S. federal income tax purposes, holders of ADSs will be treated as owners of the shares represented by those ADSs.
Taxation of Dividends. The gross amount of any distributions paid with respect to our shares represented by our ADSs, to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, generally will be included in the gross income of a U.S. holder as foreign source dividend income on the day on which the dividends are received by the ADS depositary and will not be eligible for the dividends received deduction allowed to corporations under the Internal Revenue Code of 1986, as amended. Because we do not expect to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles, it is expected that distributions paid to U.S. holders generally will be reported as dividends.
Dividends, which will be paid in Mexican pesos, will be includible in the income of a U.S. holder in a U.S. dollar amount calculated, in general, by reference to the exchange rate in effect on the date that they are received by the ADS depositary (regardless of whether such Mexican pesos are in fact converted into U.S. dollars on such date). If such dividends are converted into U.S. dollars on the date of receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividends. U.S. holders should consult their tax advisors regarding the treatment of the foreign currency gain or loss, if any, on any Mexican pesos received that are converted into U.S. dollars on a date subsequent to the date of receipt.
The U.S. dollar amount of dividends received by an individual U.S. holder in respect of the ADSs generally is subject to taxation at the reduced rate applicable to long-term capital gains if the dividends are “qualified dividends.” Subject to certain expectations for short-term and hedged positions, dividends paid on the ADSs will be treated as qualified dividends if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service (“IRS”) has approved for the purposes of the qualified dividend rules, or the dividends are paid with respect to ADSs that are “readily tradable on an established U.S. securities market” and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive
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foreign investment company (or “PFIC,” as further explained below under “Passive Foreign Investment Company Rules”). The income tax treaty between Mexico and the United States has been approved for the purposes of the qualified dividend rules. The ADSs are listed on the NYSE, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited consolidated financial statements and relevant market and shareholder data, we believe that we were not treated as a passive foreign investment company for U.S. federal income tax purposes with respect to our 2023 taxable year. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income and relevant market and shareholder data, we do not anticipate becoming a passive foreign investment company for our 2024 taxable year.
Subject to generally applicable limitations and conditions, Mexican dividend withholding tax paid at the appropriate rate applicable to the U.S. holder may be eligible for a credit against such U.S. holder’s U.S. federal income tax liability. These generally applicable limitations and conditions include new requirements adopted by the IRS in regulations promulgated in December 2021 and any Mexican tax will need to satisfy these requirements in order to be eligible to be a creditable tax for a U.S. holder. In the case of a U.S. holder that either (i) is eligible for, and properly elects, the benefits of the Tax Treaty, or (ii) consistently elects to apply a modified version of these rules under recently issued temporary guidance and complies with specific requirements set forth in such guidance, the Mexican tax on dividends will be treated as meeting the new requirements and therefore as a creditable tax. In the case of all other U.S. holders, the application of these requirements to the Mexican tax on dividends is uncertain and we have not determined whether these requirements have been met. If the Mexican dividend tax is not a creditable tax for a U.S. holder or the U.S. holder does not elect to claim a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year, the U.S. holder may be able to deduct the Mexican tax in computing such U.S. holder’s taxable income for U.S. federal income tax purposes. Dividend distributions will constitute income from sources without the United States and, for U.S. holders that elect to claim foreign tax credits, generally will constitute “passive category income” for foreign tax credit purposes.
The availability and calculation of foreign tax credits and deductions for foreign taxes depend on a U.S. holder’s particular circumstances and involve the application of complex rules to those circumstances. The temporary guidance discussed above also indicates that the Treasury Department and the IRS are considering proposing amendments to the December 2021 regulations and that the temporary guidance can be relied upon until additional guidance is issued that withdraws or modifies the temporary guidance. U.S. holders should consult their own tax advisors regarding the application of these rules to their particular situations.
Distributions to holders of additional shares with respect to our ADSs that are made as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.
Taxation of Capital Gains. Subject to the discussion below under "Passive Foreign Investment Company Rules", gain or loss realized by a U.S. holder on the sale or other taxable disposition of ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the disposition and such U.S. holder’s tax basis in the ADSs (each calculated in dollars). Any such gain or loss will be a long-term capital gain or loss if the ADSs were held for more than one year on the date of such sale. All long-term capital gain recognized by a U.S. holder that is an individual is generally subject to a reduced rate of U.S. federal income taxation. The deduction of capital losses is subject to limitations for U.S. federal income tax purposes. Deposits and withdrawals of shares by U.S. holders in exchange for ADSs will not result in the realization of gains or losses for U.S. federal income tax purposes.
A U.S. holder generally will not be entitled to credit any Mexican tax imposed on the sale or other disposition of the ADSs against such U.S. holder’s federal income tax liability, except in the case of a U.S. holder that consistently elects to apply a modified version of the U.S. foreign tax credit rules that is permitted under recently issued temporary guidance and complies with the specific requirements set forth in such guidance. Additionally, capital gain or loss recognized by a U.S. holder on the sale or other disposition of the ADSs generally will be U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, even if the Mexican tax qualifies as a creditable tax, a U.S. holder may not be able to credit the tax against its U.S. federal income tax liability unless such credit can be applied (subject to generally applicable conditions and limitations) against tax due on other income treated as derived from foreign sources. If the Mexican tax is not a creditable tax, the tax would reduce the amount realized on the sale or disposition of the ADSs even if the U.S. holder has elected to claim a foreign tax credit for other taxes in the same year. The temporary guidance discussed above also indicates that the Treasury Department and the IRS are considering proposed amendments to the December 2021 regulations and that the temporary guidance can be relied upon until additional guidance is issued
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that withdraws or modifies the temporary guidance. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to a sale or other disposition of the ADSs and any Mexican tax imposed on such sale or disposition.
Passive Foreign Investment Company Rules. Special U.S. tax rules apply to companies that are considered to be PFICs. We will be classified as a PFIC in a particular taxable year if, taking into account our proportionate share of the income and assets of our subsidiaries under applicable “look-through” rules, either
•75 percent or more of our gross income for the taxable year is passive income; or
•the value of our assets (generally based on a quarterly average) that produce or are held for the production of passive income is at least 50 percent.
For this purpose, passive income generally includes dividends, interest, gains from certain commodities transactions, rents, royalties and the excess of gains over losses from the disposition of assets that produce passive income.
Based on our audited consolidated financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2023 taxable year. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income and relevant market and shareholder data, we do not anticipate becoming a passive foreign investment company for our 2024 taxable year. However, the determination of whether we are a PFIC must be made annually after the close of the taxable year and based on the facts and circumstances at that time, some of which may be beyond our control, such as the valuation of our assets, including goodwill and other intangible assets, at the time. Accordingly, no assurance can be given that we will not be a PFIC in the current year or in future years. If we are classified as a PFIC, and you do not make one of the elections described below, you will be subject to a special tax at ordinary income tax rates on “excess distributions,” including certain distributions by us and gain that you recognize on the sale of your ADSs. The amount of income tax on any excess distributions will be increased by an interest charge to compensate for tax deferral, calculated as if the excess distributions were earned ratably over the period you hold your ADSs. Classification as a PFIC may also have other adverse tax consequences, including, in the case of individuals, the denial of a step-up in the basis of your ADSs at death.
If we are a PFIC in a taxable year and the ADSs are considered “marketable,” you generally will not be subject to the rules described in the preceding paragraph if you elect to mark your ADSs to market. The ADSs will be marketable if they are regularly traded on certain qualifying U.S. stock exchanges, including the New York Stock Exchange, or on a foreign stock exchange that meets certain requirements. If you make this mark-to-market election, you will be required in any year in which we are a PFIC to include as ordinary income the excess of the fair market value of your ADSs at the end of your taxable year over your basis in those ADSs. If at the end of your taxable year, your basis in the ADSs exceeds their fair market value, you will be entitled to deduct the excess as an ordinary loss, but only to the extent of your net mark-to-market gains from previous years. Your adjusted tax basis in the ADSs will be adjusted to reflect any income or loss recognized under these rules. In addition, any gain you recognize upon the sale of your ADSs will be taxed as ordinary income in the year of sale and any loss will be treated as an ordinary loss to the extent of your net mark-to-market gains from previous years. Once made, the election cannot be revoked without the consent of the IRS unless the shares cease to be marketable.
If you are a U.S. Holder that owns an equity interest in a PFIC, you generally must annually file IRS Form 8621, and may be required to file other IRS forms. A failure to file one or more of these forms as required may toll the running of the statute of limitations in respect of each of your taxable years for which such form is required to be filed. As a result, the taxable years with respect to which you fail to file the form may remain open to assessment by the IRS indefinitely, until the form is filed.
You should consult your own tax advisor regarding the U.S. federal income tax considerations discussed.
United States Backup Withholding and Information Reporting. A U.S. holder of ADSs may, under certain circumstances, be subject to “information reporting” and “backup withholding” with respect to certain payments to such U.S. holder, such as dividends or the proceeds of a sale or disposition of ADSs, unless such holder (i) comes within certain exempt categories, and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld under these rules does not constitute a separate tax and will be creditable against the holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS in a timely matter.
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Specified Foreign Financial Assets. Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of USD 50,000 on the last day of the taxable year or USD 75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on IRS Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the ADSs, including the application of the rules to their particular circumstances.
U.S. Tax Consequences for Non-U.S. Holders
Taxation of Dividends and Capital Gains. Subject to the discussion below under “United States Backup Withholding and Information Reporting,” a holder of ADSs that is not a U.S. holder (a “non-U.S. holder”) generally will not be subject to U.S. federal income or withholding tax on dividends received on ADSs or on any gain realized on the sale of ADSs.
United States Backup Withholding and Information Reporting. While non-U.S. holders generally are exempt from information reporting and backup withholding, a non-U.S. holder may, in certain circumstances, be required to comply with certain information and identification procedures in order to prove this exemption.
Material Contracts
We and our subsidiaries are parties to a variety of material agreements with third parties, including shareholders’ agreements, supply agreements and purchase and service agreements. Set forth below are summaries of the material terms of such agreements. The actual agreements have either been filed as exhibits to, or incorporated by reference in, this annual report. See “Item 19. Exhibits.”
Material Contracts Relating to Coca-Cola FEMSA
Shareholders Agreement
Coca-Cola FEMSA operates pursuant to a shareholders agreement among our company and TCCC and certain of its subsidiaries. This agreement, together with Coca-Cola FEMSA’s bylaws, sets forth the basic rules pursuant to which Coca-Cola FEMSA operates.
In 2010, Coca-Cola FEMSA’s main shareholders, FEMSA and TCCC, amended the shareholders agreement, and Coca-Cola FEMSA’s bylaws were amended accordingly. The amendment mainly related to changes in the voting requirements for decisions on: (i) ordinary operations within an annual business plan and (ii) appointment of the chief executive officer and all officers reporting to him, all of which may be taken by the board of directors by simple majority voting. Also, the amendment provided that payment of dividends, up to an amount equivalent to 20% of the preceding years’ consolidated net profits, may be approved by a simple majority of the voting capital stock and any payment of dividends above 20.0% of the preceding years’ consolidated net profits shall require the approval of a majority of the voting capital stock, which majority must also include a majority of Coca-Cola FEMSA Series D shares. Any decision on extraordinary matters, as they are defined in Coca-Cola FEMSA’s bylaws and which include, among other things, any new business acquisition, business combinations or any change in the existing line of business shall require the approval of the majority of the members of the board of directors, with the vote of two of the members appointed by TCCC.
Under Coca-Cola FEMSA’s bylaws and shareholders agreement, its Series A Shares, Series B Shares and Series D Shares are the only shares with full voting rights and, therefore, control actions by its shareholders.
The shareholders agreement also sets forth the principal shareholders’ understanding as to the effect of adverse actions of TCCC under the bottler agreements. Coca-Cola FEMSA’s bylaws and shareholders agreement provide that a majority of the directors appointed by the holders of its Series A Shares, upon making a reasonable, good faith determination that any action of TCCC under any bottler agreement between TCCC and Coca-Cola FEMSA or any of its subsidiaries is materially adverse to Coca-Cola FEMSA’s business interests and that TCCC has failed to cure such action within 60 days of notice, may declare a “simple majority period,” as defined in Coca-Cola FEMSA’s bylaws, at any time within 90 days after giving notice. During the simple majority period certain decisions, namely the approval of material changes in Coca-Cola FEMSA’s business plans, the introduction of a new, or termination of an existing, line of business, and related-party transactions outside the ordinary course of business, to the extent the presence and approval of at least two Coca-Cola FEMSA Series D directors would otherwise be required, can be made by a simple majority vote of its entire board of directors, without requiring the presence or approval of any Coca-Cola FEMSA Series D director. A
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majority of the Coca-Cola FEMSA Series A directors may terminate a simple majority period but, once having done so, cannot declare another simple majority period for one year after the termination. If a simple majority period persists for one year or more, the provisions of the shareholders agreement for resolution of irreconcilable differences may be triggered, with the consequences outlined in the following paragraph.
In addition to the rights of first refusal provided for in Coca-Cola FEMSA’s bylaws regarding proposed transfers of its Series A Shares or Series D Shares, the shareholders agreement contemplates three circumstances under which one principal shareholder may purchase the interest of the other in Coca-Cola FEMSA: (i) a change in control in a principal shareholder; (ii) the existence of irreconcilable differences between the principal shareholders; or (iii) the occurrence of certain specified events of default.
In the event that (i) one of the principal shareholders buys the other’s interest in Coca-Cola FEMSA in any of the circumstances described above or (ii) the beneficial ownership of TCCC or FEMSA is reduced below 20% of our outstanding voting stock, and upon the request of the shareholder whose interest is not so reduced, the shareholders agreement will be terminated and Coca-Cola FEMSA’s bylaws will be amended to eliminate all share transfer restrictions and all special-majority voting and quorum requirements.
The shareholders agreement also contains provisions relating to the principal shareholders’ understanding as to Coca-Cola FEMSA’s growth. It states that it is TCCC’s intention that Coca-Cola FEMSA will be viewed as one of a small number of its “anchor” bottlers in Latin America. In particular, the parties agree that it is desirable that Coca-Cola FEMSA expands by acquiring additional bottler territories in Mexico and other Latin American countries in the event any become available through horizontal growth. In addition, TCCC has agreed, subject to a number of conditions, that if it obtains ownership of a bottler territory that fits with Coca-Cola FEMSA’s operations, it will give Coca-Cola FEMSA the option to acquire such territory. TCCC has also agreed to support reasonable and sound modifications to Coca-Cola FEMSA’s capital structure to support horizontal growth. TCCC’s agreement as to horizontal growth expires upon either the elimination of the super-majority voting requirements described above or TCCC’s election to terminate the agreement as a result of a default.
The Coca-Cola Memorandum
In connection with the acquisition of Panamco, in 2003, Coca-Cola FEMSA established certain understandings primarily relating to operational and business issues with both TCCC and our company that were memorialized in writing prior to completion of the acquisition. Although the memorandum has not been amended, Coca-Cola FEMSA continues to develop its relationship with TCCC (through, inter alia, acquisitions and taking on new product categories), and Coca-Cola FEMSA therefore believes that the memorandum should be interpreted in the context of subsequent events, some of which have been noted in the description below. The main terms are as follows:
•The shareholder arrangements between our company and TCCC and certain of its subsidiaries will continue in place. In 2010, FEMSA amended its shareholders agreement with TCCC. See “Item 10. Additional Information—Material Contracts—Material Contracts Relating to Coca-Cola FEMSA—Shareholders Agreement.”
•We will continue to consolidate Coca-Cola FEMSA’s financial results under IFRS.
•TCCC and our company will continue to discuss in good faith the possibility of implementing changes to Coca-Cola FEMSA’s capital structure in the future.
•TCCC may require the establishment of a different long-term strategy for Brazil. If, after taking into account Coca-Cola FEMSA’s performance in Brazil, TCCC does not consider Coca-Cola FEMSA to be part of this long-term strategic solution for Brazil, then Coca-Cola FEMSA will sell its Brazilian franchise to TCCC or its designee at fair market value. Fair market value would be determined by independent investment bankers retained by each party at their own expense pursuant to specified procedures. In light of the performance of Coca-Cola FEMSA’s business in Brazil and the fact that TCCC authorized Coca-Cola FEMSA to acquire five Coca-Cola bottlers in Brazil from 2008 to 2022 and participate in the acquisition of Brazilian operations of Jugos del Valle, Leão Alimentos, Laticínios Verde Campo Ltda, the AdeS business in Brazil, among others, Coca-Cola FEMSA believe that this provision is no longer applicable.
•Coca-Cola FEMSA would like to keep open strategic alternatives that relate to the integration of sparkling beverages and beer. TCCC, our company and Coca-Cola FEMSA would explore these alternatives on a market-by-market basis at the appropriate time.
•TCCC agreed to sell to us sufficient shares to permit us to beneficially own 51% of Coca-Cola FEMSA outstanding capital stock (assuming that we do not sell any shares and that there are no issuances of Coca-Cola FEMSA stock other than as contemplated by the acquisition). As a result of this understanding, in
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November 2006, we acquired, through a subsidiary, 148,000,000 of Coca-Cola FEMSA Series D shares from certain subsidiaries of TCCC, representing 9.4% of the total outstanding voting shares and 8% of the total outstanding equity of Coca-Cola FEMSA, at a price of US$ 2.888 per share for an aggregate amount of US$ 427.4 million. Pursuant to our bylaws, the acquired shares were converted from Series D shares to Series A shares.
•Coca-Cola FEMSA may be entering some markets where significant infrastructure investment may be required. TCCC and our company will conduct a joint study that will outline strategies for these markets, as well as the investment levels required to execute these strategies. Subsequently, it is intended that our company and TCCC will reach an agreement on the level of funding to be provided by each of the partners. The parties intend that this allocation of funding responsibilities would not be overly burdensome for either partner.
Cooperation Framework with The Coca-Cola Company
In 2016, Coca-Cola FEMSA announced a new, comprehensive framework with TCCC. This cooperation framework seeks to maintain a mutually beneficial business relationship over the long-term, which will allow both companies to focus on continuing to drive the business forward and generating profitable growth. The cooperation framework contemplates the following main objectives:
•Long-term guidelines to the relationship economics. Concentrate prices for sparkling beverages in Mexico gradually increased from 2017 through July 2019.
•Other Concentrate Price Adjustments. Potential future concentrate price adjustments for sparkling beverages and flavored water in Mexico will take into account investment and profitability levels that are beneficial both to Coca-Cola FEMSA and TCCC.
•Marketing and commercial strategies. Coca-Cola FEMSA and TCCC are committed to implementing marketing and commercial strategies as well as productivity programs to maximize profitability. Coca-Cola FEMSA believes that these initiatives will partially mitigate the effects of concentrate price adjustments.
As part of a shared vision for the future, and to continue strengthening Coca-Cola FEMSA’s relationship with TCCC and combined strategy, in 2021, Coca-Cola FEMSA and TCCC agreed to enhance the Cooperation Framework. This enhancement includes additional drivers to grow the business and strengthen Coca-Cola FEMSA’s successful and longstanding partnership with TCCC.
This update contemplates the following main objectives:
•Growth principles. Coca-Cola FEMSA and The Coca-Cola Company agreed to continuously build and align ambitious business growth plans to increase Coca-Cola FEMSA operating income via top-line growth, cost and expense efficiencies and the implementation of marketing, commercial strategies and productivity programs
•Relationship economics. Ensure that the economics of Coca-Cola FEMSA’s business and management incentives are fully aligned towards long-term system value creation. Potential future concentrate price adjustments for sparkling beverages and flavored water in all Coca-Cola FEMSA’s territories will be based on mutual consensus between The Coca-Cola Company and Coca-Cola FEMSA as to which investment and profit split levels are mutually beneficial for both parties, including in such profit split levels the results from potential new business and ventures.
•Potential new business and ventures. As the Coca-Cola system continues to evolve, leveraging Coca-Cola FEMSA’s sales and distribution network, it may be allowed to engage in the distribution of potential new businesses such as the distribution of beer, spirits and other consumer goods.
•Digital strategy. Development of a joint general framework for digital initiatives as part of both companies’ industry-leading digitization efforts.
Bottler Agreements
Bottler agreements entered into by Coca-Cola FEMSA are described in Item 4, pages 39-40, of Coca-Cola FEMSA’s Form 20-F filed on April 12, 2024, which pages in relevant part are hereby incorporated by reference.
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Debt Agreements
See “Item 5. Operating and Financial Review and Prospects—Summary of Significant Debt Instruments” for a brief discussion of certain terms of our significant debt agreements.
Agreements with our affiliates and associated companies
See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” for a discussion of other transactions and agreements with our affiliates and associated companies.
Documents on Display
We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. Any filings we make electronically are available to the public over the internet at the SEC’s web site at www.sec.gov and at our website at www.femsa.com. (This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this annual report.)
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our business activities require the holding or issuing of derivative financial instruments that expose us to market risks related to changes in interest rates, foreign currency exchange rates, equity risk and commodity price risk.
Interest Rate Risk
Interest rate risk exists principally with respect to our indebtedness that bears interest at floating rates. At December 31, 2023, we had outstanding total debt of Ps. 136,824 million, of which 7.9% bore interest at variable interest rates and 92.1% bore interest at fixed interest rates. After giving effect to derivative hedging contracts, as of December 31, 2023, 82.6% of our total debt was fixed rate and 17.4% of our total debt was variable rate (the total amount of debt and of variable rate debt and fixed rate debt used in the calculation of this percentage includes the effect of cross-currency and interest rate swaps). The interest rate on our variable rate debt is determined by reference to the Secured Overnight Financing Rate (“SOFR,” a benchmark rate used for US dollar loans), the Equilibrium Interbank Interest Rate (Tasa de Interés Interbancaria de Equilibrio, or “TIIE”), and the Treasury Certificates (Certificados de la Tesorería, or “CETES”) rate. SOFR is subject to U.S. and international regulatory guidance and proposals for reform. These reforms and other pressures may cause SOFR to become unavailable or to perform or be reported differently than in the past. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our floating rate debt or exposure under our interest rate derivative transactions. We do not anticipate a significant impact to our financial position given our current mix of variable and fixed-rate debt, taking into account the impact of our interest rate hedging. If any of the above-described reference rates increase, our interest payments would consequently increase.
The table below provides information about our derivative financial instruments that are sensitive to changes in interest rates and exchange rates. The table presents notional amounts and weighted average interest rates by expected contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on the reference rates on December 31, 2023, plus spreads contracted by us. Our derivative financial instruments’ current payments are denominated in U.S. dollars and Mexican pesos. All of the payments in the table are presented in Mexican pesos, our reporting currency, utilizing the December 31, 2023 exchange rate of Ps. 16.8998 per U.S. dollar.
The table below also includes the estimated fair value as of December 31, 2023 of:
•short and long-term debt, based on the discounted value of contractual cash flows, in which the discount rate is estimated using rates currently offered for debt with similar terms and remaining maturities;
•long-term notes payable based on quoted market prices; and
•cross-currency swaps and interest rate swaps, based on quoted market prices to terminate the contracts as of December 31, 2023.
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As of December 31, 2023, the fair value represents a decrease in total debt. This represents Ps. 11,780 million less than book value.

|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying |  | Fair |  | Carrying |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Value at |  | Value at |  | Value at |
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029 and Thereafter |  | December 31, 2023 |  | December 31, 2023 |  | December 31, 2022 |
Short-term debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euros |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 15 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | 15 |  |  |  | 15 |  |  |  | — |  |
Interest rate |  |  | 2.6 |  | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2.6 |  | % |  | — |  |  |  | — |  | %
Argentine pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 72 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 72 |  |  |  | 72 |  |  |  | — |  |
Interest rate |  |  | 130.0 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 130.0 |  | % |  | — |  |  |  | — |  | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 633 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 633 |  |  |  | 633 |  |  |  | 1,072 |  |
Interest rate |  |  | 9.6 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9.6 |  | % |  | — |  |  |  | 12.3 |  | %
Variable-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 979 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 979 |  |  |  | 978 |  |  |  | 790 |  |
Interest rate |  |  | 13.3 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13.3 |  | % |  | — |  |  |  | 12.5 |  | %
Total short-term debt |  | Ps. | 2,453 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 2,453 |  |  | Ps. | 2,452 |  |  | Ps. | 1,862 |  |

(1)All interest rates shown in this table are weighted average contractual annual rates.
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|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying Value at December 31, 2023 | Fair Value at December 31, 2023 |  | Carrying Value at December 31, 2022⁽¹⁾
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2029 and Thereafter |
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  |
Long-term debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes |  | Ps. | — |  | Ps. | — |  | Ps. | 9,064 |  | Ps. | — |  | Ps. | 5,473 |  | Ps. | 4,451 |  | Ps. | 18,988 |  | Ps. | 18,088 |  | Ps. | 24,563 |
Interest rate |  |  | — |  |  | — |  |  | 2.6 | % |  | — |  |  | 0.5 | % |  | 1.0 | % |  | 1.6 | % |  | — |  |  | 0.8 | %
Promissory notes |  |  | 616 |  |  | — |  |  | — |  |  | 168 |  |  | — |  |  | 280 |  |  | 1,064 |  |  | 1,064 |  |  | 2,448 |
Interest rate |  |  | 1.1 | % |  | — |  |  | — |  |  | 2.1 | % |  | — |  |  | 2.4 | % |  | 1.3 | % |  | — |  |  | 1.4 | %
Swiss franc |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  |  | 463 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 463 |  |  | 463 |  |  | 482 |
Interest rate |  |  | 0.8 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.8 | % |  | — |  |  | 0.8 | %
U.S. dollars |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yankee bond (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 36,352 |  |  | 36,352 |  |  | 33,719 |  |  | 41,429 |
Interest rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.1 | % |  | 3.1 | % |  | — |  |  | 3.1 | %
Bank of NY (FEMSA USD 2023) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,808 |
Interest rate (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | % |  | — |  |  | 2.9 | %
Bank of NY (FEMSA USD 2043) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,121 |  |  | 7,121 |  |  | 6,379 |  |  | 13,405 |
Interest rate (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.4 | % |  | 4.4 | % |  | — |  |  | 4.4 | %
Bank of NY (FEMSA USD 2050) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 26,162 |  |  | 26,162 |  |  | 19,917 |  |  | 48,170 |
Interest rate (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.5 | % |  | 3.5 | % |  | — |  |  | 3.5 | %
Bank loans |  |  | 1,968 |  |  | 115 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,083 |  |  | 2,083 |  |  | 2,320 |
Interest rate |  |  | 3.6 | % |  | 6.7 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.8 | % |  | — |  |  | 5.1 | %
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(CEBUR MXN L22-2L) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8,434 |  |  | 8,434 |  |  | 8,678 |  |  | 8,436 |
Interest rate (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9.7 | % |  | 9.7 | % |  | — |  |  | 9.7 | %
Domestic senior notes |  |  | — |  |  | — |  |  | — |  |  | 8,495 |  |  | 9,960 |  |  | 5,491 |  |  | 23,946 |  |  | 22,439 |  |  | 31,438 |
Interest rate |  |  | — |  |  | — |  |  | — |  |  | 7.9 | % |  | 7.4 | % |  | 10.0 | % |  | 8.1 | % |  | — |  |  | 7.5 | %
Bank loans |  |  | 184 |  |  | 24 |  |  | 91 |  |  | 194 |  |  | 151 |  |  | — |  |  | 644 |  |  | 644 |  |  | 429 |
Interest rate |  |  | 11.0 | % |  | 8.7 | % |  | 9.5 | % |  | 12.0 | % |  | 12.8 | % |  | — |  |  | 11.4 | % |  | — |  |  | 10.0 | %
Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 21 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 21 |  |  | 21 |  |  | 56 |
Interest rate |  |  | 6.9 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.9 | % |  | — |  |  | 7.0 | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 27 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27 |  |  | 27 |  |  | 317 |
Interest rate |  |  | 9.3 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9.3 | % |  | — |  |  | 1.2 | %
Uruguayan pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 976 |
Interest rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | % |  | — |  |  | 6.3 | %
Subtotal |  | Ps. | 3,279 |  | Ps. | 139 |  | Ps. | 9,155 |  | Ps. | 8,857 |  | Ps. | 15,584 |  | Ps. | 88,291 |  | Ps. | 125,305 |  | Ps. | 113,522 |  | Ps. | 180,277 |

(1)All interest rates shown in this table are weighted average contractual annual rates.
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|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying Value at December 31, 2023 |  | Fair Value at December 31, 2023 |  | Carrying Value at December 31, 2022⁽¹⁾ |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2029 and Thereafter |  |  |
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  |  |  |
Variable-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  | Ps. | 1,700 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 1,700 |  |  | Ps. | 1,700 |  |  | Ps. | 2,560 |  |
Interest rate |  |  | 4.8 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4.8 |  | % |  | — |  |  |  | 1.1 |  | %
Swiss franc |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  |  | 603 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 603 |  |  |  | 603 |  |  |  | 691 |  |
Interest rate |  |  | 2.1 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2.1 |  | % |  | — |  |  |  | 0.8 |  | %
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(CEBUR MXN L22) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 826 |  |  |  | — |  |  |  | — |  |  |  | 826 |  |  |  | 832 |  |  |  | 827 |  |
Interest rate(1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11.6 |  | % |  | — |  |  |  | — |  |  |  | 11.6 |  | % |  | — |  |  |  | 10.9 |  | %
Domestic senior notes |  |  | — |  |  |  | 1,728 |  |  |  | 2,925 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,653 |  |  |  | 4,650 |  |  |  | 4,650 |  |
Interest rate (1) |  |  | — |  |  |  | 11.6 |  | % |  | 11.6 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | 11.6 |  | % |  | — |  |  |  | 10.4 |  | %
Bank Loans |  |  | 410 |  |  |  | 10 |  |  |  | — |  |  |  | 434 |  |  |  | 416 |  |  |  | — |  |  |  | 1,270 |  |  |  | 1,270 |  |  |  | 542 |  |
Interest rate (1) |  |  | 12.8 |  | % |  | 13.7 |  | % |  | — |  |  |  | 13.6 |  | % |  | 12.7 |  | % |  | — |  |  |  | 13.0 |  | % |  | — |  |  |  | 12.9 |  | %
Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 6 |  |  |  | 6 |  |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14 |  |  |  | 14 |  |  |  | 28 |  |
Interest rate |  |  | 8.8 |  | % |  | 8.9 |  | % |  | 8.9 |  | % |  | — |  |  |  | — |  |  |  | — |  |  |  | 8.9 |  | % |  | — |  |  |  | 9.8 |  | %
Colombian pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33 |  |
Interest rate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5.9 |  | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 271 |  |
Interest rate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4.9 |  | %
Subtotal |  | Ps. | 2,719 |  |  | Ps. | 1,744 |  |  | Ps. | 2,927 |  |  | Ps. | 1,260 |  |  | Ps. | 416 |  |  | Ps. | — |  |  | Ps. | 9,066 |  |  | Ps. | 9,069 |  |  | Ps. | 9,602 |  |
Total long-term debt |  | Ps. | 5,998 |  |  | Ps. | 1,883 |  |  | Ps. | 12,082 |  |  | Ps. | 10,117 |  |  | Ps. | 16,000 |  |  | Ps. | 88,291 |  |  | Ps. | 134,371 |  |  | Ps. | 122,591 |  |  | Ps. | 189,879 |  |
Current portion of long-term debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (5,998) |  |  |  |  |  |  | (16,479) |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ps. | 136,824 |  |  |  |  |  | Ps. | 191,741 |  |

(1)All interest rates shown in this table are weighted average contractual annual rates.
(2)Interest rate derivatives that have been designated as fair value hedge relationships have been used by Coca-Cola FEMSA to mitigate the volatility in the fair value of existing financing instruments due to changes in floating interest rate benchmarks. Gains and losses on these instruments are recorded in “Market value (gain) loss on financial instruments” in the period in which they occur. During 2022, we are applying IFRS 9 to the hedged portion of the Senior Notes of US$ 705, which are linked to an interest rate swap. Starting in this year, the hedging gain or loss will adjust the carrying amount of the hedged item and will be recognized in P&L under “Market value (gain) loss in financial instruments”. As of December 31, 2023, the Company recognized a loss of Ps. 371 in the income statement under “Market value (gain) loss in financial instruments”, which offsets the loss on interest rate derivatives used to hedge debt denominated in USD, that resulted from increases in interest rates.
A hypothetical, instantaneous and unfavorable change of 100 basis points in the average interest rate applicable to variable-rate liabilities held at FEMSA as of December 31, 2023 would increase our interest expense by approximately Ps. 187 million, or 3.2%, over the 12-month period of 2023, assuming no additional debt is incurred during such period, in each case after giving effect to all of our interest and cross-currency swap agreements.
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Foreign Currency Exchange Rate Risk
Our principal exchange rate risk involves changes in the value of the local currencies, of each country where we operate, relative to the U.S. dollar. In 2023, the percentage of our consolidated total revenues was denominated as follows:
Total Revenues by Currency at December 31, 2023

|  |  |  | % of Consolidated |
|  |  |  | Total |
Region |  | Currency |  | Revenues |
Mexico and Central America |  | Mexican peso, Guatemalan quetzal, Panamanian balboa, Costa Rican colon, Nicaraguan córdoba and U.S. dollar |  | 73 | %
South America |  | Brazilian reais, Argentine peso, Colombian peso, Chilean peso, Uruguayan peso and Peru sol |  | 21 | %
Europe |  | Euros and Swiss francs |  | 6 | %

We estimate that a majority of our consolidated costs and expenses are denominated in Mexican pesos for Mexican subsidiaries and in the aforementioned currencies for the foreign subsidiaries, which are principally subsidiaries of Coca-Cola FEMSA. Substantially all of our costs and expenses denominated in a foreign currency, other than the functional currency of each country where we operate, are denominated in U.S. dollars. As of December 31, 2023, after giving effect to all cross-currency swaps and interest rate swaps, 52.5% of our long-term indebtedness was denominated in Mexican pesos, 26.3% was denominated in U.S. Dollars, 8.5% was denominated in euros, 10.3% was denominated in Brazilian reais, 1.0% was denominated in Chilean pesos, 0.6% was denominated in Colombian pesos and 0.7% in Swiss franc. We also have short-term indebtedness, which mostly consists of bank loans in Colombian pesos, Chilean pesos and U.S. dollars. Decreases in the value of the different currencies relative to the U.S. dollar will increase the cost of our foreign currency denominated operating costs and expenses, and the debt service obligations with respect to our foreign currency-denominated indebtedness. A depreciation of the Mexican peso relative to the U.S. dollar will also result in foreign exchange losses, as the Mexican peso value of our foreign currency-denominated long-term indebtedness is increased.
Our exposure to market risk associated with changes in foreign currency exchange rates relates primarily to U.S. dollar and euro-denominated debt obligations as shown in the interest rate risk table above. We occasionally utilize financial derivative instruments to hedge our exposure to the U.S. dollar relative to the Mexican peso and other currencies.
As of December 31, 2023, we had forward agreements that met the hedging criteria for accounting purposes, to hedge our transactions denominated in U.S. dollars. The notional amount of these forward agreements was (i) Ps. 11,449 million that expire in 2024, for which we have recorded a net fair value liability of Ps. 537 million. The fair value of foreign currency forward contracts is estimated based on the quoted market price of each agreement at year-end assuming the same maturity dates originally contracted for. For the year ended December 31, 2023, a loss of Ps. 180 million on expired forward agreements was recorded in our consolidated results.
As of December 31, 2022, we had forward agreements that met the hedging criteria for accounting purposes, to hedge our transactions denominated in U.S. dollars. The notional amount of these forward agreements was (i) Ps. 10,828 million that expired in 2023, for which we have recorded a net fair value liability of Ps. 338 million; (ii) Ps. 2 million that expire in 2024, for which we have recorded a net fair value liability less than a million. The fair value of foreign currency forward contracts is estimated based on the quoted market price of each agreement at year-end assuming the same maturity dates originally contracted for. For the year ended December 31, 2022, a loss of Ps. 565 million on expired forward agreements was recorded in our consolidated results.
As of December 31, 2021, we had forward agreements that met the hedging criteria for accounting purposes, to hedge our transactions denominated in U.S. dollars. The notional amount of these forward agreements was (i) Ps. 6,384 million that expired in 2022, for which we have recorded a net fair value liability of Ps. 26 million; (ii) Ps. 23 million that expired in 2023, for which we have recorded a net fair value liability of Ps. 2 million; (iii) Ps. 2 million that expire in 2024, less than a million. The fair value of foreign currency forward contracts is estimated based on the quoted market price of each agreement at year-end assuming the same maturity dates originally contracted for. For the year ended December 31, 2021, a loss of Ps. 41 million on expired forward agreements was recorded in our consolidated results.
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As of December 31, 2023, we had long-term debt in the amount of € 534 million. In March 2023, the Company made a tender offer in international markets for a principal amount of €404 million in debt securities maturing in 2028 and €259 million in debt securities maturing in 2033, with a settlement price of €347 million for maturing in 2028 and €197 million for maturing in 2033, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement, representing a gain of Ps. 2,416 million. We have designated a non-derivative financial liability as a hedge on the net investment in our stake hold in Heineken. During 2023, the Company divested its investment in Heineken. Therefore, the net investment hedge was discontinued, recycling the effects of Heineken’s hedge in the consolidated income statements, which amount to a gain of Ps. 5,763 million (See Note 4.3.1 to our consolidated financial statements).
Additionally, as of December 31, 2023, we have long-term debt in the amount of U.S. $1,557 million. In March 2023, the Company made a tender offer in international markets for a principal amount of U.S. $943 million related with these senior notes, with a settlement price of U.S. $715 million, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement, representing a gain of Ps. 4,199 million. We have designated a portion of the non-derivative financial liability as a hedge on the net investment in our stake hold in Specialized Distribution and JRD. During 2023, the Company divested its investments in JRD and Envoy; as a result of these transactions, the net investment hedge was discontinued, recycling the effects of Envoy’s hedge in the consolidated income statements, which amount to a gain of Ps. 3,910 million; while in the case of JRD’s hedge, it remained in other comprehensive income, as this investment was classified as FVOCI, which amount to a gain of Ps. 1,188 million.
As of December 31, 2022, we had long-term debt in the amount of € 1,200 million. We have designated a non-derivative financial liability as a hedge on the net investment in our stake hold in Heineken. We recognized a foreign exchange gain, net of tax, of Ps. 2,179 million, which is as part of the exchange differences on translation of foreign operation within the accumulated other comprehensive income. Additionally, as of December 31, 2022, we have long-term debt in the amount of U.S. $2,500 million. We have designated a portion of the non-derivative financial liability as a hedge on the net investment in our stake hold in Specialized Distribution and JRD. We recognized a foreign exchange gain, net of tax, of Ps. 1,498 million, which is as part of the exchange differences on translation of foreign operation within the accumulated other comprehensive income.
As of December 31, 2021, we had long-term debt in the amount of € 1,200 million. We have designated a non-derivative financial liability as a hedge on the net investment in our stake hold in Heineken. We recognized a foreign exchange gain, net of tax, of Ps. 840 million, which is as part of the exchange differences on translation of foreign operation within the accumulated other comprehensive income. Additionally, as of December 31, 2021, we had long-term debt in the amount of U.S. dollars $2,500. We have designated a portion of the non-derivative financial liability as a hedge on the net investment in our stake hold in Specialized Distribution and JRD. We recognized a foreign exchange loss, net of tax, of Ps. 722 million, which is as part of the exchange differences on translation of foreign operation within the accumulated other comprehensive income.
The following table illustrates the effects that hypothetical fluctuations in the exchange rates of the U.S. dollar and the euro relative to the Mexican peso, and the U.S. dollar relative to the Brazilian real and Colombian peso, would have on our equity and profit or loss:

|  |  |  |  | Effect on Equity
|  | Change in |  |  | (in millions of
|  | Exchange |  |  | Mexican
Foreign Currency Risk |  | Rate |  |  | pesos)
2023 |  |  |  |  |
FEMSA(1) |  | +11% MXN/USD |  | Ps. | 9
|  | ‑11% MXN/USD |  |  | (9)
|  | +7% CHF/EUR |  |  | 78
|  | ‑7% CHF/EUR |  |  | (78)
|  | +7% EUR/USD |  |  | (6)
|  | ‑7% EUR/USD |  |  | 6
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 465
|  | ‑11% MXN/USD |  |  | (465)
|  | +12% BRL/USD |  |  | 521
|  | ‑12% BRL/USD |  |  | (521)
|  | +16% COP/USD |  |  | 225

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|  | ‑16% COP/USD |  |  | (225)
|  | +120% ARS/USD |  |  | 685
|  | ‑120% ARS/USD |  |  | (685)
|  | +5% UYU/USD |  |  | 20
|  | ‑5% UYU/USD |  |  | (20)
|  | +7% CRC/USD |  |  | 15
|  | -7% CRC/USD |  |  | (15)
2022 |  |  |  |  |
FEMSA(1) |  | +10% MXN/USD |  | Ps. | 6
|  | ‑10% MXN/USD |  |  | (6)
|  | +10% MXN/EUR |  |  | 1
|  | ‑10% MXN/EUR |  |  | (1)
|  | +7% CHF/EUR |  |  | 44
|  | ‑7% CHF/EUR |  |  | (44)
Coca-Cola FEMSA |  | +10% MXN/USD |  |  | 512
|  | ‑10% MXN/USD |  |  | (512)
|  | +18% BRL/USD |  |  | 550
|  | ‑18% BRL/USD |  |  | (550)
|  | +7% UYU/USD |  |  | 25
|  | ‑7% UYU/USD |  |  | (25)
|  | +17% COP/USD |  |  | 112
|  | ‑17% COP/USD |  |  | (112)
|  | +3% ARS/USD |  |  | 10
|  | ‑3% ARS/USD |  |  | (10)
|  | +7% CRC/USD |  |  | 24
|  | -7% CRC/USD |  |  | (24)
2021 |  |  |  |  |
FEMSA(1) |  | +11% MXN/USD |  | Ps. | 4
|  | ‑11% MXN/USD |  |  | (4)
|  | +16% BRL/USD |  |  | 37
|  | ‑16% BRL/USD |  |  | (37)
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 298
|  | ‑11% MXN/USD |  |  | (298)
|  | +16% BRL/USD |  |  | 284
|  | ‑16% BRL/USD |  |  | (284)
|  | +4% UYU/USD |  |  | 7
|  | ‑4% UYU/USD |  |  | (7)
|  | +11% COP/USD |  |  | 81
|  | ‑11% COP/USD |  |  | (81)
|  | +1% ARS/USD |  |  | 3
|  | ‑1% ARS/USD |  |  | (3)
|  | +3% CRC/USD |  |  | 10
|  | ‑3% CRC/USD |  |  | (10)

(1)Does not include Coca-Cola FEMSA.
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As of December 31, 2023, we had (i) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 954 million that expire in 2024, for which we have recorded a net fair value asset of Ps. 68 million; (ii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 49,834 million that expire in 2025, for which we have recorded a net fair value asset of Ps. 118 million; (iii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 6,045 million that expire in 2026, for which we have recorded a net fair value liability of Ps. 919 million; (iv) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 8,949 million that expire in 2027, for which we have recorded a net fair value liability of Ps. 1,382 million; (v) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 6,009 million that expire in 2028, for which we have recorded a net fair value asset of Ps. 89 million; (vi) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 20 million that expire in 2029, for which we have recorded a net fair value asset of Ps. 337 million; (vii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 13,633 million that expire in 2030, for which we have recorded a net fair value liability of Ps. 803 million; (viii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 845 million that expire in 2032, for which we have recorded a net fair value liability of Ps. 51 million; (ix) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 4,931 million that expire in 2033, for which we have recorded a net fair value asset of Ps. 117 million; (x) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 10,000 million that expire in 2035, for which we have recorded a net fair value liability of Ps. 3,809 million; (xi) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 5,398 million that expire in 2043, for which we have recorded a net fair value asset of Ps. 1,877 million; and (xii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 3,471 million that expire in 2050, for which we have recorded a net fair value asset of Ps. 1,235 million.
As of December 31, 2022, we had (i) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 27,804 million that expire in 2023, for which we have recorded a net fair value asset of Ps. 9,428 million; (ii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 497 million that expire in 2024, for which we have recorded a net fair value asset of Ps. 244 million; (iii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 1,010 million that expire in 2025, for which we have recorded a net fair value asset of Ps. 385 million; (iv) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 5,971 million that expire in 2026, for which we have recorded a net fair value liability of Ps. 560 million; (v) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 17,809 million that expire in 2027, for which we have recorded a net fair value liability of Ps. 594 million; (vi) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 14,620 million that expire in 2029, for which we have recorded a net fair value asset of Ps. 1,664 million; (vii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 3,679 million that expire in 2030, for which we have recorded a net fair value asset of Ps. 6 million; (viii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 10,000 million that expire in 2035, for which we have recorded a net fair value liability of Ps. 2,203 million; and (ix) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 8,869 million that expire in 2043, for which we have recorded a net fair value asset of Ps. 505 million.
As of December 31, 2021, we had (i) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 4,872 million that expire in 2022, for which we have recorded a net fair value asset of Ps. 982 million; (ii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 24,403 million that expire in 2023, for which we have recorded a net fair value asset of Ps. 12,379 million; (iii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 1,400 million that expire in 2024, for which we have recorded a net fair value asset of Ps. 438 million; (iv) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 10,667 million that expire in 2025, for which we have recorded a net fair value liability of Ps. 1,410 million; (v) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 6,348 million that expire in 2026, for which we have recorded a net fair value asset of Ps. 219 million; (vi) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 7,204 million that expire in 2027, for which we have recorded a net fair value asset of Ps. 366 million; (vii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 16,389 million that expire in 2029, for which we have recorded a net fair value asset of Ps. 634 million; (viii) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 3,911 million that expire in 2030, for which we have recorded a net fair value asset of Ps. 396 million; and (ix) cross-currency swaps designated as fair value hedges under contracts with an aggregate notional amount of Ps. 8,869 million that expire in 2043, for which we have recorded a net fair value asset of Ps. 1,553 million.
Certain cross-currency swap instruments did not meet the hedging criteria for accounting purposes. For the years ended December 31, 2023, 2022 and 2021 changes in the estimated fair value were recorded in the income statement. The changes in fair value of these contracts represented a gain of Ps. 141 in 2023, a loss of Ps. 2,270 in 2022 and a gain of Ps. 80 million in 2021.
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A hypothetical, instantaneous and unfavorable 10% devaluation of the Mexican peso relative to the U.S. dollar occurring on December 31, 2023 would result in a foreign exchange loss decreasing our consolidated net income by approximately Ps. 10,962 million over the 12-month period of 2023, reflecting greater foreign exchange loss related to our U.S. dollar denominated indebtedness, net of a gain in the cash balances held by us in U.S. dollars and euros.
As of April 15, 2024, the exchange rates relative to the U.S. dollar of all the countries where we operate, as well as their depreciation/appreciation effect compared to December 31, 2023, were as follows:

|  |  |  | Exchange Rate |  |  |
|  |  |  | as of April 15, |  | (Depreciation) / |
Country |  | Currency |  | 2024 |  | Appreciation |
Mexico |  | Mexican peso |  | 16.4583 |  | 2.6 | %
Brazil |  | Brazilian reais |  | 5.17 |  | (6.9) | %
Colombia |  | Colombian peso |  | 3,864.97 |  | (1.1) | %
Argentina |  | Argentine peso |  | 868.00 |  | (7.4) | %
Costa Rica |  | Colon |  | 504.30 |  | 4.3 | %
Guatemala |  | Quetzal |  | 7.77 |  | 0.7 | %
Nicaragua |  | Cordoba |  | 36.62 |  | — |
Panama |  | U.S. dollar |  | 1.00 |  | — |
Euro Zone |  | Euro |  | 0.93 |  | (3.0) | %
Peru |  | Nuevo sol |  | 3.73 |  | (0.3) | %
Chile |  | Chilean peso |  | 964.59 |  | (10.0) | %
Uruguay |  | Uruguayan peso |  | 38.89 |  | 0.3 | %

A hypothetical, instantaneous and unfavorable 10% devaluation in the value of the currencies in each of the countries where we operate, relative to the U.S. dollar, occurring on December 31, 2023, would produce a reduction (or gain) in stockholders’ equity as follows:

|  |  |  | Reduction in
Country |  | Currency |  | Stockholders’ Equity
|  |  |  | (in millions of Mexican pesos)
Mexico |  | Mexican peso |  | 10,962
Brazil |  | Brazilian reais |  | 3,467
Colombia |  | Colombian peso |  | 1,429
Costa Rica |  | Colon |  | 340
Argentina |  | Argentine peso |  | 228
Guatemala |  | Quetzal |  | 157
Nicaragua |  | Cordoba |  | 117
Panama |  | U.S. dollar |  | 292
Peru |  | Nuevo sol |  | 26
Chile |  | Chilean peso |  | 2,122
Uruguay |  | Uruguayan peso |  | 177
Ecuador |  | U.S. dollar |  | 55
Euro Zone |  | Euro |  | 178
U.S.A. |  | U.S. dollar |  | 3,807

Equity Risk
As of December 31, 2023 and 2022, we did not have any equity derivative agreements that exposed us to equity risk.
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On March 15, 2024, we entered into an ASR agreement with a financial institution in the U.S. to repurchase certain of our shares through the acquisition of ADSs. See "Item 4. Information on the Company––Recent Developments."
Commodity Price Risk
We entered into various derivative contracts to hedge the cost of certain raw materials that are exposed to variations of commodity price exchange rates. As of December 31, 2023, we had various derivative instruments contracts with maturity dates in 2024 and 2025, notional amounts of Ps. 3,985 million and a net fair value asset of Ps. 25 million. The results of our commodity price contracts expired for the years ended December 31, 2023, 2022 and 2021 were a loss of Ps. 430 million, Ps. 599 million and Ps.1,245 million, respectively, which were recorded in the results of each year.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
ITEM 12A. DEBT SECURITIES
Please see Exhibit 2.20 to this annual report.
ITEM 12B. WARRANTS AND RIGHTS
Not applicable.
ITEM 12C. OTHER SECURITIES
Not applicable.
ITEM 12D. AMERICAN DEPOSITARY SHARES
The Bank of New York Mellon, headquartered at 225 Liberty Street, New York, New York 10286, serves as the depositary for our ADSs. Holders of our ADSs, evidenced by ADRs, are required to pay various fees to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.
ADS holders are required to pay the depositary amounts in respect of expenses incurred by the depositary or its agents on behalf of ADS holders, including expenses arising from compliance with applicable law, taxes or other governmental charges, cable, telex and facsimile transmission, or the conversion of foreign currency into U.S. dollars. The depositary may decide in its sole discretion to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.
ADS holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below.

Depositary service |  | Fee payable by ADS holders
Issuance and delivery of ADSs, including in connection with share distributions, stock splits |  | Up to US$ 5.00 per 100 ADSs (or portion thereof)
Distribution of dividends |  | Up to US$ 0.02 per ADS
Withdrawal of shares underlying ADSs |  | Up to US$ 5.00 per 100 ADSs (or portion thereof)

Please see Exhibit 2.20 to this annual report for more information.
Direct and Indirect Payments by the Depositary
The depositary pays us an agreed amount, which includes reimbursements for certain expenses we incur in connection with the ADS program. These reimbursable expenses include legal and accounting fees, listing fees, investor relations expenses and fees payable to service providers for the distribution of material to ADS holders. For the year ended December 31, 2023, this amount was US$2,828,998.75.
ITEMS 13-14. NOT APPLICABLE
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ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
We have evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of December 31, 2023. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (or the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on our evaluation under the 2013 framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
In accordance with applicable guidance provided by SEC, our management assessment and conclusions of internal control effectiveness over financial reporting as of December 31, 2023 excludes an assessment of the internal control over financial reporting of the acquisition of NetPay, S.A.P.I de C.V.. This acquisition represented 0.09% and 0.07% of our total assets and net assets, respectively, as of December 31, 2023, and 0.23% and (0.01)% of our revenues and net income, respectively, for the year ended December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Mancera, S.C., a member practice of Ernst & Young Global Limited, an independent registered public accounting firm, as stated in its report included herein.
(c) Attestation Report of the Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Fomento Económico Mexicano, S.A.B. de C.V.
Opinion on Internal Control over Financial Reporting
We have audited Fomento Económico Mexicano, S.A.B. de C.V. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Fomento Económico Mexicano, S.A.B. de C.V. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of NetPay, S.A.P.I. de C.V. which is included in the 2023 consolidated financial statements of the Company and constituted 0.09% and 0.07% of total and net assets, respectively, as of December 31, 2023 and 0.23% and (0.01)% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of this entity.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes, and our report dated April 23, 2024, expressed an unqualified opinion thereon based on our audits and the report of other auditors.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Mancera, S.C.
A member practice of
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Ernst & Young Global Limited
/s/ MANCERA, S.C.
San Pedro Garza Garcia, Mexico
April 23, 2024
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(d) Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our shareholders and our board of directors have designated Víctor Alberto Tiburcio Celorio under the Mexican Exchange Market Law and applicable U.S. securities laws and NYSE listing standards, as “audit committee financial expert” within the meaning of this Item 16A. See “Item 6. Directors, Senior Management and Employees—Directors.”
ITEM 16B. CODE OF ETHICS
We have adopted a code of ethics, within the meaning of this Item 16B of Form 20-F. Our code of ethics applies to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions, our directors and other officers and employees, as well as any third party with which FEMSA engages. Our code of ethics is available on our website at https://www.femsa.com/en/press-room/documents/code-of-ethics/. If we amend the provisions of our code of ethics that apply to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
For the fiscal years ended December 31, 2023, 2022 and 2021 Mancera, S.C., a member practice of Ernst & Young Global Limited, was our auditor.
The following table summarizes the aggregate fees billed to us in 2023, 2022 and 2021 by Mancera, S.C., which is an independent registered public accounting firm, during the fiscal years ended December 31, 2023, 2022 and 2021:

|  | Year ended December 31,
|  | 2023 |  | 2022 |  | 2021
|  | (in millions of Mexican pesos)
Audit fees |  | Ps. | 287 |  |  | Ps. | 215 |  |  | Ps. | 159
Audit-related fees |  |  | 10 |  |  |  | 12 |  |  |  | 19
Tax fees |  |  | 23 |  |  |  | 23 |  |  |  | 17
Other fees |  |  | 14 |  |  |  | 1 |  |  |  | —
Total |  | Ps. | 334 |  |  | Ps. | 251 |  |  | Ps. | 195

Audit fees. Audit fees in the above table represent the aggregate fees billed in connection with the audit of our annual financial statements, as well as to other limited procedures in connection with our quarterly financial information and other statutory and regulatory audit activities.
Audit-related fees. Audit-related fees in the above table are the aggregate fees billed for assurance and other services related to the performance of the audit, mainly in connection with bond issuance processes and other special audits and reviews.
Tax fees. Tax fees in the above table are fees billed for services based upon existing facts and prior transactions in order to document, compute and obtain government approval for amounts included in tax filings such as value-added tax return assistance and transfer pricing documentation.
Other fees. Other fees in the above table include mainly fees billed for due diligence services.
Audit Committee Pre-Approval Policies and Procedures
We have adopted pre-approval policies and procedures under which all audit and non-audit services provided by our external auditors must be pre-approved by the audit committee as set forth in the Audit Committee’s charter. Any service proposals submitted by external auditors need to be discussed and approved by the Audit Committee during its
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meetings, which take place at least four times a year. Once the proposed service is approved, we or our subsidiaries formalize the engagement of services. The approval of any audit and non-audit services to be provided by our external auditors is specified in the minutes of our Audit Committee. In addition, the members of our board of directors are briefed on matters discussed by the different committees of our board of directors.
ITEM 16D. NOT APPLICABLE
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table summarizes our purchases of BD Units in the twelve months ended December 31, 2023.
Purchases of Equity Securities

|  |  |  |  |  |  |  |  | Approximate Value
|  |  |  |  |  |  | Total Number of |  | (in million Ps.)
|  |  |  |  |  |  | BD Units |  | of BD Units
|  | Total Number |  |  |  |  | Purchased as |  | that May Yet Be
|  | of BD Units |  | Average Price |  | Part of Publicly |  | Purchased Under
|  | Purchased |  | (in Ps.) Paid |  | Announced Plans |  | the Plans or
Period |  | (a) (b) |  | per BD Units |  | or Programs (b) |  | Programs (b)
January 1, 2023 through January 31, 2023 |  | 515,500 |  | Ps. | 158.9 |  | — |  | Ps. 17,000
February 1, 2023 through February 28, 2023 |  | 430,948 |  |  | 164.2 |  | — |  | 17,000
March 1, 2023 through March 31, 2023 |  | 2,241,515 |  |  | 164.8 |  | — |  | 17,000
April 1, 2023 through April 30, 2023 |  |  |  |  |  |  | — |  | 17,000
May 1, 2023 through May 31, 2023 |  |  |  |  |  |  | — |  | 17,000
June 1, 2023 through June 30, 2023 |  |  |  |  |  |  | — |  | 17,000
July 1, 2023 through June 31, 2023 |  |  |  |  |  |  | — |  | 17,000
August 1, 2023 through August 31, 2023 |  |  |  |  |  |  | — |  | 17,000
September 1, 2023 through September 30, 2023 |  | 807,632 |  |  | 198.9 |  | — |  | 17,000
October 1, 2023 through October 31, 2023 |  | 92,109 |  |  | 196.2 |  | — |  | 17,000
November 1, 2023 through November 30, 2023 |  | 443,895 |  |  | 215.2 |  | 368,878 |  | 16,921
December 1, 2023 through December 31, 2023 |  | 80,273 |  |  | 227.5 |  | 12,422 |  | 16,918
Total in 2023 |  | 4,611,872 |  | Ps. | 176.6 |  | 381,300 |  | Ps. 16,918

(a) BD Units purchased includes purchases by trusts that we administer in connection with our stock incentive plans, which purchases may be deemed to be "purchases by an affiliated purchaser of us." See “Item 6. Directors, Senior Management and Employees––EVA Stock Incentive Plan.”
(b) On March 31, 2023, our shareholders authorized the purchase of up to Ps. 17,000 million of our common stock, including our BD Units, during the fiscal year 2023, amount which did not exceed the total balance of the Company's net income, including retained earnings, as of such date.
On March 15, 2024, we entered into an ASR agreement with a financial institution in the U.S. to repurchase certain of our shares through the acquisition of ADSs. See "Item 4. Information on the Company––Recent Developments."
ITEM 16F. NOT APPLICABLE
ITEM 16G. CORPORATE GOVERNANCE
Pursuant to Rule 303A.11 of the Listed Company Manual of the NYSE, we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for U.S. companies under the NYSE listing standards. We are a Mexican corporation with shares listed on the Mexican Stock Exchange. Our corporate governance practices are governed by our bylaws, the Mexican Exchange Market Law and the regulations
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issued by the CNBV. We also disclose the extent of compliance with the Mexican Code of Principles and Best Corporate Governance (Código de Principios y Mejores Prácticas de Gobierno Corporativo), which was created by a group of Mexican business leaders and was endorsed by the Mexican Stock Exchange.
The table below discloses the significant differences between our corporate governance practices and the NYSE standards.

NYSE Standards |  | Our Corporate Governance Practices
Directors independence: A majority of the board of directors must be independent. |  | Directors independence: Pursuant to the Mexican Exchange Market Law, we are required to have a board of directors with a maximum of 21 members, 25% of whom must be independent. The Mexican Exchange Market Law sets forth, in article 26, the definition of “independence,” which differs from the one set forth in Section 303A.02 of the Listed Company Manual of the NYSE. Generally, under the Mexican Exchange Market Law, a director is not independent if such director: (i) is an employee or a relevant officer of the company or its subsidiaries; (ii) is an individual with significant influence over the company or its subsidiaries; (iii) is a shareholder or participant of the controlling group of the company; (iv) is a client, supplier, debtor, creditor, partner or employee of an important client, supplier, debtor or creditor of the company; or (v) is a family member of any of the aforementioned persons. In accordance with the Mexican Exchange Market Law, our shareholders are required to make a determination as to the independence of our directors at an ordinary meeting of our shareholders, though the CNBV may challenge that determination. Our board of directors is not required to make a determination as to the independence of our directors.
Executive sessions: Non-management directors must meet at regularly scheduled executive sessions without management. |  | Executive sessions: Under our bylaws and applicable Mexican law, our non-management and independent directors are not required to meet in executive sessions. Our bylaws state that the board of directors will meet at least four times a year, following the end of each quarter, to discuss our operating results and progress in achieving strategic objectives. Our board of directors can also hold extraordinary meetings.
Nominating/Corporate Governance Committee: A nominating/corporate governance committee composed entirely of independent directors is required. |  | Nominating/Corporate Governance Committee:
|  | Mexican law does not require us to have a Nominating Committee. However, our Corporate Practices and Nominations Committee was recently added with nominating functions. Our Corporate Practices and Nominations Committee is composed of four members, and as required by the Mexican Exchange Market Law and our bylaws, the four members are independent, and its chairman is elected at the shareholders’ meeting.
Compensation Committee: A compensation committee composed entirely independent directors is required. |  | Compensation Committee: We do not have a committee that exclusively oversees compensation issues. Our Corporate Practices and Nominations Committee, composed entirely of independent directors, reviews and recommends management compensation programs in order to ensure that they are aligned with shareholders’ interests and corporate performance.

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Audit Committee: Listed companies must have an audit committee satisfying the independence and other requirements of Rule 10A-3 under the Exchange Act and the NYSE independence standards. |  | Audit Committee: Our Audit Committee, which consists of four members, aligns with the regulations outlined in the Mexican Exchange Market Law. Each member of the Audit Committee is an independent director, and its chairman is elected at the shareholders’ meeting.
Equity compensation plan: Equity compensation plans require shareholder approval, subject to limited exemptions. |  | Equity compensation plan: Shareholder approval is not required under Mexican law or our bylaws for the adoption and amendment of an equity compensation plan. Such plans should provide for general application to all executives. Our current equity compensation plans have been approved by our board of directors.
Code of business conduct and ethics: Corporate governance guidelines and a code of conduct and ethics are required, with disclosure of any waiver for directors or executive officers. |  | Code of business conduct and ethics: We have adopted a code of ethics, within the meaning of Item 16B of SEC Form 20-F. Our code of ethics applies to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, our directors and other officers and employees, as well as any third party with which our business units engage. Our code of ethics is available on our website at https://www.femsa.com/en/press-room/documents/code-of-ethics/. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.

ITEM 16H. NOT APPLICABLE
ITEM 16I. NOT APPLICABLE
Item 16K. CYBERSECURITY
We maintain a comprehensive process for assessing, identifying and managing material risks from cybersecurity threats, including risks relating to disruption of business operations, financial reporting systems, intellectual property theft, fraud, extortion, harm to employees or customers, violations of privacy laws, reputational and other litigation and legal risks, as part of our overall risk management system and processes.
Our cybersecurity risk management processes focus on (i) the identification, (ii) the analysis and evaluation, and (iii) the mitigation of potential threats across critical business and operational areas of our organization. Such areas are delineated by top management, and are determined based on their outcomes and their financial, reputational and operative impact.These measures are aimed towards mitigating risks and safeguarding our sensitive information from potential security breaches. To assist with the identification of potential threats, we have robust set of internal procedures designed to accurately identify both internal and external threats. This includes comprehensive vulnerability management processes, rigorous external and internal penetration testing, the use of cyber intelligence, and continuous monitoring of emerging and existing threats. To assist with the analysis and evaluation of identified threats, we perform risk assessments processes and validate with reliable external sources, as product manufactures, industries experts, information security organizations and government best practices and bulletins. Finally, we mitigate cybersecurity-related threats through the implementation of remediation plans that assure the correct mitigation of potential adverse impacts.
Additionally, as part of our cybersecurity risk management procedures, we, on a tri-annual basis, engage external parties to perform technical and process-related assessments of our cybersecurity controls. These third-party evaluations aim to enhance the strength of our information security controls and to ensure adequate protection and control of potential threats.
Our business strategy, results of operations and financial condition have not been materially affected by risks from cybersecurity threats, including as a result of previous cybersecurity incidents, but we cannot provide assurance
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that they will not be materially affected in the future by such risks and any future material incidents. See “Item 3—Risk Factors” for more information on our cybersecurity-related risks.
The cybersecurity risk management processes described above are managed by FEMSA’s Chief Information Security Officer (the “CISO”), who is primarily responsible for the oversight of risks from cybersecurity threats. Furthermore, both the CISOs within each of our business units and FEMSA’s CISO bear the responsibility for monitoring any risks that surpass our predetermined risk tolerance thresholds and adopting follow-up actions to address such risks effectively. The Board of Directors determined that retaining responsibility for the oversight of risks from cybersecurity threats is appropriate, due to the impact that these risks have on our organization. To fulfill this responsibility, the Board of Directors receives quarterly reports regarding cybersecurity risks from the FEMSA CISO. These reports include information regarding information security risks and the corresponding mitigation strategies and actions adopted to address such risks.
ITEM 17. NOT APPLICABLE
ITEM 18. FINANCIAL STATEMENTS
See pages F-1 through F-122, incorporated herein by reference.
ITEM 19. EXHIBITS

1.1 | Amended and restated bylaws (estatutos sociales) of Fomento Económico Mexicano, S.A.B. de C.V., approved on March 31, 202 3 (English translation).
2.1 | Deposit Agreement, as further amended and restated as of May 11, 2007, among FEMSA, The Bank of New York Mellon (formerly The Bank of New York), and all owners and holders from time to time of any American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to FEMSA’s registration statement on Form F-6 filed on April 30, 2007 (File No. 333-142469)).
2.2 | Specimen certificate representing a BD Unit, consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares, together with an English translation (incorporated by reference to FEMSA’s registration statement on Form F-4 filed on April 9, 1998 (File No. 33-8618)).*
2.3 | Indenture, dated as of April 8, 2013, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent, and Transfer Agent (incorporated by reference to Exhibit 4.1 of FEMSA’s registration statement on Form F-3 filed on April 9, 2013 (File No. 333-187806)).
2.4 | First Supplemental Indenture, dated as of May 10, 2013, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent and Transfer Agent, and The Bank of New York Mellon SA/NV, Dublin Branch, as Irish Paying Agent, including the form of global note therein (incorporated by reference to Exhibit 1.4 to FEMSA’s registration statement on Form 8-A filed on May 17, 2013 (File No. 001-35934)).
2.5 | Third Supplemental Indenture, dated as of January 16, 2020, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent and Transfer Agent, including the form of global note therein (incorporated by reference to Exhibit 4.1 of FEMSA’s report on Form 6-K filed on January 16, 2020 (File No. 001-35934)).
2.6 | Indenture, dated as of February 5, 2010, among Coca-Cola FEMSA and The Bank of New York Mellon (incorporated by reference to Exhibit 2.2 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 10, 2010 (File No. 1-12260)).
2.7 | Fourth Supplemental Indenture, dated as of February 12, 2020, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent and Transfer Agent, including the form of global note therein (incorporated by reference to Exhibit 4.1 of FEMSA’s report on Form 6-K filed on February 12, 2020 (File No. 001-35934).

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2.8 | Fifth Supplemental Indenture, dated as of June 25, 2020, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent and Transfer Agent, including the form of global note therein (incorporated by reference to Exhibit 4.1 of FEMSA’s report on Form 6-K filed on June 25, 2020 (File No. 001-35934).
2.9 | Sixth Supplemental Indenture, dated as of April 28, 2021, between FEMSA, as Issuer, and The Bank of New York Mellon, as Trustee, Security Registrar, Paying Agent and Transfer Agent, including the form of global note therein (incorporated by reference to Exhibit 4.1 of FEMSA’s report on Form 6-K filed on April 28, 2021 (File No. 001-35934).
2.10 | First Supplemental Indenture, dated as of February 5, 2010 among Coca-Cola FEMSA and The Bank of New York Mellon and the Bank of New York Mellon (Luxembourg) S.A. (incorporated by reference to Exhibit 2.3 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 10, 2010 (File No. 1-12260)).
2.11 | Second Supplemental Indenture, dated as of April 1, 2011, among Coca-Cola FEMSA, Propimex, S. de R.L. de C.V. (formerly Propimex, S.A. de C.V.), as Guarantor, and The Bank of New York Mellon (incorporated by reference to Coca- Cola FEMSA’s Annual Report on Form 20-F filed on June 17, 2011 (File No. 001-12260)).
2.12 | Third Supplemental Indenture, dated as of September 6, 2013, among Coca-Cola FEMSA, as issuer, Propimex, S. de R.L. de C.V. (formerly Propimex, S.A. de C.V.), as existing guarantor, Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V. and Yoli de Acapulco, S.A. de C.V., as additional guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.7 to Coca-Cola FEMSA’s Registration Statement on Form F-3 filed on November 8, 2013 (File No.333- 187275)).
2.13 | Fourth Supplemental Indenture, dated as of October 18, 2013, among Coca-Cola FEMSA, as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V. and Yoli de Acapulco, S.A. de C.V., as existing guarantors, Controladora Interamericana de Bebidas, S. de R.L. de C.V., as additional guarantor, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.8 to Coca-Cola FEMSA’s Registration Statement on Form F-3 filed on November 8, 2013 (File No. 333-187275)).
2.14 | Fifth Supplemental Indenture, dated as of November 26, 2013, among Coca-Cola FEMSA, as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V., Yoli de Acapulco, S.A. de C.V. and Controladora Interamericana de Bebidas, S. de R.L. de C.V., as guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Form 6-K filed on December 5, 2013 (File No.1-12260)).
2.15 | Sixth Supplemental Indenture, dated as of January 21, 2014 among Coca-Cola FEMSA, as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V., Yoli de Acapulco, S.A. de C.V. and Controladora Interamericana de Bebidas, S. de R.L. de C.V., as guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Form 6-K filed on January 27, 2014 (File No.1-12260)).

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2.16 | Seventh Supplemental Indenture, dated as of November 23, 2015, among Coca-Cola FEMSA, S.A.B. de C.V., as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Yoli de Acapulco, S. de R.L. de C.V. and Controladora Interamericana de Bebidas, S. de R.L. de C.V., as guarantors, Distribuidora y Manufacturera del Valle de Mexico, S. de R.L. de C.V., as successor guarantor, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 2.9 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 15, 2016 (File No. 1-12260)).
2.17 | Eighth Supplemental Indenture, dated as of January 22, 2020 among Coca-Cola FEMSA, S.A.B. de C.V., as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Yoli de Acapulco, S. de R.L. de C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V. and Distribuidora y Manufacturera del Valle de Mexico, S. de R.L. de C.V., as guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Form 6-K filed on January 22, 2020 (File No. 1-12260)).
2.18 | Ninth Supplemental Indenture, dated as of January 22, 2020 among Coca-Cola FEMSA, S.A.B. de C.V., as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S.de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Yoli de Acapulco, S. de R.L. de C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V. and Distribuidora y Manufacturera del Valle de Mexico, S. de R.L. de C.V., as guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 2.11 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 17, 2020 (File No. 1-12260)).
2.19 | Tenth Supplemental Indenture dated as of September 1, 2020 among Coca-Cola FEMSA, S.A.B. de C.V., as issuer, Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Yoli de Acapulco, S. de R.L. de C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V. and Distribuidora y Manufacturera del Valle de Mexico, S. de R.L. de C.V., as guarantors, and The Bank of New York Mellon, as trustee, security registrar, paying agent and transfer agent (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Report on Form 6-K furnished on September 1, 2020 (File No. 1-12260)).
2.20 | Description of securities registered under Section 12 of the Securities Exchange Act of 1934.
3.1 | Amended Voting Trust Agreement among certain principal shareholders of FEMSA, together with an English translation (incorporated by reference to FEMSA’s Schedule 13D as amended, filed on August 11, 2005 (File No. 005-54705)).
4.1 | Amended and Restated Shareholders’ Agreement, dated as of July 6, 2002, by and among CIBSA, Emprex, The Coca- Cola Company and Inmex (incorporated by reference to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).
4.2 | First Amendment, dated May 6, 2003, to the Amended and Restated Shareholders’ Agreement dated July 6, 2002, among CIBSA, Emprex, The Coca-Cola Company, Inmex, Atlantic Industries, Dulux CBAI 2003 B.V. and Dulux CBEXINMX 2003 B.V. (incorporated by reference to Exhibit 4.14 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).
4.3 | Second Amendment, dated February 1, 2010, to the Amended and Restated Shareholders’ Agreement dated July 6, 2002, among CIBSA, Emprex, The Coca-Cola Company, Inmex and Dulux CBAI 2003 B.V. (incorporated by reference to Exhibit 4.3 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 10, 2010 (File No. 1-12260)).
4.4 | Coca-Cola Tradename License Agreement, dated June 21, 1993, between Coca-Cola FEMSA and The Coca-Cola Company (with English translation) (incorporated by reference to FEMSA’s Registration Statement on Form F-4 filed on April 9, 1998 (File No. 33-8618)).*

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4.5 | Amendment to the Trademark License Agreement, dated December 1, 2002, entered by and among Administración de Marcas, S.A. de C.V., as proprietor, and The Coca-Cola Export Corporation Mexico branch, as licensee (incorporated by reference to Panamco’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
4.6 | Trademark Sub-License Agreement, dated January 4, 2003, entered by and among Panamco Golfo, S.A. de C.V., as licensor, and The Coca-Cola Company, as licensee (incorporated by reference to Panamco’s Quarterly Report on Form 10- Q for the period ended March 31, 2003 (File No. 1-12290)).
4.7 | Trademark Sub-License Agreement, dated January 4, 2003, entered by and among Panamco Bajio, S.A. de C.V., as licensor, and The Coca-Cola Company, as licensee (incorporated by reference to Panamco’s Quarterly Report on Form 10- Q for the period ended March 31, 2003 (File No. 1-12290)).
4.8 | Supply Agreement, dated April 3, 1998, between ALPLA Fábrica de Plásticos, S.A. de C.V. and Industria Embotelladora de México, S.A. de C.V. (with English translation) (incorporated by reference to Exhibit 4.18 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on July 1, 2002 (File No. 1-12260)).*
4.9 | Services Agreement, dated November 7, 2000, between Coca-Cola FEMSA and FEMSA Logística, S.A. de C.V. (with English translation) (incorporated by reference to Exhibit 4.15 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 20, 2001 (File No. 1-12260)).*
4.10 | Promotion and Non-Compete Agreement, dated March 11, 2003, entered by and among The Coca-Cola Export Corporation Mexico branch and Panamco Bajio, S.A. de C.V. (with English translation) (incorporated by reference to Panamco’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
4.11 | Promotion and Non-Compete Agreement, dated March 11, 2003, entered by and among The Coca-Cola Export Corporation Mexico branch and Panamco Golfo, S.A. de C.V. (with English translation) (incorporated by reference to Panamco’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
4.12 | Memorandum of Understanding, dated as of March 11, 2003, by and among Panamco, as seller, and The Coca-Cola Company, as buyer (incorporated by reference to Panamco’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
4.13 | The Coca-Cola Company Memorandum to Steve Heyer from Jose Antonio Fernández, dated December 22, 2002 (incorporated by reference to Exhibit 10.1 to FEMSA’s Registration Statement on Amendment No. 1 to the Form F-3 filed on September 20, 2004 (File No. 333-117795)).
8.1 | Significant Subsidiaries.
12.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 2 3, 202 3.
12.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 2 3, 202 3.
13.1 | Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 2 3, 202 3.
15.1 | Consent letter of Mancera, S.C., a member practice of Ernst & Young Global.
15.2 | Consent letter of Deloitte Accountants B.V.

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97 | FEMSA Policy for the Recovery of Erroneously Awarded Compensation, effective as of October, 202 3.
101. INS | Inline XBRL Instance Document.
101. SCH | Inline XBRL Taxonomy Extension Schema Document.
101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.
101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101. DEF | Inline XBRL Taxonomy Extension Definition Document.
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document)

* This was a paper filing, and is not available on the SEC Website.
Omitted from the exhibits filed with this annual report are certain instruments and agreements with respect to our long-term debt, none of which authorizes the issuance of securities in a total amount that exceeds 10% of our total assets. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements as the SEC requests.
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SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Date: April 23, 2024

| Fomento Económico Mexicano, S.A.B. de C.V.
| By: | /s/ Eugenio Garza y Garza
|  | Eugenio Garza y Garza
|  | Chief Financial Officer

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FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MÉXICO
INDEX TO FINANCIAL STATEMENTS

Audited consolidated financial statements of Fomento Económico Mexicano, S.A.B. de C.V. |
Report of Independent Registered Public Accounting Firm (PCAOB ID 1284) | F-1
Consolidated statements of financial position as of December 31, 2023 and 2022 | F-3
Consolidated income statements for the years ended December 31, 2023, 2022 and 2021 | F-4
Consolidated statements of comprehensive income for the years ended December 31, 2023, 2022 and 2021 | F-5
Consolidated statements of changes in equity for the years ended December 31, 2023, 2022 and 2021 | F-6
Consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021 | F-7
Notes to the audited consolidated financial statements | F-9
Audited consolidated financial statements of Heineken N.V. |
Report of Independent Registered Public Accounting Firm - Deloitte Accountants B.V. (PCAOB ID 1243) | F-123

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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Fomento Económico Mexicano, S.A.B. de C.V.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Fomento Económico Mexicano, S.A.B. de C.V. and subsidiaries (“the Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, based on our audits, and for 2022 and 2021, the report of other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We did not audit the 2022 and 2021 consolidated financial statements of Heineken N.V. (a corporation in which the Company had an 8.63% interest at December 31, 2022) which is majority owned by Heineken Holding N.V. (a corporation in which the Company had a 12.26% interest at December 31, 2022) (collectively “Heineken”). In the consolidated financial statements, the Company’s investment in Heineken included its share of the net assets of Ps. 59,560 million at December 31, 2022, and its equity in the net income of Heineken of Ps. 8,316 million and Ps. 11,635 million for the years ended December 31, 2022 and 2021, respectively, which are exclusive of the impact of goodwill and other adjustments recorded by the Company. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Heineken for 2022 and 2021, is based solely on the report of the other auditors.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated April 23, 2024, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
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|  | Impairment tests for cash generating units containing goodwill, distribution rights and other indefinite lived intangible assets - Coca-Cola FEMSA Colombia
Description of the Matter |  | At December 31, 2023, the Company has distribution rights, goodwill and other indefinite lived intangible assets with an aggregate carrying value of approximately $3,635 million allocated to Coca-Cola FEMSA Colombia. The related disclosures are included in Note 2.3.2.1, Note 3.16 and Note 13 to the consolidated financial statements, and distribution rights, goodwill and other indefinite lived intangible assets are tested for impairment annually at the cash generating unit (CGU) level. Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Auditing management’s annual distribution rights, goodwill and other indefinite lived intangible assets impairment test for the Coca-Cola FEMSA Colombia CGU was complex and highly judgmental due to the significant estimation required to determine the value in use of the CGU. In particular, the value in use estimates were sensitive to significant assumptions, such as the discount rate (weighted average cost of capital), revenue growth rates and operating margins.
How We Addressed the Matter in Our Audit |  | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the distribution rights, goodwill and other indefinite lived intangible assets impairment review processes for Coca-Cola FEMSA, including controls over management’s review of the significant assumptions described above, projected financial information and the valuation model used to develop such estimates. We performed procedures to assess the significant assumptions used in the determination of the value in use of the CGU that included, among others, evaluating the methodology applied by management in performing the impairment test, testing the completeness and accuracy of the projected financial information included in the discounted cash flow model, reconciling the carrying value to the general ledger and comparing the projected financial information to Board approved business plans. We also involved our internal valuation specialists to assist with the evaluation of the discount rate and revenue growth rates used in the discounted cash flow model. We compared the revenue growth rates included in the cash flow projections to external sources of information and actual prior year revenue growth rates. We assessed the historical accuracy of management’s estimates by comparing the forecast to actual results. We reperformed management’s sensitivity analysis of the discount rate and revenue growth rates to evaluate the change in the value in use of the CGU that would result from changes in the assumptions. Furthermore, we assessed the adequacy of the related disclosures provided in Note 2.3.2.1, Note 3.16 and Note 13 to the consolidated financial statements.

Mancera, S.C.
A member practice of
Ernst & Young Global Limited
/s/ MANCERA, S.C.
We have served as the Company’s auditor since 2008
San Pedro Garza Garcia, Mexico
April 23, 2024
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FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Statements of Financial Position
As of December 31, 2023 and 2022.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.).

|  | Note |  | 2023⁽¹⁾ |  | 2023 |  | 2022
ASSETS |  |  |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 5 |  | $ | 9,770 |  | Ps. | 165,112 |  | Ps. | 83,439
Investments |  | 6 |  | 1,582 |  | 26,728 |  | 51
Trade receivables, net |  | 7 |  | 2,300 |  | 38,863 |  | 45,527
Inventories |  | 8 |  | 3,445 |  | 58,222 |  | 62,224
Recoverable taxes |  | 25 |  | 1,227 |  | 20,738 |  | 19,361
Other current financial assets |  | 9 |  | 998 |  | 16,860 |  | 11,369
Other current assets |  | 9 |  | 226 |  | 3,817 |  | 4,478
Current assets held for sale |  | 4.3.2 |  | 1,528 |  | 25,819 |  | —
Total current assets |  |  |  | 21,076 |  | 356,159 |  | 226,449
NON CURRENT ASSETS |  |  |  |  |  |  |  |
Equity method accounted investees |  | 10 |  | 1,553 |  | 26,247 |  | 103,669
Property, plant and equipment, net |  | 11 |  | 8,375 |  | 141,530 |  | 134,001
Right-of-use assets |  | 12 |  | 5,204 |  | 87,941 |  | 83,966
Intangible assets, net |  | 13 |  | 8,475 |  | 143,218 |  | 190,772
Deferred tax assets |  | 25 |  | 1,633 |  | 27,598 |  | 26,890
Other non-current financial assets |  | 14 |  | 868 |  | 14,667 |  | 23,810
Other non-current assets, net |  | 14 |  | 503 |  | 8,496 |  | 9,258
Total non-current assets |  |  |  | 26,611 |  | 449,697 |  | 572,366
TOTAL ASSETS |  |  |  | $ | 47,687 |  | Ps. | 805,856 |  | Ps. | 798,815
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |  |  |
Bank loans and notes payable |  | 19 |  | $ | 145 |  | Ps. | 2,453 |  | Ps. | 1,862
Current portion of non-current debt |  | 19 |  | 355 |  | 5,998 |  | 16,479
Lease liabilities |  | 12 |  | 724 |  | 12,236 |  | 12,095
Interest payable |  |  |  | 99 |  | 1,677 |  | 2,075
Trade payable |  |  |  | 4,824 |  | 81,518 |  | 78,400
Accounts payable |  | 26 |  | 1,584 |  | 26,772 |  | 31,842
Income tax payable |  |  |  | 572 |  | 9,666 |  | 5,419
Other current financial liabilities |  | 26 |  | 1,804 |  | 30,492 |  | 28,750
Current liabilities held for sale |  | 4.3.2 |  | 685 |  | 11,569 |  | —
Total current liabilities |  |  |  | 10,792 |  | 182,381 |  | 176,922
NON-CURRENT LIABILITIES |  |  |  |  |  |  |  |
Bank loans and notes payable |  | 19 |  | 7,596 |  | 128,373 |  | 173,400
Non-current portion lease liabilities |  | 12 |  | 4,961 |  | 83,837 |  | 81,222
Employee benefits |  | 17 |  | 409 |  | 6,920 |  | 7,048
Deferred tax liabilities |  | 25 |  | 436 |  | 7,371 |  | 6,823
Other non-current financial liabilities |  | 26 |  | 572 |  | 9,665 |  | 6,618
Provisions |  | 26 |  | 256 |  | 4,323 |  | 4,685
Other non-current liabilities |  | 26 |  | 273 |  | 4,617 |  | 4,296
Total non-current liabilities |  |  |  | 14,503 |  | 245,106 |  | 284,092
TOTAL LIABILITIES |  |  |  | 25,295 |  | 427,487 |  | 461,014
EQUITY |  |  |  |  |  |  |  |
Capital stock |  |  |  | 198 |  | 3,348 |  | 3,347
Additional paid-in capital |  |  |  | 1,041 |  | 17,599 |  | 17,714
Retained earnings |  |  |  | 18,027 |  | 304,653 |  | 251,192
Other comprehensive income (loss) |  |  |  | (1,283) |  | (21,740) |  | (9,649)
Equity attributable to equity holders of the parent |  |  |  | 17,983 |  | 303,860 |  | 262,604
Non-controlling interest |  | 22 |  | 4,409 |  | 74,509 |  | 75,197
TOTAL EQUITY |  |  |  | 22,392 |  | 378,369 |  | 337,801
TOTAL LIABILITIES AND EQUITY |  |  |  | $ | 47,687 |  | Ps. | 805,856 |  | Ps. | 798,815

(1)Convenience translation to U.S. dollars ($) – See Note 2.2.3
The accompanying notes are an integral part of these consolidated statements of financial position.
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FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Income Statements
For the years ended December 31, 2023, 2022 and 2021.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.), except for earnings per share amounts.

|  | Note |  | 2023⁽¹⁾ |  | 2023 |  | 2022 |  | 2021
Net sales |  | 28 |  | $ | 41,399 |  | Ps. | 699,640 |  | Ps. | 595,543 |  | Ps. | 504,122
Other operating revenues |  |  |  | 181 |  | 3,052 |  | 1,465 |  | 1,338
Total revenues |  |  |  | 41,580 |  | 702,692 |  | 597,008 |  | 505,460
Cost of goods sold |  | 8 |  | 25,041 |  | 423,185 |  | 355,490 |  | 299,276
Gross profit |  |  |  | 16,539 |  | 279,507 |  | 241,518 |  | 206,184
Administrative expenses |  |  |  | 1,912 |  | 32,307 |  | 28,077 |  | 22,935
Selling expenses |  |  |  | 11,168 |  | 188,732 |  | 149,145 |  | 129,057
Other income |  | 20 |  | 775 |  | 13,102 |  | 1,051 |  | 5,566
Other expenses |  | 20 |  | 370 |  | 6,252 |  | 2,896 |  | 3,725
Interest expense |  | 19 |  | 883 |  | 14,916 |  | 15,853 |  | 16,630
Interest income |  | 19 |  | 1,042 |  | 17,609 |  | 3,769 |  | 1,488
Foreign exchange (loss) gain, net |  |  |  | (583) |  | (9,849) |  | (3,696) |  | 1,321
Gain on monetary position for subsidiaries in hyperinflationary economies |  |  |  | 6 |  | 94 |  | 531 |  | 740
Market value (loss) gain on financial instruments |  |  |  | (26) |  | (440) |  | (706) |  | 38
Income before income taxes and share in the profit of equity method accounted investees |  |  |  | 3,420 |  | 57,816 |  | 46,496 |  | 42,990
Income taxes |  | 25 |  | 768 |  | 12,971 |  | 13,275 |  | 13,566
Share in the (loss) profit of equity method accounted investees, net of income taxes |  | 10 |  | (24) |  | (406) |  | 99 |  | (10)
Net income from continuing operations |  |  |  | 2,628 |  | 44,439 |  | 33,320 |  | 29,414
Net income from discontinued operations |  | 4.3 |  | 1,908 |  | 32,238 |  | 1,423 |  | 8,264
CONSOLIDATED NET INCOME |  |  |  | 4,536 |  | 76,677 |  | 34,743 |  | 37,678
Attributable to: |  |  |  |  |  |  |  |  |  |
Equity holders of the parent |  |  |  | 3,886 |  | 65,689 |  | 23,909 |  | 28,495
Non-controlling interest |  |  |  | 650 |  | 10,988 |  | 10,834 |  | 9,183
CONSOLIDATED NET INCOME |  |  |  | $ | 4,536 |  | Ps. | 76,677 |  | Ps. | 34,743 |  | Ps. | 37,678
Basic earnings per share from continuing operations attributable to equity holders of the parent |  |  |  |  |  |  |  |  |  |
Per series “B” share |  | 24 |  | $ | 0.09 |  | Ps. | 1.67 |  | Ps. | 1.12 |  | Ps. | 1.01
Per series “D” share |  | 24 |  | 0.11 |  | 2.09 |  | 1.40 |  | 1.26
Diluted earnings per share from continuing operations attributable to equity holders of the parent |  |  |  |  |  |  |  |  |  |
Per series “B” share |  | 24 |  | 0.09 |  | 1.67 |  | 1.12 |  | 1.01
Per series “D” share |  | 24 |  | 0.11 |  | 2.09 |  | 1.40 |  | 1.26
Basic earnings per share from discontinued operations attributable to equity holders of the parent |  |  |  |  |  |  |  |  |  |
Per series “B” share |  | 24 |  | 0.08 |  | 1.61 |  | 0.07 |  | 0.41
Per series “D” share |  | 24 |  | 0.10 |  | 2.02 |  | 0.09 |  | 0.52
Diluted earnings per share from discontinued operations attributable to equity holders of the parent |  |  |  |  |  |  |  |  |  |
Per series “B” share |  | 24 |  | 0.08 |  | 1.61 |  | 0.07 |  | 0.41
Per series “D” share |  | 24 |  | 0.10 |  | 2.01 |  | 0.09 |  | 0.52

(1)Convenience translation to U.S. dollars ($) – See Note 2.2.3
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Table of Contents
The accompanying notes are an integral part of these consolidated income statements.
FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2023, 2022 and 2021.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.).

|  | Note |  | 2023⁽¹⁾ |  | 2023 |  | 2022 |  | 2021
CONSOLIDATED NET INCOME |  |  |  | $ | 4,536 |  | Ps. | 76,677 |  | Ps. | 34,743 |  | Ps. | 37,678
Items that will be reclassified to consolidated net income in subsequent periods, net of income tax: |  |  |  |  |  |  |  |  |  |
Valuation of the effective portion of derivative financial instruments |  | 21 |  | (55) |  |  | (928) |  |  | (2,240) |  |  | 2,541 |
(Loss) income on hedge of net investments in foreign operations |  | 19 |  | (305) |  |  | (5,153) |  |  | 3,677 |  |  | 350 |
Exchange differences loss on the translation of foreign operations and equity method accounted investees |  |  |  | (1,064) |  |  | (17,986) |  |  | (17,430) |  |  | (8,307) |
Share of other comprehensive income of equity method accounted investees |  | 10 |  | 361 |  |  | 6,097 |  |  | 2,369 |  |  | 2,925 |
Total items that will be reclassified to consolidated net income in subsequent periods, net of income tax |  |  |  | (1,063) |  |  | (17,970) |  |  | (13,624) |  |  | (2,491) |
Items that will not to be reclassified to consolidated net income in subsequent periods, net of income tax: |  |  |  |  |  |  |  |  |  |
Gain (loss) due to changes in the fair value in equity financial instruments |  |  |  | 80 |  |  | 1,356 |  |  | (2,236) |  |  | 5,165 |
Share of other comprehensive income of equity method accounted investees |  |  |  | 53 |  |  | 897 |  |  | 267 |  |  | 590 |
Gain on remeasurements of the net defined benefit liability |  |  |  | 9 |  |  | 160 |  |  | 661 |  |  | 296 |
Total items that will not be reclassified to consolidated net income in subsequent periods, net of income tax |  |  |  | 142 |  |  | 2,413 |  |  | (1,308) |  |  | 6,051 |
Other comprehensive (loss) income, net of income tax |  |  |  | (921) |  |  | (15,557) |  |  | (14,932) |  |  | 3,560 |
Consolidated comprehensive income, net of income tax |  |  |  | $ | 3,615 |  |  | Ps. | 61,120 |  |  | Ps. | 19,811 |  |  | Ps. | 41,238 |
Attributable to: |  |  |  |  |  |  |  |  |  |
Equity holders of the parent |  |  |  | 3,170 |  |  | 53,598 |  |  | 11,175 |  |  | 32,423 |
Non-controlling interest |  |  |  | 445 |  |  | 7,522 |  |  | 8,636 |  |  | 8,815 |
Consolidated comprehensive income, net of income tax |  |  |  | $ | 3,615 |  |  | Ps. | 61,120 |  |  | Ps. | 19,811 |  |  | Ps. | 41,238 |

(1)Convenience translation to U.S. dollars ($) – See Note 2.2.3
The accompanying notes are an integral part of these consolidated statements of comprehensive income.
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Table of Contents
FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Statements of Changes in Equity
For the years ended December 31, 2023, 2022 and 2021.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.).

|  | Notes |  | Capital Stock |  | Additional paid-in capital |  | Retained earnings |  | Fair value in equity financial instrument |  | Valuation of the effective portion of derivative financial instrument |  | Exchange differences on the translation of foreign operations and equity accounted investees |  | Remeasurements of the net defined benefit liability |  | Equity attributable to equity holders of the parent |  | Non-controlling interest |  | Total equity
Balances as of January 1, 2021 |  |  |  | Ps. | 3,348 |  |  | Ps. | 17,808 |  |  | Ps. | 217,430 |  |  | Ps. | (4,482) |  |  | Ps. | 2,667 |  |  | Ps. | 4,162 |  |  | Ps. | (3,190) |  |  | Ps. | 237,743 |  |  | Ps. | 69,444 |  |  | Ps. | 307,187 |
Consolidated net income |  |  |  |  | — |  |  |  | — |  |  |  | 28,495 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 28,495 |  |  |  | 9,183 |  |  |  | 37,678 |
Other comprehensive income (loss), net |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,165 |  |  |  | 1,563 |  |  |  | (3,722) |  |  |  | 922 |  |  |  | 3,928 |  |  |  | (368) |  |  |  | 3,560 |
Total other comprehensive income (loss) |  |  |  |  | — |  |  |  | — |  |  |  | 28,495 |  |  |  | 5,165 |  |  |  | 1,563 |  |  |  | (3,722) |  |  |  | 922 |  |  |  | 32,423 |  |  |  | 8,815 |  |  |  | 41,238 |
Dividends declared and paid |  | 22,23 |  |  | — |  |  |  | — |  |  |  | (7,687) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (7,687) |  |  |  | (5,729) |  |  |  | (13,416) |
Issuance of share-based compensation plans |  | 18 |  |  | — |  |  |  | 54 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 54 |  |  |  | (14) |  |  |  | 40 |
Other movements in equity method accounted investees, net of income tax |  | 10 |  |  | — |  |  |  | — |  |  |  | 68 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 68 |  |  |  | — |  |  |  | 68 |
Balances as of December 31, 2021 |  |  |  | Ps. | 3,348 |  |  | Ps. | 17,862 |  |  | Ps. | 238,306 |  |  | Ps. | 683 |  |  | Ps. | 4,230 |  |  | Ps. | 440 |  |  | Ps. | (2,268) |  |  | Ps. | 262,601 |  |  | Ps. | 72,516 |  |  | Ps. | 335,117 |
Balances as of January 1, 2022 |  |  |  | Ps. | 3,348 |  |  | Ps. | 17,862 |  |  | Ps. | 238,306 |  |  | Ps. | 683 |  |  | Ps. | 4,230 |  |  | Ps. | 440 |  |  | Ps. | (2,268) |  |  | Ps. | 262,601 |  |  | Ps. | 72,516 |  |  | Ps. | 335,117 |
Consolidated net income |  |  |  |  | — |  |  |  | — |  |  |  | 23,909 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 23,909 |  |  |  | 10,834 |  |  |  | 34,743 |
Other comprehensive income (loss), net |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,236) |  |  |  | (1,709) |  |  |  | (9,545) |  |  |  | 756 |  |  |  | (12,734) |  |  |  | (2,198) |  |  |  | (14,932) |
Total other comprehensive income (loss) |  |  |  |  | — |  |  |  | — |  |  |  | 23,909 |  |  |  | (2,236) |  |  |  | (1,709) |  |  |  | (9,545) |  |  |  | 756 |  |  |  | 11,175 |  |  |  | 8,636 |  |  |  | 19,811 |
Dividends declared and paid |  | 22,23 |  |  | — |  |  |  | — |  |  |  | (11,358) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (11,358) |  |  |  | (6,176) |  |  |  | (17,534) |
Issuance of share-based compensation plans |  | 18 |  |  | (1) |  |  |  | 147 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 146 |  |  |  | (57) |  |  |  | 89 |
Acquisition of non-controlling interest |  |  |  |  | — |  |  |  | (295) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (295) |  |  |  | (74) |  |  |  | (369) |
Contribution from non-controlling interest |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 352 |  |  |  | 352 |
Other movements in equity method accounted investees, net of income tax |  | 10 |  |  | — |  |  |  | — |  |  |  | 335 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 335 |  |  |  | — |  |  |  | 335 |
Balances as of December 31, 2022 |  |  |  | Ps. | 3,347 |  |  | Ps. | 17,714 |  |  | Ps. | 251,192 |  |  | Ps. | (1,553) |  |  | Ps. | 2,521 |  |  | Ps. | (9,105) |  |  | Ps. | (1,512) |  |  | Ps. | 262,604 |  |  | Ps. | 75,197 |  |  | Ps. | 337,801 |
Balances as of January 1, 2023 |  |  |  | Ps. | 3,347 |  |  | Ps. | 17,714 |  |  | Ps. | 251,192 |  |  | Ps. | (1,553) |  |  | Ps. | 2,521 |  |  | Ps. | (9,105) |  |  | Ps. | (1,512) |  |  | Ps. | 262,604 |  |  | Ps. | 75,197 |  |  | Ps. | 337,801 |
Consolidated net income |  |  |  |  | — |  |  |  | — |  |  |  | 65,689 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 65,689 |  |  |  | 10,988 |  |  |  | 76,677 |
Sale of Heineken investment |  | 4.3.1 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (738) |  |  |  | 3,472 |  |  |  | 1,247 |  |  |  | 3,981 |  |  |  | — |  |  |  | 3,981 |
Other comprehensive income (loss), net |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,357 |  |  |  | (490) |  |  |  | (16,662) |  |  |  | (277) |  |  |  | (16,072) |  |  |  | (3,466) |  |  |  | (19,538) |
Total other comprehensive income (loss) |  |  |  |  | — |  |  |  | — |  |  |  | 65,689 |  |  |  | 1,357 |  |  |  | (1,228) |  |  |  | (13,190) |  |  |  | 970 |  |  |  | 53,598 |  |  |  | 7,522 |  |  |  | 61,120 |
Dividends declared and paid |  | 22,23 |  |  | — |  |  |  | — |  |  |  | (12,247) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (12,247) |  |  |  | (6,551) |  |  |  | (18,798) |
Issuance of share-based compensation plans |  | 18 |  |  | 1 |  |  |  | (115) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (114) |  |  |  | 22 |  |  |  | (92) |
Disposal of businesses |  | 22 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,681) |  |  |  | (1,681) |
Other movements in equity method accounted investees, net of income tax |  | 10 |  |  | — |  |  |  | — |  |  |  | 19 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19 |  |  |  | — |  |  |  | 19 |
Balances as of December 31, 2023 |  |  |  | Ps. | 3,348 |  |  | Ps. | 17,599 |  |  | Ps. | 304,653 |  |  | Ps. | (196) |  |  | Ps. | 1,293 |  |  | Ps. | (22,295) |  |  | Ps. | (542) |  |  | Ps. | 303,860 |  |  | Ps. | 74,509 |  |  | Ps. | 378,369 |

The accompanying notes are an integral part of these consolidated statements of changes in equity.
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Table of Contents
FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Statements of Cash Flows
For the years ended December 31, 2023, 2022 and 2021.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.).

| Note |  | 2023⁽¹⁾ |  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
OPERATING ACTIVITIES |  |  |  |  |  |  |  |  |
Net income from discontinuing operations |  |  | $ | 1,908 |  | Ps. | 32,238 |  | Ps. | 1,423 |  | Ps. | 8,264
Income before income taxes from continuing operations |  |  | 3,397 |  | 57,410 |  | 47,715 |  | 43,692
|  |  | 5,305 |  | 89,648 |  | 49,138 |  | 51,956
Non-cash items adjustments: |  |  |  |  |  |  |  |  |
Operating non-cash expenses (income) |  |  | (63) |  | (1,063) |  | 3,075 |  | (1,884)
Non-cash movements in post-employment and other non-current employee benefits obligations | 17.4 |  | 54 |  | 910 |  | — |  | —
Allowance of expected credit losses | 7.2 |  | 81 |  | 1,367 |  | — |  | —
Depreciation | 11,12 |  | 1,887 |  | 31,896 |  | 27,831 |  | 25,293
Amortization of intangible assets | 13 |  | 126 |  | 2,121 |  | 2,696 |  | 2,694
Gain on sale of long-lived assets and investment in equity instruments | 20 |  | (425) |  | (7,185) |  | (308) |  | (1,176)
Gain on sale of shares in Heineken | 4.3.1 |  | (1,957) |  | (33,070) |  | — |  | —
Dividends received | 20 |  | (196) |  | (3,311) |  | — |  | —
Disposal of long-lived assets | 20 |  | 28 |  | 466 |  | 416 |  | 579
Impairment of long-lived assets | 20 |  | 74 |  | 1,248 |  | 833 |  | 1,427
Share of the loss (profit) of equity method accounted investees, net of income taxes | 10 |  | 24 |  | 406 |  | (7,458) |  | (10,765)
Interest income |  |  | (1,042) |  | (17,609) |  | (3,842) |  | (1,464)
Interest expense | 19 |  | 883 |  | 14,916 |  | 16,314 |  | 16,938
Foreign exchange loss (gain), net |  |  | 583 |  | 9,849 |  | 3,729 |  | (1,314)
(Gain) on monetary position for subsidiaries in hyperinflationary economies |  |  | (6) |  | (94) |  | (527) |  | (738)
Market value loss (gain) on financial instruments | 21 |  | 26 |  | 440 |  | 706 |  | (38)
Net cash flows from operating activities before changes in operating accounts |  |  | 5,382 |  | 90,935 |  | 92,603 |  | 81,508
Trade accounts receivable and other current assets |  |  | (717) |  | (12,125) |  | (5,685) |  | (4,278)
Other current financial assets |  |  | 47 |  | 799 |  | (457) |  | (743)
Inventories |  |  | (381) |  | (6,442) |  | (6,860) |  | (6,623)
Derivative financial instruments |  |  | — |  | — |  | 5 |  | (69)
Trade accounts payable and other accounts |  |  | 661 |  | 11,177 |  | 12,006 |  | 17,075
Other non-current liabilities |  |  | 39 |  | 659 |  | 471 |  | (290)
Other current financial liabilities |  |  | 234 |  | 3,959 |  | 2,291 |  | 348
Employee benefits paid | 17.5 |  | (63) |  | (1,070) |  | (691) |  | (807)
|  |  | 5,202 |  | 87,892 |  | 93,683 |  | 86,121
Income taxes paid |  |  | (1,746) |  | (29,507) |  | (18,304) |  | (12,976)
Net cash used in operating activities from discontinuing operations |  |  | (515) |  | (8,706) |  | (2,803) |  | (55)
Net cash generated by operating activities |  |  | 2,941 |  | 49,679 |  | 72,576 |  | 73,090

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Table of Contents
FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO
Consolidated Statements of Cash Flows
For the years ended December 31, 2023, 2022 and 2021.
In millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.).

| Note |  | 2023⁽¹⁾ |  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
INVESTING ACTIVITIES |  |  |  |  |  |  |  |  |
Business acquisition by Coca-Cola FEMSA, net of cash acquired | 4 |  | — |  |  | — |  |  | (2,356) |  |  | — |
Business acquisition by Proximity Americas Division, net of cash acquired | 4 |  | (224) |  |  | (3,786) |  |  | (1,263) |  |  | — |
Business acquisition of Valora, net of cash acquired | 4 |  | (25) |  |  | (424) |  |  | (20,504) |  |  | — |
Other businesses acquisitions, net of cash acquired |  |  | — |  |  | — |  |  | (59) |  |  | — |
Investment in equity method accounted investees | 10 |  | (71) |  |  | (1,202) |  |  | (542) |  |  | (662) |
Other equity investments |  |  | — |  |  | — |  |  | 1,593 |  |  | — |
Proceeds from disposal of investment in Heineken | 4.3.1 |  | 7,883 |  |  | 133,222 |  |  | — |  |  | — |
Proceeds from disposal of investment in JRD |  |  | 471 |  |  | 7,967 |  |  | — |  |  | — |
Proceeds from disposal of Envoy | 10 |  | 1,448 |  |  | 24,468 |  |  | — |  |  | — |
Purchases of cash investments |  |  | (1,581) |  |  | (26,725) |  |  | — |  |  | (23,504) |
Proceeds from maturities of cash investments |  |  | — |  |  | — |  |  | 21,830 |  |  | — |
Interest received |  |  | 525 |  |  | 8,871 |  |  | 3,639 |  |  | 1,739 |
Derivative financial instruments |  |  | (12) |  |  | (199) |  |  | (560) |  |  | 213 |
Dividends received from equity method accounted investees and other investees | 10,20 |  | 204 |  |  | 3,449 |  |  | 2,602 |  |  | 5,039 |
Property, plant and equipment acquisitions | 11 |  | (2,060) |  |  | (34,814) |  |  | (29,354) |  |  | (17,572) |
Proceeds from disposal of property, plant and equipment |  |  | 51 |  |  | 857 |  |  | 462 |  |  | 1,436 |
Acquisition of intangible assets | 13 |  | (196) |  |  | (3,306) |  |  | (2,118) |  |  | (1,912) |
Proceeds from the sale of long-lived assets |  |  | — |  |  | — |  |  | — |  |  | 976 |
Investment in other assets |  |  | (44) |  |  | (737) |  |  | (1,499) |  |  | (998) |
Collections of other assets |  |  | 46 |  |  | 775 |  |  | 181 |  |  | 213 |
Other non-current assets |  |  | (92) |  |  | (1,550) |  |  | (1,500) |  |  | (420) |
Net cash generated (used in) investing activities by discontinuing operations |  |  | 1,505 |  |  | 25,426 |  |  | (16,984) |  |  | (10,723) |
Net cash generated (used in) investing activities |  |  | 7,828 |  |  | 132,292 |  |  | (46,432) |  |  | (46,175) |
FINANCING ACTIVITIES |  |  |  |  |  |  |  |  |
Proceeds from bank loans and notes payable | 19.1 |  | 665 |  |  | 11,238 |  |  | 15,855 |  |  | 39,888 |
Payments of bank loans and notes payable | 19.1 |  | (2,569) |  |  | (43,421) |  |  | (9,882) |  |  | (38,742) |
Interest paid |  |  | (626) |  |  | (10,587) |  |  | (8,259) |  |  | (9,399) |
Derivative financial instruments |  |  | 348 |  |  | 5,882 |  |  | 103 |  |  | (3,245) |
Dividends paid | 23 |  | (1,112) |  |  | (18,798) |  |  | (17,506) |  |  | (13,399) |
Contributions from non-controlling interest |  |  | — |  |  | — |  |  | 5 |  |  | — |
Acquisition of non-controlling interest |  |  | — |  |  | — |  |  | (266) |  |  | — |
Interest paid on leases liabilities | 12 |  | (398) |  |  | (6,718) |  |  | (5,376) |  |  | (4,846) |
Payments of leases | 12 |  | (559) |  |  | (9,453) |  |  | (7,915) |  |  | (6,131) |
Other financing activities |  |  | 2 |  |  | 32 |  |  | (1,430) |  |  | 296 |
Net cash used in financing activities from discontinuing operations |  |  | (1,226) |  |  | (20,727) |  |  | (1,227) |  |  | (1,411) |
Net cash used in financing activities |  |  | (5,475) |  |  | (92,552) |  |  | (35,898) |  |  | (36,989) |
Increase in cash and cash equivalents |  |  | 5,293 |  |  | 89,419 |  |  | (9,754) |  |  | (10,074) |
Cash and cash equivalents at the beginning of the period |  |  | 4,937 |  |  | 83,439 |  |  | 97,407 |  |  | 107,624 |
Effects of exchange rate changes and inflation effects on cash and cash equivalents held in foreign currencies |  |  | (460) |  |  | (7,746) |  |  | (4,214) |  |  | (143) |
Cash and cash equivalents at the end of the period |  |  | $ | 9,770 |  |  | Ps. | 165,112 |  |  | Ps. | 83,439 |  |  | Ps. | 97,407 |

(1)Convenience translation to U.S. dollars ($) – See Note 2.2.3
The accompanying notes are an integral part of these consolidated statements of cash flows.
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Note 1. Company Business
Fomento Económico Mexicano, S.A.B. de C.V. and subsidiaries (“FEMSA,” the Company or the Group), incorporated under the laws of Mexico on May 30, 1936 for a duration of 99 years. The duration can be extended indefinitely by resolution of the shareholders of the Company. FEMSA is a public company established as a Sociedad anónima bursátil de capital variable under the Mexican laws that owns subsidiaries that are direct and indirect sub-holding companies in businesses in which the Company operates in the beverage industry through Coca-Cola FEMSA; retail industry through Proximity, Fuel and Health Divisions; and transport logistic services industry. The Company's principal headquarters are located at General Anaya No. 601 Pte., Colonia Bella Vista, Monterrey, Nuevo León 64410, Mexico. The Company's telephone number at this location is (+52-81) 8328-6000.
The following is a description of the Company’s businesses, along with its interest ownership in each reportable segment:

|  | % Ownership |  |
Business |  | 2023 |  | 2022 |  | Activities
Coca-Cola FEMSA, S.A.B. de C.V. and subsidiaries (“Coca-Cola FEMSA”) |  | 47.2% (56.0% of the voting shares) |  | 47.2% (56.0% of the voting shares) |  | Production, distribution and marketing of certain Coca-Cola trademark beverages in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil, Argentina and Uruguay. As of December 31, 2023, The Coca-Cola Company (“TCCC”) indirectly owns 27.8% of Coca-Cola FEMSA’s capital stock. In addition, shares representing 25% of Coca-Cola FEMSA’s capital stock are traded on the Bolsa Mexicana de Valores (Mexican Stock Exchange “BMV”) and the New York Stock Exchange, Inc. (“NYSE”) in the form of American Depositary Shares (“ADS”).
Proximity Americas Division |  | 100% |  | 100% |  | Small-box retail chain format operations in Mexico, Colombia, Peru, Chile and Brazil, mainly under the trade name “OXXO.”
Proximity Europe Division (2) |  | 100% |  | 98.15% |  | Small-box retail and foodvenience chain operated by Valora through its portfolio of brands (k kiosk, Brezelkönig, BackWerk, Ditsch, Press & Books, avec, Caffè Spettacolo and ok.–) located in Switzerland, Germany, Austria, Luxembourg and the Netherlands.
Fuel Division |  | 100% |  | 100% |  | Retail service stations for fuels, motor oils, lubricants and car care products under the trade name “OXXO Gas” with operations in Mexico.
Health Division |  | 100% |  | 100% |  | Drugstores operations in Chile, Colombia and Ecuador, mainly under the trademark “Cruz Verde”, “Fybeca” and “Sana Sana”; and in Mexico under various brands such as “YZA”,” La Moderna” and “Farmacon.”
Heineken investment (3) |  | 0.9% |  | 14.8% |  | Heineken N.V. and Heineken Holding N.V. shares, which represented an aggregate of 14.8% economic interest in both entities (“Heineken Group”).
Other businesses (1) |  | 100% |  | Various |  | Production and distribution companies of coolers, commercial refrigeration equipment, plastic boxes, food processing, preservation and weighing equipment. Transport logistics services, specialized distribution and maintenance to subsidiary companies and third parties; with operations mainly in Mexico, the United States, Brazil, Colombia, among other countries in Latin America.

(1)In 2023 the Company finalized the merger of Envoy Solutions, LLC with BradyIFS, retaining an economic interest of 37% in IFS TopCo. See Note 10.
(2)As described in Note 4, on October 7, 2022, the Company acquired 96.87% of ownership in Valora Holding AG. Through that date and until December 31, 2022, the Company continued acquiring ownership of Valora, having 98.15% at the end of the year. As of December 31, 2023, the Company own 100% of Valora Holding AG.
(3)During 2023, the Company sold its investment in Heineken Group. See Note 10.
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Note 2. Basis of Preparation
2.1 Statement of compliance
The consolidated financial statements of the Company as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements and its accompanying notes were approved by the Company’s shareholders at the shareholder meeting on March 22, 2024, and were authorized for issuance to the Mexican Stock Exchange by the Company’s Board of Directors on the same date. The accompanying consolidated financial statements were approved for issuance in the Company’s annual report on Form 20-F by the Company’s Chief Executive Officer and Chief Corporate Financial Officer on April 23, 2024 and subsequent events have been considered through that date (see Note 30).
2.2 Basis of measurement and presentation
2.2.1 General considerations
The consolidated financial statements have been prepared on historical cost basis, except for the following:
•Derivative financial instruments.
•Trust assets of post-employment and other long-term employee benefit plans.
•Investments in equity instruments and some financial liabilities.
•Assets and liabilities held for sale. See Note 3.17.
The carrying values of assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships.
The financial statements of subsidiaries in a hyperinflationary economy are stated in terms of the measuring unit at the end of the reporting period.
2.2.2 Presentation of the consolidated income statements
The Company’s consolidated income statements classifies its costs and expenses by function according to the industry practices in which the Company operates.
2.2.3 Presentation of consolidated statements of cash flows
The Company’s consolidated statement of cash flows is presented using the indirect method.
2.2.4 Convenience translation to U.S. dollars ($)
The consolidated financial statements are stated in millions of Mexican pesos (“Ps.”) and rounded to the nearest million unless stated otherwise. However, solely for the convenience of the readers, the consolidated statement of financial position, as of December 31, 2023, the consolidated income statement, the consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended December 31, 2023 were converted into U.S. dollars at the closing exchange rate of Ps. 16.8998 Mexican pesos per U.S. dollar as published by the Federal Reserve Bank of New York as of December 31, 2023. This arithmetic conversion should not be construed as a representation that amounts expressed in Mexican pesos may be converted into U.S. dollars at that or any other exchange rate.
As explained in Note 2.1 above, as of April 22, 2024 the exchange rate was Ps. 17.2062 per U.S. dollar, a depreciation of 1.8% since December 31, 2023.
2.3 Critical accounting judgments and estimates
For the application of the Company’s accounting policies, which are described in Note 3, management is required to make judgments, estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if it affects only such period or in the current and subsequent periods if the revision affects both.
2.3.1 Judgments and estimations
In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effects on the consolidated financial statements.
2.3.1.1 Useful lives of property, plant and equipment and intangible assets with definite useful lives
Property, plant and equipment, including returnable bottles which are expected to provide benefits over more than one year, as well as intangible assets with definite useful lives are depreciated/amortized over their estimated useful lives. The Company bases its estimates on the experience of its technical personnel as well as its experience in the industry for similar assets, see Notes 3.15, 3.18, 11 and 13.
2.3.1.2 Equity method accounted investees
Associates
If the Company holds, directly or indirectly, 20 percent or more of the voting power of the investee, it is presumed that it has significant influence, unless it can be clearly demonstrated that this is not the case. If the Company holds, directly or indirectly, less than 20 percent of the voting power of the investee, it is presumed that the Company does not have significant influence, unless such influence can be demonstrated. Decisions regarding the propriety of utilizing the equity method of accounting for a less than 20 percent-owned corporate investee requires a careful evaluation of voting rights and their impact on the Company’s ability to exercise significant influence. Management considers the existence of the following circumstances which may indicate that the Company is able to exercise significant influence over a less than 20 percent-owned corporate investee:
•Representation on the board of directors or equivalent governing body of the investee;
•Participation in policy-making processes, including participation in decisions about dividends or other distributions;
•Material transactions between the Company and the investee;
•Interchange of managerial personnel; or
•Provision of essential technical information.
Management also considers the existence and effect of potential voting rights that are currently exercisable or convertible when assessing whether the Company has significant influence.
In addition, the Company evaluates certain indicators that provide evidence of significant influence, such as:
•Whether the extent of the Company’s ownership is significant relative to other shareholders (i.e. a lack of concentration of other shareholders);
•Whether the Company’s significant shareholders or officers hold an additional investment in the investee; and
•Whether the Company is a part of an investee’s board of director committees, such as the executive committee or the finance committee.
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2.3.1.3 Leases
The Company periodically evaluates the reasonability of the assumptions used in the calculation of the right-of-use asset and lease liability. The results of these evaluations are recognized in the consolidated statement of financial position.
Information on assumptions and estimates that have a significant risk of resulting in an adjustment to the carrying value of right-of-use assets and lease liabilities, and the related statement of income accounts, include the following:
•If the Company is reasonably certain to exercise an option to extend a lease agreement or not exercise an option to terminate a lease agreement before its termination date, considering all the facts and circumstances that create an economic incentive for the Company to exercise, or not, such options, taking into account whether the lease option is enforceable and when the Company has the unilateral right to apply the option in question.
•Determination of the non-cancellable period for evergreen contracts and lifelong leases, considering whether the Company is reasonably certain to terminate the lease and/or estimating a reasonable period for the use of the asset, based on significant leasehold improvements made on the leased properties that provide reasonable certainty to the Company about the remaining period to obtain the benefits of such improvements on leased properties.
The Company estimates the Incremental Borrowing Rate (“IBR”) using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
2.3.2 Key sources of estimation uncertainty
The following are the assumptions and other sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the subsequent financial period. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes would be included in the assumptions when they occur.
2.3.2.1 Impairment of indefinite-lived intangible assets, goodwill and depreciable long-lived assets
Intangible assets with indefinite lives including goodwill are subject to impairment tests annually or whenever indicators of impairment are present. An impairment exists when the carrying value of an asset or cash-generating unit (“CGU”) exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculations are based on available data from binding sales agreements in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. To determine whether such assets are impaired, the Company calculates an estimation of the value-in-use of the CGU to which such assets have been allocated. Impairment losses are recognized in current earnings for the excess of the carrying amount of the asset or CGU over its recoverable amount.
The Company assesses at each reporting date whether there is an indication that a long-lived asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows expected to be generated from the use of the asset or CGU are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries, or other available fair value indicators.
The key assumptions used to determine the recoverable amount for the Company’s CGUs, including a sensitivity analysis, are further explained in Notes 3.20 and 13.
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2.3.2.2 Tax, labor and legal contingencies and provisions
The Company is subject to various claims and contingencies related to tax, labor and legal proceedings as described in Note 26. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management periodically assesses the probability of loss for such contingencies and accrues a provision and/or discloses the relevant circumstances, as appropriate. If the potential loss of any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a provision for the estimated loss. Management’s judgment must be exercised to determine the likelihood of such a loss and an estimate of the amount, due to the subjective nature of the loss.
Management periodically evaluates positions taken in tax returns concerning situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a tax authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
The Company operates in numerous tax jurisdictions and is subject to periodic tax audits, in the normal course of business, by local tax authorities on a range of tax matters in relation to corporate tax, transfer pricing and indirect taxes. The impact of changes in local tax regulations and ongoing inspections by local tax authorities could materially impact the amounts recorded in the financial statements. Where the amount of tax payable is uncertain, the Company establishes provisions based on management’s estimates with respect to the likelihood of material tax exposures and the probable amount of the liability.
2.3.2.3 Fair value measurements
The Company measures all financial instruments at fair value.
The fair values of derivative financial instruments are determined considering quoted prices in recognized markets. If such instruments are not traded, fair value is determined by applying techniques based upon technical models supported by sufficient reliable and verifiable data, recognized in the financial sector. The Company bases its forward price curves upon market price quotations. Management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments, see Note 21.
In the initial recognition of an equity instrument that is not held for trading, under the “other” business model, the Company may irrevocably choose to present changes in the fair value of the investment in Other Comprehensive Income (“OCI”). This choice is made for each investment. Equity instruments are subsequently measured at fair value. Dividends are recognized as other income in the consolidated income statement unless the dividend represents a recovery of part of the cost of the investment. Other net gains and losses, related to changes in fair value, are recognized in OCI and are considered items that will not be reclassified to consolidated net income in subsequent periods.
For 2023 the Company determined the fair value less cost to sell of the assets and liabilities held for sale related to its Strategic Businesses (see Note 3.17 and Note 4).
In the initial recognition of the Company's investment in IFS Top Co, the fair value of the initial investment was determined through a valuation using the estimated discounted cash flows of the share of the retained investment.
2.3.2.4 Business combinations
Businesses combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, the liabilities assumed by the Company from the former owners of the acquiree, the amount of any non-controlling interest in the acquiree, and the equity interests issued by the Company in exchange for control of the acquiree.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognized and measured at their fair value, except that:
•Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12, Income Taxes, and IAS 19, Employee Benefits, respectively;
•Liabilities or equity instruments related to share-based compensation arrangements of the acquiree or share-based compensation arrangements of the Company entered into to replace share-based compensation arrangements of the acquiree are measured in accordance with IFRS 2, Share-based Payment, at the acquisition date, see Note 3.27;
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•Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, are measured in accordance with that standard; and
•Indemnifiable assets are recognized at the acquisition date on the same basis as the indemnified liability subject to any contractual limitations.
For each acquisition, management’s judgment is exercised to determine the fair value of the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, applying estimates or judgments in techniques used, especially in forecasting CGU's cash flows, in the computation of weighted average cost of capital (“WACC”) and estimation of inflation during the identification of intangible assets with indefinite lives including goodwill and distribution and trademark rights, and estimation of useful lives of acquired intangible assets with definite lives, mainly, customer relationships.
2.4 Application of recently issued accounting standards
The Company has applied the following amendments to IFRS during 2023. None of the amendments had a significant impact on the Company’s consolidated financial statements:
2.4.1 Definition of Accounting Estimates – Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of “accounting estimates”. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
2.4.2 Income Taxes Amendments to IAS 12
On May 7, 2021, the IASB issued amendments to IAS 12, Income Tax. The amendments require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments modify paragraphs 15, 22 and 24 of IAS 12, which state that the initial recognition exemption does not apply to operations that at the time of initial recognition give rise to equal taxable and deductible temporary differences.
2.4.3 Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2, Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
2.5 Reclassifications by consistent presentation in consolidated financial statements
The Company has made certain reclassifications to financial information presented as of December 31, 2022 in the consolidated statement of financial position, to provide a consistent presentation of the financial information as of December 31, 2023. A summary of reclassifications made is disclosed below.
The Company retrospectively adjusted the presentation of Taxes payable, Provisions and other non-current liabilities in the balances as of December 31, 2022. In accordance with IAS 1 Presentation of Financial Statements: 1) The income tax payable was presented together with Other taxes payable; and 2) Provisions were presented together with Other non-current liabilities in the consolidated financial statements as of December 31, 2022. This change had no impact on current and non-current liabilities initially reported.
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| Balance as at December 31, 2022 (as initially reported) | Effects of reclassification | Balance as at December 31, 2022 (adjusted)
CURRENT LIABILITIES |  |  |
Taxes payable | 16,694 | (16,694) | —
Income tax payable | — | 5,419 | 5,419
Other current financial liabilities | 17,475 | 11,275 | 28,750
NON-CURRENT LIABILITIES |  |  |
Provisions and other non-current liabilities | 8,981 | (8,981) | —
Provisions | — | 4,685 | 4,685
Other non-current liabilities | — | 4,296 | 4,296

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Note 3. Material Accounting Policies
3.1 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its power over the investee.
Specifically, the Company controls an investee if and only if the Company has:
•Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
•Exposure, or rights, to variable returns from its involvement with the investee; and
•The ability to use its power over the investee to affect its returns.
When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
•The contractual arrangements with the other vote holders of the investee;
•Rights arising from other contractual arrangements; and
•The Company’s voting rights and potential voting rights.
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Company and the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in full-on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it:
•Derecognizes the assets (including goodwill) and liabilities of the subsidiary.
•Derecognizes the carrying amount of any non-controlling interests.
•Derecognizes the cumulative translation differences recorded in equity.
•Recognizes the fair value of the consideration received.
•Recognizes the fair value of any investment retained.
•Recognizes any surplus or deficit in profit or loss.
•Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liabilities.
3.1.1 Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests arising from transactions that do
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not involve the loss of control are measured at carrying amount and reflected in equity as part of additional paid-in capital.
3.2 Business combinations
Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred to the Company. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or the proportionate share of the acquiree’s identifiable net assets.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the Company’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets of the acquiree and the liabilities assumed. If the net of the acquisition-date amounts of the identifiable assets of the acquiree and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the Company’s previously held an interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Costs, other than those associated with the issuance of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent considerations are recognized in consolidated net income.
Indemnification assets are recognized at the acquisition date on the same basis as the indemnified liability subject to any contractual limitations.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items in which the accounting is incomplete and discloses that its allocation is preliminary. Those provisional amounts are adjusted retrospectively during the measurement period (not greater than 12 months from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
Sometimes obtaining control of an acquiree in which equity interest is held immediately before the acquisition date is considered as a business combination achieved in stages also referred to as a step acquisition. The Company remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss. Also, the changes in the value of equity interest in the acquiree recognized in OCI is recognized on the same basis as required if the Company had disposed directly of the previously held equity interest, see Note 3.14.
The acquisition method of accounting for a business combination applies to those combinations that may take the following forms:
(a)The acquiree repurchases a sufficient number of its shares for the Company to obtain control.
(b)Minority veto rights lapse that previously kept the Company from controlling an acquiree in which it held the majority voting rights.
(c)The Company and the acquiree agree to combine their businesses by contract alone in which it transfers no consideration in exchange for control and no equity interest is held in the acquiree, either on the acquisition date or previously.
3.3 Foreign currencies, consolidation of foreign subsidiaries and accounting of equity method accounted investees
In preparing the financial statements of each subsidiary and accounting for equity method accounted investees, transactions in currencies other than the individual entity’s functional currency (foreign currencies) are recognized at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-measured.
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Exchange differences on monetary items are recognized in the consolidated net income in the period in which they arise except for:
•The variations in the net investment in foreign subsidiaries generated by exchange rate fluctuation which are included in OCI, which is recorded in equity as part of cumulative translation adjustment within the accumulated other comprehensive income; and
•Exchange differences on transactions entered into to hedge certain foreign currency risks.
Foreign exchange differences on monetary items are recognized in profit or loss. Their classification in the consolidated income statements depends on their nature. Differences arising from fluctuations related to operating activities are presented in the “other expenses” line (see Note 20) while fluctuations related to non-operating activities such as financing activities are presented as part of the “foreign exchange gain (loss)” line in the consolidated income statements.
For incorporation into the Company’s consolidated financial statements, each foreign subsidiary, associate or joint venture’s individual financial statements are translated into Mexican pesos, as follows:
•For entities operating in hyperinflationary economic environments, the inflation effects of the origin country are recognized under IAS 29, Financial Reporting in Hyperinflationary Economies, and subsequently translated into Mexican pesos using the year-end exchange rate for the consolidated statements of financial position and consolidated income statements and comprehensive income; and
•For entities operating in non-hyperinflationary economic environments, assets and liabilities are translated into Mexican pesos using the year-end exchange rate, equity is translated into Mexican pesos using the historical exchange rate, and the consolidated income statements and comprehensive income are translated using the exchange rate at the date of each transaction. The Company uses the average exchange rate of each month if the exchange rate does not fluctuate significantly.
In addition, in relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of exchange differences on translation of foreign subsidiaries and associates are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial disposals (i.e., partial disposals of associates or joint ventures that do not result in the Company losing significant influence or joint control), the proportionate share of the exchange differences on translation of foreign subsidiaries and associates is reclassified to profit or loss.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Foreign exchange differences arising are recognized in equity as part of the cumulative translation adjustment.
The translation of assets and liabilities denominated in foreign currencies into Mexican pesos is for consolidation purposes and does not indicate that the Company could realize or settle the reported value of those assets and liabilities in Mexican pesos. Additionally, this does not indicate that the Company could return or distribute the reported Mexican peso value in equity to its shareholders.
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|  |  | Exchange Rates of Local Currencies Translated to Mexican Pesos (1)
| Functional / |  | Average Exchange Rate for |  | Exchange Rate as of
| Recording |  |  |  |  |  |  |  | December 31, |  | December 31,
Country or Zone | Currency |  | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022
Guatemala | Quetzal |  | 2.27 |  | 2.60 |  | 2.62 |  | 2.16 |  | 2.47
Costa Rica | Colon |  | 0.03 |  | 0.03 |  | 0.03 |  | 0.03 |  | 0.03
Panama | U.S. dollar |  | 17.77 |  | 20.13 |  | 20.28 |  | 16.89 |  | 19.36
Colombia | Colombian peso |  | 0.004 |  | 0.01 |  | 0.01 |  | 0.01 |  | 0.01
Nicaragua | Cordoba |  | 0.49 |  | 0.56 |  | 0.58 |  | 0.46 |  | 0.53
Argentina | Argentine peso |  | 0.07 |  | 0.16 |  | 0.21 |  | 0.02 |  | 0.11
Brazil | Reais |  | 3.56 |  | 3.90 |  | 3.76 |  | 3.49 |  | 3.71
Chile | Chilean peso |  | 0.02 |  | 0.02 |  | 0.03 |  | 0.02 |  | 0.02
Euro Zone | Euro (€) |  | 19.19 |  | 21.17 |  | 24.00 |  | 18.76 |  | 20.65
Peru | Nuevo Sol |  | 4.74 |  | 5.24 |  | 5.22 |  | 4.55 |  | 5.07
Ecuador | U.S. dollar |  | 17.77 |  | 20.13 |  | 20.28 |  | 16.89 |  | 19.36
United States | U.S. dollar |  | 17.77 |  | 20.13 |  | 20.28 |  | 16.89 |  | 19.36
Uruguay | Uruguayan peso |  | 0.46 |  | 0.49 |  | 0.47 |  | 0.43 |  | 0.48
Switzerland | Swiss franc |  | 19.77 |  | — |  | — |  | 20.11 |  | —

(1)Exchange rates published by the Central Bank of each country where the Company operates, except for Panama and Ecuador.
3.4 Recognition of the effects of inflation in countries with hyperinflationary economic environments
The Company recognizes the effects of inflation on the financial information of its subsidiaries that operate in hyperinflationary economic environments (when cumulative inflation of the three preceding years is approaching, or exceeds, 100% or more in addition to other qualitative factors), which consists of:
•Using inflation factors to restate non-monetary assets, such as inventories, property, plant and equipment, net, intangible assets, net including related costs and expenses when such assets are consumed or depreciated;
•Applying the appropriate inflation factors to restate capital stock, additional paid-in capital, net income, retained earnings and items of other comprehensive income by the necessary amount to maintain the purchasing power equivalent in the currency of the subsidiary on the dates such capital was contributed, or income was generated up to the date the consolidated financial statements are presented; and
•Including the monetary position gain or loss in the consolidated income statements in the caption "Gain on monetary position for subsidiaries in hyperinflationary economies".
The Company restates the financial information of the Argentine subsidiary that operates in a hyperinflationary economic environment using the consumer price index (“CPI”) of the country.
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As of December 31, 2023, 2022, and 2021, the operations of the Company are classified as follows:

|  |  |  |  |  | Cumulative Inflation 2020 - 2022 |  |  |  |  |
Country |  | Cumulative Inflation 2021 - 2023 | Type of Economy |  | Type of Economy |  | Cumulative Inflation 2019 - 2021 | Type of Economy
Mexico |  | 21.1 | % | Non-hyperinflationary |  | 19.4 | % | Non-hyperinflationary |  | 13.9 | % | Non-hyperinflationary
Guatemala |  | 17.3 | % | Non-hyperinflationary |  | 18.0 | % | Non-hyperinflationary |  | 11.7 | % | Non-hyperinflationary
Costa Rica |  | 9.5 | % | Non-hyperinflationary |  | 12.4 | % | Non-hyperinflationary |  | 5.8 | % | Non-hyperinflationary
Panama |  | 6.7 | % | Non-hyperinflationary |  | 3.1 | % | Non-hyperinflationary |  | 0.9 | % | Non-hyperinflationary
Colombia |  | 30.6 | % | Non-hyperinflationary |  | 21.4 | % | Non-hyperinflationary |  | 11.4 | % | Non-hyperinflationary
Nicaragua |  | 26.3 | % | Non-hyperinflationary |  | 23.1 | % | Non-hyperinflationary |  | 17.1 | % | Non-hyperinflationary
Argentina (a) |  | 815.6 | % | Hyperinflationary |  | 300.3 | % | Hyperinflationary |  | 216.1 | % | Hyperinflationary
Brazil |  | 21.8 | % | Non-hyperinflationary |  | 21.7 | % | Non-hyperinflationary |  | 20.0 | % | Non-hyperinflationary
Euro Zone |  | 18.0 | % | Non-hyperinflationary |  | 14.6 | % | Non-hyperinflationary |  | 5.8 | % | Non-hyperinflationary
Chile |  | 25.6 | % | Non-hyperinflationary |  | 20.9 | % | Non-hyperinflationary |  | 13.7 | % | Non-hyperinflationary
Peru |  | 19.2 | % | Non-hyperinflationary |  | 15.4 | % | Non-hyperinflationary |  | 10.6 | % | Non-hyperinflationary
Ecuador |  | 7.2 | % | Non-hyperinflationary |  | 5.8 | % | Non-hyperinflationary |  | 22.8 | % | Non-hyperinflationary
United States |  | 17.8 | % | Non-hyperinflationary |  | 13.8 | % | Non-hyperinflationary |  | 11.0 | % | Non-hyperinflationary
Uruguay |  | 22.9 | % | Non-hyperinflationary |  | 27.9 | % | Non-hyperinflationary |  | 28.5 | % | Non-hyperinflationary
Germany |  | 24.1 | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary
Netherlands |  | 19.1 | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary
Austria |  | 21.3 | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary
Luxembourg |  | 17.3 | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary
Switzerland |  | 6.2 | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary |  | — | % | Non-hyperinflationary

a) Argentina
Beginning on July 1, 2018, Argentina became a hyperinflationary economy because, among some other economic factors, the last three years’ cumulative inflation in Argentina exceeded 100% according to the several economic indices that exist in the country. The financial information for the Company’s Argentine subsidiary has been adjusted to recognize the inflationary effects since January 1, 2018 through:
•Using inflation factors to restate non-monetary assets, such as inventories, property, plant and equipment, net, intangible assets, net, including related costs and expenses when such assets are consumed or depreciated.
•Recognizing the monetary position gain or loss in the consolidated net income.
The FACPCE (Federación Argentina de Consejos Profesionales de Ciencias Económicas) approved on September 29, 2018 and published on October 5, 2018, a resolution which defines, among other things, that the index price to determine the restatement coefficient (Based on a series that applies the Consumer Price Index (“CPI”) from January 2017 with the Wholesale Domestic Price Index ("WDPI") until this date, and computing November and December 2015 using the CPI- of Ciudad del Gran Buenos Aires (“CGBA”) variation).
3.5 Cash and cash equivalents and restricted cash
Cash is comprised of deposits in bank accounts that generate interest on the available balance. Cash equivalents are mainly represented by short-term bank deposits and fixed-income investments (overnight), both with maturities of three months or less, and their carrying values approximate fair value. All credit card, debit card and electronic transfer transactions that process in less than 1.5 days are classified as cash and cash equivalents. The amount due from banks for these transactions classified as cash and cash equivalents amounts to Ps. 2,315 and Ps. 1,466 as of December 31, 2023 and 2022, respectively.
The Company also maintains restricted cash which is pledged as collateral to meet certain contractual obligations. Restricted cash is presented within other current financial assets given that, by their nature, the restrictions are short-term (Note 9.2).
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3.6 Investments
The investments include debt securities and bank deposits with a maturity of more than three months but less than twelve as of the acquisition date.
Management determines the appropriate classification of investments at the time of purchase and evaluates that classification at the date of each statement of financial position, see Note 6.
3.7 Financial assets
Financial assets are classified within the following business models depending on management’s objective: (i) “held to maturity to recover cash flows,” (ii) “held to maturity and to sell financial assets” and (iii) “others or held for trading,” including derivatives designated as hedging instruments in an effective hedge, as appropriate. The classification depends on the nature and purpose of holding the financial assets and is determined at the time of initial recognition.
The Company performs a portfolio–level assessment of the business model in which a financial asset is managed to accomplish the Company’s risk management purposes. The information that is considered within the evaluation includes:
•The policies and objectives of the Company about the portfolio and the practical implementation of policies;
•Performance and evaluation of the Company’s portfolio including accounts receivable;
•Risks that affect the performance of the business model and how those risks are managed;
•Any compensation related to the performance of the portfolio; and
•Frequency, volume and timing of sales of financial assets in previous periods together with the reasons for said sales and expectations regarding future sales activities.
The Company’s financial assets include cash, cash equivalents and restricted cash, investments with maturities of more than three months and accounts receivable, derivative financial instruments and other financial assets.
For the initial recognition of a financial asset, the Company measures it at fair value plus the transaction costs that are directly attributable to the purchase thereof, if said asset is not measured at fair value through profit or loss. Accounts receivable that do not have a significant financing component are measured and recognized at the transaction price. The rest of the financial assets are recognized only when the Company is part of the contractual provisions of the instrument.
The fair value of an asset is measured using assumptions that would be used by market participants when valuing the asset, assuming that the transaction is orderly and takes place in the principal or the most advantageous market for the asset.
Financial assets are classified, at initial recognition, as measured at: amortized cost, fair value with changes in other comprehensive income – debt or equity investments – and fair value through profit or loss. The classification depends on the objective by which the financial asset is acquired.
Financial assets are not reclassified after their initial recognition unless the Company changes the business model to manage the financial assets; in which case, all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
3.7.1 Financial assets at amortized cost
A financial asset is measured at amortized cost if it meets the following two conditions and is not designated as fair value through profit and loss (“FVTPL”):
•It’s managed within a business model whose objective is to maintain financial assets to recover the contractual cash flows; and
•The contractual terms are only payments at specified dates of the principal and interest on the amount of the outstanding principal, or solely payments of principal and interest (“SPPI”).
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The amortized cost of a financial asset is the amount of the initial recognition less the principal payments, plus or minus the accumulated amortization using the effective interest rate method of any difference between the initial amount and the amount as of the maturity and, for financial assets, adjusted for any impairment losses. The exchange fluctuation and impairment are recognized in the consolidated income statement.
3.7.2 Effective interest rate method (“ERR”)
The effective interest rate method consists of calculating the amortized cost of loans and accounts receivables and other financial assets (measured at amortized cost) and allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
3.7.3 Financial assets at fair value with changes in other comprehensive income (“FVOCI”)
A financial asset is measured at FVOCI if it meets the following two conditions and is not designated as FVTPL:
•It’s managed within a business model whose objective is achieved through the collection of contractual cash flows and the sale of financial assets; and
•The contractual terms are solely principal and interest payments.
These assets are subsequently measured at fair value. The interest income calculated using the internal rate of return (“IRR”), the exchange fluctuation and any impairment are recognized in profit and loss. Other gains and losses, related to changes in fair value, are recognized in OCI. In the case of derecognition or reclassification, the accumulated gains and losses in OCI are reclassified to profit and loss.
In the initial recognition of an equity instrument that is not held for trading, under the “other” business model, the Company may irrevocably choose to present changes in the fair value of the investment in OCI. This choice has to be made for each investment. Equity instruments are subsequently measured at fair value. Dividends are recognized as other income in results unless the dividend represents a recovery of part of the cost of the investment. Other net gains and losses, related to changes in fair value, are recognized in OCI and are not reclassified to consolidated net income in subsequent periods.
3.7.4 Financial assets at fair value through profit or loss (“FVTPL”)
Financial assets designated as FVTPL include financial assets held for trading and financial assets designated at initial recognition as FVTPL. Financial assets are classified as held for trading if they are acquired to sell in the short-term. Derivatives, including embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments as defined in IFRS 9. Financial assets designated as FVTPL are recorded in the consolidated statements of financial position with changes in fair value presented as interest expense (net negative changes in fair value) or interest income (net positive changes in fair value) in the consolidated income statements, including any dividend income.
3.7.5 Evaluation that contractual cash flows are solely principal and interest payments (“SPPI”)
To classify a financial asset within one of the three different categories, the Company determines whether the contractual cash flows of the asset are only principal and interest payments. The Company considers the contractual terms of the financial instrument and whether the financial asset contains any contractual term that could change the timing or amount of the contractual cash flows in such a way that it would not meet the SPPI criteria. In making this evaluation, the Company considers the following:
•Contingent events that would change the amount or timing of cash flows;
•Terms that can adjust the contractual coupon rate, including variable interest rate characteristics;
•Prepayment and extension features; and
•Characteristics that limit the Company's right to obtain cash flows.
A prepaid feature is consistent with the characteristics of SPPI if the prepayment amount substantially represents the amounts of the principal and interest pending payment, which could include reasonable compensation for early
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termination of the contract. Additionally, a financial asset acquired or originated with a premium or discount to its contractual amount and at initial recognition the fair value of the prepaid characteristic is insignificant, the asset will pass the test of the contractual characteristics of cash flow if the amount of the prepayment represents substantially the contractual amount and accrued interest (but not paid); which may include additional compensation for the early termination of the contract.
3.7.6 Impairment of financial assets
The Company recognizes impairment due to expected credit loss (“ECL”) in:
•Financial assets measured at amortized cost;
•Debt investments measured at FVOCI; and
•Other contractual assets.
Impairment losses on accounts receivable and contractual assets are measured at the amount that equals the lifetime ECL, whether or not it has a significant financing component. The Company applies the criteria to all accounts receivable and contractual assets, together or separately.
The Company measures impairment losses at an amount equal to ECL for the lifetime, except for the following:
•Debt instruments classified as low credit risk; and
•Other debt instruments in which the credit risk (non-recoverability risk over the financial instrument’s expected life) has not increased significantly since the initial recognition.
In determining whether the credit risk of a financial asset has increased significantly since initial recognition and estimating the ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. It includes qualitative and quantitative analysis based on Company’s experience and credit assessment.
The impairment loss is a weighted estimate of the probability of expected loss. The amount of impairment loss is measured as the present value of any lack of liquidity (the difference between the contractual cash flows that correspond to the Company and the cash flows that management expects to receive). The expected credit loss is discounted at the original effective interest rate of the financial asset.
The Company evaluates if there was evidence of impairment on a regular basis or when an impairment indicator exists. Some observable data that financial assets were impaired includes:
•Significant financial difficulty of the issuer or the borrower;
•A breach of contract, such as default or past due event;
•Granting concessions due to the borrower’s financial difficulties which the Company would not consider in other circumstances;
•Indicators that the borrower will enter bankruptcy or other financial reorganization;
•The disappearance of an active market for a financial instrument because of financial difficulties; or
•Information indicating that there was a measurable decrease in the expected cash flows of a group of financial assets.
For an equity instrument, evidence of impairment includes a significant decrease in its fair value lower than its carrying value.
The impairment loss on financial assets measured at amortized cost reduces the book value and for financial assets measured at FVOCI, the impairment loss is recognized as a loss within OCI.
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3.7.7 Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:
•The rights to receive cash flows from the financial asset have expired; or
•The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement, and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
3.7.8 Offsetting of financial instruments
Financial assets are required to be offset against financial liabilities and the net amount reported in the consolidated statement of financial position if, and only if, the Company:
•Currently has an enforceable legal right to offset the recognized amounts; and
•Intends to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
3.8 Other financial assets
Other financial assets include long-term accounts receivable, derivative financial instruments and recoverable contingencies acquired from business combinations. Long-term accounts receivable with a stated term are measured at amortized cost using the effective interest method, less any impairment.
3.9 Derivative financial instruments
The Company is exposed to different risks related to cash flows, liquidity, market and third-party credit. As a result, the Company contracts different derivative financial instruments to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and other currencies, and interest rate fluctuations associated with its borrowings denominated in foreign currencies and the exposure to the risk of fluctuation in the costs of certain raw materials.
The Company recognizes all derivative financial instruments and hedging activities in the consolidated statement of financial position as either an asset or liability measured at FVTPL or FVOCI, considering quoted prices in recognized markets. If such instruments are not traded in a formal market, fair value is determined by applying techniques based upon technical models supported by sufficient, reliable and verifiable market data. Changes in the fair value of derivative financial instruments are recorded each period in current earnings or otherwise as a component of cumulative other comprehensive income based on the item being hedged and the effectiveness of the hedge.
3.9.1 Hedge accounting
The Company designates certain hedging instruments, which include derivatives to cover foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
When forward contracts are used to hedge forecasted transactions, the Company generally designates only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses related to the effective portion of the change in the spot component of forward contracts are recognized in the cash flow hedge reserve under OCI. The change in the forward element of the contract that refers to the hedged item “aligned forward element” is recognized in other comprehensive income in the costs of the hedge reserve in capital stock. In some cases, the Company can designate the total change in the fair value of the forward contract including forward points as a hedging instrument. In those cases, gains or losses related to the effective portion of the change in the fair value of the overall forward contract are recognized in the cash flow hedge reserve under OCI.
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3.9.2 Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income under the heading valuation of the effective portion of derivative financial instruments. The gain or loss relating to the ineffective portion is recognized immediately in the "market value (gain) loss on financial instruments" line item within the consolidated income statements.
Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to consolidated net income in the periods when the hedged item is recognized in consolidated net income, in the same line of the consolidated income statements as the recognized hedged item.
Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in cumulative other comprehensive income in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in consolidated net income. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in consolidated net income.
3.9.2.1 Fair value hedges
For hedged items carried at fair value, the change in the fair value of a hedging derivative is recognized in the consolidated income statement as foreign exchange gain or loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the consolidated income statement as "foreign exchange gain or loss".
For fair value hedges relating to items carried at amortized cost, the change in the fair value of the effective portion of the hedge is recognized first as an adjustment to the carrying value of the hedged item and then is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss.
When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.
3.9.2.2 Hedge of net investment in a foreign business
The Company designates debt securities as a hedge of certain net investment in foreign subsidiaries and applies hedge accounting to foreign currency differences arising between the currency of its investments abroad and the functional currency of the holding company (Mexican peso), regardless of whether the net investment is held directly or through a sub-holding company.
Differences in foreign currency that arise in the conversion of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income in the exchange differences in the "translation of foreign operations and associates" caption, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized as market value gain or loss on financial instruments within the consolidated income statements. When part of the hedge of net investment is disposed, the corresponding accumulated foreign currency translation effect is recognized as part of the gain or loss on the disposal in discontinued operations within the consolidated income statement. In the case of an equity instrument measured at FVOCI, the corresponding accumulated foreign currency translation effects remains as part of OCI.
3.10 Fair value measurement
The Company measures financial instruments, such as derivatives, and certain non-financial assets, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortized cost are disclosed in Notes 14 and 19.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either:
•the principal market for the asset or liability; or
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•in the absence of a principal market, in the most advantageous market for the asset or liability.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
•Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
•Level 2 — Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
•Level 3 — Unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
For assets and liabilities that are recognized in the consolidated financial statements regularly, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company determines the policies and procedures for both recurring fair value measurements, such as those described in Note 21 and unquoted liabilities such as debt described in Note 19.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
3.11 Inventories and cost of goods sold
Inventories are measured at a the lower of cost and net realizable value. The net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Inventories represent the acquisition or production cost that is incurred when purchasing or producing a product and are based on the weighted average cost formula. The operating segments of the Company use different inventory costing methodologies to value their inventories, such as the weighted average cost method in Coca-Cola FEMSA, Proximity Europe, the distribution centers of Proximity Americas, as well as the Health Division; retail method (a method to estimate the average cost) for most stores within Proximity Americas; and the acquisition method in the Fuel Division.
Cost of goods sold includes expenses related to the purchase of raw materials used in the production process, as well as labor costs (wages and other benefits), depreciation of production facilities, equipment and other costs, including fuel, electricity, equipment maintenance and inspection; expenses related to the purchase of goods and services used in the sale process of the Company’s products and expenses related to the purchase of gasoline, diesel and all engine lubricants used in the sale process of the Company.
Management makes judgments regarding write-downs to determine the net realizable value of the inventory. These write-downs consider factors such as age and condition of goods as well as recent market data to assess the estimated future demand for goods.
3.12 Other current and non-current assets
Other current assets, which will be realized within less than one year from the reporting date, are comprised of prepaid assets and product promotion agreements with customers.
Prepaid assets principally consist of advances to suppliers of raw materials, advertising, promotional, leasing and insurance costs, and are recognized as other current assets at the time of the cash disbursement. Prepaid assets are
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initially recorded as an asset and are subsequently amortized in the appropriate caption in the consolidated income statement when goods or services have been received.
The Company has prepaid advertising costs which consist of television and radio advertising airtime in advance. These prepaids are generally amortized over the period based on the transmission of the television and radio spots. The related production costs are recognized in the consolidated income statement as incurred.
Coca-Cola FEMSA has agreements with customers for the right to sell and promote Coca-Cola FEMSA’s products over a certain period. The majority of these agreements have terms of more than one year, and the related costs are amortized using the straight-line method over the term of the contract and deducted from Net sales as consideration paid to customers. During the years ended December 31, 2023, 2022 and 2021, such amortization aggregated to Ps. 304, Ps. 295 and Ps. 219, respectively. See Note 9.1 and Note 14.1.
3.13 Equity method accounted investees
Associates are those entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control over those policies. Upon loss of significant influence over the associate, the Company measures and recognizes any retained investment at its fair value.
Investments in associates are accounted for using the equity method and initially recognized at cost, which comprises the investment’s purchase price and any directly attributable expenditure necessary to acquire it. The carrying value of the investment is adjusted to recognize changes in the Company’s shareholding of the associate since the acquisition date. The financial statements of the associates are prepared for the same reporting period as the Company.
The consolidated financial statements include the Company’s share of the associates consolidated net income and other comprehensive income, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.
Profits and losses resulting from 'upstream' and 'downstream' transactions between the Company (including its consolidated subsidiaries) and an associate are recognized in the consolidated financial statements only to the extent of unrelated investors' interests in the associate. 'Upstream' transactions are, for example, sales of assets from an associate to the Company. 'Downstream' transactions are, for example, sales of assets from the Company to an associate. The Company’s share in the associate’s profits and losses resulting from these transactions is eliminated.
When the Company’s share of losses exceeds the carrying amount of the investment in the associate, including any advances, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has a legal or constructive obligation to pay the associate or has to make payments on behalf of the associate.
Goodwill identified at the acquisition date is presented as part of the investment in shares of the associate in the consolidated statement of financial position. Any goodwill arising on the acquisition of the Company’s interest in an associate is measured in accordance with the Company’s accounting policy for goodwill arising in a business combination, see Note 3.2 and Note 10.
After the application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. Goodwill that forms part of the carrying amount of the net investment in an associate or a joint venture is not separately recognized and therefore is not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment in accordance with IAS 36 as a single asset, by comparing its recoverable amount. The Company determines at each reporting date whether there is any objective evidence that the investment in the associates is impaired. If this is the case, the Company determines the amount of impairment as the difference between the recoverable amount of the investment and its carrying value and recognizes the amount in the share in profit or loss of equity method accounted investees, net of tax in the consolidated income statements.
If an investment interest is reduced but continues to be classified as an associate, the Company reclassifies to profits or losses the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest if the gain or loss would be required to be reclassified to consolidated net income on the disposal of the related investment.
The Company reclassifies in each case proportionate to the interest disposed of the following amounts recognized in other comprehensive income: i) foreign exchange differences, ii) accumulated hedging gains and losses, iii) any other
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amount previously recognized that would have been recognized in net income if the associate had directly disposed of the asset to which it relates.
Upon loss of significant influence over the associate, the Company measures and recognizes any retained investment at its fair value.
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Company classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Company’s rights to the assets and obligations for the liabilities of the arrangements.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Company recognizes its interest in the joint ventures as an investment and accounts for that investment using the equity method. For the years ended December 31, 2023, 2022 and 2021 the Company does not have an interest in joint operations.
If an investment interest is reduced but continues to be classified as joint arrangement, the Company reclassifies to profits or losses the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest if the gain or loss would be required to be reclassified to consolidated net income on the partial disposal of the related investment.
The Company reclassifies the proportion of the interest disposed of a joint venture investment based on the overall reduction in the investment. During the years ended December 31, 2023, 2022, and 2021 the Company did not have any significant disposals or partial disposals of joint arrangements.
Upon loss of joint control over a joint venture, the Company measures and recognizes any retained investment at its fair value.
3.14 Property, plant and equipment
Property, plant, and equipment are initially recorded at their cost of acquisition and/or construction and are presented net of accumulated depreciation and accumulated impairment losses, if any. The borrowing costs related to the acquisition or construction of qualifying assets are capitalized as part of the cost of that asset, if material.
Major maintenance costs are capitalized as part of the total acquisition cost. Routine maintenance and repair costs are expensed as incurred.
Investments in progress consist of long-lived assets not yet in service or, in other words, that are not yet ready for the purpose that they were bought, built or developed. The Company expects to complete those investments during the following 12 months.
Depreciation is computed using the straight-line method over the asset’s estimated useful life. Where an item of property, plant and equipment comprises major components having different useful lives, the components are accounted and depreciated for as separate items of property, plant and equipment.
During 2022, Coca-Cola FEMSA reviewed the useful lives of its property, plant and equipment, and determined changes in its estimated useful lives of these assets. The financial impact of this change for 2022 was immaterial. Changes in these estimates were applied prospectively.
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The estimated useful lives of the Company’s assets are as follows:

|  | Years
Buildings |  | 20-50
Machinery and equipment |  | 5-25
Distribution equipment |  | 4-14
Refrigeration equipment |  | 6-10
Returnable bottles |  | 1.5-4
Leasehold improvements |  | The shorter of the lease term or 21 years
Information technology equipment |  | 3-5
Other equipment |  | 2-15

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds (if any) and the carrying amount of the asset and is recognized in the consolidated income statement.
Returnable and non-returnable bottles:
Coca-Cola FEMSA has two types of bottles: returnable and non-returnable.
•Non-returnable bottles are expensed in the consolidated income statement at the time of the sale of the product.
•Returnable bottles are classified as long-lived assets as a component of property, plant and equipment. Returnable bottles are recorded at acquisition cost. Depreciation of returnable bottles is computed using the straight-line method over their estimated useful lives of the bottles.
There are two types of returnable bottles:
•Those that are in Coca-Cola FEMSA’s control within its facilities, plants and distribution centers; and
•Those that have been placed in the hands of customers, and still belong to Coca-Cola FEMSA.
Returnable bottles that have been placed in the hands of customers are subject to an agreement with a retailer under which Coca-Cola FEMSA retains ownership. These bottles are monitored by sales personnel during periodic visits to retailers and Coca-Cola FEMSA has the right to charge any breakage identified to the retailer. Bottles that are not subject to such agreements are expensed when placed in the hands of retailers.
Coca-Cola FEMSA’s returnable bottles are depreciated according to their estimated useful lives (four years for glass bottles and 1.5 years for PET bottles). Deposits received from customers are amortized over the same estimated useful lives of the bottles.
3.15 Leases
The Company assesses at its inception whether a contract is, or contains, a lease when the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. The Company assesses whether a contract is a lease arrangement, when:
•The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all the capacity of a physically distinct asset. If the lessor has substantive substitution rights, then the asset is not identified;
•The Company has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and
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•The Company has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. When the use of the asset is predetermined, the Company has the right to direct the use of the asset if either: i) it has the right to operate the asset; or ii) it designed the asset in a way that predetermines how and for what purpose it will be used.
The Company enters into leases mainly for land and buildings for its retail stores and other buildings for its offices. In general, lease agreements for retail stores last 15 years, and office space agreements generally have terms between three and five years.
As a lessee
Initial recognition
At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date. The right-of-use asset considers any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The lease liability is initially measured at the present value of the lease payments to be made over the lease term. The future lease payments are discounted using the Company’s incremental borrowing rate, which is considered as the rate that the Company would negotiate when obtaining financing for a similar period, and with a similar guarantee, to obtain an asset of a similar value to the leased asset. For the Company, the discount rate used to measure the right of use asset and its lease liability is the rate related to the cost of financing for the Company from the consolidated perspective (“Ultimate Parent Company”).
Lease payments included in the measurement of the lease liability, comprise the following:
•Fixed payments, including in-substance fixed payments, less any incentives receivable;
•Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
•The exercise price under a purchase option that the Company is reasonably certain to exercise, an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early; and
•Amounts expected to be payable to the lessor under residual value guarantees.
The Company does not recognize a right-of-use asset and a lease liability for short-term leases that have a lease term of 12 months or less and leases of low-value assets, mainly technological equipment used by the employees, such as computers, handheld devices, and printers. The Company recognizes the lease payments associated with these leases as an expense in the consolidated statement of income as they are incurred.
Subsequent measurement
The right-of-use asset is depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. In addition, the right-of-use asset is periodically adjusted for impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortized cost using the effective interest rate method. The Company remeasures the lease liability when there is a modification in the lease term or amounts of expected payments under a residual value guarantee and when it arises from a change in an index or rate, without modifying the incremental borrowing rate (unless it results from a change in a floating rate). The lease liability is remeasured using a new incremental borrowing rate at the date of the modification when:
•An extension or termination option is exercised modifying the non-cancellable period of the contract; or
•The Company changes its assessment of whether it will exercise a purchase option of the underlying asset.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying value amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
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A modification to the lease agreement is accounted for as a separate lease if both of the following conditions are met: i) the modification increases the scope of the lease by adding the right-to-use one or more underlying assets, and ii) the consideration for the lease increases by an amount proportional to the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the contract.
In the consolidated statement of income, the interest expense from the lease liability is recognized as a component of interest expense, unless it is directly attributable to qualifying assets, in which case it is capitalized in accordance with the Company’s accounting policy on borrowing costs. Depreciation of the right-of-use asset is recognized in the consolidated statement of income.
Leasehold improvements on lease agreements are recognized as a part of property, plant and equipment in the consolidated financial statements and are amortized using the straight-line method over the shorter of either the useful life of the assets or the related lease term.
All intra-group right-of-use assets and lease liabilities, interest expenses, depreciation and cash flows relating to transactions between subsidiaries of the Company are eliminated on consolidation.
3.16 Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance and represent payments whose benefits will be received in future years. Intangible assets acquired separately are measured at initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as of the date of acquisition (see Note 3.2). Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite, in accordance with the period over which the Company expects to receive the benefits.
Intangible assets with finite useful lives are amortized and mainly consist of:
•Customer relationships intangible assets acquired in a business combination, are recognized on acquisition and recorded at fair value. After initial recognition, customer relationships intangible assets are stated at cost less accumulated amortization and any impairment losses. Amortization is charged to the consolidated income statement on a straight-line basis over the estimated useful economic lives which range from 6 to 25 years.
•Technology costs and management system costs incurred during the development stage which are currently in use. Such amounts are capitalized and then amortized using the straight-line method over their expected useful lives, with a range in useful lives from 3 to 10 years. Expenditures that do not fulfill the requirements for capitalization are expensed as incurred.
•Alcohol licenses are amortized using the straight-line method over their estimated useful lives, which are estimated at 12 years.
Amortized intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable through its expected future cash flows.
Intangible assets with indefinite useful lives consist of:
•Rights to produce and distribute Coca-Cola trademark products in the Company’s territories.
As of December 31, 2023, Coca-Cola FEMSA had four bottler agreements in Mexico, (i) Valley of Mexico territory, which is up for renewal in June 2033, (ii) Southeast territory, which is up for renewal in June 2033, (iii) Bajio territory, which is up for renewal in May 2025 and (iv) Golfo territory, which is up for renewal in May 2025. As of December 31, 2023, Coca-Cola FEMSA had one bottler agreement in Brazil, which is up for renewal in October 2027. As of December 31, 2023, Coca-Cola FEMSA had three bottler agreements in Guatemala, which are up for renewal in March 2025 (one contract) and April 2028 (two contracts).
In addition, Coca-Cola FEMSA had one bottler agreement in each country which are up for renewal as follows: Argentina, which is up for renewal in September 2024; Colombia which is up for renewal in June 2024; Panama which is up for renewal in November 2024; Costa Rica which is up for renewal in September 2027; Nicaragua which is up for renewal in May 2026; and Uruguay which is up for renewal in June 2028.
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As of December 31, 2023, Coca-Cola FEMSA’s Venezuela investee (see Note 2.3.1.9) had one bottler agreement, which is up for renewal in August 2026.
The bottler agreements are automatically renewable for ten-year terms, subject to the right of either party to give prior notice that it does not wish to renew a specific agreement. In addition, these agreements generally may be terminated in the case of material breach. Termination would prevent Coca-Cola FEMSA from selling Coca-Cola trademark beverages in the affected territory and would have an adverse effect on the Company´s business, financial conditions and results from operations.
•Trademark rights include Health Division’s trademark rights which consist of standalone beauty store retail banners, pharmaceutical distribution to third-party clients and the production of generic and bio equivalent pharmaceuticals.
Intangible assets with an indefinite life are not amortized and are subject to impairment tests on an annual basis as well as whenever certain circumstances indicate that the carrying amount of those intangible assets may exceed their recoverable value.
3.17 Non-current assets held for sale and discontinued operations
The Company classifies non-current assets and disposal groups as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuous operational use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. The sale is considered highly probable if the following conditions are met:
•The appropriate level of management must be committed to a plan to sell the asset (or disposal group);
•An active program to locate a buyer and complete the plan must have been initiated;
•The asset (disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value; and
•The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (or disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. For the year ended on December 31, 2023 the Company has assets and liabilities held for sale. See Note 4.
Discontinued operations are excluded from the continuing operations and are also presented as a single line item as earnings (loss) after income taxes of discontinued operations in the consolidated income statement.
For the year ended on December 31, 2023, 2022 and 2021 the Company has discontinued operations related to its investment in Heineken and other significant businesses that have been disposed or are in the process of being sold. See Note 4.
3.18 Impairment of long-lived assets
At the end of each reporting period, the Company reviews the carrying amounts of its long-lived tangible and intangible assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest CGUs for which a reasonable and consistent allocation basis can be identified.
For impairment testing, goodwill acquired in a business combination is allocated at the acquisition date to each of the group’s CGUs that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
For goodwill and other indefinite-lived intangible assets, the Company tests for impairment on an annual basis and whenever certain circumstances indicate that the carrying amount of the related CGU might exceed its recoverable amount.
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The recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted, as discussed in Note 2.3.1.1.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in consolidated net income.
Where the conditions leading to an impairment loss no longer exist, it is subsequently reversed. That is, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in consolidated net income. Impairment losses related to goodwill are not reversible.
For the years ended December 31, 2023, 2022 and 2021, the Company recognized impairment losses of Ps. 1,248, Ps. 833 and Ps. 1,427, respectively (see Note 20).
3.19 Financial liabilities and equity instruments
3.19.1 Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.19.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognized as a deduction from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s equity instruments.
3.19.3 Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at amortized cost, except for derivative instruments designated as hedging instruments in an effective hedge, which are recognized at FVTPL. The Company determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value less, in the case of loans and borrowings, directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings, and derivative financial instruments, see Note 3.9.
Subsequent measurement
The subsequent measurement of the Company’s financial liabilities depends on their classification as described below.
3.19.4 Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated income statements when the liabilities are derecognized.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest method. The effective interest method amortization is included in interest expense in the consolidated income statements, see Note 19.
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3.19.5 Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated income statements.
3.20 Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.
The Company recognizes a provision for a loss contingency when it is probable (i.e. the probability that the event will occur is greater than the probability that it will not) that certain effects related to past events, would materialize and can be reasonably quantified. These events and their financial impact are also disclosed as loss contingencies in the consolidated financial statements when the risk of loss is deemed to be other than remote. The Company does not recognize an asset for a gain contingency until the gain is virtually certain, see Note 26.
Restructuring provisions are recognized only when the recognition criteria for provisions are satisfied. The Company has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, there is a detailed estimate of the associated costs, and an appropriate timeline. Furthermore, the employees affected must have been notified of the plan’s main features.
3.21 Post-employment and other short and long-term employee benefits
Post-employment and other long-term employee benefits include obligations for pension and retirement plans, seniority premiums and postretirement medical services.
In Mexico, the economic benefits from employee benefits and retirement pensions are granted to employees with 10 years of service and minimum age of 60. In addition, in accordance with Mexican Labor Law, the Company provides seniority premium benefits to its employees under certain circumstances. The seniority premium benefits consist of a one-time payment equivalent to 12 days wages for each year of service (at the employee’s most recent salary, but not to exceed twice the legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily before the vesting of their seniority premium benefit. For qualifying employees, the Company also provides certain post-employment healthcare benefits such as the medical-surgical services, pharmaceuticals, and hospitals.
For defined benefit retirement plans and other long-term employee benefits, such as the Company’s sponsored pension and retirement plans, seniority premiums and postretirement medical service plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. All remeasurement effects of the Company’s defined benefit obligation such as actuarial gains and losses are recognized directly in OCI. The Company presents service costs within cost of goods sold, administrative and selling expenses in the consolidated income statements. The Company presents net interest cost within interest expense in the consolidated income statements. The projected benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation as of the end of each reporting period. Certain subsidiaries of the Company have established plan assets for the payment of pension benefits, seniority premiums and postretirement medical services through irrevocable trusts of which the employees are named as beneficiaries, which serve to decrease the unfunded status of such plans’ related obligations.
Costs related to compensated absences, such as vacations and vacation premiums, are recognized on an accrual basis.
Employee profit sharing ("PTU") in Mexico is paid by the Company’s Mexican subsidiaries to its eligible employees. In Mexico, PTU is computed at the rate of 10% of the individual company taxable income. PTU in Mexico is calculated
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from the same taxable income for income tax, except for the following: a) neither tax losses from prior years nor the PTU paid during the year are deductible; and b) payments to employees that are exempt from taxes are fully deductible in the PTU computation.
The amendment to the Federal Labor Law established a limit on the amount to be paid for profit sharing to employees, which indicates that the amount of PTU assigned to each employee may not exceed the equivalent of three months of the employee’s current salary, or the average PTU received by the employee in the previous three years, whichever is greater. If the PTU determined is less than or equal to this limit, the PTU will be determined by applying 10% of the individual company taxable income. If the PTU determined exceeds this limit, the limit would apply and this should be considered the PTU for the period.
A settlement occurs when an employer enters into a transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan. A curtailment arises from an isolated event such as the closing of a plant, discontinuance of an operation or termination or suspension of a plan. Gains or losses on the settlement or curtailment of a defined benefit plan are recognized when the settlement or curtailment occurs.
3.22 Revenue recognition
The Company recognizes revenue when the control of performance obligations included in the contract is transferred to the customer. Control refers to the ability that the customer has to direct the use and also to obtain substantially all the benefits of the goods or services exchanged. These benefits are generally paid on a short-term basis.
Management defined the following as indicators to analyze the timing and circumstances as well as the amount by which the revenues would be recognized:
•Identify the contract(s) with a customer (written, oral or any other according to business practices);
•Evaluate the goods and services promised in the customer contract and identifying how each performance obligation in the contract will be transferred to the customer;
•Consider the contractual terms jointly with business practices to determine the transaction price. The transaction price is the amount of the consideration the Company expects to receive in exchange for transferring the promised goods and services to the customer, excluding tax on sales. The expected consideration in a contract may include fixed amounts, variable amounts or both;
•Allocate the transaction price to each performance obligations in the contract (to each good and service that is different) for an amount that represents the consideration to which the entity expects to receive in exchange for the goods and services arranged with the customer; and
•Recognize revenue when (or as) the entity satisfies a performance obligation in exchange for promised goods and services.
All of the above conditions are typically met at the point in time that goods are delivered to the customer at the customers’ facilities. The net sales reflect the effect of agreements with customers, the units delivered at list price, net of variable considerations such as promotions and discounts, which are measure based on the amounts agreed with customers using the expected value method.
The benefits granted from suppliers to the Company as discounts and incentives are recognized as benefits in the cost of goods sold because the Company does not have a separate performance obligation.
When the Company is not the primary responsible party for selling goods or providing services to its customers, it recognizes revenues on a net basis as an agent, in the net sales line item which are generated mainly by Proximity Americas.
All the conditions mentioned above are accomplished normally when the goods are delivered to the customer, usually payment terms varies from 0 to 90 days.
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The Company generates revenues for the following activities:
Sale of goods
Includes the sales of goods by all the subsidiaries of the Company, mainly the sale of beverages of the leading brand of
Coca-Cola and the sale or consumption of goods in the small-format stores of the Proximity Americas, Proximity Europe, Health Division and Fuel Division; in which the revenue is recognized at the point of time those products were sold to the customers. See Note 28.
Rendering of services
Includes the revenues of distribution services, maintenance services and packing of raw materials that the Company recognizes as revenues as the related performance obligation is satisfied. The Company recognizes revenues for the rendering of services during the period in which the performance obligation is satisfied when the following conditions are met:
•The customer receives and consumes simultaneously the benefits, as the Company satisfies the obligation;
•The customer controls the related assets, even if the Company improves them;
•The revenues can be measured reliably; and
•It is probable that economic benefits will flow to the Company.
Rewards programs
The Company recognizes a contract liability for the obligation to award additional benefits to its customers mainly from reward points granted by Proximity Americas and Fuel Division. Management considers in determining that liability, the amount of points granted to its customers and revenue is recognized when the reward points are redeemed or expired and the related inventory is transferred to the customer.
Variable consideration
The Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. Some contracts include promotions, discounts or any other variable allowances that may be granted to the customers. These estimates are based on the commercial agreements celebrated with the customers and on the historical performance for the customer.
Sales discounts are considered variable consideration and are reflected in the client’s invoice. Therefore discounts are recognized at the moment of sale (sales are recorded net of discounts).
In the Modern Channel, retail products are sold at a discount based on volume, considering total sales during certain period. Revenues on these sales are recognized based on the price established in the agreement, net of variable consideration for discounts for estimated volume. The Company uses its accumulated experience to estimate discounts, using the expected value method.
Significant financing component
There is no significant financing component, due to the fact that the majority of sales are made either in cash or on credit with payment terms of less than one year.
Contracts costs
The incremental costs for obtaining a customer contract are recognized as an asset if the Company expects to recover those costs. The incremental costs are those incurred to obtain a contract and that would not be incurred if the contract hadn’t been obtained. The Company recognizes these costs as incurred in the consolidated income statement when the associated revenue is realized in a period equal to or less than one year. The contract costs, are amortized on a straight-line basis over the terms of the related revenue contracts, reflecting how the goods and services are transferred to the client (See Note 3.12). Any other costs that are related to the fulfillment of a contract with a customer and not within the scope of another IFRS standard (e.g. IAS 2, Inventories), are recorded as an asset if they meet the following criteria:
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•The costs relate directly to a contract that the Company expects to identify specifically;
•The costs generate or improve the resources of the Company that will be applied to satisfy, or continue satisfying performance obligations in the future; and
•The costs are expected to be recovered.
The contract asset is amortized in the same manner as the goods and services are transferred to the customer. Accordingly, the asset is recognized in the consolidated income statement through its amortization in the same period in which the related revenue is recognized. For the years ended December 31, 2023, 2022 and 2021, contract costs were not significant.
3.23 Administrative and selling expenses
Administrative expenses include labor costs (salaries and other benefits, including PTU of employees not directly involved in the sale or production of the Company’s products, as well as professional service fees, the depreciation of office facilities, amortization of capitalized information technology system implementation costs and any other similar costs.
Selling expenses include:
•Distribution: labor costs, outbound freight costs, warehousing costs of finished products, write-off of returnable bottles in the distribution process, depreciation and maintenance of trucks and other distribution facilities and equipment. For the years ended December 31, 2023, 2022 and 2021, these distribution costs amounted to Ps. 34,615, Ps. 30,721 and Ps. 26,023, respectively;
•Sales: labor costs (salaries and other benefits including PTU) and sales commissions paid to sales personnel; and
•Marketing: promotional expenses and advertising costs.
3.24 Income taxes
The income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes are charged to the consolidated income statements as they are incurred, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
Uncertain tax positions
The Company operates in numerous tax jurisdictions and is subject to periodic tax inspections, in the normal course of business, by local tax authorities on a range of tax matters in relation to corporate income tax.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
3.24.1 Current income taxes
Income taxes are recognized in the results of the period of the year in which they are incurred, however, in the case of inflationary effects, penalties and surcharges derived from income taxes from previous years, they are recognized within the line of other expenses and other income before the income taxes line item in the consolidated income statement of the Company since Management considers that the aforementioned inflationary effects, penalties and surcharges are not an integral part of the income taxes of the year (see Note 25.2).
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3.24.2 Deferred income taxes
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, including tax loss carryforwards and certain tax credits, to the extent that it is probable that future taxable profits, reversal of existing taxable temporary differences and future tax planning strategies will create taxable profits that will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from initial recognition of goodwill (no recognition of deferred tax liabilities) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In the case of Brazil, where certain goodwill amounts are at times deductible for tax purposes, the Company recognizes as part of the acquisition method a deferred tax asset for the tax effect of the excess of the tax basis over the related carrying value.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred income taxes are classified as a long-term asset or liability, regardless of when the temporary differences are expected to reverse.
Deferred tax relating to items recognized in the other comprehensive income is recognized in correlation to the underlying transaction in OCI.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the how the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
The Company offsets tax assets and liabilities only if it has a legally enforceable right to offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes are levied by the same tax authority.
In Mexico, the income tax rate was 30% for 2023, 2022 and 2021, and currently Management has no reason to believe that the tax rate will change in the foreseeable future. The tax rates for other countries is disclosed in Note 25.
3.25 Share-based payments arrangements
Senior executives of the Company receive remuneration in the form of FEMSA and Coca-Cola FEMSA share-based payment transactions, whereby the employees render services as consideration for equity instruments. Under this stock incentive plan, eligible executive officers and senior management are entitled to receive a special annual bonus in cash, after withholding applicable taxes, to purchase FEMSA and Coca-Cola FEMSA shares traded in the Mexican Stock Exchange. This plan uses the EVA result achieved, and their individual performance as its main evaluation metric. The Company makes a cash contribution to the administrative trust (which is controlled and consolidated by FEMSA) in the amount of the individual executive’s special bonus. The administrative trust then uses the funds to purchase FEMSA and Coca-Cola FEMSA shares or options (as instructed by the Corporate Practices Committee). The equity instruments are granted and then held by an administrative trust controlled and consolidated by the Company until vesting. They are accounted for as equity-settled transactions. The award of equity instruments is based on a fixed monetary value on the grant date.
Equity-settled share-based payments to these employees are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed and recognized based on the graded vesting method over the vesting period at 33% per year over three-year period, based on
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the Company’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in the consolidated income statements such that the cumulative expense reflects the revised estimate.
3.26 Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its shares. Basic EPS is calculated by dividing the consolidated net income attributable to equity holders of the parent by the weighted average number of shares outstanding during the period adjusted for the weighted average of own shares purchased in the year. Diluted EPS is determined by adjusting the weighted average number of shares outstanding including the weighted average of the Company’s own shares purchased in the year for the effects of all potentially dilutive securities, which comprise share rights granted to employees described above. See Note 24.
Note 4. Business Combinations and Disposals
4.1 Business Combinations
The Company consummated certain business acquisitions during 2023, 2022 and 2021, which were recorded using the acquisition method of accounting. The results and cash flows of the acquired operations have been included in the consolidated financial statements since the date on which the Company obtained control of the business, as disclosed below. Therefore, the consolidated income statement, the consolidated statements of financial position and the consolidated statements of cash flows in the year of such acquisitions are not comparable with previous periods. The consolidated statements of cash flows show the cash outflow for the acquired operations, net of the cash acquired related to those acquisitions.
Acquisitions completed in the periods presented and disclosed below are presented according to their relative importance to the consolidated financial statements, not necessarily following a chronological order.
4.1.1 Proximity Division - Europe
During October 2022, the Company (through Proximity Europe Division) completed the acquisition of 96.87% of Valora Holding AG. (herein “Valora”), for Ps. 22,475 in all-cash consideration, looking to develop the convenience and food service market in Europe, the remaining economic interest of 3.13% was acquired during February 2023 for Ps. 673 in all-cash consideration. The acquisition costs amounted to Ps. 252.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:

|  | 2022
Other current assets, including cash acquired of Ps. 1,971 |  | Ps. | 2,988
Clients |  |  | 2,581
Inventories |  |  | 2,967
Right of use assets |  |  | 21,299
Trademark rights |  |  | 8,699
Franchise contracts |  |  | 447
Other non-current assets |  |  | 7,581
Total assets |  |  | 46,562
Deferred tax liability |  |  | (1,325)
Other liabilities |  |  | (35,055)
Net assets acquired |  |  | 10,182
Goodwill arising on acquisition |  |  | 12,966
Total consideration transferred |  |  | 23,148
Cash acquired |  |  | (1,971)
Net cash paid |  |  | 21,177

(1) In 2022 the PPA was pending finalization, as the allocation of the value in the assets was still in process, As a result of the purchase price allocation which was finalized in 2023, additional fair value adjustments were recognized in 2023 as follows: an increase in the fair value of total assets of Ps. 10,482 (from which Ps. 7,617 are trademark rights as indefinite life intangible assets, Ps. 447 are franchise contracts, Ps. 2,743 are right of use asset and Ps. 325 are other non-current assets), a related deferred tax liability for Ps. 1,887 and a decrease in goodwill of Ps. 7,395. Trademark rights and goodwill both included in the same financial statement caption, indefinite life
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intangibles. The Company did not retrospectively adjust the provisional amounts recognized in the statement of financial position and the income statement (amortization for definite life intangibles) at the acquisition date given the amounts recognized in the current period are insignificant.
The Company expects to recover the amounts allocated as goodwill through synergies, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of small-format proximity stores.
The income statement information of this acquisition for the period from the acquisition date through December 31,
2022 is as follows:

Income Statement |  | 2022
Total revenues |  | Ps. | 10,064 |
Income before income taxes |  |  | 229 |
Net loss |  | Ps. | (72) |

4.1.2 Envoy Solutions LLC
In May 2022, the Company (through Envoy Solutions LLC) completed the acquisition of 100% of Sigma Supply of North America, LLC. (herein “Sigma Supply”), for Ps. 7,385 in all-cash consideration.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:

|  | 2022
Current assets, including cash acquired of Ps. 5 |  | Ps. | 132
Accounts receivable |  |  | 1,252
Inventory |  |  | 1,206
Customer relationships |  |  | 3,893
Trademark rights |  |  | 8
Total non-current assets |  |  | 860
Total assets |  |  | 7,351
Total liabilities |  |  | (2,104)
Net assets acquired |  |  | 5,247
Goodwill arising on acquisition |  |  | 2,138
Total consideration transferred |  |  | 7,385
Cash acquired |  |  | (5)
Net cash paid (2) |  |  | 7,380

(1) In 2022 the PPA was pending finalization, as the allocation of the value in the assets was still in process, As a result of the purchase price allocation which was finalized in 2023, additional fair value adjustments were recognized in 2023 as follows: an increase in total net assets of Ps. 4,635 (from which Ps. 3,893 are customer relationships and Ps. 8 are trademark rights), and a decrease in goodwill of Ps. 3,824. Trademark rights and goodwill both included in the same financial statement caption, indefinite life intangibles. The Company did not retrospectively adjust the provisional amounts recognized in the statement of financial position and the income statement (amortization for definite life intangibles) at the acquisition date given the amounts recognized in the current period are insignificant.
(2) Cash flow from this acquisition is included as part of discontinued operations on the consolidated statements of cash flows.
The Company expected to recover the amounts allocated as goodwill through its strategy of creating a national distribution platform in the US, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of supply chains and distribution systems in adjacent businesses. Additionally, this goodwill is deductible for US tax purposes over a period of 15 years.
The income statement information of this acquisition for the period from the acquisition date through December 31,
2022 is as follows:

Income Statement |  | 2022
Total revenues |  | Ps. | 5,718
Income before income taxes |  |  | 463
Net income |  | Ps. | 463

4.2 Other acquisitions
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4.2.1 Coca-Cola FEMSA
In January 2022, the Company (through Coca-Cola FEMSA) completed the acquisition of 100% of CVI Refrigerantes Ltda. (herein “CVI”), to expand its geographic footprint, for Ps. 1,947 in all-cash consideration. CVI was a bottler of Coca-Cola trademark products which operated in Rio Grande do Sul, Brazil. CVI is included in the Company’s results since the acquisition date.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:

|  | 2022
Total current assets, including cash acquired of Ps. 104 |  | Ps. | 615
Total non-current assets |  |  | 972
Distribution rights |  |  | 894
Total assets |  |  | 2,481
Total liabilities |  |  | (731)
Net assets acquired |  |  | 1,750
Goodwill arising on acquisition |  |  | 197
Total consideration transferred |  |  | 1,947
Consideration not paid on acquisition date |  |  | (186)
Consideration paid in acquisition date, net |  |  | 1,761
Cash acquired of CVI |  |  | (104)
Net cash paid |  | Ps. | 1,657

Total revenues of CVI for the period from the acquisition date through to December 31, 2022 were Ps.1,923. Goodwill was allocated on the South America segment.
In November 2022, the Company (through Coca-Cola FEMSA) completed the acquisition of 100% of the business of “Agua Cristal” from Bepensa, a Mexican business group, in the Southeast region of Mexico for Ps. 699 in all-cash consideration transferred. The business of “Agua Cristal” is included in the Company results since December 2022. The Company booked mainly property, plant and equipment for Ps. 448, other indefinite lived intangible assets for Ps.228, goodwill for Ps. 8 and the amount of liabilities assumed was not significant.
4.2.2 Digital@FEMSA
In March 2023, the Company (through Digital@FEMSA) completed the acquisition of 100% of NetPay S.A.P.I. de C.V. (herein “NetPay”), a small business focused on processing electronic transactions for small and medium-sized businesses, for Ps. 4,422 in all-cash consideration.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:

|  | 2023
Total current assets, including cash acquired of Ps. 39 |  | Ps. | 271 |
Customer relationships |  |  | 188 |
Trademark rights |  |  | 26 |
Technology cost |  |  | 145 |
Total non-current assets |  |  | 97 |
Total assets |  |  | 727 |
Total liabilities |  |  | (223) |
Net assets acquired |  |  | 504 |
Goodwill arising on acquisition |  |  | 3,918 |
Total consideration transferred |  |  | 4,422 |
Earn out |  |  | (596) |
Cash acquired |  |  | (39) |
Net cash paid |  | Ps. | 3,787 |

The Company expects to recover the amounts allocated as goodwill through synergies, building on FEMSA’s capabilities by leveraging its expertise in the organization and management in digital business.
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The income statement information of this acquisition for the period from the acquisition date through December 31, 2023 is as follows:

Income Statement |  | 2023
Total revenues |  | Ps. | 1,527 |
Income before income taxes |  |  | 2 |
Net loss |  | Ps. | (11) |

4.2.3 Proximity Americas Division
In February 2022, the Company (through Proximity Americas Division) completed the acquisition of 100% of Ok Market (herein “Ok Market”), a chain of small-format proximity stores in Chile, for Ps. 1,269 in all-cash consideration.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:

|  | 2022
Total current assets, including cash acquired of Ps. 6 |  | Ps. | 463 |
Total non-current assets |  |  | 1,238 |
Total assets |  |  | 1,701 |
Total liabilities |  |  | (1,055) |
Net assets acquired |  |  | 646 |
Goodwill arising on acquisition |  |  | 623 |
Total consideration transferred |  |  | 1,269 |
Cash acquired |  |  | (6) |
Net cash paid |  | Ps. | 1,263 |

The Company expects to recover the amounts allocated as goodwill through synergies, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of small-format proximity stores.
The income statement information of this acquisition for the period from the acquisition date through December 31,
2022 is as follows:

Income Statement |  | 2022
Total revenues |  | Ps. | 2,635 |
Income before income taxes |  |  | 314 |
Net income |  | Ps. | 204 |

4.2.4 Envoy Solutions LLC
During 2022, the Company (through Envoy Solutions LLC) completed the acquisition of 100% of ATRA Janitorial Supply Co., LLC. (herein “Atra”), Hughes Enterprises, LLC. (herein "Hughes"), Sunbelt Packaging, LLC. (herein "Sunbelt"), H.T. Berry Company, LLC. (herein "H.T. Berry") and other smaller acquisitions for Ps. 8,203 in all-cash consideration.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:
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|  | 2022
Total current assets, including cash acquired of Ps. 85 |  | Ps. | 2,103
Customer relationships |  |  | 1,269
Trademark rights |  |  | 14
Total non-current assets |  |  | 909
Total assets |  |  | 4,295
Total liabilities |  |  | (1,535)
Net assets acquired |  |  | 2,760
Goodwill arising on acquisition |  |  | 5,443
Total consideration transferred |  |  | 8,203
Cash acquired |  |  | (85)
Net cash paid (2) |  | Ps. | 8,118

(1) In 2022 the PPA was pending finalization, as the allocation of the value in the assets was still in process, As a result of the purchase price allocation which was finalized in 2023, additional fair value adjustments were recognized in 2023 as follows: an increase in total net assets of Ps. 1,783 (from which Ps. 1,269 are customer relationships and Ps. 14 are trademark rights), and a decrease in goodwill of Ps. 1,054. Trademark rights and goodwill both included in the same financial statement caption, indefinite life intangibles. The Company did not retrospectively adjust the provisional amounts recognized in the statement of financial position and the income statement (amortization for definite life intangibles) at the acquisition date given the amounts recognized in the current period are insignificant.
(2) Cash flow from this acquisition is included as part of discontinued operations on the consolidated statements of cash flows.
The Company expected to recover the amounts allocated as goodwill through its strategy of creating a national distribution platform in the US, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of supply chains and distribution systems in adjacent businesses. Additionally, this goodwill is deductible for US tax purposes over a period of 15 years.
The income statement information of these acquisitions for the period from the acquisition date through December 31, 2022 is as follows:

Income Statement |  | 2022
Total revenues |  | Ps. | 2,148 |
Income before income taxes |  |  | 115 |
Net income |  | Ps. | 115 |

During 2021, the Company (through Envoy Solutions, LLC) completed the acquisition of 100% of Daycon Products, Co. (herein “Daycon”), Penn Jersey Paper, Co. (herein “PJP”), Next-Gen Supply Group, Inc. (herein “Next-Gen”), Johnston Paper Company, Inc. (herein “Johnston Paper”), and other smaller acquisitions which amounted to Ps. 9,949 fully paid in cash, increasing its specialized distribution footprint in the United States.
In 2022, the Company finalized the allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed for acquisitions completed during the prior year, with no significant variations to the preliminary allocation to the fair value of the net assets acquired, which were included in its audited annual consolidated financial statements as of and for the year ended December 31, 2021.
The final allocation of the purchase price to the fair value of the net assets acquired is as follows:
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|  | 2021
Total current assets, including cash acquired of Ps. 337 |  | Ps. | 2,795 |
Customer relationships |  |  | 2,864 |
Trademark rights |  |  | 58 |
Other non-current assets |  |  | 1,594 |
Total assets |  |  | 7,311 |
Total liabilities |  |  | (2,907) |
Net assets acquired |  |  | 4,404 |
Goodwill arising on acquisition |  |  | 5,545 |
Total consideration transferred |  |  | 9,949 |
Cash acquired |  |  | (337) |
Net cash paid |  | Ps. | 9,612 |

(1) In 2021 the PPA was pending finalization, as the allocation of the value in the assets was still in process, As a result of the purchase price allocation which was finalized in 2022, additional fair value adjustments were recognized in 2022 as follows: an increase in total net assets of Ps. 3,068 (from which Ps. 2,864 are customer relationships and Ps. 58 are trademark rights), and a decrease in goodwill of Ps. 2,395. Trademark rights and goodwill both included in the same financial statement caption, indefinite life intangibles. The Company did not retrospectively adjust the provisional amounts recognized in the statement of financial position and the income statement (amortization for definite life intangibles) at the acquisition date given the amounts recognized in the current period are insignificant.
The Company expected to recover the amounts recorded as goodwill through its strategy of creating a national distribution platform in the US, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of supply chains and distribution systems in adjacent businesses. Additionally, this goodwill is deductible for US tax purposes over a period of 15 years.
The income statement information of these acquisitions for the period from the acquisition date through December 31, 2021 is as follows:

Income Statement |  | 2021
Total revenues |  | Ps. | $ | 2,187 |
Income before income taxes |  |  | 46 |
Net income |  | Ps. | 46 |

Unaudited Pro Forma Financial Data
The following unaudited consolidated pro forma financial data represent the Company’s historical financial information, adjusted to give effect to (i) the acquisition of NetPay as if this acquisition had occurred on January 1, 2023; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets and amortization of definite life intangibles of the acquired companies.
Unaudited consolidated pro forma financial data for the acquisitions is as follows:

|  | For the year ended
|  | December 31, 2023
Total revenues |  | Ps. | 710,327 |
Income before income taxes and share of the profit of equity method accounted investees |  |  | 57,826 |
Net income |  |  | 76,622 |
Basic net controlling interest income per share Series “B” |  | Ps. | 3.27 |
Basic net controlling interest income per share Series “D” |  |  | 4.09 |

The following unaudited consolidated pro forma financial data represent the Company’s historical financial information, adjusted to give effect to (i) the acquisitions of Valora, Sigma Supply and the other acquisitions made by Envoy Solutions LLC as if these acquisitions had occurred on January 1, 2022; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets and amortization of definite life intangibles of the acquired companies.
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Unaudited consolidated pro forma financial data for the acquisitions is as follows:

|  | For the year ended
|  | December 31, 2022
Total revenues |  | Ps. | 730,624 |
Income before income taxes and share of the profit of equity method accounted investees |  |  | 43,318 |
Net income |  |  | 34,864 |
Basic net controlling interest income per share Series “B” |  | Ps. | 1.20 |
Basic net controlling interest income per share Series “D” |  |  | 1.50 |

The following unaudited consolidated pro forma financial data represent the Company’s historical financial information, adjusted to give effect to (i) the acquisitions of Daycon, PJP, Next-Gen and Johnston Paper as if these acquisitions had occurred on January 1, 2021; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets and amortization of definite life intangibles of the acquired companies.
Unaudited consolidated pro forma financial data for the acquisitions is as follows:

|  | For the year ended
|  | December 31, 2021
Total revenues |  | Ps. | 565,838 |
Income before income taxes and share of the profit of equity method accounted investees |  |  | 41,313 |
Net income |  |  | 37,800 |
Basic net controlling interest loss per share Series “B” |  | Ps. | 1.43 |
Basic net controlling interest loss per share Series “D” |  |  | 1.78 |

4.3. Disposals (Discontinued Operations)
4.3.1 Heineken
On February 16, 2023, the Company sold a portion of its investment in Heineken Group for a total amount of EUR 3.2 billion all in cash consideration. After this transaction FEMSA's economic interest decreased from 14.76% to 8.13%. As a result, FEMSA's appointed directors resigned from Heineken's Boards and the Company lost its significant influence over this investment, discontinuing the use of the equity method of accounting for the Heineken Investment.
On May 31, 2023, the Company sold the majority of its economic interest in Heineken Group common shares through an accelerated book building of shares for a total amount of EUR 3.3 billion with the exception of the retained shares recognized at fair value a financial asset underlying the Company's unsecured exchangeable bonds, which represent less than 1% of an economic interest for the amount of EUR 500 million redeemable for shares of Heineken Holding N.V. see Note 14.
Because of its importance as a substantial business for the Company, which includes its geographical footprint, in accordance with IFRS 5, the investment in Heineken was classified as a discontinued operation for all the years presented in these consolidated financial statements; the results related with the equity method were presented in the profit after tax from discontinued operations in the consolidated statements of income. The consolidated statements of income comparative figures have therefore been restated accordingly.
All other notes to the consolidated financial statements include amounts for continued operations, unless indicated otherwise.
A summary of the results of the discontinued operation from January 1 to December 31, 2023, corresponding to Heineken's equity method, is shown below:
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| December 31, 2023
Proceeds from the sale of shares | Ps. | 133,222 |
Cost of sale of shares |  | 106,273 |
|  | 26,949 |
Expenses related to the sale |  | (430) |
Recycling: |  |
Foreign exchange loss of the equity method |  | (9,235) |
Gain on the remeasurement of the value of derivative instruments |  | 738 |
Employee benefits |  | (1,247) |
Cancellation effects of hedge of foreign net investment (Note 19) |  | 5,763 |
|  | (3,981) |
Equity method: |  |
Results for the period, net of tax |  | 619 |
Foreign exchange of the period |  | (2,141) |
|  | (1,523) |
Change in investment recognition: |  |
Gain on revaluation at fair value of the shares |  | 26,820 |
Taxes |  |
Cancellation of deferred tax asset related to the investment |  | (4,134) |
Tax paid on the sale of shares |  | (10,697) |
Gain on sale of shares reclassified to discontinued operations | Ps. | 33,003 |

For the years ended December 31, 2022 and 2021, the amount of discontinued operations was Ps. 7,359 and Ps. 10,775 respectively, related with the equity method of Heineken.
After the sale of the economic interest in Heineken, the remaining shares linked to the exchangeable bond are classified as a financial asset within the consolidated statement of financial position amounted to Ps. 7,514 as of December 31, 2023. See Note 14.2.
The investment in Heineken represented a business segment until 2023. With this investment being classified as discontinued operations, the investment in Heineken segment is no longer presented in the segment note as it no longer meets the definition of a reportable segment and therefore prior periods have been restated as such for purposes of comparability (see Note 27).
4.3.2 Plan for Disposal of Strategic Businesses
The following companies were part of the Strategic businesses operation segment:
•AlPunto, which is a group of companies focused on the production and distribution of coolers, commercial refrigeration equipment, plastic boxes, food processing, preservation and weighing equipment.
•Solistica, dedicated to providing 3PL comprehensive logistics solutions to FEMSA companies and to external customers.
•Envoy, a business related with the specialized distribution of cleaning products and consumables in the United States.
On February 15, 2023, the Company publicly announced FEMSA Forward Strategy which consists on maximize long term value creation by focusing on its core business verticals and exploring alternatives for strategic businesses. Therefore, the Company started the process for the divestment of these businesses during 2023.
The Company identified AlPunto and Solistica businesses are held for sale and discontinued operations as of December 31, 2023 and the sale is expected to be completed within a year from the reporting date. The major classes of assets and liabilities classified as held for sale as at December 31, 2023 are, as follows:
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|  | 2023
Cash |  | Ps. | 319 |
Trade receivables |  |  | 6,567 |
Inventories |  |  | 2,636 |
Other current assets |  |  | 866 |
Total Current Assets |  |  | 10,387 |
Property, plant and equipment |  |  | 3,830 |
Right-of-use assets |  |  | 2,827 |
Intangible assets |  |  | 6,250 |
Other assets |  |  | 2,525 |
Total Assets |  |  | 25,819 |
Lease liabilities |  |  | 674 |
Operating liabilities |  |  | 7,631 |
Total Current Liabilities |  |  | 8,305 |
Non-current portion lease liabilities |  |  | 2,391 |
Employee benefits |  |  | 479 |
Other liabilities |  |  | 396 |
Total Liabilities |  | Ps. | 11,569 |

On October 31, 2023, the Company finalized the merger of Envoy Solutions, LLC into BradyIFS ("IFS TopCo LLC"), with Envoy continuing its operations as a wholly-owned subsidiary of Brady IFS. As a result of the transaction, the Company lost control over Envoy and recognized a gain of disposal of Ps. 163 million in the consolidated income statement for 2023. Following the merger, the Company received approximately US$1.5 billion in cash and acquired a 37% ownership stake in the newly formed entity which was measured at fair value. The remaining ownership, approximately 63%, was acquired by existing BradyIFS equity holders, represented by Sponsor Co, LLC, and the existing non-controlling interest of Envoy Solutions. Subsequently, the Company recognizes its investment in Brady IFS under the equity method given that it exercises significant influence over the entity.
Strategic Businesses were presented within the Logistics and Distributions segment until 2023. With these businesses being classified as discontinued operations, the Logistics and Distributions segment is no longer presented in the segment note as it no longer meets the definition of a reportable segment and therefore prior periods have been restated as such for purposes of comparability (see Note 27).
The results of the discontinued operations related to these dispositions, which are all part of the same disposal decision related to the FEMSA Forward strategy, for the years ended are shown below:

|  | 2023 |  | 2022 |  | 2021
Net sales | Ps. | 80,634 |  | Ps. | 76,194 |  | Ps. | 50,801 |
Cost of goods sold |  | 62,275 |  |  | 66,044 |  |  | 43,272 |
Gross profit |  | 18,359 |  |  | 10,150 |  |  | 7,529 |
Operating profit |  | 3,997 |  |  | 1,972 |  |  | (1,777) |
Loss before income taxes of discontinued operations |  | (1,334) |  |  | (4,816) |  |  | (1,799) |
Income taxes |  | 511 |  |  | (1,120) |  |  | (712) |
Gain on sale of discontinued operations |  | 59 |  |  | — |  |  | — |
Net loss of the period of discontinued operations (1) | Ps. | (765) |  | Ps. | (5,936) |  | Ps. | (2,511) |
Heineken |  | 33,003 |  |  | 7,359 |  |  | 10,775 |
Total discontinued operations | Ps. | 32,238 |  | Ps. | 1,423 |  | Ps. | 8,264 |

(1) Includes impairment loss related to Logistics and Distribution for an amount of Ps. 3,955 in 2023.
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Note 5. Cash and Cash Equivalents
Includes cash on hand and in bank deposits and cash equivalents, which are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value, with a maturity date of three months or less at their acquisition date. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statements of financial position and cash flows are comprised of the following:

|  | December 31, 2023 |  | December 31, 2022
Cash and bank balances |  | Ps. | 90,114 |  | Ps. | 39,598
Cash equivalents (see Note 3.5) |  |  | 74,998 |  |  | 43,841
|  | Ps. | 165,112 |  | Ps. | 83,439

Note 6. Investments
As of December 31, 2023 and 2022, current investments with a maturity greater than three months but less than twelve months are carried at amortized cost, and their carrying value is similar to their fair value. The following is a detail of such investments:

Fixed-rate |  |  |  |  |  |
Corporate debt securities |  | 2023 |  | 2022
Acquisition cost |  | Ps. | — |  | Ps. | 21
Accrued interest |  |  | — |  |  | 30
Bank deposits |  |  |  |  |  |
Acquisition cost |  | Ps. | 26,354 |  | Ps. | —
Accrued interest |  |  | 374 |  |  | —
Total investments |  | Ps. | 26,728 |  | Ps. | 51

Note 7. Trade Accounts Receivable, Net

|  | December 31, 2023 |  | December 31, 2022
Trade accounts receivable |  | Ps. | 34,047 |  | Ps. | 39,331
The Coca-Cola Company (see Note 15) |  |  | 378 |  |  | 776
Loans to employees |  |  | 114 |  |  | 131
Heineken Group (see Note 15) |  |  | 352 |  |  | 1,172
Others |  |  | 6,507 |  |  | 6,355
|  |  | 41,398 |  |  |  | 47,765 |
Allowance for expected credit losses |  |  | (2,535) |  |  |  | (2,238) |
|  | Ps. | 38,863 |  | Ps. | 45,527

7.1 Trade receivables
Trade receivables representing rights arising from sales and loans to employees or any other similar concept, are presented net of discounts and the allowance for expected credit losses.
Coca-Cola FEMSA has accounts receivable from The Coca-Cola Company arising from the latter’s participation in advertising and promotional programs.
Because 6% of the trade accounts receivables are unrecoverable, the Company does not have customers classified as "high risk,” which would be eligible to have special management conditions for the credit risk.
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The allowance is calculated under an expected loss model that recognizes the impairment losses throughout the life of the contract. For this particular case, because the accounts receivable are generally outstanding for less than one year, the Company defined an impairment estimation model under a simplified approach of expected loss through a parametric model.
The parameters used within the model are:
•Breach probability;
•Loss severity;
•Financing rate;
•Special recovery rate; and
•Breach exposure.
Aging of accounts receivable (days current or outstanding)

|  | December 31, 2023 |  | December 31, 2022
Current |  | Ps. | 25,424 |  | Ps. | 36,978
0‑30 days |  |  | 9,892 |  |  | 7,517
31‑60 days |  |  | 1,398 |  |  | 1,037
61‑90 days |  |  | 835 |  |  | 463
91‑120 days |  |  | 1,017 |  |  | 291
120+ days |  |  | 2,832 |  |  | 1,479
Total |  | Ps. | 41,398 |  |  | Ps. | 47,765 |

7.2 Changes in the allowance for expected credit losses

|  | 2023 |  | 2022 |  | 2021
Balance at the beginning of the period |  | Ps. | 2,238 |  |  | Ps. | 1,951 |  |  | Ps. | 2,462 |
Allowance for the period |  |  | 1,367 |  |  |  | 1,060 |  |  |  | 496 |
Additions (write-offs) of uncollectible accounts |  |  | (557) |  |  |  | (945) |  |  |  | (821) |
Addition from business combinations |  |  | 3 |  |  |  | 166 |  |  |  | — |
Effects of changes in foreign exchange rates |  |  | (26) |  |  |  | 6 |  |  |  | (186) |
Disposal of businesses |  |  | (490) |  |  |  | — |  |  |  | — |
Balance at the end of the period |  | Ps. | 2,535 |  |  | Ps. | 2,238 |  |  | Ps. | 1,951 |

In determining the recoverability of trade receivables, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the customer base being large and dispersed.
In 2023 the Company recognized a write-off in Health Division for an amount of Ps. 527 related with trades receivables in Colombia due to uncertainty in collection with one of the main institutional customers.
7.3 Payments from The Coca-Cola Company
The Coca-Cola Company participates in certain marketing and promotional programs. Contributions received by the Company are recognized as a reduction in selling expenses. For the years ended December 31, 2023, 2022, and 2021 contributions received were Ps. 2,450, Ps. 1,170 and Ps. 2,437, respectively.
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Note 8. Inventories

|  | December 31, 2023 |  | December 31, 2022
Finished products |  | Ps. | 51,939 |  | Ps. | 53,185
Raw materials |  |  | 3,701 |  |  | 6,383
Spare parts |  |  | 1,145 |  |  | 1,159
Work in process |  |  | 899 |  |  | 1,028
Inventories in transit |  |  | 538 |  |  | 469
|  | Ps. | 58,222 |  | Ps. | 62,224

For the years ended 2023, 2022 and 2021, the Company recognized write-downs of its inventories for Ps. 3,278, Ps. 2,089 and Ps. 1,867 to net realizable value, respectively.
For the years ended 2023, 2022 and 2021, changes in inventories are comprised of the following and included in the consolidated income statement under the cost of goods sold caption:

|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Changes in inventories of finished goods and work in process |  | Ps. | 286,346 |  | Ps. | 234,174 |  | Ps. | 246,134
Raw materials and consumables used |  |  | 115,542 |  |  | 84,984 |  |  | 42,014 |
Total |  | Ps. | 401,888 |  | Ps. | 319,158 |  | Ps. | 288,148

Note 9. Other Current Assets and Other Current Financial Assets
9.1 Other current assets

|  | December 31, 2023 |  | December 31, 2022
Prepaid expenses |  | Ps. | 3,331 |  | Ps. | 3,953
Agreements with customers, net of accumulated amortization |  |  | 126 |  |  | 208
Licenses |  |  | 233 |  |  | 247
Other |  |  | 127 |  |  | 70
|  | Ps. | 3,817 |  | Ps. | 4,478

As of December 31, 2023 and 2022, the Company’s prepaid expenses are as follows:

|  | December 31, 2023 |  | December 31, 2022
Advances for inventories |  | Ps. | 1,826 |  | Ps. | 1,964
Advertising and promotional expenses paid in advance |  |  | 96 |  |  | 119
Advances to service suppliers |  |  | 4 |  |  | 44
Prepaid leases |  |  | 63 |  |  | 64
Prepaid insurance |  |  | 674 |  |  | 332
Others |  |  | 668 |  |  | 1,430
|  | Ps. | 3,331 |  | Ps. | 3,953

For the years ended December 31, 2023, 2022 and 2021, the Company’s advertising and promotional expenses amounted to Ps. 6,778, Ps. 5,768 and Ps. 7,586, respectively.
9.2 Other current financial assets

|  | 2023 |  | 2022
Restricted cash |  | Ps. | 304 |  |  | Ps. | 1,103 |
Derivative financial instruments (see Note 21) |  |  | 431 |  |  |  | 10,061 |
Notes receivable (1) |  |  | 16,125 |  |  |  | 205 |
|  | Ps. | 16,860 |  |  | Ps. | 11,369 |

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(1) In 2023, the Company sold its investment in Jetro Restaurant Depot. As part of the purchase sale agreement, a note receivable was agreed for U.S.$933 (Ps. 15,954), see Note 14.2.
The Company has pledged part of its cash to fulfill the collateral requirements for the accounts payable in different currencies. As of December 31, 2023 and 2022, the restricted cash pledged was held in:

|  | 2023 |  | 2022
U.S. Dollars |  | Ps. | 304 |  | Ps. | 1,095
Chilean pesos |  |  | — |  |  | 8
|  | Ps. | 304 |  | Ps. | 1,103

The restricted cash in U.S. Dollars corresponds to operations in Brazil and relates to short term deposits in order to fulfill the collateral requirements for accounts payable.
Note 10. Equity Method Accounted Investees
As of December 31, 2023 and 2022, Company’s equity method accounted investees are as follows:

|  |  |  |  |  | Ownership Percentage |  |  | Carrying Value
Investee |  | Principal Activity |  | Place of Incorporation |  | December 31, 2023 |  | December 31, 2022 |  |  | December 31, 2023 |  |  | December 31, 2022
Heineken (1) (2) |  | Beverages |  | The Netherlands |  | — | % | 14.8 | % | Ps. | — |  | Ps. | 92,282
IFS TopCo LLC (4) |  | Distribution |  | United States |  | 37.1 | % | — | % |  | 15,032 |  |  | —
Coca-Cola FEMSA: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Joint ventures: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dispensadoras de Café, S.A.P.I. de C.V. |  | Services |  | Mexico |  | 50.0 | % | 50.0 | % |  | 223 |  |  | 189
Fountain Agua Mineral, L.T.D.A. |  | Beverages |  | Brazil |  | 50.0 | % | 50.0 | % |  | 808 |  |  | 752
Planta Nueva Ecología De Tabasco, S.A. de C.V. |  | Recycling |  | Mexico |  | 50.0 | % | 50.0 | % |  | 1,139 |  |  | 578
Associates: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promotora Industrial Azucarera, S.A. de C.V. (“PIASA”) |  | Sugar production |  | Mexico |  | 36.4 | % | 36.4 | % |  | 3,454 |  |  | 3,632
Industria Envasadora de Querétaro, S.A. de C.V. (“IEQSA”) |  | Canned bottling |  | Mexico |  | 26.5 | % | 26.5 | % |  | 215 |  |  | 157
Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”) |  | Recycling |  | Mexico |  | 35.0 | % | 35.0 | % |  | 99 |  |  | 100
Jugos del Valle, S.A.P.I. de C.V. |  | Beverages |  | Mexico |  | 28.2 | % | 29.3 | % |  | 2,831 |  |  | 2,267
Leao Alimentos e Bebidas, L.T.D.A. |  | Beverages |  | Brazil |  | 25.1 | % | 25.1 | % |  | 298 |  |  | 388
Alimentos de Soja S.A.U. |  | Beverages |  | Argentina |  | 10.7 | % | 10.7 | % |  | 23 |  |  | 282
Other investments in Coca-Cola FEMSA |  | Various |  | Various |  | Various |  | Various |  |  | 156 |  |  | 107
Proximity Americas Division: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Joint ventures: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Raizen Conveniências |  | Proximity |  | Brazil |  | 50.0 | % | 50.0 | % |  | 1,636 |  |  | 2,371
Other investments (1) (3) |  | Various |  | Various |  | Various |  | Various |  |  | 333 |  |  | 564
|  |  |  |  |  |  |  |  |  | Ps. | 26,247 |  | Ps. | 103,669

(1)Associate.
(2)As of December 31, 2022 comprised of 8.63% of Heineken, N.V. and 12.26% of Heineken Holding, N.V., which represented an economic interest of 14.76% in Heineken Group. The Company had significant influence, mainly, because it participated in the Board of Directors of Heineken Holding, N.V. and the Supervisory Board of Heineken N.V. During the first semester of 2023, the Company completed the Heineken share offering, leaving less than 1% of economic interest in Heineken Group, therefore the Company no longer maintains significant influence over this Group.
(3)Joint ventures.
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(4)As a result of the merger between Envoy Solutions and BradyIFS during October 2023, the Company owns 37.1% of the shares of IFS TopCo LLC, having significant influence over this investee, mainly because it has appointed directors who participate in the Board of IFS TopCo LLC (see Note 4).
Coca-Cola FEMSA's investments
During 2023 Coca-Cola FEMSA received dividends from Promotora Mexicana de Embotelladores, S.A. de C.V. ("PIASA") for the amount of Ps. 79.
During 2023 Coca-Cola FEMSA made capital contributions to Jugos del Valle, S.A.P.I. de C.V. for the amount of Ps. 466, and sale of shares for an amount of Ps. 24, also its ownership decreased due to a corporate restructuring.
During 2023, Coca-Cola FEMSA recognized an impairment on its investment in Alimentos de Soja S.A.U. for an amount of Ps. 143 recognized in the South America segment.
During 2023 and 2022 Coca-Cola FEMSA made capital contributions to Planta Nueva Ecología de Tabasco S.A. de C.V. for the amounts of Ps. 506, and Ps. 560, respectively. There were no changes in the ownership percentage as a result of capital contributions made by the other shareholders.
During 2022, Coca-Cola FEMSA's ownership in Jugos del Valle, S.A.P.I. de C.V. increased due to a corporate reestructuring and its ownership in Leao Alimentos e Bebidas, LTDA, Trop Frutas do Brasil, LTDA increased due to acquisition of CVI.
During 2022 Coca-Cola FEMSA received dividends from Industria Envasadora de Querétaro, S.A. de C.V. ("IEQSA") for the amount of Ps. 16.
During 2021 Coca-Cola FEMSA made capital contributions to Jugos del Valle, S.A.P.I. de C.V. for the amount of Ps. 44 and there were no changes in the ownership percentage as a result of capital contributions made by the other shareholders.
During 2021 Coca-Cola FEMSA reduced its capital on Leao Alimentos y Bebidas LTDA. for the amount of Ps. 46, and there were no changes in the ownership percentage as a result of the capital reduction.
During 2021, Coca-Cola FEMSA recognized an impairment on its investment in Trop Frutas Do Brasil LTDA. for the amount of Ps. 250.
On September 30, 2020, Coca-Cola FEMSA announced that its joint venture with The Coca-Cola Company (Compañía Panameña de Bebidas, S.A.P.I. de C.V.) successfully sold 100% of its stock interest in Estrella Azul, a dairy products company in Panama. As part of the transaction, Coca-Cola FEMSA agreed with the buyer that it could receive payments in the future if the business of Estrella Azul achieves certain volume and EBITDA targets during the 2022-2027 period. Coca-Cola FEMSA estimated the amount of the payments to be received based on the forecasts of the business and calculated their net present value.
For the years ended December 31, 2023, 2022 and 2021 the equity earnings recognized for associates of Coca-Cola FEMSA were Ps. 25, Ps. 194 and Ps. 85, respectively.
For the years ended December 31, 2023, 2022 and 2021 the equity earnings recognized for joint ventures of Coca-Cola FEMSA were Ps. 190, Ps. 192 and Ps. 3, respectively.
Heineken
On April 30, 2010, the Company acquired an economic interest of 20% of Heineken Group. Heineken’s main activities are the production, distribution and marketing of beer worldwide. The economic interest as of December 31, 2022 was 14.8%. The Company’s share of the net income attributable to equity holders of Heineken Group exclusive of amortization of adjustments amounted to Ps. 8,316 for the year ended December 31, 2022.
On February 17, 2023, the Company, through several block transactions, sold 20,879,120 Heineken N.V. shares and 17,333,518 Heineken Holding N.V. shares, from which Heineken N.V. repurchased 7,782,100 Heineken N.V. shares and 3,891,050 Heineken Holding shares from the Company. In addition, on May 31, 2023, the Company sold 28,828,083 Heineken N.V. shares and 12,756,044 Heineken Holding shares, from which Heineken N.V. repurchased 2,531,462 Heineken N.V. shares and 1,265,731 Heineken Holding shares from the Company.
Consequently, the Company and its subsidiaries sold a total of 49,697,203 shares of Heineken N.V. and 30,089,562 shares of Heineken Holding N.V., representing 8.63% and 10.45% of the capital stock of each of them, respectively, and which together represent an economic interest of 13.9% in Heineken Group. As a result of the transactions described
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above, the Company no longer maintains significant influence over the Heineken Group, and the equity method over this investment was discontinued, considering reclassifications from other comprehensive income to the profit and losses (see Note 4).
The Company recognized equity method income of Ps. 7,359 and Ps. 10,775 net of taxes based on its economic interest in Heineken Group for the years ended December 31, 2022 and 2021, respectively. For the three months ended from January 1st to March 31st of 2023, the Company recognized equity method income of Ps. 619 from Heineken Group (see Note 4.3.1).
Summarized financial information in respect of the associate Heineken Group accounted for under the equity method is set out below.

|  |  | December 31, 2022
Amounts in millions |  |  | Peso |  | Euro
Total current assets |  |  | Ps. | 227,480 |  | €. | 11,015
Total non-current assets |  |  |  | 854,803 |  |  | 41,391
Total current liabilities |  |  |  | 293,050 |  |  | 14,190
Total non-current liabilities |  |  |  | 336,543 |  |  | 16,296
Total equity |  |  |  | 452,690 |  |  | 21,920
Equity attributable to equity holders |  |  |  | 403,765 |  |  | 19,551
Total revenue and other income |  |  | Ps. | 598,072 |  | €. | 28,866
Total cost and expenses |  |  |  | 509,333 |  |  | 24,583
Net income |  |  | Ps. | 62,965 |  | €. | 3,039
Net income attributable to equity holders |  |  |  | 55,568 |  |  | 2,682
Other comprehensive income |  |  |  | 6,257 |  |  | 302
Total comprehensive income |  |  | Ps. | 69,222 |  | €. | 3,341
Total comprehensive income attributable to equity holders |  |  |  | 62,965 |  |  | 3,039

Reconciliation from the equity of the associate Heineken Group to the investment of the Company.

|  |  | December 31, 2022 |
Amounts in millions |  |  | Peso |  | Euro |
Equity attributable to equity holders of Heineken |  |  | Ps. | 403,765 |  | €. | 19,551 |
Economic ownership percentage |  | % |  | 14.76 | % |  | 14.76 |
Investment in Heineken investment exclusive of goodwill and other adjustments |  |  | Ps. | 59,560 |  | €. | 2,884 |
Effects of fair value determined by purchase price allocation |  |  |  | 14,528 |  |  | 704 |
Goodwill |  |  |  | 18,194 |  |  | 881 |
Heineken investment |  |  | Ps. | 92,282 |  | €. | 4,469 |

As of December 31, 2022, the fair value of the Company’s investment in Heineken N.V. Holding and Heineken N.V. represented by shares equivalent to 14.8% of its outstanding shares amounted to Ps. 143,638 (€.6,912 million) based on quoted market prices of those dates.
During the years ended December 31, 2023, 2022 and 2021, the Company received dividends distributions from Heineken Group, amounting to Ps. 3,428, Ps. 2,635 and Ps. 2,005, respectively.
IFS TopCo LLC
On October 31, 2023, the Company entered into a definitive agreement with BradyIFS to create a new distribution platform for the facility cleaning, food disposables and packaging industries in the United States. The Company received Ps. 24,468 (U.S. $1.5 billion) in cash and will maintain a 37.1% equity interest in the new combined entity IFS TopCo LLC. Due to the timing of the acquisition in the fourth quarter of 2023, the Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period. Goodwill and intangibles assets pending allocation would include primarily trademark rights and customer relationships of which the majority are expected to be indefinite life. Any potential adjustments would be reflected within the equity method investment for this entity given that the Company does not control but does have significant influence over it. The fair value of the investment derived from the transaction was Ps. 15,032 (U.S. $890 million) (see Note 4.3.2).
Reconciliation from the equity of the associate IFS TopCo LLC to the investment of the Company.
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|  |  | December 31, 2023 |
Amounts in millions |  |  | Peso |  | U.S. dollars |
Fair value of IFS TopCo |  |  | Ps. | 36,169 |  | $. | 2,141 |
Economic ownership percentage |  | % |  | 37.08 | % |  | 37.08 |
Investment in IFS TopCo investment exclusive of goodwill and other adjustments |  |  | Ps. | 13,412 |  | $. | 794 |
Goodwill pending to be allocated |  |  |  | 1,620 |  |  | 96 |
IFS TopCo investment (1) |  |  | Ps. | 15,032 |  | $. | 890 |

(1)IFS TopCo purchase price allocation will be finalized during the twelve month remeasurement period after the acquisition date.
For the year ended December 31, 2023, 2022 and 2021, the Company’s share of other comprehensive income from equity investees, net of taxes are as follows:

|  | 2023 |  | 2022 |  | 2021
Items that may be reclassified to consolidated net income: |  |  |  |  |  |  |  |  |
Valuation of the effective portion of derivative financial instruments |  | Ps. | (526) |  | Ps. | (286) |  |  | Ps. | 32
Exchange differences on translating foreign operations |  |  | 6,623 |  |  | 2,655 |  |  |  | 2,893
Total |  | Ps. | 6,097 |  | Ps. | 2,369 |  |  | Ps. | 2,925
Items that may not be reclassified to consolidated net income in subsequent periods: |  |  |  |  |  |  |  |  |
Remeasurements of the net defined benefit liability |  | Ps. | 897 |  | Ps. | 267 |  |  | Ps. | 590 |

For the years ended December 31, 2023, 2022 and 2021 the equity earnings (loss) recognized for other associates were Ps. (621), Ps. 287, and Ps. (98), respectively.
Note 11. Property, Plant and Equipment

Cost |  | Land |  | Buildings |  | Machinery and Equipment |  | Refrigeration Equipment |  | Returnable Bottles |  | Investments in Fixed Assets in Progress |  | Leasehold Improvements |  | Other |  | Total
Cost as of January 1,2021 |  | Ps. | 9,922 |  |  | Ps. | 27,255 |  |  | Ps. | 86,726 |  |  | Ps. | 16,949 |  |  | Ps. | 17,923 |  |  | Ps. | 10,534 |  |  | Ps. | 26,527 |  |  | Ps. | 905 |  |  | Ps. | 196,741 |
Additions (1) |  |  | 303 |  |  |  | 484 |  |  |  | 5,263 |  |  |  | 115 |  |  |  | 3,655 |  |  |  | 8,527 |  |  |  | 2,869 |  |  |  | 237 |  |  |  | 21,453 |
Additions from business acquisitions |  |  | — |  |  |  | — |  |  |  | 86 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 86 |
Changes in the fair value of past acquisitions |  |  | — |  |  |  | — |  |  |  | 55 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 58 |
Transfer of completed projects in progress |  |  | 3 |  |  |  | 768 |  |  |  | 4,997 |  |  |  | 1,351 |  |  |  | 31 |  |  |  | (7,384) |  |  |  | 215 |  |  |  | 19 |  |  |  | — |
Transfer (to)/from assets classified as held for sale |  |  | — |  |  |  | — |  |  |  | 60 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (8) |  |  |  | 4 |  |  |  | 56 |
Disposals |  |  | (93) |  |  |  | (205) |  |  |  | (7,196) |  |  |  | (1,614) |  |  |  | (2,300) |  |  |  | (190) |  |  |  | (1,771) |  |  |  | (32) |  |  |  | (13,401) |
Effects of changes in foreign exchange rates |  |  | (162) |  |  |  | (657) |  |  |  | (1,487) |  |  |  | (556) |  |  |  | (364) |  |  |  | (752) |  |  |  | (76) |  |  |  | (82) |  |  |  | (4,136) |
Effects on the recognition of inflation effects |  |  | 140 |  |  |  | 464 |  |  |  | 1,580 |  |  |  | 318 |  |  |  | 487 |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 2,990 |
Cost as of December 31, 2021 |  | Ps. | 10,113 |  |  | Ps. | 28,109 |  |  | Ps. | 90,084 |  |  | Ps. | 16,563 |  |  | Ps. | 19,432 |  |  | Ps. | 10,736 |  |  | Ps. | 27,759 |  |  | Ps. | 1,051 |  |  | Ps. | 203,847 |
Cost as of January 1, 2022 |  | Ps. | 10,113 |  |  | Ps. | 28,109 |  |  | Ps. | 90,084 |  |  | Ps. | 16,563 |  |  | Ps. | 19,432 |  |  | Ps. | 10,736 |  |  | Ps. | 27,759 |  |  | Ps. | 1,051 |  |  | Ps. | 203,847 |
Additions (1) |  |  | 447 |  |  |  | 774 |  |  |  | 8,237 |  |  |  | 939 |  |  |  | 4,124 |  |  |  | 15,597 |  |  |  | 2,669 |  |  |  | 397 |  |  |  | 33,184 |
Additions from business acquisitions |  |  | 201 |  |  |  | 1,268 |  |  |  | 4,478 |  |  |  | 126 |  |  |  | 8 |  |  |  | 699 |  |  |  | 175 |  |  |  | — |  |  |  | 6,955 |
Changes in the fair value of past acquisitions |  |  | — |  |  |  | — |  |  |  | (68) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 36 |  |  |  | (19) |  |  |  | (51) |
Transfer of completed projects in progress |  |  | 159 |  |  |  | 1,571 |  |  |  | 4,794 |  |  |  | 2,485 |  |  |  | 645 |  |  |  | (9,954) |  |  |  | 290 |  |  |  | 10 |  |  |  | — |
Transfer (to)/from assets classified as held for sale |  |  | — |  |  |  | — |  |  |  | (107) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (107) |
Disposals |  |  | (33) |  |  |  | (259) |  |  |  | (3,362) |  |  |  | (1,072) |  |  |  | (381) |  |  |  | (290) |  |  |  | (214) |  |  |  | (15) |  |  |  | (5,626) |
Effects of changes in foreign exchange rates |  |  | (458) |  |  |  | (1,167) |  |  |  | (1,955) |  |  |  | (1,276) |  |  |  | (1,707) |  |  |  | (589) |  |  |  | 641 |  |  |  | (166) |  |  |  | (6,677) |
Effects on the recognition of inflation effects |  |  | 222 |  |  |  | 735 |  |  |  | 2,903 |  |  |  | 536 |  |  |  | 849 |  |  |  | 7 |  |  |  | — |  |  |  | (2) |  |  |  | 5,250 |
Cost as of December 31, 2022 |  | Ps. | 10,651 |  |  | Ps. | 31,031 |  |  | Ps. | 105,004 |  |  | Ps. | 18,301 |  |  | Ps. | 22,970 |  |  | Ps. | 16,206 |  |  | Ps. | 31,356 |  |  | Ps. | 1,256 |  |  | Ps. | 236,775 |

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Cost as of January 1, 2023 |  | Ps. | 10,651 |  |  | Ps. | 31,031 |  |  | Ps. | 105,004 |  |  | Ps. | 18,301 |  |  | Ps. | 22,970 |  |  | Ps. | 16,206 |  |  | Ps. | 31,356 |  |  | Ps. | 1,256 |  |  | Ps. | 236,775 |
Additions (1) |  |  | 135 |  |  |  | 319 |  |  |  | 9,193 |  |  |  | 855 |  |  |  | 2,782 |  |  |  | 18,376 |  |  |  | 4,572 |  |  |  | 566 |  |  |  | 36,798 |
Additions from business acquisitions |  |  | — |  |  |  | — |  |  |  | 64 |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 66 |
Business combinations from disposals |  |  | — |  |  |  | — |  |  |  | 70 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70 |
Changes in the fair value of past acquisitions |  |  | 73 |  |  |  | (15) |  |  |  | 189 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10 |  |  |  | 257 |
Transfer of completed projects in progress |  |  | 558 |  |  |  | 1,582 |  |  |  | 6,008 |  |  |  | 2,346 |  |  |  | 2,110 |  |  |  | (12,621) |  |  |  | 3 |  |  |  | 14 |  |  |  | — |
Transfer (to)/from assets classified as held for sale |  |  | — |  |  |  | — |  |  |  | 57 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 57 |
Disposals |  |  | (327) |  |  |  | (799) |  |  |  | (9,656) |  |  |  | (1,245) |  |  |  | (270) |  |  |  | (322) |  |  |  | (1,012) |  |  |  | (100) |  |  |  | (13,731) |
Disposal of Envoy Solutions |  |  | — |  |  |  | — |  |  |  | (1,001) |  |  |  | — |  |  |  | — |  |  |  | (91) |  |  |  | (200) |  |  |  | (17) |  |  |  | (1,309) |
Effects of changes in foreign exchange rates |  |  | (523) |  |  |  | (2,174) |  |  |  | (5,845) |  |  |  | (1,299) |  |  |  | (2,155) |  |  |  | (1,109) |  |  |  | (266) |  |  |  | (371) |  |  |  | (13,742) |
Effects on the recognition of inflation effects |  |  | 177 |  |  |  | 587 |  |  |  | 1,897 |  |  |  | 400 |  |  |  | 655 |  |  |  | 123 |  |  |  | 4 |  |  |  | — |  |  |  | 3,843 |
Cost as of December 31, 2023 |  | Ps. | 10,744 |  |  | Ps. | 30,531 |  |  | Ps. | 105,980 |  |  | Ps. | 19,358 |  |  | Ps. | 26,092 |  |  | Ps. | 20,564 |  |  | Ps. | 34,457 |  |  | Ps. | 1,358 |  |  | Ps. | 249,084 |

(1)Total includes Ps. 890, Ps. 2,278 and Ps. 3,784 outstanding payment to suppliers, as of December 31, 2023, 2022 and 2021 respectively.
(2)Investments in fixed assets in progress are expected to be completed and transferred to other fixed assets categories within next twelve months.

Accumulated Depreciation |  | Land |  | Buildings |  | Machinery and Equipment |  | Refrigeration Equipment |  | Returnable Bottles |  | Investments in Fixed Assets in Progress |  | Leasehold Improvements |  | Other |  | Total
Accumulated Depreciation as of January 1, 2021 |  | Ps. | — |  | Ps. | (7,643) |  | Ps. | (43,110) |  | Ps. | (9,162) |  | Ps. | (12,152) |  | Ps. | — |  | Ps. | (11,130) |  | Ps. | (438) |  | Ps. | (83,635)
Depreciation for the year |  |  | — |  |  | (870) |  |  | (8,344) |  |  | (1,795) |  |  | (2,708) |  |  | — |  |  | (2,462) |  |  | (154) |  |  | (16,333)
Transfer to/(from) assets classified as held for sale |  |  | — |  |  | — |  |  | (38) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (38)
Disposals |  |  | — |  |  | 80 |  |  | 5,312 |  |  | 1,493 |  |  | 2,391 |  |  | 4 |  |  | 1,649 |  |  | 27 |  |  | 10,956
Effects of changes in foreign exchange rates |  |  | — |  |  | 151 |  |  | 864 |  |  | 372 |  |  | 222 |  |  | — |  |  | 417 |  |  | 88 |  |  | 2,114
Changes in value on the recognition of inflation effects |  |  | — |  |  | (139) |  |  | (946) |  |  | (208) |  |  | (427) |  |  | — |  |  | (6) |  |  | (38) |  |  | (1,764)
Accumulated Depreciation as of December 31, 2021 |  | Ps. | — |  | Ps. | (8,421) |  | Ps. | (46,262) |  | Ps. | (9,300) |  | Ps. | (12,674) |  | Ps. | 4 |  | Ps. | (11,532) |  | Ps. | (515) |  | Ps. | (88,700)

Accumulated Depreciation as of January 1, 2022 |  | Ps. | — |  |  | Ps. | (8,421) |  |  | Ps. | (46,262) |  |  | Ps. | (9,300) |  |  | Ps. | (12,674) |  |  | Ps. | 4 |  |  | Ps. | (11,532) |  |  | Ps. | (515) |  |  | Ps. | (88,700) |
Depreciation for the year |  |  | — |  |  | (1,393) |  |  | (9,107) |  |  | (2,015) |  |  | (3,234) |  |  | — |  |  | (2,456) |  |  | (134) |  |  | (18,339)
Transfer to/(from) assets classified as held for sale |  |  | — |  |  | — |  |  | 89 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 89
Disposals |  |  | — |  |  | 217 |  |  | 3,319 |  |  | 936 |  |  | 305 |  |  | — |  |  | 248 |  |  | 12 |  |  | 5,037
Effects of changes in foreign exchange rates |  |  | — |  |  | 298 |  |  | 745 |  |  | 860 |  |  | 1,274 |  |  | — |  |  | (766) |  |  | 144 |  |  | 2,555
Changes in value on the recognition of inflation effects |  |  | — |  |  | (244) |  |  | (2,034) |  |  | (354) |  |  | (745) |  |  | — |  |  | (5) |  |  | (34) |  |  | (3,416)
Accumulated Depreciation as of December 31, 2022 |  | Ps. | — |  | Ps. | (9,543) |  | Ps. | (53,250) |  | Ps. | (9,873) |  | Ps. | (15,074) |  | Ps. | 4 |  | Ps. | (14,511) |  | Ps. | (527) |  | Ps. | (102,774)

Accumulated Depreciation as of January 1, 2023 |  | Ps. | — |  |  | Ps. | (9,543) |  |  | Ps. | (53,250) |  |  | Ps. | (9,873) |  |  | Ps. | (15,074) |  |  | Ps. | 4 |  |  | Ps. | (14,511) |  |  | Ps. | (527) |  |  | Ps. | (102,774) |
Depreciation for the year |  |  | — |  |  |  | (1,021) |  |  |  | (10,309) |  |  |  | (1,844) |  |  |  | (3,257) |  |  |  | — |  |  |  | (2,784) |  |  |  | (196) |  |  |  | (19,411) |
Transfer to/(from) assets classified as held for sale |  |  | — |  |  |  | — |  |  |  | (43) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (43) |
Disposals |  |  | — |  |  |  | 260 |  |  |  | 6,494 |  |  |  | 1,249 |  |  |  | 261 |  |  |  | (4) |  |  |  | 592 |  |  |  | 63 |  |  |  | 8,915 |
Disposal of Envoy Solutions |  |  | — |  |  |  | — |  |  |  | 344 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70 |  |  |  | (38) |  |  |  | 376 |
Effects of changes in foreign exchange rates |  |  | — |  |  |  | 708 |  |  |  | 3,898 |  |  |  | 793 |  |  |  | 1,783 |  |  |  | — |  |  |  | 398 |  |  |  | 241 |  |  |  | 7,821 |
Changes in value on the recognition of inflation effects |  |  | — |  |  |  | (218) |  |  |  | (1,265) |  |  |  | (291) |  |  |  | (649) |  |  |  | — |  |  |  | (2) |  |  |  | (13) |  |  |  | (2,438) |
Accumulated Depreciation as of December 31, 2023 |  | Ps. | — |  |  | Ps. | (9,814) |  |  | Ps. | (54,131) |  |  | Ps. | (9,966) |  |  | Ps. | (16,936) |  |  | Ps. | — |  |  | Ps. | (16,237) |  |  | Ps. | (470) |  |  | Ps. | (107,554) |

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Carrying Amount |  | Land |  | Buildings |  | Machinery and Equipment |  | Refrigeration Equipment |  | Returnable Bottles |  | Investments in Fixed Assets in Progress |  | Leasehold Improvements |  | Other |  | Total
As of December 31, 2021 |  | Ps. | 10,113 |  | Ps. | 19,688 |  | Ps. | 43,822 |  | Ps. | 7,263 |  | Ps. | 6,758 |  | Ps. | 10,740 |  | Ps. | 16,227 |  | Ps. | 536 |  | Ps. | 115,147
As of December 31, 2022 |  | Ps. | 10,651 |  | Ps. | 21,488 |  | Ps. | 51,754 |  | Ps. | 8,428 |  | Ps. | 7,896 |  | Ps. | 16,210 |  | Ps. | 16,845 |  | Ps. | 729 |  | Ps. | 134,001
As of December 31, 2023 |  | Ps. | 10,744 |  | Ps. | 20,717 |  | Ps. | 51,849 |  | Ps. | 9,392 |  | Ps. | 9,156 |  | Ps. | 20,564 |  | Ps. | 18,220 |  | Ps. | 888 |  | Ps. | 141,530

Note 12. Leases
During 2023, the changes in the Company’s right-of-use assets were as follows:

|  | Land and buildings |  | Other (1) |  | Total
Cost as of January 1, 2023 |  | Ps. | 81,753 |  |  | 2,213 |  |  | 83,966 |
Additions |  |  | 21,858 |  |  | 772 |  |  | 22,630 |
Changes in fair value of past acquisitions |  |  | 2,774 |  |  | 30 |  |  | 2,804 |
Transfer (from)/to assets classified as held for sale |  |  | (6,721) |  |  | (618) |  |  | (7,339) |
Disposals |  |  | (5,956) |  |  | (141) |  |  | (6,097) |
Remeasurements |  |  | 8,416 |  |  | 674 |  |  | 9,090 |
Depreciation |  |  | (13,889) |  |  | (879) |  |  | (14,768) |
Effects of changes in foreign exchange rates and restatement effects associated with hyperinflationary economies |  |  | (2,184) |  |  | (161) |  |  | (2,345) |
Right-of-use assets, net as of December 31 2023 |  | Ps. | 86,051 |  |  | 1,890 |  |  | 87,941 |

(1)Other assets mainly include transportation equipment and servers.
As of December 31, 2023, the lease liabilities are integrated as follows:

|  | December 31, 2023
Maturity analysis – contractual undiscounted cash flows |  |  |
Less than one year |  | Ps. | 24,267 |
One to five years |  |  | 57,694 |
Five to ten years |  |  | 40,107 |
More than ten years |  |  | 18,700 |
Total undiscounted lease liabilities on December 31 |  |  | 140,768 |
Lease liabilities included in the statement of financial position on December 31 |  |  | 96,073 |
Current |  |  | 12,236 |
Non-Current |  | Ps. | 83,837 |

As December 31, 2023, the weighted average incremental borrowing rate was 9.79%.
The interest expense for leases reported in the consolidated income statement for the year ended December 31, 2023 was Ps. 6,841.
The expense relating to short-term leases and leases of low-value assets for the year ended December 31, 2023 was Ps. 10 included in the consolidated income statement in selling expenses.
For the year ended December 31, 2023, the amounts recognized in the consolidated statement of cash flows related to leases paid, including interest paid derived from leases, are Ps. 16,171.
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During 2022, the changes in the Company’s right-of-use assets was as follows:

|  | Land and buildings |  | Other (1) |  | Total
Cost as of January 1, 2022 |  | Ps. | 54,944 |  | 2,050 |  | 56,994
Additions |  |  | 10,208 |  | 478 |  | 10,686
Additions from business combinations |  |  | 21,414 |  | 519 |  | 21,933
Disposals |  |  | (1,464) |  | (77) |  | (1,541)
Remeasurements |  |  | 6,228 |  | 494 |  | 6,722
Depreciation |  |  | (9,366) |  | (1,106) |  | (10,472)
Effects of changes in foreign exchange rates and restatement effects associated with hyperinflationary economies |  |  | (211) |  | (145) |  | (356)
Right-of-use assets, net as of December 31 2022 |  | Ps. | 81,753 |  | 2,213 |  | 83,966

(1)Other assets mainly include transportation equipment and servers.
As of December 31, 2022, the lease liabilities are integrated as follows:

|  | December 31, 2022
Maturity analysis – contractual undiscounted cash flows |  |  |
Less than one year |  | Ps. | 14,374 |
One to five years |  |  | 45,562 |
Five to ten years |  |  | 32,348 |
More than ten years |  |  | 14,282 |
Total undiscounted lease liabilities on December 31 |  |  | 106,566 |
Lease liabilities included in the statement of financial position on December 31 |  |  | 93,317 |
Current |  |  | 12,095 |
Non-Current |  | Ps. | 81,222 |

As of December 31, 2022, the weighted average incremental borrowing rate was 9.17%.
The interest expense for leases reported in the consolidated income statement for the year ended December 31, 2022 and 2021 was Ps. 5,789 and Ps. 5,118, respectively.
The expense relating to short-term leases and leases of low-value assets for the year ended December 31, 2022 and 2021 was Ps. 841 and Ps. 112, respectively.
For the year ended December 31, 2022 and 2021, the amounts recognized in the consolidated statement of cash flows related to leases paid, including interest paid derived from leases, are Ps. 13,291 and Ps. 10,977, respectively.
During 2022 and 2021, the Company applied the related COVID 19 rent concessions practical expedient to apply the exemption from assessing whether a COVID 19 rent concession is a lease modification for all rent concessions that met the criteria of the amendment to IFRS 16 effective as of June 1, 2020.
12.1 Land and buildings leases
The Company leases land for construction of its retail stores mainly and some buildings for its office space. The leases of retail stores typically run for an average useful life of 15 years, and leases of office space for three to five years. Some leases include an option to renew the lease for an additional period at the end of the contract term.
Some leases provide for additional rent payments that are based on changes in the National Consumer and Price Index, or sales that the Company makes at the leased store in the period.
Variable lease payments based on sales
Some leases of retail stores contain variable lease payments that are based on sales that the Company makes at the store. Variable rental payments were not material for the year ended December 31, 2023 and 2022.
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The Company expects the relative proportions of fixed and variable lease payments to remain broadly consistent in future years.
Extension options
Some leases of office buildings, cellars and retail stores contain extension options exercisable by the Company up to one year before the end of the non-cancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by FEMSA and not by the lessor, in other words, the lessee has the unilateral right to exercise the extension option. The Company assesses at lease commencement whether it is reasonably certain to exercise the extension options. FEMSA reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. Except for some business units, FEMSA considers that the “reasonably certain” criteria are met when a new lease contract is signed by both the Company and the lessor, which usually occurs within a short period of the expiration of the current lease term. Extension options on leases do not represent a significant impact on the right-of-use assets on December 31, 2023 and 2022.
12.2 Other leases
The Company leases vehicles, servers and equipment, with lease terms from three to five years. In some cases, the Company has options to purchase the assets at the end of the contract term. At the commencement date, the Company does not expect to exercise the purchase options.
FEMSA also leases IT equipment and machinery with contract terms from one to three years. These leases are short-term and/or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these types of leases.
Note 13. Intangible Assets

|  | Rights to Produce and Distribute Coca-Cola Trademark Products |  | Goodwill |  | Trademark Rights |  | Other Indefinite Lived Intangible Assets |  | Total Unamortized Intangible Assets |  | Technology Costs and Management Systems |  | Customer Relationships (1) |  | Alcohol Licenses |  | Other |  | Total Amortized Intangible Assets |  | Total Intangible Assets
Cost as of January 1, 2021 |  | Ps. | 76,649 |  |  | Ps. | 52,820 |  |  | Ps. | 8,647 |  |  | Ps. | 1,376 |  |  | Ps. | 139,492 |  |  | Ps. | 10,873 |  |  | Ps. | 9,850 |  |  | Ps. | 1,897 |  |  | Ps. | 2,350 |  |  | Ps. | 24,970 |  |  | Ps. | 164,462 |
Additions |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 127 |  |  |  | 129 |  |  |  | 1,140 |  |  |  | — |  |  |  | 145 |  |  |  | 1,103 |  |  |  | 2,388 |  |  |  | 2,517 |
Acquisitions from business combinations (see Note 4) |  |  | — |  |  |  | 7,940 |  |  |  | 65 |  |  |  | — |  |  |  | 8,005 |  |  |  | — |  |  |  | 873 |  |  |  | — |  |  |  | 1 |  |  |  | 874 |  |  |  | 8,879 |
Transfer of completed development systems |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 262 |  |  |  | — |  |  |  | — |  |  |  | (262) |  |  |  | — |  |  |  | — |
Disposals |  |  | — |  |  |  | (12) |  |  |  | — |  |  |  | (10) |  |  |  | (22) |  |  |  | (973) |  |  |  | — |  |  |  | (36) |  |  |  | (102) |  |  |  | (1,111) |  |  |  | (1,133) |
Effect of movements in exchange rates |  |  | (1,255) |  |  |  | (2,303) |  |  |  | (584) |  |  |  | (80) |  |  |  | (4,222) |  |  |  | (641) |  |  |  | 77 |  |  |  | — |  |  |  | (682) |  |  |  | (1,246) |  |  |  | (5,468) |
Changes in value on the recognition of inflation effects |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 62 |  |  |  | 62 |  |  |  | 62 |
Impairment |  |  | — |  |  |  | (1,094) |  |  |  | (55) |  |  |  | — |  |  |  | (1,149) |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,149) |
Cost as of December 31, 2021 |  | Ps. | 75,396 |  |  | Ps. | 57,351 |  |  | Ps. | 8,073 |  |  | Ps. | 1,413 |  |  | Ps. | 142,233 |  |  | Ps. | 10,661 |  |  | Ps. | 10,800 |  |  | Ps. | 2,006 |  |  | Ps. | 2,470 |  |  | Ps. | 25,937 |  |  | Ps. | 168,170 |

(1)Includes customer relationships related to the acquisitions through Envoy Solutions disclosed in Note 4.
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|  | Rights to Produce and Distribute Coca-Cola Trademark Products |  | Goodwill |  | Trademark Rights |  | Other Indefinite Lived Intangible Assets |  | Total Unamortized Intangible Assets |  | Technology Costs and Management Systems |  | Customer Relationships (1) |  | Alcohol Licenses |  | Other |  | Total Amortized Intangible Assets |  | Total Intangible Assets
Cost as of January 1, 2022 |  | Ps. | 75,396 |  | Ps. | 57,351 |  | Ps. | 8,073 |  | Ps. | 1,413 |  | Ps. | 142,233 |  | Ps. | 10,661 |  | Ps. | 10,800 |  | Ps. | 2,006 |  | Ps. | 2,470 |  | Ps. | 25,937 |  | Ps. | 168,170
Additions |  |  | — |  |  | 22 |  |  | — |  |  | 12 |  |  | 34 |  |  | 672 |  |  | — |  |  | 50 |  |  | 1,476 |  |  | 2,198 |  |  | 2,232
Acquisitions from business combinations (see Note 4) |  |  | 1,116 |  |  | 33,715 |  |  | 1,077 |  |  | — |  |  | 35,908 |  |  | 373 |  |  | — |  |  | — |  |  | 1,054 |  |  | 1,427 |  |  | 37,335
Changes in fair value of past acquisitions |  |  | — |  |  | (2,557) |  |  | — |  |  | — |  |  | (2,557) |  |  | — |  |  | 2,955 |  |  | — |  |  | — |  |  | 2,955 |  |  | 398
Internal developments |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10 |  |  | — |  |  | — |  |  | — |  |  | 10 |  |  | 10
Transfer of completed development systems |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 65 |  |  | — |  |  | (50) |  |  | (15) |  |  | — |  |  | —
Disposals |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | (2) |  |  | (891) |  |  | (3) |  |  | (29) |  |  | — |  |  | (923) |  |  | (925)
Effect of movements in exchange rates |  |  | (756) |  |  | (2,057) |  |  | (106) |  |  | (158) |  |  | (3,077) |  |  | 15 |  |  | (264) |  |  | — |  |  | 466 |  |  | 217 |  |  | (2,860)
Changes in value on the recognition of inflation effects |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 80 |  |  | 80 |  |  | 80
Impairment |  |  | — |  |  | (770) |  |  | — |  |  | — |  |  | (770) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (770)
Cost as of December 31, 2022 |  | Ps. | 75,756 |  | Ps. | 85,704 |  | Ps. | 9,044 |  | Ps. | 1,265 |  | Ps. | 171,769 |  | Ps. | 10,905 |  | Ps. | 13,488 |  | Ps. | 1,977 |  | Ps. | 5,531 |  | Ps. | 31,901 |  | Ps. | 203,670

(1)Includes customer relationships related to the acquisitions through Envoy Solutions disclosed in Note 4.

|  | Rights to Produce and Distribute Coca-Cola Trademark Products |  | Goodwill |  | Trademark Rights |  | Other Indefinite Lived Intangible Assets |  | Total Unamortized Intangible Assets |  | Technology Costs and Management Systems |  | Customer Relationships |  | Alcohol Licenses |  | Other |  | Total Amortized Intangible Assets |  | Total Intangible Assets
Cost as of January 1, 2023 |  | Ps. | 75,756 |  | Ps. | 85,704 |  | Ps. | 9,044 |  | Ps. | 1,265 |  | Ps. | 171,769 |  | Ps. | 10,905 |  | Ps. | 13,488 |  | Ps. | 1,977 |  | Ps. | 5,531 |  | Ps. | 31,901 |  | Ps. | 203,670
Additions |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 4 |  |  | 1,966 |  |  | — |  |  | 261 |  |  | 1,174 |  |  | 3,401 |  |  | 3,405
Acquisitions from business combinations (see Note 4) |  |  | — |  |  | 3,918 |  |  | 26 |  |  | — |  |  | 3,944 |  |  | 145 |  |  | 188 |  |  | — |  |  | 25 |  |  | 358 |  |  | 4,302
Changes in fair value of past acquisitions |  |  | — |  |  | (12,273) |  |  | 7,683 |  |  | — |  |  | (4,590) |  |  | — |  |  | 5,162 |  |  | — |  |  | (117) |  |  | 5,045 |  |  | 455
Business disposals |  |  | (12) |  |  | (25,036) |  |  | (3,009) |  |  | (56) |  |  | (28,113) |  |  | (482) |  |  | (17,788) |  |  | — |  |  | (29) |  |  | (18,299) |  |  | (46,412)
Transfer of completed development systems |  |  | (224) |  |  | — |  |  | — |  |  | 227 |  |  | 3 |  |  | 292 |  |  | — |  |  | — |  |  | (295) |  |  | (3) |  |  | —
Disposals |  |  | — |  |  | (2) |  |  | — |  |  | (2) |  |  | (4) |  |  | (197) |  |  | — |  |  | (161) |  |  | (235) |  |  | (593) |  |  | (597)
Effect of movements in exchange rates |  |  | (1,568) |  |  | (3,744) |  |  | (810) |  |  | 45 |  |  | (6,077) |  |  | (424) |  |  | (814) |  |  | — |  |  | (683) |  |  | (1,921) |  |  | (7,998)
Changes in value on the recognition of inflation effects |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 70 |  |  | 70 |  |  | 70
Impairment |  |  | — |  |  | (4,995) |  |  | — |  |  | — |  |  | (4,995) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,995)
Business combinations from disposals |  |  | — |  |  |  | 1,950 |  |  |  | — |  |  |  | — |  |  |  | 1,950 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,950 |
Cost as of December 31, 2023 |  | Ps. | 73,952 |  | Ps. | 45,522 |  | Ps. | 12,934 |  | Ps. | 1,483 |  | Ps. | 133,891 |  | Ps. | 12,205 |  | Ps. | 236 |  | Ps. | 2,077 |  | Ps. | 5,441 |  | Ps. | 19,959 |  | Ps. | 153,850

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Amortization and Impairment Losses |  | Rights to Produce and Distribute Coca-Cola Trademark Products |  | Goodwill |  | Trademark Rights |  | Other Indefinite Lived Intangible Assets |  | Total Unamortized Intangible Assets |  | Technology Costs and Management Systems |  | Customer Relationships |  | Alcohol Licenses |  | Other |  | Total Amortized Intangible Assets |  | Total Intangible Assets
Amortization as of January 1 2021 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | (6,469) |  | Ps. | (827) |  | Ps. | (736) |  | Ps. | (929) |  | Ps. | (8,961) |  | Ps. | (8,961)
Amortization expense |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,473) |  |  | (791) |  |  | (102) |  |  | (328) |  |  | (2,694) |  |  | (2,694)
Disposals |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 789 |  |  | — |  |  | — |  |  | 101 |  |  | 890 |  |  | 890
Effect of movements in exchange rates |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 792 |  |  | 10 |  |  | — |  |  | (15) |  |  | 787 |  |  | 787
Changes in value on the recognition of inflation effects |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (53) |  |  | — |  |  | — |  |  | (1) |  |  | (54) |  |  | (54)
Amortization as of December 31 2021 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | (6,414) |  | Ps. | (1,608) |  | Ps. | (838) |  | Ps. | (1,172) |  | Ps. | (10,032) |  | Ps. | (10,032)
Amortization as of January 1 2022 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | (6,414) |  | Ps. | (1,608) |  | Ps. | (838) |  | Ps. | (1,172) |  | Ps. | (10,032) |  | Ps. | (10,032)
Amortization expense |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,312) |  |  | (915) |  |  | (104) |  |  | (365) |  |  | (2,696) |  |  | (2,696)
Disposals |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 992 |  |  | 157 |  |  | 3 |  |  | — |  |  | 1,152 |  |  | 1,152
Effect of movements in exchange rates |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (193) |  |  | (786) |  |  | — |  |  | (248) |  |  | (1,227) |  |  | (1,227)
Changes in value on the recognition of inflation effects |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (94) |  |  | — |  |  | — |  |  | (1) |  |  | (95) |  |  | (95)
Amortization as of December 31 2022 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | (7,021) |  | Ps. | (3,152) |  | Ps. | (939) |  | Ps. | (1,786) |  | Ps. | (12,898) |  | Ps. | (12,898)
Amortization as of January 1 2023 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | (7,021) |  | Ps. | (3,152) |  | Ps. | (939) |  | Ps. | (1,786) |  | Ps. | (12,898) |  | Ps. | (12,898)
Amortization expense |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,519) |  |  | (1,113) |  |  | (116) |  |  | (547) |  |  | (3,295) |  |  | (3,295)
Disposals |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 161 |  |  | — |  |  | — |  |  | 209 |  |  | 370 |  |  | 370
Business disposals |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 276 |  |  | 4,010 |  |  | — |  |  | 51 |  |  | 4,337 |  |  | 4,337
Impairment |  |  | — |  |  | — |  |  | (36) |  |  | — |  |  | (36) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (36)
Effect of movements in exchange rates |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 578 |  |  | 188 |  |  | 15 |  |  | 187 |  |  | 968 |  |  | 968
Changes in value on the recognition of inflation effects |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (78) |  |  | — |  |  | — |  |  | — |  |  | (78) |  |  | (78)
Amortization as of December 31 2023 |  | Ps. | — |  | Ps. | — |  | Ps. | (36) |  | Ps. | — |  | Ps. | (36) |  | Ps. | (7,603) |  | Ps. | (67) |  | Ps. | (1,040) |  | Ps. | (1,886) |  | Ps. | (10,596) |  | Ps. | (10,632)

Carrying Amount |  | Rights to Produce and Distribute Coca-Cola Trademark Products |  | Goodwill |  | Trademark Rights |  | Other Indefinite Lived Intangible Assets |  | Total Unamortized Intangible Assets |  | Technology Costs and Management Systems |  | Customer Relationships |  | Alcohol Licenses |  | Other |  | Total Amortized Intangible Assets |  | Total Intangible Assets
As of December 31 2021 |  | Ps. | 75,396 |  | Ps. | 57,351 |  | Ps. | 8,073 |  | Ps. | 1,413 |  | Ps. | 142,233 |  | Ps. | 4,247 |  | Ps. | 9,192 |  | Ps. | 1,168 |  | Ps. | 1,298 |  | Ps. | 15,905 |  | Ps. | 158,138
As of December 31 2022 |  | Ps. | 75,756 |  | Ps. | 85,704 |  | Ps. | 9,044 |  | Ps. | 1,265 |  | Ps. | 171,769 |  | Ps. | 3,884 |  | Ps. | 10,336 |  | Ps. | 1,038 |  | Ps. | 3,745 |  | Ps. | 19,003 |  | Ps. | 190,772
As of December 31 2023 |  | Ps. | 73,952 |  | Ps. | 45,522 |  | Ps. | 12,898 |  | Ps. | 1,483 |  | Ps. | 133,855 |  | Ps. | 4,602 |  | Ps. | 169 |  | Ps. | 1,037 |  | Ps. | 3,555 |  | Ps. | 9,363 |  | Ps. | 143,218

For the years ended December 31, 2023, 2022 and 2021, allocation for amortization expense is as follows:

|  | 2023 |  | 2022 |  | 2021
Cost of goods sold |  | Ps. | 1,229 |  |  | Ps. | 207 |  |  | Ps. | 254 |
Administrative expenses |  |  | 1,257 |  |  |  | 1,771 |  |  |  | 1,630 |
Selling expenses |  |  | 809 |  |  |  | 718 |  |  |  | 810 |
|  | Ps. | 3,295 |  |  | Ps. | 2,696 |  |  | Ps. | 2,694 |

The average remaining period for the Company’s intangible assets that are subject to amortization is as follows:

|  | Years
Technology Costs and Management Systems |  | 3 - 10
Customer Relationships |  | 6 - 25
Alcohol Licenses |  | 12

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Coca-Cola FEMSA Impairment Tests for cash-generating Units Containing Goodwill, Distribution Rights and Other indefinite lived intangible assets
For the purpose of impairment testing, goodwill and distribution rights are allocated and monitored on an individual country basis, which is considered to be the CGU.
The aggregate carrying amounts of goodwill, distribution rights and other indefinite lived intangible assets allocated to each CGU are as follows:

|  | December 31, 2023 |  | December 31, 2022
Mexico |  | Ps. | 56,662 |  | Ps. | 56,967
Guatemala |  |  | 1,684 |  |  | 1,691
Nicaragua |  |  | 404 |  |  | 404
Costa Rica |  |  | 1,418 |  |  | 1,418
Panama |  |  | 1,169 |  |  | 1,170
Colombia |  |  | 3,635 |  |  | 3,583
Brazil |  |  | 30,018 |  |  | 31,883
Argentina |  |  | 245 |  |  | 426
Uruguay |  |  | 2,381 |  |  | 2,512
Total |  | Ps. | 97,616 |  | Ps. | 100,054

The foregoing forecasts reflect the outcomes that Coca-Cola FEMSA considers most likely to occur based on the current situation of each of the CGUs including the macroeconomic situation in each CGU, the foregoing forecasts could differ from the results obtained over time.
The value in use of CGUs is determined based on the method of discounted cash flows. The key assumptions used to calculate value in use are: volume, expected annual long-term inflation, and the WACC used to discount the projected flows.
To determine the discount rate, Coca-Cola FEMSA uses the WACC as determined for each of the cash generating units in real terms and as described in following paragraphs.
The estimated discount rates to perform the impairment test for each CGU considers market participants’ assumptions. Market participants were selected considering the size, operations and characteristics of the businesses that are similar to those of Coca-Cola FEMSA.
The discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated into the projected cash flows. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of Coca-Cola FEMSA and its operating segments and is derived from its WACC. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by Coca-Cola FEMSA’s investors. The cost of debt is based on the interest-bearing borrowings Coca-Cola FEMSA is obliged to service, which is equivalent to the cost of debt based on the conditions that a creditor would assess in the market. Segment-specific risk is incorporated by applying beta factors which are evaluated annually based on publicly available market data.
Market participant assumptions are important because, not only do they include industry data for growth rates, management also assesses how the CGU’s position, relative to its competitors, might change over the forecasted period.
The key assumptions used for the value-in-use calculations are as follows:
•Cash flows were projected based on actual operating results and the five-year business plan.
•For discounting cash flows to get the recoverable amount of the units, Coca-Cola FEMSA applies the WACC for each CGU, and the calculation assumes a size premium adjustments.
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The key assumptions by CGU for impairment testing as of December 31, 2023 were as follows:

CGU |  | Pre-tax WACC |  | Post-tax WACC |  | Expected Annual Long-Term Inflation |  | Expected Volume Growth Rates |
|  |  |  |  |  | 2024‑2028 |  | 2024‑2028 |
Mexico |  | 9.0 | % | 6.3 | % | 4.3 | % | 4.4 | %
Brazil |  | 10.1 | % | 6.8 | % | 3.8 | % | 3.8 | %
Colombia |  | 12.2 | % | 7.7 | % | 4.2 | % | 6.8 | %
Argentina |  | 20.8 | % | 16.1 | % | 70.8 | % | 4.8 | %
Guatemala |  | 9.3 | % | 7.3 | % | 4.0 | % | 14.9 | %
Costa Rica |  | 11.4 | % | 8.8 | % | 2.9 | % | 6.6 | %
Nicaragua |  | 23.3 | % | 16.4 | % | 2.6 | % | 6.5 | %
Panama |  | 11.6 | % | 8.6 | % | 2.0 | % | 7.8 | %
Uruguay |  | 9.7 | % | 7.4 | % | 5.7 | % | 3.7 | %

The key assumptions by CGU for impairment testing as of December 31, 2022 were as follows:

|  | Pre-tax WACC |  | Post-tax WACC |  | Expected Annual Long-Term Inflation |  | Expected Volume Growth Rates |
CGU |  |  |  |  |  | 2023‑2027 |  | 2023‑2027 |
Mexico |  | 9.5 | % | 6.5 | % | 4.3 | % | 2.4 | %
Brazil |  | 11.6 | % | 7.2 | % | 3.9 | % | 4.3 | %
Colombia |  | 13.9 | % | 8.0 | % | 3.9 | % | 9.5 | %
Argentina |  | 27.8 | % | 19.8 | % | 68.0 | % | 4.5 | %
Guatemala |  | 10.2 | % | 7.6 | % | 4.4 | % | 14.8 | %
Costa Rica |  | 15.4 | % | 10.2 | % | 3.3 | % | 6.4 | %
Nicaragua |  | 24.6 | % | 11.8 | % | 4.1 | % | 6.0 | %
Panama |  | 11.0 | % | 8.3 | % | 2.2 | % | 4.0 | %
Uruguay |  | 10.2 | % | 7.4 | % | 5.7 | % | 4.0 | %

Sensitivity to Changes in Assumptions
On December 31, 2023, Coca-Cola FEMSA performed an additional impairment sensitivity calculation, taking into account an adverse change in post-tax WACC, according to the country risk premium, using for each country the relative standard deviation between equity and sovereign bonds and an additional sensitivity to the volume of 100 basis points and concluded that no impairment would be recorded.

CGU |  | Change in WACC | Change in Volume Growth CAGR (1) | Effect on Valuation
Mexico |  | +0.6 | p.p. | -1.0 | % | Passes by 3.2x
Brazil |  | +0.8 | p.p. | -1.0 | % | Passes by 0.9x
Colombia |  | +0.9 | p.p. | -1.0 | % | Passes by 1.1x
Argentina |  | +3.3 | p.p. | -1.0 | % | Passes by 0.9x
Guatemala |  | +0.7 | p.p. | -1.0 | % | Passes by 5.4x
Costa Rica |  | +0.8 | p.p. | -1.0 | % | Passes by 4x
Nicaragua |  | +3.3 | p.p. | -1.0 | % | Passes by 0.8x
Panama |  | +0.7 | p.p. | -1.0 | % | Passes by 2.2x
Uruguay |  | +0.3 | p.p. | -1.0 | % | Passes by 2x

(1)Compound Annual Growth Rate (“CAGR”).
The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data). Coca-Cola FEMSA consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing.
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Health Division Impairment Test for cash-generating Units Containing Goodwill and Trademark Rights
For the purpose of impairment testing, goodwill and trademark rights are allocated and monitored on an individual country basis by operating segment. The Company has identified its cash-generating units as follows: Mexico, Chile, Colombia and Ecuador.
As of December 31, 2023 in Health Division there is a significant carrying amount of goodwill and trademark rights allocated in all countries in which the Company operates as a cash generating unit with a total carrying amount of Ps. 8,695. The aggregate carrying amounts of goodwill and trademark rights allocated to each CGU as of December 31, 2023 are as follows: Mexico Ps. 1,975, Chile Ps. 5,890, Colombia Ps. 634 and Ecuador Ps. 196. The aggregate carrying amounts of goodwill and trademark rights allocated to each CGU as of December 31, 2022 are as follows: Mexico Ps. 2,455, Chile Ps. 7,786, Colombia Ps. 577 and Ecuador Ps. 50.
The recoverable amounts are based on the value in use. The value in use of CGUs is determined based on the method of discounted cash flows. The key assumptions used in projecting cash flows are: sales, expected annual long-term inflation, and the WACC used to discount the projected cash flows. The cash flow forecasts could differ from the results obtained over time; however, the Company prepares its estimates based on the current situation of each of the CGUs or group of CGUs.
To determine the discount rate, the Company uses the WACC as determined for each of the cash generating units or group of the cash-generating units in real terms and as described in the following paragraphs.
The discount rates represent the current market assessment of the risks specific to each CGU or group of CGUs, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of the Company and its operating segments and is derived from its WACC.
Market participant assumptions are important because, not only do they include industry data for growth rates, management also assesses how the CGU’s position, relative to its competitors, might change over the forecasted period.
The key assumptions used for the value-in-use calculations are as follows:
•Cash flows were projected based on actual operating results and the five-year business plan.
•For discounting cash flows to get the recoverable amount of the units, the Company applies the WACC for each CGU, and the calculation assumes a size premium adjustments.
The key assumptions by the significant CGU (Chile) in the Health Division (Mexico, Colombia and Ecuador are insignificant) for impairment test as of December 31, 2023 was as follows:

CGU |  | Pre-tax WACC |  | Post-tax WACC |  | Expected Annual Long-Term Inflation 2024‑2028 |  | Expected Sales Growth Rates 2024‑2028 |
Chile |  | 7.3 | % | 6.4 | % | 2.6 | % | 0.2 | %

The key assumptions by the significant CGU in the Health Division for impairment test as of December 31, 2022 was as follows:

CGU |  | Pre-tax WACC |  | Post-tax WACC |  | Expected Annual Long-Term Inflation 2023‑2027 |  | Expected Sales Growth Rates 2023‑2027 |
Chile |  | 9.3 |  | % | 6.5 |  | % | 4.9 |  | % | 0.6 |  | %

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The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data). The Company consistently applied its methodology to determine CGU specific WACCs to perform its annual impairment testing.
Sensitivity to Changes in Assumptions
On December 31, 2023, the Company performed an additional impairment sensitivity calculation, taking into account an adverse change in post-tax WACC, according to the country risk premium, using for each country the relative standard deviation between equity and sovereign bonds and a sensitivity analysis of sales that would be affected considering a contraction in economic conditions as a result of lower purchasing power of customers, which based on management estimation considered to be reasonably possible an effect of 50 basis points in the sale’s CAGR, concluding that no impairment would be recognized.
The sensitivity test by the significant CGU in the Health Division as of December 31, 2023 was as follows:

CGU |  | Change in WACC | Change in Sales Growth CAGR | Effect on Valuation
Chile |  | 0.7 | p.p. | (0.5) | % | Passes by 1.85x

Valora impairment testing for cash-generating units containing goodwill.
The Company has identified its cash-generating units as a retail food distribution platform located in Europe for impairment testing purposes for goodwill and trademark rights.
As of December 31, 2023 in Valora there is a significant carrying amount of goodwill and trademarks allocated in the cash generating unit with a total carrying amount of Ps. 22,519.
The recoverable amounts are based on the value in use. The value in use of the CGU is determined based on the method of discounted cash flows. The key assumptions used in projecting cash flows are: sales, expected annual long-term inflation, and the WACC used to discount the projected cash flows. The cash flow forecasts could differ from the results obtained over time; however, the Company prepares its estimates based on the current situation of the CGU.
To determine the discount rate, the Company uses the WACC as determined for each of the cash generating units or group of the cash generating units in real terms and as described in following paragraphs.
The discount rates represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of the Company and its operating segments and is derived from its WACC.
Market participant assumptions are important because, not only do they include industry data for growth rates, management also assesses how the CGU’s position, relative to its competitors, might change over the forecasted period.
The key assumptions used for the value-in-use calculations are as follows:
•Cash flows were projected based on actual operating results and the five-year business plan.
•For discounting cash flows to get the recoverable amount of the units, the Company applies the WACC for the CGU, and the calculation assumes a size premium adjustment.
The key assumptions by CGU for impairment test as of December 31, 2023 were as follows:

CGU |  | Pre-tax WACC |  | Post-tax WACC |  | Expected Annual Long-Term Inflation 2024‑2028 |  | Expected Sales Growth Rates 2024‑2028 |
Valora |  | 5.8 | % | 5.5 | % | 1.4 | % | 0.2 | %

The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data). The Company consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing.
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Sensitivity to Changes in Assumptions
On December 31, 2023, the Company performed an additional impairment sensitivity calculation, taking into account an effect of 50 basis points in the sale’s compound annual growth rate ("CAGR"), concluding that no impairment would be recognized.

CGU |  | Change in Sales Growth CAGR |  | Effect on Valuation |
Valora |  | (0.5) | % | Passes by 1.42x |

Note 14. Other Non-Current Assets and Other Non-Current Financial Assets
14.1 Other non-current assets

|  | December 31, 2023 |  | December 31, 2022
Agreements with customers, net of accumulated amortization and other rights |  | Ps. | 766 |  | Ps. | 771
Non-current prepaid advertising expenses |  |  | 238 |  |  | 184
Guarantee deposits (1) |  |  | 1,410 |  |  | 1,612
Prepaid bonuses |  |  | 445 |  |  | 327
Advances to acquire property, plant and equipment |  |  | 1,432 |  |  | 981
Recoverable taxes |  |  | 2,120 |  |  | 1,844
Indemnifiable assets from business combinations (2) |  |  | 1,030 |  |  | 1,555
Others |  |  | 1,055 |  |  | 1,984
|  | Ps. | 8,496 |  | Ps. | 9,258

(1)As it is customary in Brazil, the Company is required to guarantee tax, legal and labor contingencies by guarantee deposits including those related to business acquisitions. See Note 26.7.
(2)Corresponds to indemnification assets that are warranted by former Vonpar owners in accordance with the share purchase agreement.
14.2 Other non-current financial assets

|  | December 31, 2023 |  | December 31, 2022
Non-current accounts receivable (3) |  | Ps. | 1,686 |  | Ps. | 1,686
Derivative financial instruments (see Note 21) |  |  | 3,880 |  |  | 3,520
Others |  |  | 1,587 |  |  | 923
Other investments measured at FVTPL (2) |  |  | 7,514 |  |  | —
Other investments in equity instruments at FVOCI (1) |  |  | — |  |  | 17,681
|  | Ps. | 14,667 |  | Ps. | 23,810

(1)In 2023, the Company sold its investment in Jetro Restaurant Depot. As part of the purchase sale agreement, a note receivable was agreed for U.S.$933 (Ps. 15,954), see Note 9.2.
(2)The Company maintains an investment in Heineken shares that are linked to the Convertible Bond issued in February 2023.
(3)Includes long-term notes receivable held to maturity for Ps. 696, as well as long-term receivable for Ps. 543 related to Health Division.
Note 15. Balances and Transactions with Related Parties and Affiliated Companies
The consolidated statements of financial position and consolidated income statements include the following balances and transactions with related parties and affiliated companies:
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|  | December 31, 2023 |  | December 31, 2022
Balances |  |  |  |  |  |
Due from The Coca-Cola Company (see Note 7) (1) (6) |  | Ps. | 378 |  | Ps. | 776
Balance with BBVA Bancomer, S.A. de C.V. (2) |  |  | 5,233 |  |  | 3,891
Balance with Grupo Scotiabank Inverlat, S.A. (2) |  |  | 3,897 |  |  | 2,350
Due from Heineken Group (5) |  |  | — |  |  | 2,455
Other receivables (1) |  |  | 93 |  |  | 114
Due to The Coca-Cola Company (4) (6) |  | Ps. | 1,196 |  | Ps. | 1,248
Due to BBVA Bancomer, S.A. de C.V. (3) |  |  | 1,651 |  |  | 2,317
Due to Heineken Group (5) |  |  | — |  |  | 3,214
Due to Grupo Financiero Scotiabank Inverlat, S.A. (4) |  |  | 124 |  |  | 65
Other payables (4) |  |  | 1,845 |  |  | 2,711

(1)Presented within trade receivables.
(2)Presented within cash and cash equivalents.
(3)Recorded within bank loans and notes payable.
(4)Recorded within trade payables.
(5)As a result of the Heineken share offering during 2023, Heineken is no longer considered a related party.
(6)Non-controlling interest.
Balances due from related parties are considered to be recoverable. Accordingly, for the years ended December 31, 2023, 2022 and 2021, there was no expense resulting from uncollectible balances due from related parties.

Transactions |  | 2023 |  | 2022 |  | 2021
Income: |  |  |  |  |  |  |  |  |
Services to Heineken Group (5) |  | Ps. | — |  |  | Ps. | 3,796 |  |  | Ps. | 2,530 |
Logistic services to Jugos del Valle (1) |  |  | 601 |  |  |  | 552 |  |  |  | 514 |
Interest revenues from BBVA Bancomer, S.A. de C.V. (3) |  |  | 3,346 |  |  |  | 2,297 |  |  |  | 2,146 |
Interest revenues from Grupo Financiero Scotiabank Inverlat, S.A. (3) |  |  | 413 |  |  |  | 455 |  |  |  | 302 |
Other revenues from related parties |  |  | 1,671 |  |  |  | 963 |  |  |  | 814 |
Expenses: |  |  |  |  |  |  |  |  |
Purchase of concentrate from The Coca-Cola Company (2) |  | Ps. | 46,461 |  |  | Ps. | 43,717 |  |  | Ps. | 37,213 |
Purchases of beer from Heineken Group (5) |  |  | — |  |  |  | 16,006 |  |  |  | 19,552 |
Purchase of baked goods and snacks from Grupo Bimbo, S.A.B. de C.V. (3) |  |  | 7,264 |  |  |  | 6,101 |  |  |  | 4,417 |
Advertisement expense paid to The Coca-Cola Company (2) (4) |  |  | 869 |  |  |  | 545 |  |  |  | 1,482 |
Purchase of juices from Jugos del Valle, S.A.P.I. de C.V. (1) |  |  | 5,301 |  |  |  | 4,990 |  |  |  | 4,102 |
Purchase of sugar from Promotora Industrial Azucarera, S.A. de C.V. (1) |  |  | 2,841 |  |  |  | 2,841 |  |  |  | 2,213 |
Interest expense and fees paid to BBVA Bancomer, S.A. de C.V. (3) |  |  | 215 |  |  |  | 472 |  |  |  | 72 |
Purchase of sugar from Beta San Miguel (1) |  |  | 917 |  |  |  | 724 |  |  |  | 938 |
Purchases of inventories from Fountain Agua Mineral Ltda |  |  | 638 |  |  |  | — |  |  |  | — |
Purchase of canned products from IEQSA (1) |  |  | 843 |  |  |  | 577 |  |  |  | 234 |
Purchases from Sigma Alimentos (3) |  |  | 2,466 |  |  |  | — |  |  |  | — |
Purchase of inventories from Leao Alimentos e Bebidas, L.T.D.A. (1) |  |  | 181 |  |  |  | 215 |  |  |  | 1,320 |
Purchases of material from Ecolab, Inc (3) |  |  | — |  |  |  | 99 |  |  |  | 450 |
Advertising paid to Grupo Televisa, S.A.B. (3) |  |  | 196 |  |  |  | 123 |  |  |  | 167 |
Insurance premiums for policies with Grupo Nacional Provincial, S.A.B. (3) |  |  | — |  |  |  | 10 |  |  |  | 1 |
Donations to Fundación FEMSA, A.C. (3) |  |  | 309 |  |  |  | 232 |  |  |  | 144 |
Donations to Difusión y Fomento Cultural, A.C. |  |  | 123 |  |  |  | 20 |  |  |  | 32 |
Donations to ITESM (3) |  |  | 237 |  |  |  | 371 |  |  |  | 208 |
Purchases of resine to IMER (1) |  |  | 458 |  |  |  | 504 |  |  |  | 416 |
Other expenses with related parties |  |  | 225 |  |  |  | 57 |  |  |  | 206 |

(1)Associates.
(2)Non-controlling interest.
(3)Members of the board of directors in FEMSA participate in the board of directors of this entity, management.believes that due to this fact and the level of transactions with the entity, the disclosure provides relevant information to users.
(4)Net of the contributions from The Coca-Cola Company of Ps. 2,450, Ps. 1,170 and Ps. 2,437, for the years ended in 2023, 2022 and 2021, respectively.
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(5)As a result of the Heineken share offering during 2023, Heineken is no longer considered a related party.
The aggregate compensation paid to executive officers and senior management of the Company were as follows:

|  | 2023 |  | 2022 |  | 2021
Short-term employee benefits paid |  | Ps. | 3,742 |  | Ps. | 2,381 |  | Ps. | 1,934
Postemployment benefits |  |  | 54 |  |  | 53 |  |  | 52
Termination benefits |  |  | 935 |  |  | 63 |  |  | 36
Share-based payments (Note 18.2) |  |  | 943 |  |  | 866 |  |  | 853

Note 16. Balances and Transactions in Foreign Currencies
Assets, liabilities and transactions denominated in foreign currencies are those realized in a currency different than the functional currency of the Company. For the three years ended on December 31, 2023, 2022 and 2021, the assets, liabilities and transactions denominated in foreign currencies, expressed in Mexican pesos (contractual amounts) are as follows:

|  | Assets |  | Liabilities
Balances |  | Short-Term |  | Long-Term |  | Short-Term |  | Long- Term
As of December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars |  | Ps. | 128,143 |  | Ps. | 895 |  | Ps. | 5,534 |  | Ps. | 71,969
Euros |  |  | 4,311 |  |  | — |  |  | 498 |  |  | 19,404
Other currencies |  |  | 46 |  |  | 1,311 |  |  | 6 |  |  | —
Total |  | Ps. | 132,500 |  | Ps. | 2,206 |  | Ps. | 6,038 |  | Ps. | 91,373
As of December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars |  | Ps. | 40,557 |  | Ps. | 978 |  | Ps. | 11,049 |  | Ps. | 111,962
Euros |  |  | 34 |  |  | — |  |  | 400 |  |  | 24,782
Other currencies |  |  | 46 |  |  | 1,358 |  |  | 6 |  |  | —
Total |  | Ps. | 40,637 |  | Ps. | 2,336 |  | Ps. | 11,455 |  | Ps. | 136,744

Transactions |  | Revenues |  | Other Operating Revenues |  | Purchases of Raw Materials |  | Interest Expense |  | Consulting Fees |  | Asset Acquisitions |  | Share Disposition |  | Other
For the year ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars |  | Ps. | 13,322 |  | Ps. | 5,981 |  | Ps. | 21,806 |  | Ps. | 1,266 |  | Ps. | 815 |  | Ps. | 40 |  | Ps. | — |  | Ps. | 5,022
Euros |  |  | 3,064 |  |  | 1 |  |  | 185 |  |  | 288 |  |  | 782 |  |  | — |  |  | 3,120 |  |  | 11
Other currencies |  |  | 9 |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  | — |  |  | —
Total |  | Ps. | 16,395 |  | Ps. | 5,984 |  | Ps. | 21,991 |  | Ps. | 1,554 |  | Ps. | 1,597 |  | Ps. | 43 |  | Ps. | 3,120 |  | Ps. | 5,033
For the year ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars |  | Ps. | 6,373 |  | Ps. | 2,080 |  | Ps. | 25,247 |  | Ps. | 2,411 |  | Ps. | 1,011 |  | Ps. | 44 |  | Ps. | — |  | Ps. | 4,245
Euros |  |  | 651 |  |  | 1 |  |  | 253 |  |  | 226 |  |  | 11 |  |  | 3 |  |  | — |  |  | 779
Other currencies |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 16 |  |  | — |  |  | — |  |  | —
Total |  | Ps. | 7,024 |  | Ps. | 2,081 |  | Ps. | 25,500 |  | Ps. | 2,637 |  | Ps. | 1,038 |  | Ps. | 47 |  | Ps. | — |  | Ps. | 5,024
For the year ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars |  | Ps. | 4,261 |  | Ps. | 2,107 |  | Ps. | 20,009 |  | Ps. | 3,466 |  | Ps. | 826 |  | Ps. | 180 |  | Ps. | — |  | Ps. | 2,908
Euros |  |  | 14 |  |  | — |  |  | 81 |  |  | 1,371 |  |  | 16 |  |  | 8 |  |  | — |  |  | 1
Other currencies |  |  | 7 |  |  | 14 |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 64
Total |  | Ps. | 4,282 |  | Ps. | 2,121 |  | Ps. | 20,090 |  | Ps. | 4,837 |  | Ps. | 843 |  | Ps. | 188 |  | Ps. | — |  | Ps. | 2,973

Mexican peso exchange rates effective at the dates of the consolidated statements of financial position and the issuance date of the Company’s consolidated financial statements were as follows:

|  | December 31, |  | April 15,
|  | 2023 |  | 2022 |  | 2024
U.S. dollar |  | 16.8935 |  | 19.3615 |  | 16.4583
Euro |  | 18.6896 |  | 20.7810 |  | 17.7503

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Note 17. Employee Benefits
The Company has various labor liabilities for employee benefits in connection with pension, seniority and post-retirement medical benefits. Benefits vary depending upon the country where the individual employees are located. Presented below is a discussion of the Company’s labor liabilities in Mexico, which comprise the substantial majority of those recorded in the consolidated financial statements.
17.1 Assumptions
The Company annually evaluates the reasonableness of the assumptions used in its labor liability for post-employment and other non-current employee benefits computations.
Actuarial calculations for pension and retirement plans, seniority premiums and post-retirement medical benefits, as well as the associated cost for the period, were determined using the following long-term assumptions for Mexico:

Mexico |  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021 |
Financial: |  |  |  |  |  |  |
Discount rate used to calculate the defined benefit obligation |  | 10.20 | % | 9.90 | % | 8.00 | %
Salary increase |  | 4.75 | % | 4.75 | % | 4.50 | %
Future pension increases |  | 3.75 | % | 3.75 | % | 3.50 | %
Healthcare cost increase rate |  | 6.00 | % | 6.00 | % | 5.10 | %
Biometric: |  |  |  |  |  |  |
Mortality (1) |  | EMSSA 2009 |  | EMSSA 2009 |  | EMSSA 2009 |
Disability (2) |  | IMSS 97 |  | IMSS‑97 |  | IMSS 97 |
Normal retirement age |  | 60 years |  | 60 years |  | 60 years |
Employee turnover table (3) |  | BMAR 2007 |  | BMAR 2007 |  | BMAR 2007 |

Measurement date December:
(1)EMSSA. Mexican Experience of social security.
(2)IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.
(3)BMAR. Actuary experience.
In Mexico, the methodology used to determine the discount rate was the Yield or Internal Rate of Return (“IRR”) which involves a yield curve. In this case, the expected rates for each period were taken from a yield curve of Mexican Federal Government Treasury Bonds (known as CETES in Mexico) because there is no deep market in high-quality corporate obligations in Mexican pesos.
In Mexico upon retirement, the Company purchases an annuity for the employee, which will be paid according to the option chosen by the employee.
Based on these assumptions, the amounts of benefits expected to be paid out in the following years are as follows:

|  | Pension and Retirement Plans |  | Seniority Premiums |  | Post-Retirement Medical Services |  | Total
2024 |  | Ps. | 701 |  | Ps. | 359 |  | Ps. | 18 |  | Ps. | 1,078
2025 |  |  | 400 |  |  | 262 |  |  | 19 |  |  | 681
2026 |  |  | 402 |  |  | 242 |  |  | 20 |  |  | 664
2027 |  |  | 544 |  |  | 234 |  |  | 22 |  |  | 800
2028 |  |  | 549 |  |  | 226 |  |  | 24 |  |  | 799
2029 to 2033 |  |  | 3,888 |  |  | 1,157 |  |  | 155 |  |  | 5,200

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17.2 Balances of the liabilities for employee benefits

|  | December 31, 2023 |  | December 31, 2022
Pension and Retirement Plans: |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 15,560 |  |  | Ps. | 15,113 |
Pension plan assets at fair value |  |  | (14,061) |  |  |  | (14,324) |
Effect due to asset ceiling |  |  | 3,098 |  |  |  | 3,851 |
Discontinued operations |  |  | (195) |  |  |  | — |
Net defined benefit liability |  | Ps. | 4,402 |  |  | Ps. | 4,640 |
Seniority Premiums: |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 2,416 |  |  | Ps. | 2,068 |
Seniority premium plan assets at fair value |  |  | (123) |  |  |  | (128) |
Discontinued operations |  |  | (235) |  |  |  | — |
Net defined benefit liability |  | Ps. | 2,058 |  |  | Ps. | 1,940 |
Postretirement Medical Services: |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 604 |  |  | Ps. | 556 |
Medical services plan assets at fair value |  |  | (95) |  |  |  | (88) |
Discontinued operations |  |  | (49) |  |  |  | — |
Net defined benefit liability |  | Ps. | 460 |  |  | Ps. | 468 |
Total Employee Benefits |  | Ps. | 6,920 |  |  | Ps. | 7,048 |

17.3 Plan assets
Plan assets consist of fixed and variable return financial instruments recorded at fair value (Level 1), which are invested as follows:

|  | 2023 | 2022
Fixed return: |  |  |  |  |
Traded securities |  | 4 | % | 2 | %
Bank instruments |  | 16 | % | 13 | %
Federal government instruments of the respective countries |  | 47 | % | 52 | %
Variable return: |  |  |  |  |
Publicly traded shares |  | 33 | % | 33 | %
|  | 100 | % | 100 | %

In Mexico, the regulatory framework for pension plans is established in the Income Tax Law and its Regulations, the Federal Labor Law and the Mexican Social Security Institute Law. None of these laws establish minimum funding levels or a minimum required level of contributions.
In Mexico, the Income Tax Law requires that, in the case of private plans, certain notifications must be submitted to the authorities and a certain level of instruments must be invested in Federal Government securities among others.
The Company’s various pension plans have a technical committee that is responsible for verifying the correct operation of the plan with regard to the payment of benefits, actuarial valuations of the plan, and supervising the trustee. The committee is responsible for determining the investment portfolio and the types of instruments the fund will be invested in. The technical committee is also responsible for verifying the correct operation of the plans in all of the countries in which the Company has these benefits.
The risks related to the Company’s employee benefit plans are primarily attributable to the plan assets. The Company’s plan assets are invested in a diversified portfolio, which considers the term of the plan to invest in assets whose expected return coincides with the estimated future payments.
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Since the Mexican Tax Law limits the plan’s asset investment to 10% for related parties, this risk is not considered to be significant for purposes of the Company’s Mexican subsidiaries.
In Mexico, the Company’s policy is to invest at least 30% of the fund assets in Mexican Federal Government instruments. Guidelines for the target portfolio have been established for the remaining percentage and investment decisions are made to comply with these guidelines insofar as the market conditions and available funds allow.
In Mexico, the amounts and types of securities in related parties included in the portfolio fund are as follows:

|  | December 31, 2023 |  | December 31, 2022
Debt: |  |  |  |  |  |
BBVA Bancomer, S.A de C.V. |  | Ps. | 46 |  |  | Ps. | 9 |
Grupo Industrial Bimbo, S.A.B. de C. V. |  |  | 18 |  |  |  | 5 |
Equity: |  |  |  |  |  |
Grupo Industrial Bimbo, S.A.B. de C. V. |  |  | 1 |  |  |  | — |

For the years ended December 31, 2023, 2022 and 2021, the Company did not make significant contributions to the plan assets and does not expect to make material contributions to the plan assets during the following fiscal year. There are no restrictions placed on the trustee’s ability to sell those securities. As of December 31, 2023 and 2022, the plan assets did not include securities of the Company in portfolio funds.
17.4 Amounts recognized in the consolidated income statements, the consolidated statements of comprehensive income and the consolidated statements of changes in equity

|  | Consolidated Income Statement |  | AOCI (1)
December 31, 2023 |  | Current Service Cost |  | Past Service Cost |  | Gain or Loss on Settlement or Curtailment |  | Net Interest on the Net Defined Benefit Liability |  | Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans |  | Ps. | 489 |  |  | Ps. | 288 |  |  | Ps. | (243) |  |  | Ps. | 367 |  |  | Ps. | 1,311 |
Seniority premiums |  |  | 345 |  |  |  | 21 |  |  |  | (21) |  |  |  | 178 |  |  |  | 117 |
Postretirement medical services |  |  | 32 |  |  |  | 13 |  |  |  | (14) |  |  |  | 45 |  |  |  | (29) |
Total |  | Ps. | 866 |  |  | Ps. | 322 |  |  | Ps. | (278) |  |  | Ps. | 590 |  |  | Ps. | 1,399 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension and retirement plans |  | Ps. | 534 |  |  | Ps. | 189 |  |  | Ps. | (220) |  |  | Ps. | 313 |  |  | Ps. | 1,686 |
Seniority premiums |  |  | 328 |  |  |  | 21 |  |  |  | (27) |  |  |  | 150 |  |  |  | 38 |
Postretirement medical services |  |  | 32 |  |  |  | 26 |  |  |  | (29) |  |  |  | 45 |  |  |  | (35) |
Total |  | Ps. | 894 |  |  | Ps. | 236 |  |  | Ps. | (276) |  |  | Ps. | 508 |  |  | Ps. | 1,689 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension and retirement plans |  | Ps. | 390 |  |  | Ps. | 39 |  |  | Ps. | (55) |  |  | Ps. | 319 |  |  | Ps. | 1,757 |
Seniority premiums |  |  | 290 |  |  |  | 1 |  |  |  | (3) |  |  |  | 114 |  |  |  | 853 |
Postretirement medical services |  |  | 44 |  |  |  | 2 |  |  |  | (24) |  |  |  | 52 |  |  |  | 202 |
Total |  | Ps. | 724 |  |  | Ps. | 42 |  |  | Ps. | (82) |  |  | Ps. | 485 |  |  | Ps. | 2,812 |

(1)Amounts accumulated in other comprehensive income as of the end of the period.
For the years ended December 31, 2023, 2022 and 2021, labor costs of Ps. 910, Ps. 854 and Ps. 684 have been included in the consolidated income statements in costs of goods sold, administrative expenses, and selling expenses. Net interest on the defined benefit liability has been included as part of interest expense (Note 19).
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Remeasurements of the net defined benefit liability recognized in accumulated other comprehensive income are as follows:

|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Amount accumulated in other comprehensive income as of the beginning of the period, net of tax |  | Ps. | 1,661 |  |  | Ps. | 2,078 |  |  | Ps. | 2,099 |
Actuarial (gains) losses arising from exchange rates |  |  | (100) |  |  |  | (77) |  |  |  | 11 |
Remeasurements during the year, net of tax |  |  | 314 |  |  |  | 211 |  |  |  | 744 |
Actuarial (gains) and losses arising from changes in financial assumptions |  |  | 223 |  |  |  | (1,848) |  |  |  | (776) |
Actuarial (gains) and losses arising from changes in demographic assumptions |  |  | (4) |  |  |  | (71) |  |  |  | — |
Business Acquisitions |  |  | — |  |  |  | 336 |  |  |  | — |
Return on plan assets |  |  | (92) |  |  |  | 713 |  |  |  | — |
Changes in the effect of limiting a net defined benefit asset to the asset ceiling |  |  | (546) |  |  |  | 319 |  |  |  | — |
Effect of settlement |  |  | (533) |  |  |  | — |  |  |  | — |
Amount accumulated in other comprehensive income as of the end of the period, net of tax |  | Ps. | 923 |  |  | Ps. | 1,661 |  |  | Ps. | 2,078 |

Remeasurements of the net defined benefit liability include the following:
•The return on plan assets, excluding amounts included in net interest expense.
•Actuarial gains and losses arising from changes in demographic assumptions.
•Actuarial gains and losses arising from changes in financial assumptions.
17.5 Changes in the balance of the defined benefit obligation for post-employment
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|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Pension and Retirement Plans: |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 15,113 |  |  | Ps. | 8,015 |  |  | Ps. | 7,679 |
Current service cost |  |  | 489 |  |  |  | 534 |  |  |  | 390 |
Past service cost |  |  | 288 |  |  |  | 163 |  |  |  | 2,881 |
Interest expense |  |  | 820 |  |  |  | 687 |  |  |  | 527 |
Gain on settlement |  |  | (243) |  |  |  | (280) |  |  |  | (2,884) |
Remeasurements of the net defined benefit obligation |  |  | 531 |  |  |  | (2,073) |  |  |  | (42) |
Foreign exchange (gain) or loss |  |  | (48) |  |  |  | (79) |  |  |  | 28 |
Benefits paid |  |  | (1,504) |  |  |  | (1,146) |  |  |  | (564) |
Business Acquisitions |  |  | — |  |  |  | 9,189 |  |  |  | — |
Employees contributions |  |  | 119 |  |  |  | 103 |  |  |  | — |
Plan amendments |  |  | (4) |  |  |  | — |  |  |  | — |
Discontinued operations |  |  | (195) |  |  |  | — |  |  |  | — |
Ending balance |  | Ps. | 15,366 |  |  | Ps. | 15,113 |  |  | Ps. | 8,015 |
Seniority Premiums: |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 2,068 |  |  | Ps. | 2,108 |  |  | Ps. | 1,763 |
Current service cost |  |  | 345 |  |  |  | 328 |  |  |  | 290 |
Past service cost |  |  | 21 |  |  |  | 7 |  |  |  | 836 |
Interest expense |  |  | 191 |  |  |  | 160 |  |  |  | 124 |
Gain on settlement |  |  | (21) |  |  |  | (13) |  |  |  | (839) |
Remeasurements of the net defined benefit obligation |  |  | 66 |  |  |  | (342) |  |  |  | 112 |
Benefits paid |  |  | (254) |  |  |  | (180) |  |  |  | (178) |
Discontinued operations |  |  | (235) |  |  |  | — |  |  |  | — |
Ending balance |  | Ps. | 2,181 |  |  | Ps. | 2,068 |  |  | Ps. | 2,108 |
Postretirement Medical Services: |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 556 |  |  | Ps. | 647 |  |  | Ps. | 812 |
Current service cost |  |  | 32 |  |  |  | 32 |  |  |  | 44 |
Past service cost |  |  | 13 |  |  |  | 26 |  |  |  | 236 |
Interest expense |  |  | 54 |  |  |  | 52 |  |  |  | 57 |
Gain on settlement |  |  | (14) |  |  |  | (29) |  |  |  | (271) |
Remeasurements of the net defined benefit obligation |  |  | 5 |  |  |  | (136) |  |  |  | (191) |
Benefits paid |  |  | (43) |  |  |  | (36) |  |  |  | (40) |
Discontinued operations |  |  | (49) |  |  |  | — |  |  |  | — |
Ending balance |  | Ps. | 554 |  |  | Ps. | 556 |  |  | Ps. | 647 |

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17.6 Changes in the balance of plan assets

|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Total Plan Assets: |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 14,540 |  | Ps. | 3,170 |  | Ps. | 3,001
Actual return on trust assets |  |  | 522 |  |  | (695) |  |  | 152
Foreign exchange loss |  |  | (150) |  |  | 60 |  |  | —
Life annuities |  |  | 6 |  |  | (3) |  |  | 17
Business Acquisitions |  |  | — |  |  | 12,417 |  |  | —
Benefits paid |  |  | (731) |  |  | (533) |  |  | —
Plan amendments |  |  | (126) |  |  | (101) |  |  | —
Employees´contributions |  |  | 102 |  |  | 103 |  |  | —
Employer´s contributions |  |  | 130 |  |  | 133 |  |  | —
Administration cost |  |  | (14) |  |  | (11) |  |  | —
Ending balance |  | Ps. | 14,279 |  | Ps. | 14,540 |  | Ps. | 3,170

As a result of the Company’s investments in life annuities plans, management does not expect it will need to make material contributions to plan assets to meet its future obligations.
17.7 Variation in assumptions
The Company considers that the relevant actuarial assumptions that are subject to sensitivity and valued using the projected unit credit method, are the discount rate, the salary increase rate and healthcare cost increase rate. The reasons for choosing these assumptions are as follows:
•Discount rate: The rate that determines the value of the obligations over time.
•Salary increase rate: The rate that considers the salary increase which implies an increase in the benefit payable.
•Healthcare cost increase rate: The rate that considers the trends of health care costs which implies an impact on the postretirement medical service obligations and the cost for the year.
The following table presents the amount of defined benefit plan expense and OCI impact in absolute terms of a variation of 1% in the assumptions on the net defined benefit liability associated with the Company’s defined benefit plans. The sensitivity of this 1% on the significant actuarial assumptions is based on projected long-term discount rates for Mexico and a yield curve projection of long-term Mexican government bonds – CETES:

ctualiz |  |  |  |  |  |  |  |  |  |  |  |
+1%: |  | Consolidated Income Statement |  | OCI(1)
|  |  |  |  | (Gain) or |  | Effect of Net |  | Remeasurements
Discount rate used to calculate the defined benefit |  |  |  |  | Loss on |  | Interest on the Net |  | of the Net Defined
obligation and the net interest on the net defined |  | Current |  | Settlement or |  | Defined Benefit |  | Benefit Liability
benefit liability |  | Service Cost |  | Curtailment |  | Liability |  |
Pension and retirement plans |  | Ps. | 644 |  | Ps. | (199) |  |  | Ps. | 250 |  | Ps. | 1,289
Seniority premiums |  |  | 346 |  |  | (17) |  |  |  | 164 |  |  | 108
Postretirement medical services |  |  | 37 |  |  | (10) |  |  |  | 37 |  |  | (20)
Total |  | Ps. | 1,027 |  | Ps. | (226) |  |  | Ps. | 451 |  | Ps. | 1,377
Expected salary increase |  |  |  |  |  |  |  |  |  |  |  |
Pension and retirement plans |  | Ps. | 834 |  | Ps. | (227) |  |  | Ps. | 413 |  | Ps. | 1,358
Seniority premiums |  |  | 382 |  |  | (20) |  |  |  | 189 |  |  | 137
Total |  | Ps. | 1,216 |  | Ps. | (247) |  |  | Ps. | 602 |  | Ps. | 1,495
Assumed rate of increase in healthcare costs |  |  |  |  |  |  |  |  |  |  |  |
Postretirement medical services |  | Ps. | 52 |  | Ps. | (14) |  |  | Ps. | 52 |  | Ps. | (39)

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-1%: |  |  |  |  |  |  |  |  |  |  | OCI(1)
|  |  |  |  | (Gain) or |  | Effect of Net |  | Remeasurements
Discount rate used to calculate the defined benefit |  |  |  |  | Loss on |  | Interest on the Net |  | of the Net Defined
obligation and the net interest on the net defined |  | Current |  | Settlement or |  | Defined Benefit |  | Benefit Liability
benefit liability |  | Service Cost |  | Curtailment |  | Liability |  |
Pension and retirement plans |  | Ps. | 830 |  |  | Ps. | (232) |  |  | Ps. | 468 |  |  | Ps. | 1,384 |
Seniority premiums |  |  | 387 |  |  |  | (19) |  |  |  | 194 |  |  |  | 128 |
Postretirement medical services |  |  | 52 |  |  |  | (14) |  |  |  | 52 |  |  |  | (39) |
Total |  | Ps. | 1,269 |  |  | Ps. | (265) |  |  | Ps. | 714 |  |  | Ps. | 1,473 |
Expected salary increase |  |  |  |  |  |  |  |  |  |  |  |
Pension and retirement plans |  | Ps. | 711 |  |  | Ps. | (199) |  |  | Ps. | 313 |  |  | Ps. | 1,327 |
Seniority premiums |  |  | 346 |  |  |  | (17) |  |  |  | 166 |  |  |  | 102 |
Total |  | Ps. | 1,057 |  |  | Ps. | (216) |  |  | Ps. | 479 |  |  | Ps. | 1,429 |
Assumed rate of increase in healthcare costs |  |  |  |  |  |  |  |  |  |  |  |
Postretirement medical services |  | Ps. | 36 |  |  | Ps. | (9) |  |  | Ps. | 37 |  |  | Ps. | (20) |

(1)Amounts accumulated in other comprehensive income as of the end of the period.
17.8 Employee benefits expense
For the years ended December 31, 2023, 2022 and 2021, employee benefits expenses recognized in the consolidated income statements as cost of goods sold, administrative and selling expenses are as follows:

|  | 2023 |  | 2022 |  | 2021
Wages and salaries |  | Ps. | 97,751 |  |  | Ps. | 83,433 |  |  | Ps. | 70,238 |
Social security costs |  |  | 15,941 |  |  |  | 13,511 |  |  |  | 11,737 |
Employee profit sharing |  |  | 2,419 |  |  |  | 2,598 |  |  |  | 2,035 |
Post-employment benefits |  |  | 910 |  |  |  | 854 |  |  |  | 684 |
Share-based payments (Note 15) |  |  | 943 |  |  |  | 866 |  |  |  | 854 |
|  | Ps. | 117,964 |  | Ps. | 101,262 |  |  | Ps. | 85,548 |

Note 18. Bonus Programs
18.1 Quantitative and qualitative objectives
The bonus program for executives is based on complying with certain goals established annually by management, which include quantitative and qualitative objectives, and special projects.
The quantitative objectives represent approximately 50% of the bonus and are based on the Economic Value Added (“EVA”) methodology. The objective established for the executives at each entity is based on a combination of the EVA generated per entity and the EVA generated by the Company, calculated at approximately 70% and 30%, respectively. The qualitative objectives and special projects represent the remaining 50% of the annual bonus and are based on the critical success factors established at the beginning of the year for each executive.
The bonus amount is determined based on each eligible participant’s level of responsibility and based on the EVA generated by the applicable business unit the employee works for. This formula is established by considering the level of responsibility within the organization, the employees’ evaluation and competitive compensation in the market. The bonus is paid to the eligible employee on an annual basis and after withholding applicable taxes.
18.2 Share-based payment bonus plan
The Company has implemented a stock incentive plan for the benefit of its senior executives. As discussed above, this plan uses as its main evaluation metric the EVA. Under the EVA stock incentive plan, eligible employees are entitled to receive a special annual bonus (fixed amount), to be paid in shares of FEMSA or Coca-Cola FEMSA, as applicable or
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stock options (the plan considers providing stock options to employees; however, since inception only shares of FEMSA or Coca-Cola FEMSA have been granted).
The plan is managed by FEMSA’s chief executive officer (“CEO”), with the support of the board of directors, together with the CEO of the respective sub-holding company. FEMSA’s Board of Directors is responsible for approving the plan’s structure, and the annual amount of the bonus. Each year, FEMSA’s CEO in conjunction with the Evaluation and Compensation Committee of the board of directors and the CEO of the respective sub-holding company determines the employees eligible to participate in the plan and the bonus formula to determine the number of shares to be received. The shares vest ratably over a three year period. FEMSA accounts for its share-based payment bonus plan as an equity-settled share-based payment transaction as it will ultimately settle its obligations with its employees by issuing its own shares or those of its subsidiary Coca-Cola FEMSA.
The Company contributes the individual employee’s special bonus (after taxes) in cash to the Administrative Trust (which is controlled and consolidated by FEMSA), who then uses the funds to purchase FEMSA or Coca-Cola FEMSA shares (as instructed by the Administrative Trust’s Technical Committee), which are then allocated to such employee. The Administrative Trust tracks the individual employees’ account balance. FEMSA created the Administrative Trust to conduct the purchase of FEMSA and Coca-Cola FEMSA shares by each of its subsidiaries with eligible executives participating in the stock incentive plan. The Administrative Trust’s objectives are to acquire FEMSA shares or shares of Coca-Cola FEMSA and to manage the shares granted to the individual employees based on instructions set forth by the Technical Committee. Once the shares are acquired following the Technical Committee’s instructions, the Administrative Trust assigns to each participant their respective rights. As the trust is controlled and therefore consolidated by FEMSA, shares purchased in the market and held within the Administrative Trust are presented as treasury stock (as it relates to FEMSA’s shares) or as a reduction of the non-controlling interest (as it relates to Coca-Cola FEMSA’s shares) in the consolidated statement of changes in equity, within the line item “issuance (purchase) of share-based compensation plan”. Should an employee leave prior to their shares vesting, such employee would lose the rights to such shares, which would then remain within the Administrative Trust and be able to be reallocated to other eligible employees as determined by the Company. The incentive plan target is expressed in months of salary, and the final amount payable is computed based on a percentage of compliance with the goals established every year. For the years ended December 31, 2023, 2022 and 2021, the compensation expense recorded in the consolidated income statement amounted to Ps. 943, Ps. 866 and Ps. 853, respectively.
All shares held in the Administrative Trust are considered outstanding for diluted earnings per share purposes and dividends on treasury shares are paid out and affect retained earnings.
As of December 31, 2023 and 2022, the changes in the number of shares held by the trust associated with the Company’s share-based payment plans are as follows:

|  | Number of Shares
|  | FEMSA UBD |  | KOF UBL
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Beginning balance |  | 5,723,019 |  | 3,672,586 |  | 1,860,379 |  | 1,701,074
Shares acquired by the administrative trust to employees |  | 4,844,120 |  | 4,256,433 |  | 1,139,180 |  | 1,266,283
Shares released from administrative trust to employees upon vesting |  | (3,283,941) |  | (2,206,000) |  | (1,095,319) |  | (1,106,978)
Ending balance |  | 7,283,198 |  | 5,723,019 |  | 1,904,240 |  | 1,860,379

The vesting period corresponding to the shares held by the trust as of December 31, 2023 is 2024-2026.
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Note 19. Bank Loans and Notes Payable

|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying |  | Fair |  | Carrying |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Value at |  | Value at |  | Value at |
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029 and Thereafter |  | December 31, 2023 |  | December 31, 2023 |  | December 31, 2022 |
Short-term debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euros |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  | Ps. | 15 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 15 |  |  | Ps. | 15 |  |  |  | — |  |
Interest rate |  |  | 2.6 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 2.6 |  | % |  | — |  |  |  | — |  | %
Argentine pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 72 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 72 |  |  |  | 72 |  |  | Ps. | — |  |
Interest rate |  |  | 130.0 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 130.0 |  | % |  | — |  | % |  | — |  | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 633 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 633 |  |  |  | 633 |  |  |  | 1,072 |  |
Interest rate |  |  | 9.6 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 9.6 |  | % |  | — |  |  |  | 12.3 |  | %
Variable-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 979 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 979 |  |  |  | 978 |  |  |  | 790 |  |
Interest rate |  |  | 13.3 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 13.3 |  | % |  | — |  |  |  | 12.5 |  | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 754 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 754 |  |  |  | 754 |  |  |  | — |  |
Interest rate |  |  | 9.2 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  |  |  | 9.2 |  | % |  |  |  |  | — |  | %
Total short-term debt |  | Ps. | 2,453 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 2,453 |  |  | Ps. | 2,452 |  |  | Ps. | 1,862 |  |

(1)All interest rates shown in this table are weighted average contractual annual rates.
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|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying Value at December 31, 2023 | Fair Value at December 31, 2023 |  | Carrying Value at December 31, 2022⁽¹⁾
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2029 and Thereafter |
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  |
Long-term debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes |  | Ps. | — |  | Ps. | — |  | Ps. | 9,064 |  | Ps. | — |  | Ps. | 5,473 |  | Ps. | 4,451 |  | Ps. | 18,988 |  | Ps. | 18,088 |  | Ps. | 24,563 |
Interest rate |  |  | — | % |  | — | % |  | 2.6 | % |  | — | % |  | 0.5 | % |  | 1.0 | % |  | 1.6 | % |  | — |  |  | 0.8 | %
Promissory notes |  |  | 616 |  |  | — |  |  | — |  |  | 168 |  |  | — |  |  | 280 |  |  | 1,064 |  |  | 1,064 |  |  | 2,448 |
Interest rate |  |  | 1.1 | % |  | — | % |  | — | % |  | 2.1 | % |  | — | % |  | 2.4 | % |  | 1.3 | % |  | — |  |  | 1.4 | %
Swiss franc |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  |  | 463 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 463 |  |  | 463 |  |  | 482 |
Interest rate |  |  | 0.8 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 0.8 | % |  | — |  |  | 0.8 | %
U.S. dollars |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yankee bond (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 36,352 |  |  | 36,352 |  |  | 33,719 |  |  | 41,429 |
Interest rate |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 3.1 | % |  | 3.1 | % |  | — |  |  | 3.1 | %
Bank of NY (FEMSA USD 2023) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,808 |
Interest rate (1) |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — |  |  | 2.9 | %
Bank of NY (FEMSA USD 2043) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,121 |  |  | 7,121 |  |  | 6,379 |  |  | 13,405 |
Interest rate (1) |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 4.4 | % |  | 4.4 | % |  | — |  |  | 4.4 | %
Bank of NY (FEMSA USD 2050) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 26,162 |  |  | 26,162 |  |  | 19,917 |  |  | 48,170 |
Interest rate (1) |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 3.5 | % |  | 3.5 | % |  | — |  |  | 3.5 | %
Bank loans |  |  | 1,968 |  |  | 115 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,083 |  |  | 2,083 |  |  | 2,320 |
Interest rate |  |  | 3.6 | % |  | 6.7 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 3.8 | % |  | — |  |  | 5.1 | %
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(CEBUR MXN L22-2L) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8,434 |  |  | 8,434 |  |  | 8,678 |  |  | 8,436 |
Interest rate (1) |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 9.7 | % |  | 9.7 | % |  | — |  |  | 9.7 | %
Domestic senior notes |  |  | — |  |  | — |  |  | — |  |  | 8,495 |  |  | 9,960 |  |  | 5,491 |  |  | 23,946 |  |  | 22,439 |  |  | 31,438 |
Interest rate |  |  | — | % |  | — |  |  | — |  |  | 7.9 | % |  | 7.4 | % |  | 10.0 | % |  | 8.1 | % |  | — |  |  | 7.5 | %
Bank loans |  |  | 184 |  |  | 24 |  |  | 91 |  |  | 194 |  |  | 151 |  |  | — |  |  | 644 |  |  | 644 |  |  | 429 |
Interest rate |  |  | 11.0 | % |  | 8.7 | % |  | 9.5 | % |  | 12.0 | % |  | 12.8 | % |  | — | % |  | 11.4 | % |  | — |  |  | 10.0 | %
Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 21 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 21 |  |  | 21 |  |  | 56 |
Interest rate |  |  | 6.9 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 6.9 | % |  | — |  |  | 7.0 | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 27 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27 |  |  | 27 |  |  | 317 |
Interest rate |  |  | 9.3 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 9.3 | % |  | — |  |  | 1.2 | %
Uruguayan pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 976 |
Interest rate |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — |  |  | 6.3 | %
Subtotal |  | Ps. | 3,279 |  | Ps. | 139 |  | Ps. | 9,155 |  | Ps. | 8,857 |  | Ps. | 15,584 |  | Ps. | 88,291 |  | Ps. | 125,305 |  | Ps. | 113,522 |  | Ps. | 180,277 |

(1)All interest rates shown in this table are weighted average contractual annual rates.
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|  |  | As of December 31, (1) |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying Value at December 31, 2023 | Fair Value at December 31, 2023 | Carrying Value at December 31, 2022⁽¹⁾
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2029 and Thereafter
(in millions of Mexican pesos) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |
Variable-rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  | Ps. | 1,700 |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | 1,700 |  | Ps. | 1,700 |  | Ps. | 2,560 |
Interest rate |  |  | 4.8 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 4.8 | % |  | — |  |  | 1.1 | %
Swiss franc |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Promissory notes |  |  | 603 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 603 |  |  |  | 603 |  |  |  | 691 |  |
Interest rate |  |  | 2.1 | % |  | — | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 2.1 | % |  | — |  |  |  | 0.8 | %
Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(CEBUR MXN L22) |  |  | — |  |  | — |  |  | — |  |  |  | 826 |  |  | — |  |  | — |  |  | 826 |  |  | 832 |  |  | 827 |
Interest rate (1) |  |  | — | % |  | — | % |  | — |  | % |  | 11.6 | % |  | — | % |  | — | % |  | 11.6 | % |  | — |  |  | 10.9 | %
Domestic senior notes |  |  | — |  |  | 1,728 |  |  | 2,925 |  |  | — |  |  | — |  |  | — |  |  | 4,653 |  |  | 4,650 |  |  | 4,650 |
Interest rate (1) |  |  | — | % |  | 11.6 | % |  | 11.6 | % |  | — | % |  | — | % |  | — | % |  | 11.6 | % |  | — |  |  | 10.4 | %
Bank Loans |  |  | 410 |  |  |  | 10 |  |  |  | — |  |  |  | 434 |  |  |  | 416 |  |  |  | — |  |  |  | 1,270 |  |  |  | 1,270 |  |  |  | 542 |  |
Interest rate (1) |  |  | 12.8 |  | % |  | 13.7 |  | % |  | — |  | % |  | 13.6 |  | % |  | 12.7 |  | % |  | — |  | % |  | 13.0 |  | % |  | — |  |  |  | 12.9 |  | %
Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | 6 |  |  |  | 6 |  |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14 |  |  |  | 14 |  |  |  | 28 |  |
Interest rate |  |  | 8.8 |  | % |  | 8.9 |  | % |  | 8.9 |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | 8.9 |  | % |  | — |  |  |  | 9.8 |  | %
Colombian pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33 |  |
Interest rate |  |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  |  |  | 5.9 |  | %
Chilean pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 271 |  |
Interest rate |  |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  | % |  | — |  |  |  | 4.9 |  | %
Subtotal |  | Ps. | 2,719 |  |  | Ps. | 1,744 |  |  | Ps. | 2,927 |  |  | Ps. | 1,260 |  |  | Ps. | 416 |  |  | Ps. | — |  |  | Ps. | 9,066 |  |  | Ps. | 9,069 |  |  | Ps. | 9,602 |  |
Total long-term debt |  | Ps. | 5,998 |  |  | Ps. | 1,883 |  |  | Ps. | 12,082 |  |  | Ps. | 10,117 |  |  | Ps. | 16,000 |  |  | Ps. | 88,291 |  |  | Ps. | 134,371 |  |  | Ps. | 122,591 |  |  | Ps. | 189,879 |  |
Current portion of long-term debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (5,998) |  |  |  |  |  |  | (16,479) |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ps. | 136,824 |  |  |  |  |  | Ps. | 191,741 |  |

(1)All interest rates shown in this table are weighted average contractual annual rates.
(2)Interest rate derivatives that have been designated as fair value hedge relationships have been used by Coca-Cola FEMSA to mitigate the volatility in the fair value of existing financing instruments due to changes in floating interest rate benchmarks. Gains and losses on these instruments are recorded in “Market value (gain) loss on financial instruments” in the period in which they occur. During 2022, the Company applied hedging to a portion of the Senior Notes of US$ 705, which are linked to an interest rate swap. Starting in 2022, the hedging gain or loss adjust the carrying amount of the hedged item and is recognized in the consolidated income statement under “Market value (gain) loss in financial instruments”. During the year ended December 31, 2023, the Company recognized a loss of Ps. 371 in the consolidated income statement under “Market value (gain) loss in financial instruments”, which offsets the loss on interest rate derivatives used to hedge debt denominated in USD, that resulted from increases in interest rates.
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|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2029 and |  | Total |  | Total |
Hedging Derivative Financial Instruments (1) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | Thereafter |  | 2023 |  | 2022 |
|  | (notional amounts in millions of Mexican pesos) |  |  |  |  |  | ` |
Cross-currency swaps: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars to Mexican pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed to a variable (3) (4) |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  | Ps. | — |  |  | 6,031 |  | Ps. | 6,031 |  | Ps. | 15,082 |
Interest pay rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 56.1 | % |  | 56.1 | % |  | 7.4 | %
Interest receive rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.6 | % |  | 3.6 | % |  | 3.9 | %
Fixed to fixed |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10,000 |  |  | 10,000 |  |  | 11,743 |
Interest pay rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 8.9 | % |  | 8.9 | % |  | 8.8 | %
Interest receive rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.5 | % |  | 3.5 | % |  | 3.5 | %
Fixed to fixed (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest pay rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9.4 | % |  | 9.4 | % |  | 9.4 | %
Interest receive rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.4 | % |  | 4.4 | % |  | 4.4 | %
U.S. dollars to Euro |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed to fixed |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,009 |  |  | 4,931 |  |  | 10,940 |  |  | 22,130 |
Interest pay rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.7 | % |  | 2.1 | % |  | 1.9 | % |  | 2.4 | %
Interest receive rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.5 | % |  | 1.0 | % |  | 0.7 | % |  | 3.5 | %
U.S. dollars to Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed to variable |  |  | — |  |  | — |  |  | — |  |  | 4,223 |  |  | 1,689 |  |  | — |  |  | 5,912 |  |  | 6,777 |
Interest pay rate |  |  | — |  |  | — |  |  | — |  |  | 12.4 | % |  | 2.8 | % |  | — |  |  | 11.6 | % |  | 11.5 | %
Interest receive rate |  |  | — |  |  | — |  |  | — |  |  | 2.1 | % |  | 2.8 | % |  | — |  |  | 2.3 | % |  | 2.1 | %
Fixed to fixed |  |  | 8,109 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8,109 |  |  | 9,294 |
Interest pay rate |  |  | 8.0 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8.0 | % |  | 11.5 | %
Interest receive rate |  |  | 2.8 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2.8 | % |  | 3.2 | %
Colombian pesos |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed to fixed |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 987 |  |  | — |  |  | 987 |  |  | 1,476 |
Interest pay rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | 6.3 | % |  | — |  |  | 6.3 | % |  | 6.8 | %
Interest receive rate |  |  | — | % |  | — |  |  | — |  |  | — |  |  | 2.8 | % |  | — |  |  | 2.8 | % |  | 2.6 | %
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed to variable rate: |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8,447 |  |  | 8,447 |  |  | 9,681 |
Interest pay rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5.7 | % |  | 5.7 | % |  | 5.0 | %
Interest receive rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.9 | % |  | 1.9 | % |  | — | %
Variable to a fixed rate: |  |  | 1,943 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,943 |  |  | 2,905 |
Interest pay rate |  |  | 3.6 | % |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 3.6 | % |  | 4.1 | %
Interest receive rate |  |  | 1.9 | % |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.9 | % |  | 1.9 | %
Variable to fixed rate (3): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest pay rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7.2 | %
Interest receive rate |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7.0 | %
Total |  |  | 10,052 |  |  | — |  |  | — |  |  | 4,223 |  |  | 8,685 |  |  | 29,409 |  |  | 52,369 |  |  | 79,088 |

(1)All interest rates shown in this table are weighted average contractual annual rates.
(2)Cross Currency swaps which covers U.S. dollars to Mexican pesos with a notional of Ps.6,031, that have a starting date in 2023; receiving a fixed rate of 4.4% and pay a fixed rate of 9.4%.
(3)Interest rate swaps with a notional amount of Ps.8,447 that receive a variable rate of 7.0% and pay a fixed rate of 7.2%; joined with a cross-currency swaps, which covers U.S. dollars to Mexican pesos, that receives a fixed rate of 4.4% and pay a variable rate of 9.4%.
(4)In 2023, the Company had an unwind of part of its cross currency swaps related with the debt prepayment.
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For the years ended December 31, 2023, 2022 and 2021, the interest expense is comprised as follows:

|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Interest on debts and borrowings |  | Ps. | 8,555 |  |  | Ps. | 8,129 |  |  | Ps. | 9,356 |
Interest expense charges for employee benefits (Note 17.4) |  |  | 590 |  |  |  | 553 |  |  |  | 476 |
Derivative instruments |  |  | (1,891) |  |  |  | 1,795 |  |  |  | 1,970 |
Finance operating charges |  |  | 821 |  |  |  | (413) |  |  |  | (290) |
Interest expense for leases liabilities (Note 12) |  |  | 6,841 |  |  |  | 5,789 |  |  |  | 5,118 |
|  | Ps. | 14,916 |  |  | Ps. | 15,853 |  |  | Ps. | 16,630 |

For the years ended December 31, 2023, 2022 and 2021, the interest income is comprised as follows:

|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Tender Offer gain |  | Ps. | 6,961 |  |  | Ps. | — |  |  | Ps. | — |
Interest on investments |  |  | 9,566 |  |  |  | 3,782 |  |  |  | 1,465 |
Finance operating products |  |  | 514 |  |  |  | — |  |  |  | — |
Others |  |  | 568 |  |  |  | (13) |  |  |  | 23 |
|  | Ps. | 17,609 |  |  | Ps. | 3,769 |  |  | Ps. | 1,488 |

On May 7, 2013, the Company issued long-term debt on the NYSE (Yankee Bond) in the amount of U.S. $1,000, which was made up of senior notes of U.S. $300 with a maturity of 10 years and a fixed interest rate of 2.875%; and senior notes of U.S. $700 with a maturity of 30 years and a fixed interest rate of 4.375%. In March 2023, the Company made a tender offer in international markets for a principal amount of U.S. $147 related to this Yankee Bond, with a settlement price of U.S. $130, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement, representing a gain of Ps. 346. Then, in May 2023, the Company paid the senior notes of U.S. $300 which became to maturity. Finally, in November 2023, the Company made an additional tender offer for a principal amount of U.S. $127 related to the same senior notes.
On March 14, 2016, the Company issued long-term debt on the Irish Stock Exchange (“ISE”) in the amount of €.1,000, which was made up of senior notes with a maturity of 7 years, a fixed interest rate of 1.75%, and a spread of 155 basis points over the relevant benchmark mid-swap, for a total yield of 1.824%. The Company designated this non-derivative financial liability as a hedge on the net investment in Heineken. These senior notes were prepaid in May 2021, with a settlement price of €. 1,042, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement. As a result of this transaction, the net investment hedge was discontinued without any effects in the consolidated income statement. For the year ended December 31, 2021, up to the prepayment date, a foreign exchange gain, net of tax, had been recognized as part of the exchange differences on translation of foreign operations within the cumulative other comprehensive income of Ps. 232.
On January 16, 2020, the Company issued U.S. $1,500 3.500% Senior Unsecured Notes at an annual rate of 130 basis points over the relevant benchmark. In addition, on February 12, 2020, the Company placed a re-tap to its US-denominated SEC-registered Senior Unsecured Notes due 2050 and issued U.S. $300 3.500% at an annual rate of 137.5 basis points over the relevant benchmark, raising the total outstanding balance to U.S. $1,800 with an implied yield to maturity of 3.577%. In June 2020, the Company issued U.S. $700 3.500% Senior Unsecured Notes due 2050 with an implicit weighted performance of 3.358%. In March 2023, the Company made a tender offer in international markets for a principal amount of U.S. $943 related with these senior notes, with a settlement price of U.S. $715, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement, representing a gain of Ps. 4,199.
The Company has designated a portion of these non-derivative financial liabilities as a hedge on the net investment. During 2023, the Company divested its investments in JRD and Envoy; as a result of these transactions, the net investment hedge was discontinued, recycling the effects of Envoy’s hedge in the consolidated income statements, which amount to a gain of Ps. 3,910; while in the case of JRD’s hedge, it remained in other comprehensive income, as this investment was classified as FVOCI, which amount to a gain of Ps. 1,188.
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In April 2021, the Company issued €. 500 and €. 700 in debt certificates at a fixed rate of 1.0%, maturing in 2033 and 0.5% maturing in 2028, respectively. In March 2023, the Company made a tender offer in international markets for a principal amount of €404 in debt securities maturing in 2028 and €259 in debt securities maturing in 2033, with a settlement price of €347 for maturing in 2028 and €197 for maturing in 2033, which includes accrued expenses. The difference between the settlement price and the book value of the debt at the date of prepayment was recognized in the consolidated income statement, representing a gain of Ps. 2,416.
On May 21, 2021, this non-derivative financial liability was designated as a hedge of the net investment in Heineken. During 2023, the Company divested its investment in Heineken. Therefore, the net investment hedge was discontinued, recycling the effects of Heineken’s hedge in the consolidated income statements, which amount to a gain of Ps. 5,763 (See Note 4.3.1).
In November 2022, the Company issued Ps. 8,446 and Ps. 827 in debt certificates at a fixed rate of 9.65%, maturing in 2032 and a floating rate of TIIE28 + 0.10%, maturing in 2027, respectively. The bond’s interest rate depends on the Company achieving key performance indicators, and in the event that such indicators are not met by the dates established in the offering documents, (2027 and 2032), the interest rate on the will increase by 25 basis points. As of December 31, 2023 the Company continues monitoring and expects to meet these key performance indicators. In accordance with the terms of the Bonds, they are linked to FEMSA's Sustainability-Linked Bond Framework, the which was adopted and published by the Company in relation to the issuance of the Sustainability-Linked Bond denominated in Euros issued in 2021 in the international capital market, for €700 in senior notes maturing in 2028, and €500 in senior notes maturing in 2033.
In February 2023, as part of Heineken Offering shares, the Company issued debt on the Frankfurt Stock Exchange (FWB) in the amount of EUR 500 million which was made up of senior unsecured Exchangeable Bonds (EB) due 2026; with a fixed interest rate of 2.625% per annum payable annually. The aggregate principal amount of the EB will be repayable with Heineken Holding N.V. shares or cash, considering an initial exchange price of EUR 95.625, being a premium of 27.5%, to EUR 75.00, being the clearing price of each share. As of the issuance date, the initial exchange option shall be comprised of 5,228,758 shares. See Note 14.2.
Coca-Cola FEMSA has the following bonds:
a)registered with the Mexican stock exchange:
i) Ps. 8,500 (nominal value) with a maturity in 2027 and a fixed interest rate of 7.87%; ii) Ps. 1,727 (nominal value) with a maturity date in 2025 and a floating interest rate of Equilibrium Interbank Interest Rate ("TIIE") + 0.08%; iii) Ps. 3,000 (nominal amount) with a maturity date in 2028 and fixed interest rate of 7.35%, iv) Ps. 6,965 (nominal amount) on a Sustainability-Linked Bond ("SLB") with a maturity date in 2028 and fixed rate of 7.36%, and v) Ps. 2,435 (nominal amount) on an SLB with a maturity date in 2026 and floating rate of TIIE + 0.05%, vi) Ps.5,500 (nominal amount) with a maturity date in 2029 and a fixed rate of 9.95%, vii) Ps.$500 (nominal amount) with a maturity date in 2026 and a floating rate of TIIE + 0.05%.
b)registered with the New York Stock Exchange:
i) Senior notes of U.S. $1,041 with a fixed interest rate of 2.75% and maturity on January 22, 2030; ii) Senior notes of US. $ 705 with interest at a fixed rate of 1.85% and maturity date on September 1, 2032 and iii) Senior notes of US. $ 489 with interest at a fixed rate of 5.25% and maturity date on November 26, 2043.
The Senior Notes are guaranteed by Coca-Cola FEMSA subsidiaries: Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., and Yoli de Acapulco, S. de R.L. de C.V. (the “Guarantors”).
During the third quarter of 2021, Coca-Cola FEMSA issued the first SLB in the Mexican market for a total of Ps. 9,400 in the modality of communicating vessels with maturities in 2025 and 2026 and with those resources prepaid bilateral loans denominated in Mexican pesos of: i) Ps. 3,760 with a maturity date of February 2025 and ii) Ps. 5,640 with an expiration date of August 2026. The bond’s interest rate depends on us achieving key performance indicators, and in the event that such indicators are not met by the dates established in the offering
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documents, (2024 and 2026), the interest rate on the bonds will increase by 25 basis points. As of December 31, 2023 Coca-Cola FEMSA continues monitoring and expects to meet these key performance indicators.
During the fourth quarter of 2022, Coca-Cola FEMSA repurchased a portion of the following notes registered with the SEC i) Senior notes of US. $ 209 with maturity date on January 2030, and ii) Senior notes of US. $111 with maturity date on November 2043, representing a net savings of Ps. 408 (nominal amounts). The amounts shown on the first paragraph already consider these repurchases.
Additionally during 2022, Coca-Cola FEMSA issued a social and sustainable bond in the Mexican Market on a dual-tranche transaction for an amount of Ps. 6,000.
During the second quarter of 2023, the Company paid on the maturity date May,12,2023 a Certificado Bursátil for i) Ps. 7,500 (nominal value) and a fixed interest rate of 5.46%.
Additionally, during 2023, the Company obtained bank loans in Argentina for Ps. 73.
The Company has financing from different institutions under agreements that stipulate different restrictions and covenants, which mainly consist of maximum levels of leverage and capitalization as well as minimum consolidated net equity and debt and interest coverage ratios. As of the date of these consolidated financial statements, the Company complied with all restrictions and covenants contained in its financing agreements.
19.1 Reconciliation of liabilities arising from financing activities

|  | Carrying |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying
|  | Value at |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Value at
|  | January 1, 2023 |  | Cash Flows |  | Non-cash effects |  | December 31, 2023
|  |  |  |  |  |  |  |  |  |  |  |  |  | Foreign |  |  |  |  |  |
|  |  |  |  |  |  |  | Business |  | New leases |  | Exchange |  | Others (1) |  |  |
|  |  |  |  |  |  |  | Acquisitions / Disposal |  |  |  |  | Income |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | (Loss) |  |  |  |  |  |
Bank loans |  | Ps. | 12,893 |  | Ps. | (1,526) |  | Ps. | 3 |  | Ps. | — |  | Ps. | (852) |  | Ps. | — |  | Ps. | 10,518
Notes payable |  |  | 178,848 |  |  | (30,657) |  |  | — |  |  | — |  |  | (15,364) |  |  | (6,521) |  |  | 126,306
Total liabilities from financing activities |  |  | 191,741 |  |  | (32,183) |  |  | 3 |  |  | — |  |  | (16,216) |  |  | (6,521) |  |  | 136,824
Lease liabilities |  |  | 93,317 |  |  | (16,171) |  |  | 48 |  |  | 20,698 |  |  | (1,891) |  |  | 72 |  |  | 96,073
Total financing activities |  | Ps. | 285,058 |  | Ps. | (48,354) |  | Ps. | 51 |  | Ps. | 20,698 |  | Ps. | (18,107) |  | Ps. | (6,449) |  | Ps. | 232,897

(1) Includes mainly remeasurements of leases, and amortized costs.

|  | Carrying |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Value at |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying
|  | January |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Value at
|  | 1, 2022 |  | Cash Flows (2) |  | Non-cash effects |  | December 31, 2022
|  |  |  |  |  |  |  |  |  |  |  |  |  | Foreign |  |  |  |  |  |
|  |  |  |  |  |  |  | Acquisition |  | New leases |  | Exchange |  | Others (1) |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Income |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | (Loss) |  |  |  |  |  |
Bank loans |  | Ps. | 7,580 |  | Ps. | (415) |  | Ps. | 6,181 |  | Ps. | — |  | Ps. | (78) |  | Ps. | (375) |  | Ps. | 12,893
Notes payable |  |  | 183,005 |  |  | 6,718 |  |  | — |  |  | — |  |  | (8,957) |  |  | (1,919) |  |  | 178,848
Total liabilities from financing activities |  |  | 190,585 |  |  | 6,303 |  |  | 6,181 |  |  | — |  |  | (9,034) |  |  | (2,294) |  |  | 191,741
Lease liabilities |  |  | 62,355 |  |  | (15,108) |  |  | 21,933 |  |  | 10,686 |  |  | (356) |  |  | 13,807 |  |  | 93,317
Total financing activities |  | Ps. | 252,940 |  | Ps. | (8,805) |  | Ps. | 28,114 |  | Ps. | 10,686 |  | Ps. | (9,390) |  | Ps. | 11,513 |  | Ps. | 285,058

(1)Includes mainly remeasurements of leases, and amortization of transaction costs.
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(2)Cash flows of Total liabilities from financing activities include Ps. 5,973 from continuing operations and Ps. 330 from discontinued operations.

|  | Carrying |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Value at |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Carrying
|  | January |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Value at
|  | 1, 2021 |  | Cash Flows (2) |  | Non-cash effects |  | December 31, 2021
|  |  |  |  |  |  |  |  |  |  |  |  |  | Foreign |  |  |  |  |  |
|  |  |  |  |  |  |  | Acquisition |  | New leases |  | Exchange |  | Others (1) |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Income |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | (Loss) |  |  |  |  |  |
Bank loans |  | Ps. | 19,430 |  | Ps. | (11,015) |  | Ps. | — |  | Ps. | — |  | Ps. | (939) |  | Ps. | 104 |  | Ps. | 7,580
Notes payable |  |  | 169,235 |  |  | 12,156 |  |  | — |  |  | — |  |  | 1,614 |  |  | — |  |  | 183,005
Total liabilities from financing activities |  |  | 188,665 |  |  | 1,141 |  |  | — |  |  | — |  |  | 675 |  |  | 104 |  |  | 190,585
Lease liabilities |  |  | 58,308 |  |  | (12,325) |  |  | 1,540 |  |  | 7,871 |  |  | (798) |  |  | 7,759 |  |  | 62,355
Total liabilities from financing activities |  |  | 246,973 |  |  | (11,184) |  |  | 1,540 |  |  | 7,871 |  |  | (123) |  |  | 7,863 |  |  | 252,940

(1)Includes mainly remeasurements of leases, and amortization of transaction costs.
(2)Cash flows of Total liabilities from financing activities include Ps. 1,146 from continuing operations and Ps. (5) from discontinued operations.
Note 20. Other Income and Expenses

|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Gain on sale of other assets |  | Ps. | 473 |  |  | Ps. | — |  |  | Ps. | 968 |
Gain on sale of long-lived assets |  |  | 400 |  |  |  | 301 |  |  |  | 176 |
Sale of waste material |  |  | — |  |  |  | 2 |  |  |  | 13 |
Insurance rebates |  |  | 279 |  |  |  | 64 |  |  |  | 32 |
Foreign exchange gain |  |  | 815 |  |  |  | 124 |  |  |  | — |
Other investment in shares (4) |  |  | 3,311 |  |  |  | — |  |  |  | — |
Recoveries of prior years taxes (1) |  |  | 483 |  |  |  | 354 |  |  |  | 809 |
Investment in equity instruments (5) (6) |  |  | 6,785 |  |  |  | 113 |  |  |  | 3,245 |
Other investments |  |  | 415 |  |  |  | — |  |  |  | — |
Others |  |  | 141 |  |  |  | 93 |  |  |  | 323 |
Other income |  | Ps. | 13,102 |  |  | Ps. | 1,051 |  |  | Ps. | 5,566 |
Recoveries of prior years |  | Ps. | 958 |  |  | Ps. | 9 |  |  | Ps. | 41 |
Impairment of long-lived assets (2) |  |  | 1,248 |  |  |  | 833 |  |  |  | 1,427 |
Disposal of long-lived assets (3) |  |  | 466 |  |  |  | 389 |  |  |  | 534 |
Contingencies, net (Note 26) |  |  | 1,110 |  |  |  | 456 |  |  |  | 244 |
Severance payments |  |  | 998 |  |  |  | 224 |  |  |  | 357 |
Donations |  |  | 711 |  |  |  | 512 |  |  |  | 425 |
Legal fees and other expenses from past acquisitions |  |  | — |  |  |  | 210 |  |  |  | 112 |
Foreign exchange loss |  |  | — |  |  |  | — |  |  |  | 84 |
Items without tax requirements |  |  | 139 |  |  |  | 96 |  |  |  | 167 |
Interest and penalties of previous years taxes |  |  | 385 |  |  |  | — |  |  |  | — |
Other |  |  | 237 |  |  |  | 167 |  |  |  | 334 |
Other expenses |  | Ps. | 6,252 |  |  | Ps. | 2,896 |  |  | Ps. | 3,725 |

(1)Following a favorable decision from Brazilian tax authorities received during 2020, Coca-Cola FEMSA has been entitled to reclaim indirect tax payments made in prior years in Brazil, resulting in the recognition of a tax credit and a positive effect on the "other income" captions of the consolidated income statements. See Note 25.1.1.
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(2)Includes impairment losses in Health Division related with the Company's operation in Ecuador for an amount of Ps. 596 and Ps. 770 in 2023 and 2022, respectively; due to market conditions; as well as an impairment loss in Mexico for an amount of Ps. 480 in 2023 related with a challenging competitive environment. Additionally, the Company recognized impairment losses in Coca-Cola FEMSA for its investment in Alimentos de Soja S.A.U. for an amount of Ps. 143 in 2023, as well as its investmet in Trop Frutas Do Brasil LTDA. for an amount of Ps. 256 in 2021.
(3)Charges related to fixed assets retirement from ordinary operations and other long-lived assets.
(4)Related to dividends received from Heineken.
(5)During 2021, the Company received dividends related to its investment in Jetro Restaurant Depot.
(6)In 2023, the Company sold its investment in Jetro Restaurant Depot.
Note 21. Financial Instruments
Fair Value of Financial Instruments
The Company’s financial assets and liabilities that are measured at fair value are based on level 1 and 2 applying the income approach method, which estimates the fair value based on expected cash flows discounted to net present value. The following table summarizes the Company’s financial assets and liabilities measured at fair value, as of December 31, 2023, and 2022:

|  | December 31, 2023 |  | December 31, 2022
|  | Level 1 |  | Level 2 |  | Level 1 |  | Level 2
Financial instruments (current asset) |  | 228 |  | 203 |  | 351 |  | 9,710
Financial instruments (non-current asset) |  | 14,279 |  | 11,394 |  | 14,540 |  | 21,201
Financial instruments (current liability) |  | 202 |  | 536 |  | 64 |  | 404
Financial instruments (non-current liability) |  | — |  | 8,653 |  | — |  | 5,651

21.1 Total debt
The fair value of bank loans and notes payable is calculated based on the discounted value of contractual cash flows whereby the discount rate is estimated using rates currently offered for the debt of similar amounts and maturities, which is considered to be level 2 in the fair value hierarchy. The fair value of the Company’s publicly traded debt is based on quoted market prices as of December 31, 2023 and 2022, which is considered to be level 1 in the fair value hierarchy.

|  | December 31, 2023 |  | December 31, 2022
Carrying value |  | Ps. | 136,824 |  | Ps. | 191,741
Fair value |  |  | 125,043 |  |  | 163,312

21.2 Interest rate swaps
The Company uses interest rate swaps to offset the interest rate risk associated with its borrowings, under which it pays amounts based on a fixed rate and receives amounts based on a floating rate. These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value. The fair value is estimated using formal technical models. The valuation method involves discounting to present value the expected cash flows of interest, calculated from the rate curve of the cash flow currency, and expresses the net result in the reporting currency. Changes in fair value are recorded in cumulative other comprehensive income, net of taxes until the hedged amount is recorded in the consolidated income statements.
As of December 31, 2023, the Company has the following outstanding interest rate swap agreements:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2023 |  | December 31, 2023
2024 |  | Ps. | 2 |  | Ps. | — |  | Ps. | 65
2032 |  |  | 8,447 |  |  | (1,381) |  |  | —

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As of December 31, 2022, the Company has the following outstanding interest rate swap agreements:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2022 |  | December 31, 2022
2023 |  | Ps. | 11,675 |  | Ps. | — |  | Ps. | 236
2024 |  |  | 2,227 |  |  | — |  |  | 129
2032 |  |  | 9,681 |  |  | (1,728) |  |  | —

The net effect of expired contracts treated as hedges is recognized as interest expense within the consolidated income statements.
21.3 Forward agreements to purchase foreign currency
The Company has entered into forward agreements to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and other currencies. Foreign exchange forward contracts measured at fair value are designated hedging instruments in cash flow hedges of forecast inflows in euros and forecast purchases of raw materials in U.S. dollars. These forecast transactions are considered to be highly probable.
These instruments are recognized in the consolidated statement of financial position at their estimated fair value which is determined based on prevailing market exchange rates to terminate the contracts at the end of the period. The price agreed in the instrument is compared to the current price of the market forward currency and is discounted to the present value of the rate curve of the relevant currency. Changes in the fair value of these forwards are recorded as part of cumulative other comprehensive income, net of taxes. Net gain/loss on expired contracts is recognized as part of the cost of goods sold when the raw material is included in sale transactions, and as a part of foreign exchange when the inflow in the foreign currency is received.
As of December 31, 2023, the Company had the following outstanding forward agreements to purchase foreign currency:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2023 | December 31, 2023
2024 |  | Ps. | 11,449 |  | Ps. | (573) |  | Ps. | 36

As of December 31, 2022, the Company had the following outstanding forward agreements to purchase foreign currency:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2022 |  | December 31, 2022
2023 |  | Ps. | 10,828 |  |  | Ps. | (399) |  |  | Ps. | 61 |
2024 |  |  | 2 |  |  |  | — |  |  |  | — |

21.4 Cross-currency swaps
The Company has contracted for several cross-currency swaps to reduce the risks of exchange rate and interest rate fluctuations associated with its borrowings denominated in U.S. dollars and other foreign currencies. Cross-currency swaps contracts are designated as hedging instruments through which the Company changes the debt profile to its functional currency to reduce exchange exposure and interest rate.
These instruments are recognized in the consolidated statement of financial position at their estimated fair value which is estimated using formal technical models. The valuation method involves discounting to present value the expected cash flows of interest, calculated from the rate curve of the cash foreign currency, and expresses the net result in the reporting currency. These contracts are designated as financial instruments at fair value through profit or loss. The fair values changes related to those cross-currency swaps are recorded under the caption “market value gain (loss) on financial instruments,” net of changes related to the long-term liability, within the consolidated income statements.
The Company has cross-currency contracts designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value. Changes in fair value are recorded in cumulative other
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comprehensive income, net of taxes until such time as the hedge amount is recorded in the consolidated income statement.
As of December 31, 2023, the Company had the following outstanding cross–currency swap agreements:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2023 | December 31, 2023
2024 |  | Ps. | 954 |  | Ps. | (35) |  | Ps. | 103
2025 |  |  | 49,834 |  |  | (2) |  |  | 119
2026 |  |  | 6,045 |  |  | (1,017) |  |  | 98
2027 |  |  | 8,949 |  |  | (1,391) |  |  | 9
2028 |  |  | 6,009 |  |  | — |  |  | 89
2029 |  |  | 20 |  |  | — |  |  | 337
2030 |  |  | 13,633 |  |  | (803) |  |  | —
2032 |  |  | 845 |  |  | (51) |  |  | —
2033 |  |  | 4,931 |  |  | — |  |  | 117
2035 |  |  | 10,000 |  |  | (3,809) |  |  | —
2043 |  |  | 5,398 |  |  | — |  |  | 1,877
2050 |  |  | 3,471 |  |  | — |  |  | 1,235

As of December 31, 2022, the Company had the following outstanding cross–currency swap agreements:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2022 |  | December 31, 2022
2023 |  | Ps. | 27,804 |  |  | Ps. | (7) |  |  | Ps. | 9,435 |
2024 |  |  | 497 |  |  |  | (3) |  |  |  | 247 |
2025 |  |  | 1,010 |  |  |  | — |  |  |  | 385 |
2026 |  |  | 5,971 |  |  |  | (924) |  |  |  | 364 |
2027 |  |  | 17,809 |  |  |  | (689) |  |  |  | 95 |
2029 |  |  | 14,620 |  |  |  | — |  |  |  | 1,664 |
2030 |  |  | 3,679 |  |  |  | (104) |  |  |  | 110 |
2035 |  |  | 10,000 |  |  |  | (2,203) |  |  |  | — |
2043 |  |  | 8,869 |  |  |  | — |  |  |  | 505 |

21.5 Commodity price contracts
The Company has entered into various commodity price contracts to reduce its exposure to the risk of fluctuation in the costs of certain raw materials. The fair value is estimated based on the market valuations to terminate the contracts at the end of the period. These instruments are designated as cash flow hedges and the changes in the fair value are recorded as part of “cumulative other comprehensive income.”
The fair value of expired commodity price contracts was recorded in the cost of goods sold where the hedged item was recorded also in the cost of goods sold.
As of December 31, 2023, Coca-Cola FEMSA had the following sugar price contracts:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2023 | December 31, 2023
2024 |  | Ps. | 2,593 |  | Ps. | (130) |  | Ps. | 206
2025 |  |  | 745 |  |  | (72) |  |  | —

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As of December 31, 2022, Coca-Cola FEMSA had the following sugar price contracts:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2022 | December 31, 2022
2023 |  | Ps. | 1,688 |  | Ps. | (46) |  | Ps. | 328
2024 |  |  | 468 |  |  | — |  |  | 21

As of December 31, 2023, Coca-Cola FEMSA had the following aluminum price contracts:

|  | Notional |  | Fair Value Liability |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2023 |  | December 31, 2023
2024 |  | Ps. | 647 |  | Ps. | — |  | Ps. | 21

As of December 31, 2022, Coca-Cola FEMSA had the following aluminum price contracts:

|  | Notional |  | Fair Value Liability |  |  | Fair Value Asset
Maturity Date |  | Amount |  | December 31, 2022 |  |  | December 31, 2022
2023 |  | Ps. | 662 |  | Ps. | (18) |  |  | Ps. | 1 |

21.6 Convertible Bond (Embedded derivative)
As described in Note 19, in February 2023, the Company issued a convertible bond for EUR 500 million linked with the remaining Heineken economic interest (see Note 10), which is recognized as a liability component and embedded derivative (option). The bond (liability) is booked on an amortized cost basis, while the written option is measured at fair value with Mark to Market changes recognized in the consolidated income statements. At the settlement date, depending on the decision of the bondholders, the convertible bond and the embedded derivative will be canceled against cash or Heineken Holding N.V. shares. As of December 31, 2023, the fair value of the option amounted to Ps. 128.
21.7 Net effects of expired contracts that met hedging criteria

|  | Impact in Consolidated |  |  |  |  |  |  |  |  |
|  | Income Statement |  | 2023 |  | 2022 |  | 2021
Cross-currency swaps (1) |  | Interest expense |  | Ps. | (392) |  |  | Ps. | 1 |  |  | Ps. | — |
Cross-currency swaps (1) |  | Foreign exchange |  |  | (747) |  |  |  | (5) |  |  |  | — |
Interest rate swaps |  | Interest expense |  |  | — |  |  |  | — |  |  |  | — |
Forward agreements to purchase foreign currency |  | Foreign exchange |  |  | 180 |  |  |  | 565 |  |  |  | 41 |
Commodity price contracts |  | Cost of goods sold |  |  | 430 |  |  |  | 599 |  |  |  | 1,245 |
Options to purchase foreign currency |  | Cost of goods sold |  |  | — |  |  |  | — |  |  |  | — |
Forward agreements to purchase foreign currency |  | Cost of goods sold |  |  | (1,834) |  |  |  | (681) |  |  |  | (788) |

(1)This amount corresponds to the settlement of cross-currency swaps portfolio in Brazil presented as part of the other financial activities.
21.8 Net effect of changes in fair value of derivative financial instruments that did not meet the hedging criteria for accounting purposes.

|  | Impact in Consolidated |  |  |  |  |  |  |  |  |
Type of Derivatives |  | Income Statement |  | 2023 |  | 2022 |  | 2021
Cross currency swaps and interest rate swaps |  | Market value gain (loss) on financial instruments |  | Ps. | 141 |  | Ps. | (2,270) |  | Ps. | 80 |

21.9 Risk management
The Company has exposure to the following financial risks:
•Market risk;
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•Interest rate risk;
•Liquidity risk; and
•Credit risk.
The Company determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount and timing of their respective cash flows. The Company evaluates whether the derivative designated in each hedging relationship is expected to be effective and that it has been effective to offset changes in the cash flows of the hedged item using the hypothetical derivative method.
In these hedging relationships, the main sources of inefficiency are:
•The effect of the credit risk of the counterparty and the Company on the fair value of foreign currency forward contracts; and
•Changes in the periods covered.
21.9.1 Market risk
Market risk is the risk that the fair value or the future cash flow of a financial instrument will fluctuate because of changes in market prices. Market prices include currency risk and commodity price risk.
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and commodity prices. The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk, and commodity prices risk including:
•Forward agreements to purchase foreign currency to reduce its exposure to the risk of exchange rate fluctuations.
•Cross-currency swaps to reduce its exposure to the risk of exchange rate fluctuations.
•Commodity price contracts to reduce its exposure to the risk of fluctuation in the costs of certain raw materials.
The Company tracks the fair value (mark to market) of its derivative financial instruments and its possible changes using scenario analyses.
The following disclosures provide a sensitivity analysis of the market risks management considered to be reasonably possible at the end of the reporting period based on a stress test of the exchange rates according to an annualized volatility estimated with historic prices obtained for the underlying asset over a period, in the cases of derivative financial instruments related to foreign currency risk, which the Company is exposed to as it relates to in its existing hedging strategy:

|  | Change in |  |  |
Foreign Currency Risk |  | Exchange Rate |  | Effect on Equity
2023 |  |  |  |  |
FEMSA (1) |  | +11% MXN/USD |  | Ps. | 9 |
|  | ‑11% MXN/USD |  |  | (9) |
|  | +7% CHF/EUR |  |  | 78 |
|  | ‑7% CHF/EUR |  |  | (78) |
|  | +7% EUR/USD |  |  | (6) |
|  | ‑7% EUR/USD |  |  | 6 |
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 465 |
|  | ‑11% MXN/USD |  |  | (465) |
|  | +12% BRL/USD |  |  | 521 |
|  | ‑12% BRL/USD |  |  | (521) |
|  | +16% COP/USD |  |  | 225 |
|  | ‑16% COP/USD |  |  | (225) |

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|  | Change in |  |  |
Foreign Currency Risk |  | Exchange Rate |  | Effect on Equity
|  | +120% ARS/USD |  |  | 685 |
|  | ‑120% ARS/USD |  |  | (685) |
|  | +5% UYU/USD |  |  | 20 |
|  | ‑5% UYU/USD |  |  | (20) |
|  | +7% CRC/USD |  |  | 15 |
|  | -7% CRC/USD |  |  | (15) |
2022 |  |  |  |  |
FEMSA (1) |  | +10% MXN/USD |  | Ps. | 6 |
|  | ‑10% MXN/USD |  |  | (6) |
|  | +10% MXN/EUR |  |  | 1 |
|  | ‑10% MXN/EUR |  |  | (1) |
|  | +7% CHF/EUR |  |  | 44 |
|  | ‑7% CHF/EUR |  |  | (44) |
Coca-Cola FEMSA |  | +10% MXN/USD |  |  | 512 |
|  | ‑10% MXN/USD |  |  | (512) |
|  | +18% BRL/USD |  |  | 550 |
|  | ‑18% BRL/USD |  |  | (550) |
|  | +7% UYU/USD |  |  | 25 |
|  | ‑7% UYU/USD |  |  | (25) |
|  | +17% COP/USD |  |  | 112 |
|  | ‑17% COP/USD |  |  | (112) |
|  | +3% ARS/USD |  |  | 10 |
|  | ‑3% ARS/USD |  |  | (10) |
|  | +7% CRC/USD |  |  | 24 |
|  | -7% CRC/USD |  |  | (24) |
2021 |  |  |  |  |
FEMSA (1) |  | +11% MXN/USD |  | Ps. | 4 |
|  | ‑11% MXN/USD |  |  | (4) |
|  | +16% BRL/USD |  |  | 37 |
|  | ‑16% BRL/USD |  |  | (37) |
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 298 |
|  | ‑11% MXN/USD |  |  | (298) |
|  | +16% BRL/USD |  |  | 284 |
|  | ‑16% BRL/USD |  |  | (284) |
|  | +4% UYU/USD |  |  | 7 |
|  | ‑4% UYU/USD |  |  | (7) |
|  | +11% COP/USD |  |  | 81 |
|  | ‑11% COP/USD |  |  | (81) |
|  | +1% ARS/USD |  |  | 3 |
|  | ‑1% ARS/USD |  |  | (3) |
|  | +3% CRC/USD |  |  | 10 |
|  | ‑3% CRC/USD |  |  | (10) |

(1)Does not include Coca-Cola FEMSA.
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|  | Change in |  |  |  |  |  |
Cross Currency Swaps (1) |  | Exchange Rate |  | Effect on Equity |  | Effect on Profit or Loss
2023 |  |  |  |  |  |  |  |
FEMSA (2) |  | +14% CLP/USD |  | Ps. | — |  |  | Ps. | 678 |
|  | ‑14% CLP/USD |  |  | — |  |  |  | (678) |
|  | +11% MXN/USD |  |  | — |  |  |  | 1,796 |
|  | ‑11% MXN/USD |  |  | — |  |  |  | (1,796) |
|  | +16% COP/USD |  |  | — |  |  |  | 425 |
|  | ‑16% COP/USD |  |  | — |  |  |  | (425) |
|  | +12% BRL/USD |  |  | — |  |  |  | 34 |
|  | ‑12% BRL/USD |  |  | — |  |  |  | (34) |
|  | +8% EUR/USD |  |  | — |  |  |  | 742 |
|  | ‑8% EUR/USD |  |  | — |  |  |  | (742) |
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 1,314 |  |  |  | — |
|  | ‑11% MXN/USD |  |  | (1,314) |  |  |  | — |
|  | +12% BRL/USD |  |  | 1,683 |  |  |  | — |
|  | ‑12% BRL/USD |  |  | (1,683) |  |  |  | — |
2022 |  |  |  |  |  |  |  |
FEMSA (2) |  | +21% CLP/USD |  | Ps. | — |  |  | Ps. | 966 |
|  | ‑21% CLP/USD |  |  | — |  |  |  | (996) |
|  | +10% MXN/USD |  |  | — |  |  |  | 2,647 |
|  | ‑10% MXN/USD |  |  | — |  |  |  | (2,647) |
|  | +21% COP/USD |  |  | — |  |  |  | 354 |
|  | ‑21% COP/USD |  |  | — |  |  |  | (354) |
|  | +18% USD/BRL |  |  | — |  |  |  | 18 |
|  | ‑18% USD/BRL |  |  | — |  |  |  | (18) |
|  | +10% EUR/USD |  |  | — |  |  |  | 1,315 |
|  | ‑10% EUR/USD |  |  | — |  |  |  | (1,315) |
|  | +10% EUR/MXN |  |  | — |  |  |  | 902 |
|  | ‑10% EUR/MXN |  |  | — |  |  |  | (902) |
Coca-Cola FEMSA |  | +10% MXN/USD |  |  | 1,220 |  |  |  | — |
|  | ‑10% MXN/USD |  |  | (1,220) |  |  |  | — |
|  | +18% BRL/USD |  |  | 2,893 |  |  |  | — |
|  | ‑18% BRL/USD |  |  | (2,893) |  |  |  | — |
2021 |  |  |  |  |  |  |  |
FEMSA (2) |  | +13% CLP/USD |  | Ps. | — |  |  | Ps. | 552 |
|  | ‑13% CLP/USD |  |  | — |  |  |  | (552) |
|  | +11% MXN/USD |  |  | — |  |  |  | 3,404 |
|  | ‑11% MXN/USD |  |  | — |  |  |  | (3,404) |
|  | +11% COP/USD |  |  | — |  |  |  | 235 |
|  | ‑11% COP/USD |  |  | — |  |  |  | (235) |
|  | +15% MXN/BRL |  |  | — |  |  |  | 123 |
|  | ‑15% MXN/BRL |  |  | — |  |  |  | (123) |
|  | +6% EUR/USD |  |  | — |  |  |  | 1,049 |
|  | ‑6% EUR/USD |  |  | — |  |  |  | (1,049) |
Coca-Cola FEMSA |  | +11% MXN/USD |  |  | 1,645 |  |  |  | — |
|  | ‑11% MXN/USD |  |  | (1,645) |  |  |  | — |

|  | +16% BRL/USD |  |  | 2,300 |  |  |  | — |
|  | ‑16% BRL/USD |  |  | (2,300) |  |  |  | — |

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(1)Includes the sensitivity analysis effects of all derivative financial instruments related to foreign exchange risk.
(2)Does not include Coca-Cola FEMSA.

|  | Change in |  |  |
Net Cash in Foreign Currency |  | Exchange Rate |  | Effect on Profit or Loss
2023 |  |  |  |  |
FEMSA (1) |  | +11% EUR/ +11 % USD |  | Ps. | 14,617 |
|  | ‑11% EUR/ -11 % USD |  |  | (14,617) |
Coca-Cola FEMSA |  | +11% USD |  |  | 1,797 |
|  | ‑11% USD |  |  | (1,797) |
2022 |  |  |  |  |
FEMSA (1) |  | +10% EUR/ +10 % USD |  | Ps. | 1,779 |
|  | ‑10% EUR/ -10 % USD |  |  | (1,779) |
Coca-Cola FEMSA |  | +10% USD |  |  | 2,282 |
|  | ‑10% USD |  |  | (2,282) |
2021 |  |  |  |  |
FEMSA (1) |  | +10% EUR/ +11 % USD |  | Ps. | 4,931 |
|  | ‑10% EUR/ -11 % USD |  |  | (4,931) |
Coca-Cola FEMSA |  | +11% USD |  |  | 3,200 |
|  | ‑11% USD |  |  | (3,200) |

(1)Does not include Coca-Cola FEMSA.

|  | Change in |  |  |
Commodity Price Contracts |  | U.S.$ Rate |  | Effect on Equity
2023 |  |  |  |  |
Coca-Cola FEMSA |  | Sugar -29 | % | Ps. | (765) |
|  | Alumimum -22 | % | Ps. | (2,812) |
2022 |  |  |  |  |
Coca-Cola FEMSA |  | Sugar -22 | % | Ps. | (333) |
|  | Alumimum -35 | % | Ps. | (4,520) |
2021 |  |  |  |  |
Coca-Cola FEMSA |  | Sugar -28 | % | Ps. | (714) |
|  | Aluminum -24 | % | Ps. | (39) |

21.9.2 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market interest rates.
The Company is exposed to interest rate risk because it and its subsidiaries borrow funds at both fixed and variable interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and variable rate borrowings, and by the use of the different derivative financial instruments. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.
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The following disclosures provide a sensitivity analysis of the interest rate risks management considered to be reasonably possible at the end of the reporting period, which the Company is exposed to as it relates to its fixed and floating rate borrowings, which it considers in its existing hedging strategy:

|  | Change in |  |  |
Interest Rate Swap (1) |  | Bps. |  | Effect on Equity
2023 |  |  |  |  |
FEMSA (2) |  | (100 Bps.) |  | Ps. | (9) |
2022 |  |  |  |  |
FEMSA (2) |  | (100 Bps.) |  | Ps. | (90) |
2021 |  |  |  |  |
FEMSA (2) |  | (100 Bps.) |  | Ps. | (212) |

(1)The sensitivity analysis effects include all subsidiaries of the Company.
(2)Does not include Coca-Cola FEMSA.

Interest Effect of Unhedged Portion Bank Loans |  | 2023 |  | 2022 |  | 2021
Change in interest rate |  |  | +100 Bps. |  |  | +100 Bps. |  |  | +100 Bps.
Effect on profit loss |  | Ps. | (250) |  |  | Ps. | (249) |  |  | Ps. | (627) |

21.9.3 Liquidity risk
Each of the Company’s sub-holding companies generally finances its operational and capital requirements on an independent basis. As of December 31, 2023 and 2022, 55.0% and 46.5%, respectively of the Company’s outstanding consolidated total indebtedness was at the level of its sub-holding companies. This structure is attributable, in part, to the inclusion of third parties in the capital structure of Coca-Cola FEMSA. Currently, the Company’s management expects to continue financing its operations and capital requirements (e.g., acquisitions, investments or capital expenditures) when it is considering domestic funding at the level of its sub-holding companies, otherwise; it is generally more convenient that its foreign operations would be financed directly through the Company because of more favorable terms of its financing market conditions. Nonetheless, sub-holdings companies may decide to incur indebtedness in the future to finance their operations and capital requirements of the Company’s subsidiaries or significant acquisitions, investments or capital expenditures. As a holding company, the Company depends on dividends and other distributions from its subsidiaries to service the Company’s indebtedness.
The Company’s principal source of liquidity has generally been cash generated from its operations. The Company has traditionally been able to rely on cash generated from operations because a significant majority of the sales of Coca-Cola FEMSA and Proximity Division - Americas, Health Division and Fuel Division are on a cash or short-term credit basis, and OXXO stores can finance a significant portion of their initial and ongoing inventories with supplier credit. The Company’s principal use of cash has generally been for capital expenditure programs, acquisitions, debt repayment and dividend payments.
Ultimate responsibility for liquidity risk management rests with the Company’s board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-, medium- and long-term funding and liquidity requirements. The management of the Company is accountable manages liquidity risk by maintaining adequate cash reserves and continuously monitoring the forecast and actual cash flows, and with a low concentration of maturities per year.
The Company has access to credit from national and international banking institutions to meet treasury needs. The Company has the highest rating for Mexican companies (AAA) given by independent rating agencies, allowing the Company to evaluate capital markets in case it needs resources.
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As part of the Company’s financing policy, management expects to continue financing its liquidity needs with cash from operations. Nonetheless, as a result of regulations in certain countries in which the Company operates, it may not be beneficially practicable to remit cash generated in local operations to fund cash requirements in other countries. If cash from operations in these countries is not sufficient to fund future working capital requirements and capital expenditures, management may decide, or be required, to fund cash requirements in these countries through local borrowings rather than remitting funds from another country. In the future the Company’s management may finance its working capital and capital expenditure needs with short-term or other borrowings.
The Company’s management continuously evaluates opportunities to pursue acquisitions or engage in joint ventures or other transactions. The Company would expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness and capital stock.
The Company’s sub-holding companies generally incur short-term indebtedness if they are temporarily unable to finance operations or meet any capital requirements with cash from operations. A significant decline in the business of any of the Company’s sub-holding companies may affect the sub-holding company’s ability to fund its capital requirements. A significant and prolonged deterioration in the economies in which the Company operates or in the Company’s businesses may affect the Company’s ability to obtain short-term and long-term credit or to refinance existing indebtedness on terms satisfactory to the Company’s management.
The Company presents the maturity dates associated with its long-term financial liabilities as of December 31, 2023, see Note 19. The Company generally makes payments associated with its long-term financial liabilities with cash generated from its operations.
The following table reflects all contractually fixed pay-offs for settlement, repayments and interest resulting from recognized financial liabilities. It includes expected net cash outflows from derivative financial liabilities that are in place as of December 31, 2023. Such expected net cash outflows are determined based on each particular settlement date of an instrument. The amounts disclosed are undiscounted net cash outflows for the respective upcoming fiscal years, based on the earliest date on which the Company could be required to pay. Cash outflows for financial liabilities (including interest and excluding lease liabilities) without fixed amount or timing are based on economic conditions (like interest rates and foreign exchange rates) existing on December 31, 2023.

|  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029 and thereafter |  | Total
Non-derivative financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes and bonds |  | Ps. | — |  |  | Ps. | 1,728 |  |  | Ps. | 11,989 |  |  | Ps. | 9,321 |  |  | Ps. | 15,433 |  |  | Ps. | 88,010 |  |  | Ps. | 126,481 |
Loans from Banks |  |  | 8,452 |  |  |  | 155 |  |  |  | 93 |  |  |  | 796 |  |  |  | 567 |  |  |  | 280 |  |  |  | 10,343 |
Derivative financial liabilities |  |  | (307) |  |  |  | 45 |  |  |  | (919) |  |  |  | (1,382) |  |  |  | 89 |  |  |  | (2,478) |  |  |  | (4,952) |

The Company generally makes payments associated with its non-current financial liabilities with cash generated from its operations.
21.9.4 Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment-grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses other publicly available financial information and its own trading records to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee.
The Company has a high receivable turnover; hence management believes credit risk is minimal due to the nature of its businesses, which have a large portion of their sales settled in cash. The Company’s maximum exposure to credit risk for the components of the consolidated statement of financial position at December 31, 2023 and 2022 is the carrying amounts, see Note 7.
The Company manages the credit risk related to its derivative portfolio by only entering into transactions with reputable and credit-worthy counterparties as well as by maintaining in some cases a Credit Support Annex (“CSA”) that establishes margin requirements, which could change upon changes to the credit ratings given to the Company by independent rating agencies. As of December 31, 2023, the Company concluded that the maximum exposure to credit risk related to derivative financial instruments is not significant given the high credit rating of its counterparties.
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21.10 Cash flows hedges
The Company determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount, and timing of their respective cash flows. The Company evaluates whether the derivative designated in each hedging relationship is expected to be effective and that it has been effective to offset changes in the cash flows of the hedged item using the hypothetical derivative method.
In these hedging relationships, the main sources of inefficiency are:
• The effect of the credit risk of the counterparty and the Company on the fair value of foreign currency forward contracts, which is not reflected in the change in the fair value of the hedged cash flows; and
• Changes in the period hedges.
As of December 31, 2023, the Company’s financial instruments used to hedge its exposure to foreign exchange rates and interest rates are as follows:
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|  | Maturity |
|  | 1‑6 months |  | 6‑12 months |  | More than 12 |
Foreign exchange currency risk |  |  |  |  |  |  |
Foreign exchange currency forward contracts |  |  |  |  |  |  |
Net exposure |  | 3,049 |  | 1,781 |  | — |
Average exchange rate MXN/USD |  | 18.39 |  | 18.40 |  | — |
Net exposure |  | 2,486 |  | 1,370 |  | — |
Average exchange rate BRL/USD |  | 5.10 |  | 5.07 |  | — |
Net exposure |  | 757 |  | 334 |  | — |
Average exchange rate COP/USD |  | 4,436 |  | 4,316 |  | — |
Net exposure |  | 150 |  | — |  | — |
Average exchange rate ARS/USD |  | 668.06 |  | — |  | — |
Net exposure |  | 344 |  | 163 |  | — |
Average exchange rate URY/USD |  | 40.18 |  | 40.66 |  | — |
Net exposure |  | 154 |  | 117 |  | — |
Average exchange rate CRC/USD |  | 558.89 |  | 556.00 |  | — |
Net exposure |  | — |  | — |  | — |
Average exchange rate ARS/MXN |  | — |  | — |  | — |
Foreign exchange currency swap contracts |  |  |  |  |  |  |
Net exposure |  | — |  | — |  | 43,095 |
Average exchange rate MXN/USD |  | — |  | — |  | 17.77 |
Net exposure |  | 174 |  | — |  | 14,022 |
Average exchange rate BRL/USD |  | 4.81 |  | — |  | 5.05 |
Net exposure |  | — |  | 1,109 |  | 1,822 |
Average exchange rate COP/USD |  | — |  | 3,601.94 |  | 3,743.16 |
Net exposure |  | — |  | 286,246 |  | 2,082 |
Average exchange rate CLP/USD |  | — |  | 870.50 |  | 764.40 |
Net exposure |  | — |  |  | — |  |  | 10,939 |  |
Average exchange rate EUR/USD |  | — |  |  | — |  |  | 1.09 |  |
Interest rate risk |  |  |  |  |  |  |
Interest rate swaps |  |  |  |  |  |  |
Net exposure |  | — |  | — |  | 8,447 |
Interest rate average BRL |  | — |  | — |  | 0.16 | %
Net exposure |  | — |  | — |  | — |
Interest rate average MXN |  | — |  | — |  | — |
Net exposure |  | — |  | 2 |  | — |
Interest rate average CLP |  | — |  | 3.57 | % | — |
Net exposure |  | — |  | — |  | — |
Interest rate average USD |  | — |  | — |  | — |
Commodities risk |  |  |  |  |  |  |
Aluminum |  | 298 |  | 349 |  | — |
Average price (USD/Ton) |  | 2,304 |  | 2,364 |  | — |
Sugar |  | 1,703 |  | 890 |  | 745 |
Average price (USD cent/Lb) |  | 22.43 |  | 22.18 |  | 22.62 |

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As of December 31, 2022, the Company’s financial instruments used to hedge its exposure to foreign exchange rates and interest rates are as follows:

|  | Maturity |
|  | 1‑6 months |  | 6‑12 months |  | More than 12 |
Foreign exchange currency risk |  |  |  |  |  |  |  |  |  |
Foreign exchange currency forward contracts |  |  |  |  |  |  |  |  |  |
Net exposure |  | Ps. | 3,405 |  | Ps. | 2,485 |  | Ps. | 2 |
Average exchange rate MXN/USD |  |  | 20.71 |  |  | 20.88 |  |  | 24.33 |
Net exposure |  |  | 1,857 |  |  | 746 |  |  | — |
Average exchange rate BRL/USD |  |  | 5.34 |  |  | 5.55 |  |  | — |
Net exposure |  |  | 407 |  |  | 207 |  |  | — |
Average exchange rate COP/USD |  |  | 4,502 |  |  | 4,977 |  |  | — |
Net exposure |  |  | 437 |  |  | — |  |  | — |
Average exchange rate ARS/USD |  |  | 231.40 |  |  | — |  |  | — |
Net exposure |  |  | 299 |  |  | 139 |  |  | — |
Average exchange rate URY/USD |  |  | 42.51 |  |  | 42.74 |  |  | — |
Net exposure |  |  | 332 |  |  | 182 |  |  | — |
Average exchange rate CRC/USD |  |  | 686.50 |  |  | 664.50 |  |  | — |
Net exposure |  |  | 293 |  |  | — |  |  | — |
Average exchange rate ARS/MXN |  |  | 10.57 |  |  |  | — |  |  |  | — |  |
Foreign exchange currency swap contracts |  |  |  |  |  |  |  |  |  |
Net exposure |  |  | 12,670 |  |  | 1,743 |  |  | 29,324 |
Average exchange rate MXN/USD |  |  | 12.67 |  |  | 19.00 |  |  | 18.11 |
Net exposure |  |  | — |  |  | 9,294 |  |  | 6,874 |
Average exchange rate BRL/USD |  |  | — |  |  | 4.00 |  |  | 5.28 |
Net exposure |  |  | 345 |  |  | 250 |  |  | 2,313 |
Average exchange rate COP/USD |  |  | 3,926 |  |  | 2,333.06 |  |  | 3,510.06 |
Net exposure |  |  | 3,306 |  |  | — |  |  | 1,225 |
Average exchange rate CLP/USD |  |  | 774.49 |  |  | — |  |  | 677 |
Net exposure |  |  | — |  |  |  | — |  |  |  | 22,130 |  |
Average exchange rate EUR/USD |  |  | — |  |  |  | — |  |  |  | 0.91 |  |
Interest rate risk |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  |  |  |  |  |  |  |  |
Net exposure |  |  | — |  |  | — |  |  | 9,681 |
Interest rate average BRL |  |  | — |  |  | — |  |  | 0.16 | %
Net exposure |  |  | — |  |  | — |  |  | 11,403 |
Interest rate average MXN |  |  | — |  |  | — |  |  | 7.17 | %
Net exposure |  |  | 271 |  |  | — |  |  | — |
Interest rate average CLP |  |  | 5.79 | % |  | — |  |  | — |
Net exposure |  |  | — |  |  | — |  |  | 3 |
Interest rate average USD |  |  | — |  |  | — |  |  | 3.57 | %
Commodities risk |  |  |  |  |  |  |  |  |  |
Aluminum |  |  | 294 |  |  | 368 |  |  | — |
Average price (USD/Ton) |  |  | 2,483 |  |  | 2,480 |  |  | — |

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|  | Maturity |
|  | 1‑6 months |  | 6‑12 months |  | More than 12 |
Sugar |  |  | 1,058 |  |  | 631 |  |  | 468 |
Average price (USD cent/Lb) |  |  | 17.62 |  |  | 17.08 |  |  | 17.14 |

As of December 31, 2023, a reconciliation per category of equity components and an analysis of OCI components, net of tax; generated by the cash flow hedges were as follows:

|  | Hedging
|  | reserve
Balances at beginning of the period |  | Ps. | 1,881 |
Cash flows hedges |  |  |
Fair value changes: |  |  |
Foreign exchange currency risk – Purchase of stock |  |  | (1,950) |
Foreign exchange currency risk – Other stock |  |  | (360) |
Interest rate risk |  |  | 64 |
Commodity price contracts – Purchase of stock |  |  | 145 |
The amounts reclassified to profit and loss: |  |  |
Foreign exchange currency risk – Other stock |  |  | 2,671 |
Interest rate risk |  |  | 201 |
The amounts included in non-financial costs: |  |  |
Foreign exchange currency risk – Purchase of stock |  |  | 1,806 |
Commodity price contracts – Purchase of stock |  |  | (363) |
Taxes due to changes in reserves during the period |  |  | (3,140) |
Balances at the end of the period |  | Ps. | 956 |

21.11 Disposal of Estrella Azul
On September 30, 2020, Coca-Cola FEMSA announced that its joint venture with The Coca-Cola Company (Compañía Panameña de Bebidas, S.A.P.I. de C.V.) successfully sold 100% of its stock interest in Estrella Azul, a dairy products company in Panama. As part of the transaction, the company agreed with the buyer that the Company could receive payments in the future if the business of Estrella Azul achieves certain volume and EBITDA targets during the 2022-2027 period. The Company estimated the amount of the payments to be received based on the forecasts of the business (level 3 inputs) and calculated their net present value. As of December 31, 2023 and 2022, the financial assets recognized in the consolidated statement of financial position have a total value of Ps. 0 and Ps. 5, respectively.
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Impact of hedging on equity
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:

|  | Foreign currency option |  |  | Cross-currency swaps |  | Interest rate swaps |  |  | Commodity price contracts |  | Equity holders of the parent |  | Non-controlling interest |  | Total
As at January 1, 2022 |  | Ps. | (124) |  |  |  | Ps. | 3,403 |  |  | Ps. | (34) |  |  |  | Ps. | 141 |  |  | Ps. | 3,385 |  |  | Ps. | 736 |  |  | Ps. | 4,121 |
Financial instruments – purchases |  |  | (223) |  |  |  |  | (2,080) |  |  |  | — |  |  |  |  | (23) |  |  |  | (2,326) |  |  |  | (269) |  |  |  | (2,595) |
Change in fair value of financial instruments recognized in OCI |  |  | (211) |  |  |  |  | (3,231) |  |  |  | 199 |  |  |  |  | 133 |  |  |  | (3,110) |  |  |  | (1,500) |  |  |  | (4,610) |
Amount reclassified from OCI to profit or loss |  |  | 303 |  |  |  |  | 2,674 |  |  |  | — |  |  |  |  | (289) |  |  |  | 2,688 |  |  |  | (79) |  |  |  | 2,609 |
Foreign currency revaluation of the net foreign operations |  |  | — |  |  |  |  | 513 |  |  |  | — |  |  |  |  | — |  |  |  | 513 |  |  |  | 670 |  |  |  | 1,183 |
Effects of changes in foreign exchange rates |  |  | 2 |  |  |  |  | 1 |  |  |  | — |  |  |  |  | 1 |  |  |  | 4 |  |  |  | 6 |  |  |  | 10 |
Tax effect |  |  | 30 |  |  |  |  | 769 |  |  |  | (54) |  |  |  |  | 59 |  |  |  | 804 |  |  |  | 359 |  |  |  | 1,163 |
As at December 31, 2022 |  | Ps. | (223) |  |  |  | Ps. | 2,049 |  |  | Ps. | 111 |  |  |  | Ps. | 22 |  |  | Ps. | 1,958 |  |  | Ps. | (77) |  |  | Ps. | 1,881 |
Financial instruments – purchases |  |  | (350) |  |  |  |  | 50 |  |  |  | — |  |  |  |  | (59) |  |  |  | (359) |  |  |  | (608) |  |  |  | (967) |
Change in fair value of financial instruments recognized in OCI |  |  | (595) |  |  |  |  | (1,514) |  |  |  | 64 |  |  |  |  | 128 |  |  |  | (1,917) |  |  |  | (2,078) |  |  |  | (3,995) |
Amount reclassified from OCI to profit or loss |  |  | 848 |  |  |  |  | 2,698 |  |  |  | 201 |  |  |  |  | (171) |  |  |  | 3,576 |  |  |  | 746 |  |  |  | 4,322 |
Foreign currency revaluation of the net foreign operations |  |  | — |  |  |  |  | 1,277 |  |  |  | — |  |  |  |  | — |  |  |  | 1,277 |  |  |  | 1,577 |  |  |  | 2,854 |
Effects of changes in foreign exchange rates |  |  | 2 |  |  |  |  | — |  |  |  | — |  |  |  |  | (1) |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Tax effect |  |  | 45 |  |  |  |  | (3,335) |  |  |  | (19) |  |  |  |  | 33 |  |  |  | (3,276) |  |  |  | 136 |  |  |  | (3,140) |
As at December 31, 2023 |  | Ps. | (273) |  |  |  | Ps. | 1,224 |  |  | Ps. | 357 |  |  |  | Ps. | (48) |  |  | Ps. | 1,260 |  |  | Ps. | (304) |  |  | Ps. | 956 |

Note 22. Non-Controlling Interest in Consolidated Subsidiaries
An analysis of FEMSA’s non-controlling interest in its consolidated subsidiaries as of December 31, 2023 and 2022 is as follows:

|  | December 31, 2023 |  | December 31, 2022
Coca-Cola FEMSA |  | Ps. | 73,151 |  | Ps. | 72,128
Proximity Americas Division |  |  | 1,046 |  |  | 1,004
Envoy Solutions |  |  | — |  |  | 1,777
Other |  |  | 312 |  |  | 288
|  | Ps. | 74,509 |  | Ps. | 75,197

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The changes in the FEMSA’s non-controlling interest were as follows:

|  | 2023 |  | 2022 |  | 2021
Balance at beginning of the period |  | Ps. | 75,197 |  |  | Ps. | 72,516 |  |  | Ps. | 69,444 |
Net income of non-controlling interest |  |  | 10,988 |  |  |  | 10,834 |  |  |  | 9,183 |
Other comprehensive loss: |  |  | (3,465) |  |  |  | (2,198) |  |  |  | (368) |
Exchange differences on translation of foreign operation |  |  | (3,325) |  |  |  | (1,558) |  |  |  | (1,342) |
Remeasurements of the net defined benefits liability |  |  | 87 |  |  |  | 173 |  |  |  | (36) |
Valuation of the effective portion of derivative financial instruments |  |  | (227) |  |  |  | (813) |  |  |  | 1,010 |
Dividends |  |  | (6,551) |  |  |  | (6,176) |  |  |  | (5,729) |
Share based payment |  |  | 22 |  |  |  | (57) |  |  |  | (14) |
Other acquisitions and remeasurements |  |  | — |  |  |  | 5 |  |  |  | — |
Repurchase of non-controlling interests |  |  | — |  |  |  | (79) |  |  |  | — |
Contribution from non-controlling interest |  |  | — |  |  |  | 352 |  |  |  | — |
Disposals of businesses (Envoy and others) |  |  | (1,682) |  |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 74,509 |  |  | Ps. | 75,197 |  |  | Ps. | 72,516 |

Non-controlling interest’s accumulated other comprehensive loss is comprised as follows:

|  | December 31, 2023 |  | December 31, 2022
Exchange differences on translation foreign operation |  | Ps. | (12,882) |  |  | Ps. | (9,557) |
Remeasurements of the net defined benefits liability |  |  | (335) |  |  |  | (422) |
Valuation of the effective portion of derivative financial instruments |  |  | (307) |  |  |  | (80) |
Accumulated other comprehensive loss |  | Ps. | (13,524) |  |  | Ps. | (10,059) |

Coca-Cola FEMSA shareholders, especially the Coca-Cola Company which holds Series D shares, have some protective rights about investing in or disposing of significant businesses. However, these rights do not limit the continued normal operations of Coca-Cola FEMSA.
Summarized financial information in respect of Coca-Cola FEMSA is set out below:

|  | December 31, 2023 |  | December 31, 2022
Total current assets |  | Ps. | 67,738 |  |  | Ps. | 79,212 |
Total non-current assets |  |  | 205,782 |  |  |  | 198,783 |
Total current liabilities |  |  | 54,916 |  |  |  | 57,960 |
Total non-current liabilities |  |  | 84,899 |  |  |  | 88,159 |
Total revenue |  | Ps. | 245,088 |  |  | Ps. | 226,740 |
Consolidated net income |  |  | 20,226 |  |  |  | 19,626 |
Consolidated comprehensive income for the year, net of tax |  | Ps. | 14,104 |  |  | Ps. | 15,767 |
Net cash flows generated from operating activities |  |  | 42,289 |  |  |  | 35,491 |
Net cash flows used in investing activities |  |  | (20,070) |  |  |  | (19,597) |
Net cash flows used in financing activities |  |  | (26,352) |  |  |  | (20,847) |

22.1 Options from past business acquisitions
Open Market - The former controlling shareholders of Open Market retain a put option for their remaining 20% non-controlling interest that can be exercised (i) at any time after the acquisition date (December 27, 2016) upon the occurrence of certain events and (ii) annually from January through April, after the third anniversary of the acquisition date (i.e. 2019). In any event, the Company through one of its subsidiaries can call the remaining 20% non-controlling
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interest annually from January through April, after the fifth anniversary of the acquisition date (i.e. 2021). Both options would be exercisable at the then fair value of the interest and shall remain indefinitely.
Note 23. Equity
23.1 Equity accounts
The capital stock of FEMSA is comprised of 2,161,177,770 BD units and 1,417,048,500 B units. As of December 31, 2023 and 2022, the common stock of FEMSA was comprised of 17,891,131,350 common shares, without par value and with no foreign ownership restrictions. Fixed capital stock amounts to Ps. 300 (nominal value) and the variable capital may not exceed 10 times the minimum fixed capital stock amount.
The characteristics of the common shares are as follows:
•Series “B” shares, with unlimited voting rights, which at all times must represent a minimum of 51% of total capital stock;
•Series “L” shares, with limited voting rights, which may represent up to 25% of total capital stock; and
•Series “D” shares, with limited voting rights, which individually or jointly with series “L” shares may represent up to 49% of total capital stock.
The Series “D” shares are comprised as follows:
•Subseries “D-L” shares may represent up to 25% of the series “D” shares;
•Subseries “D-B” shares may comprise the remainder of outstanding series “D” shares; and
•The non-cumulative premium dividend to be paid to series “D” shareholders will be 125% of any dividend paid to series “B” shareholders.
The Series “B” and “D” shares are linked together in related units as follows:
•“B units” each of which represents five series “B” shares, and which are traded on the BMV; and
•“BD units” each of which represents one series “B” share, two subseries “D-B” shares and two subseries “D-L” shares, and which are traded both on the BMV and the NYSE.
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As of December 31, 2023, FEMSA’s capital stock is comprised as follows:

|  | “B” Units |  | “BD” Units |  | Total
Units |  | 1,417,048,500 |  | 2,161,177,770 |  | 3,578,226,270
Shares: |  |  |  |  |  |
Series “B” |  | 7,085,242,500 |  | 2,161,177,770 |  | 9,246,420,270
Series “D” |  | — |  | 8,644,711,080 |  | 8,644,711,080
Subseries “D-B” |  | — |  | 4,322,355,540 |  | 4,322,355,540
Subseries “D-L” |  | — |  | 4,322,355,540 |  | 4,322,355,540
Total shares |  | 7,085,242,500 |  | 10,805,888,850 |  | 17,891,131,350

As of December 31, 2022, FEMSA’s capital stock is comprised as follows:

|  | “B” Units |  | “BD” Units |  | Total
Units |  | 1,417,048,500 |  | 2,161,177,770 |  | 3,578,226,270
Shares: |  |  |  |  |  |
Series “B” |  | 7,085,242,500 |  | 2,161,177,770 |  | 9,246,420,270
Series “D” |  | — |  | 8,644,711,080 |  | 8,644,711,080
Subseries “D-B” |  | — |  | 4,322,355,540 |  | 4,322,355,540
Subseries “D-L” |  | — |  | 4,322,355,540 |  | 4,322,355,540
Total shares |  | 7,085,242,500 |  | 10,805,888,850 |  | 17,891,131,350

The net income of the Company is subject to the legal requirement that 5% thereof be transferred to a legal reserve until such reserve equals 20% of common stock at nominal value. This reserve may not be distributed to shareholders during the existence of the Company, except as a stock dividend. As of December 31, 2023 and 2022, this reserve amounted to Ps. 596 and accordingly, has not reached 20% of the capital stock.
Retained earnings and other reserves distributed as dividends, as well as the effects derived from capital reductions, are subject to income tax at the rate in effect at the date of distribution, except when capital reductions come from restated shareholder contributions (Cuenta de Capital de Aportación “CUCA”) and when the distributions of dividends come from net taxable income, denominated Cuenta de Utilidad Fiscal Neta (“CUFIN”).
Dividends paid in excess of CUFIN are subject to income tax at a grossed-up rate based on the current statutory rate. Since 2003, this tax may be credited against the income tax of the year in which the dividends are paid, and in the following two years against the income tax and estimated tax payments. The sum of the individual CUFIN balances of FEMSA and its subsidiaries as of December 31, 2023 amounted to Ps. 351,271. Under Mexican income tax law, dividends distributed to its stockholders who are individuals and foreign residents are subject to a 10% withholding tax, which will be paid in Mexico. The foregoing will not be applicable when distributed dividends arise from the accumulated CUFIN balances as of December 31, 2013.
At an ordinary shareholders’ meeting of FEMSA held on March 24, 2021, the shareholders approved a dividend of Ps. 7,687 that was paid 50% on May 6, 2021, and the other 50% on November 5, 2021; and a reserve for share repurchase of a maximum of Ps. 17,000. As of December 31, 2021, the Company has not repurchased shares. Treasury shares from share-based payment bonus plan are disclosed in Note 18.
At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 19, 2021, the shareholders approved a dividend of Ps. 10,588 that was paid 50% on May 4, 2021 and other 50% on November 3, 2021. The corresponding payment to the non-controlling interest was Ps. 5,588.
At an ordinary shareholders’ meeting of FEMSA held on April 8, 2022, the shareholders approved a dividend of Ps.11,358 that was paid 50% on May 5, 2022, and the other 50% on November 7, 2022; and a reserve for share repurchase of a maximum of Ps. 17,000. As of December 31, 2022, the Company has not repurchased shares. Treasury shares from the share-based payment bonus plan are disclosed in Note 18.
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At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 28, 2022, the shareholders approved a dividend of Ps. 11,407 that was paid 50% on May 3, 2022, and the other 50% on November 3, 2022. The corresponding payment to the non-controlling interest was Ps. 6,021.
At an ordinary shareholders’ meeting of FEMSA held on March 31, 2023, the shareholders approved a dividend of Ps.12,247 that was paid 50% on May 8, 2023, and the other 50% on November 7, 2023; and a reserve for share repurchase of a maximum of Ps. 17,000. During 2023, the Company started its Share Repurchase Program, reacquiring 381,300 BD Units which are held as Treasury shares. The Company expects to maintain these shares in the Treasury for one year and subsequently cancel them. Treasury shares from the share-based payment bonus plan are disclosed in Note 18.
At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 27, 2023, the shareholders approved a dividend of Ps. 12,185 that was paid 50% on May 3, 2023, and the other 50% on November 3, 2023. The corresponding payment to the non-controlling interest was Ps. 6,431.
For the years ended December 31, 2023, 2022 and 2021 the dividends declared and paid by the Company and Coca-Cola FEMSA were as follows:

|  | 2023 |  | 2022 |  | 2021
FEMSA |  | Ps. | 12,247 |  | Ps. | 11,358 |  | Ps. | 7,687
Coca-Cola FEMSA (100% of dividend) |  |  | 12,185 |  |  | 11,407 |  |  | 10,588

For the years ended December 31, 2023, 2022 and 2021 the dividends declared and paid per share by the Company are as follows:

Series of Shares |  | 2023 |  | 2022 |  | 2021
“B” |  | Ps. | 0.61070 |  | Ps. | 0.56600 |  | Ps. | 0.38333
“D” |  |  | 0.76340 |  |  | 0.70850 |  |  | 0.47917

23.2 Capital management
The Company manages its capital to ensure that its subsidiaries will be able to continue as going concerns while maximizing the return to shareholders through the optimization of its debt and equity balance to obtain the lowest cost of capital available. The Company manages its capital structure and adjusts it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2023, 2022 and 2021.
The Company is not subject to any externally imposed capital requirements, other than the legal reserve (see Note 23.1) and debt covenants (see Note 19).
The Company's Finance, Planning and the Corporate Practices Committees review the capital structure of the Company on a quarterly basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. In conjunction with this objective, the Company seeks to maintain the highest credit rating both national and international, currently rated as of December 31, 2023 AAA and BBB+ respectively, which requires it to have a debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio lower than 2. As a result, before entering new business ventures, acquisitions or divestitures, management evaluates the optimal ratio of debt to EBITDA to maintain its credit rating.
Note 24. Earnings per Share
Basic earnings per share amounts are calculated by dividing consolidated net income for the year attributable to controlling interest by the weighted average number of shares outstanding during the period adjusted for the weighted average of own shares purchased in the period.
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Diluted earnings per share amounts are calculated by dividing consolidated net income for the year attributable to controlling interest by the weighted average number of shares outstanding during the period adjusted for the effects of dilutive potential shares (originated by the Company’s share-based payment program).

|  | 2023 |  | 2022 |  |  | 2021 |
|  | Per Series |  | Per Series |  | Per Series |  | Per Series |  | Per Series |  | Per Series |
|  | “B” Shares |  | “D” Shares |  | “B” Shares |  | “D” Shares |  | “B” Shares |  | “D” Shares |
(in millions of shares) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of shares for basic earnings per share |  |  | 9,239.73 |  |  |  | 8,617.94 |  |  |  | 9,241.72 |  |  |  | 8,625.92 |  |  |  | 9,242.88 |  |  |  | 8,630.54 |  |
Effect of dilution associated with non-vested shares for share based payment plans |  |  | 6.69 |  |  |  | 26.78 |  |  |  | 4.70 |  |  |  | 18.79 |  |  |  | 3.54 |  |  |  | 14.17 |  |
Weighted average number of shares adjusted for the effect of dilution (Shares outstanding) |  |  | 9,246.42 |  |  |  | 8,644.71 |  |  |  | 9,246.42 |  |  |  | 8,644.71 |  |  |  | 9,246.42 |  |  |  | 8,644.71 |  |
Dividend rights per series (see Note 23.1) |  |  | 100 |  | % |  | 125 |  | % |  | 100 |  | % |  | 125 |  | % |  | 100 |  | % |  | 125 |  | %
Weighted average number of shares further adjusted to reflect dividend rights |  |  | 9,246.42 |  |  |  | 10,805.89 |  |  |  | 9,246.42 |  |  |  | 10,805.89 |  |  |  | 9,246.42 |  |  |  | 10,805.89 |  |
Basic earnings per share from continuing operations |  |  | 1.67 |  |  |  | 2.09 |  |  |  | 1.12 |  |  |  | 1.40 |  |  |  | 1.01 |  |  |  | 1.26 |  |
Diluted earnings per share from continuing operations |  |  | 1.67 |  |  |  | 2.09 |  |  |  | 1.12 |  |  |  | 1.40 |  |  |  | 1.01 |  |  |  | 1.26 |  |
Basic earnings per share from discontinued operations |  |  | 1.61 |  |  |  | 2.02 |  |  |  | 0.07 |  |  |  | 0.09 |  |  |  | 0.41 |  |  |  | 0.52 |  |
Diluted earnings per share from discontinued operations |  |  | 1.61 |  |  |  | 2.01 |  |  |  | 0.07 |  |  |  | 0.09 |  |  |  | 0.41 |  |  |  | 0.52 |  |
Allocation of earnings, weighted |  |  | 46.11 |  | % |  | 53.89 |  | % |  | 46.11 |  | % |  | 53.89 |  | % |  | 46.11 |  | % |  | 53.89 |  | %
Net controlling interest income allocated from continuing operations |  | Ps. | 15,425 |  |  | Ps. | 18,026 |  |  | Ps. | 10,369 |  |  | Ps. | 12,117 |  |  | Ps. | 9,329 |  |  | Ps. | 10,902 |  |
Net controlling interest income allocated from discontinued operations |  | Ps. | 14,865 |  |  | Ps. | 17,373 |  |  | Ps. | 656 |  |  | Ps. | 767 |  |  | Ps. | 3,811 |  |  | Ps. | 4,453 |  |

Note 25. Taxes
25.1 Recoverable taxes
Recoverable taxes are mainly the result of higher interim payments of value added tax and income tax in Mexico during 2023 compared to the current year's provision, which will be offset in future years. Operations in Guatemala, Panama, Nicaragua, and Colombia are subject to a minimum tax. In Guatemala and Colombia, this tax is recoverable only under certain circumstances. Guatemala's tax base is determined by considering the greater of total assets and net income; in Colombia, the taxable base is stockholders' equity.
25.1.1 Exclusion of the State Value Added Tax ("VAT") (ICMS) on the federal sale taxes (PIS / COFINS) calculate basis
On March 15, 2017 the Brazilian Federal Supreme Court (STF) ruled that the inclusion of the VAT (ICMS) on federal sales taxes (PIS and COFINS) taxable basis was unconstitutional. During 2019, the Company's subsidiaries in Brazil obtained conclusive favorable motions over this exclusion of VAT (ICMS) over PIS / COFINS calculation. The net favorable effects of each case are to be recorded at the time all formalities and legal procedures are finalized and recovery of the taxes paid becomes virtually certain. During 2023, 2022 and 2021, , the Company recorded in other operating revenues in the consolidated income statement the effects of the administrative formalities concluded (see Note 20).
As of December 31, 2023 and 2022 the amount of recoverable taxes in Brazil including PIS and COFINS is Ps. 745 and Ps. 1,060, respectively.
25.2 Taxation of beverages
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As of December 31, 2023, all the countries where the Company operates, with the exception of Panama, impose value added tax on the sale of carbonated beverages, with a rate of 16.0% in Mexico, 12.0% in Guatemala, 15.0% in Nicaragua, 13% in Costa Rica, 19.0% in Colombia, 21.0% in Argentina, 22.0% in Uruguay, and in Brazil 16.0% in the state of Rio de Janeiro, 17.0% in the states of Goiás and Santa Catarina, 18.0% in the states of São Paulo, Minas Gerais and Paraná, and 20.0% in the states of Mato Grosso do Sul and Rio Grande do Sul. The states of Rio de Janeiro, Goiás and Paraná also charge an additional 2.0% on sales as a contribution to a poverty eradication fund.
In Brazil, value-added tax is calculated and added, along with federal sales tax, to the tax base. The Company is also responsible for collecting and paying the tax for its retailers in Brazil. This is calculated based on a survey conducted by each state's government. In 2023, the Company collected 16.3% of its net sales taxes.
Several of the countries in which the Company operates impose excise duties or other taxes, as follows:
•Mexico imposes a special tax on the production, sale and import of beverages with added sugar and high fructose corn syrup, which from January 1, to December 31, 2023 the excise tax was Ps.1.5086 per liter. This excise tax applies only to the first sale, and we are responsible for collecting and paying it. As of January 1, 2024, the excise duty was equal to Ps.1.5737 per liter. This excise tax rate will be in effect until December 31, 2024, and thereafter will be subject to an annual increase based on the previous year's inflation rate.
•Guatemala imposes an excise tax of 18 cents in local currency (Ps.0.40 as of December 31, 2023) per liter of carbonated beverage.
•Costa Rica imposes a specific tax on non-alcoholic carbonated bottled beverages based on the combination of packaging and flavor, currently assessed at 21.07 colones (Ps.0.68 as of December 31, 2023) per 250 ml, and an excise tax (which is a contribution to the National Institute of Rural Development) currently assessed at 7,254 colones (approximately Ps.0.23 as of December 31, 2023) per 250 ml.
•Nicaragua imposes a 15.0% tax on beverages, except water, and municipalities impose a 1.0% tax on our Nicaraguan gross income.
•Panama imposes a 7.0% excise tax on carbonated beverages with more than 7.5 grams of sugar or any caloric sweetener per 100 ml, and a 10.0% tax on syrups, powders and concentrates used to produce sugary drinks. Since January 1, 2020, Panama imposes a 5.0% excise tax on non-carbonated beverages with more than 7.5 grams of sugar or any caloric sweetener per 100 ml, whether imported or locally produced. Beverages derived from dairy products, grains or cereals, nectar, fruit and vegetable juices with natural fruit concentrates are exempt from this tax.
•Argentina applies an excise tax of 8.7% to carbonated beverages containing less than 5.0% lemon juice or less than 10.0% fruit juice, and a 4.2% excise tax to sparkling water and flavored carbonated beverages with a fruit juice content of 10.0% or more, although this excise tax is not applicable to some of our products.
•In Brazil, it applies an average excise tax on production of about 2.6% and an average sales tax of about 12.0% on net sales. Except for sales to wholesalers, these production and sales taxes apply only to the first sale, and the Company is responsible for collecting and paying these taxes from each of its retailers. In the case of sales to wholesalers, they are entitled to recover sales tax and collect this tax again for the resale of its products to retailers.
•Colombian municipalities impose a sales tax ranging from 0.35% to 1.2% of net sales. On November 1, 2023, a new tax of 18 Colombian pesos (approximately Ps.0.08 as of December 31, 2023) was applied to beverages with 6 to 10 grams of added sugar per 100 ml, while a tax of 35 Colombian pesos (approximately Ps.0.15 as of December 31, 2023) was applied to beverages with more than 10 grams of added sugar per 100 ml. The amount of this tax will increase in early 2024 and 2025, as detailed in a paragraph below.
•In Uruguay, an excise tax of 19.0% is levied on carbonated beverages, a 12.0% excise tax is levied on fruit juice-based beverages with a minimum content of 10.0% in natural fruit juices (or at least 5.0% natural content of fruit juices in the case of lemon) and an excise tax of 8.0% in the case of sparkling and still water.
25.3 Tax reforms
Mexico
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In April 2021, the Mexican government amended the Federal Labor Law, the Federal Tax Code, and other laws that regulate labor benefits with the purpose of prohibiting the subcontracting of personnel, except in activities such as specialized works or services that are not part of a company's core business and that are provided by service providers registered with the Ministry of Labor and Social Welfare. As a result of this tax reform, the deduction of expenses related to subcontracting is prohibited, as well as the possibility of crediting the value added tax generated by expenses related to subcontracting and in extreme cases, the subcontracting of personnel can qualify as tax fraud. This reform entered into effect on September 1, 2021.
Pursuant to the amendments to Mexican tax laws effective January 1, 2022, Mexican issuers are jointly and severally liable for taxes payable on gains arising from the sale or disposition of their shares or securities representing their shares, as ADSs, by majority shareholders who are not residents of Mexico and do not have a permanent establishment in Mexico for tax purposes. To other Mexican non-residents who do not have a permanent establishment in Mexico for tax purposes, to the extent that such Mexican issuer fails to provide certain information regarding such sale or disposition to Mexican tax authorities. For the purposes of this rule, "majority shareholders" shall be understood as shareholders who are identified in the reports submitted by the Mexican issuer to the CNBV annually as (i) directors or officers who directly or indirectly own 1.0% or more of the Mexican issuer's share capital, (ii) shareholders who directly or indirectly own 5.0% or more of the Mexican issuer's share capital, or (iii) within the ten largest shareholders of the Mexican share capital of the Mexican issuer. issuer based on direct ownership of the shares of the share capital. Although in some cases the Mexican tax authorities have indicated that this reporting obligation would only apply to transfers of shares or securities representing shares that result in a change of control, there are no established criteria or general interpretations in this regard issued by the Mexican tax authorities. There is currently no obligation on the part of Mexican non-residents to report to Mexican issuers their sales or disposals of shares or securities representing shares, which limits our ability to comply with our reporting obligations to Mexican tax authorities. Therefore, the amount of a potential tax liability is uncertain and difficult to determine given the inherent mechanisms and procedures, including the application of any available tax treaty, applicable to the trading of publicly traded securities.
Colombia
In August 2021, a new tax reform came into force in Colombia. This reform increased the income tax rate from 30.0% to 35.0% for 2022 and limited the ability to deduct or deduct municipal sales taxes against income taxes to 50.0%.
In December 2022, a new tax reform was approved in Colombia, which began to be applied during 2023.
The main changes are as follows:
•Introduction of an excise duty on beverages with added sugar based on the following timetable:
◦From November 1, 2023 to December 30, 2023, a tax of 18 Colombian pesos (approximately Ps.0.08 as of December 31, 2023) was applied to beverages containing 6 to 10 grams of added sugar per 100 ml and a tax of 35 Colombian pesos (approximately Ps.0.15 as of December 31, 2023) for beverages with more than 10 grams of added sugar per 100 ml;
◦From January 1, 2024 to December 30, 2024, a tax of 28 Colombian pesos (approximately Ps.0.12 as of December 31, 2023) for beverages containing 6 to 10 grams of added sugar per 100 ml and a tax of 55 Colombian pesos (approximately Ps.0.24 as of December 31, 2023) for beverages with more than 10 grams of added sugar per 100 ml;
◦From January 1, 2025 to December 30, 2025, a tax of 38 Colombian pesos (approximately Ps.0.17 as of December 31, 2023) for beverages containing between 5 grams and 9 grams of added sugar per 100 ml and a tax of 65 Colombian pesos (approximately Ps.0.29 as of December 31, 2023) for beverages with more than 9 grams of added sugar per 100 ml;
◦From 2026, the corresponding tax will be increased annually by the same percentage as the UVT (Tax Value Unit).
•Introduction of a new tax on single-use plastics, with a rate of 0.00005 on the Tax Value Units per gram of plastic. One Tax Value Unit is equivalent to 42,412 Colombian pesos (approximately Ps.187.46 as of December 31, 2023). This new tax is applicable to our products that are not considered part of the market basket of goods
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(currently two of our products fall into this category). However, this tax can be waived with a circular economy certification that will be issued in case recycled resin is incorporated into the packaging. Through legal resolution C-526/23, it was indicated that the responsible for the tax is the producer of single-use plastics.
•Increase in the income tax rate as of January 1, 2023, from 20.0% to 35.0% on taxable income obtained from free zones within Colombia. This change will go into effect on January 1, 2026 if a free zone company can demonstrate a 60.0% revenue increase in 2022 compared to fiscal year 2019. Despite this, the Supreme Court ruled that this law is not applicable to entities that have obtained its approval before December 13, 2022.
•The possibility of taking municipal sales taxes as a tax deduction against income tax was eliminated.
•Increase in the occasional income tax rate from 10.0% to 15.0% applicable to sales of fixed assets and introduction of a stamp duty at a rate between —% and 3.0%, on the sale price of real estate and other assets.
•Introduction of a minimum income tax rate of 15%, which must be calculated considering an adjusted income (UD). The Adjusted Tax Rate (TTD) will be the result of dividing an Adjusted Tax (ID) by the Adjusted Income (UD).
Costa Rica
Until December 31, 2022, the producer or importer was responsible for collecting value-added taxes on carbonated beverages from supply chain participants, with an effective value-added tax rate for carbonated beverages of 15.8%. On January 1, 2023, a new tax reform came into effect to reintroduce the standard debt and credit system for producers, wholesalers, and retailers with a tax rate of 13.0%, so our Costa Rican subsidiary is no longer responsible for collecting such tax along the entire supply chain.
Uruguay
On December 31, 2021, the Uruguayan government issued an executive decree that increased the excise tax on energy drinks from 19.0% to 22.0%. This increase went into effect as of January 2022.
Brazil
In early 2017, Brazil's Federal Supreme Court ruled that value-added tax would not be used as the basis for calculating federal sales tax, resulting in a reduction of federal sales tax. Our Brazilian subsidiaries initiated legal proceedings to determine their ability to calculate federal sales tax without using value-added tax as a basis, in accordance with the first ruling of the Brazilian Federal Supreme Court, and obtained a favorable final resolution in 2019. However, the Brazilian tax authorities appealed the decision of the Brazilian Federal Supreme Court and the appeal was denied in May 2021. In 2023, federal sales and production taxes together resulted in an average tax of 14.6% on net sales.
In recent years, the rate of excise duty on concentrate in Brazil has undergone recurring temporary fluctuations. The excise tax rate was increased from 4% to 8.0% from February 1, 2021 to February 24, 2022, decreased to 6.0% from February 25, 2022 to April 30, 2022, and increased again to 8.0% on May 1, 2022. The tax credit that we may recognize in our Brazilian operations in connection with concentrate purchases in the Manaus Free Trade Zone has been affected accordingly.
In December 2022, the Brazilian government published the new transfer pricing rules that will come into effect from January 1, 2024. The new transfer pricing rules aim to align the Brazilian transfer pricing system with the transfer pricing guidelines recommended by the Organization for Economic Co-operation and Development (OECD). During 2023, the Brazilian government issued specific regulatory instructions to regulate this new tax legislation and transfer pricing methods. In 2024, greater regulation of intangibles and the obligations to file transfer pricing tax returns is expected.
In March 2023, the value-added tax rate in the state of Paraná increased from 16.0% to 18.0%. As of January 1, 2024, the value-added tax rate in the state of Rio Grande do Sul is 18%. As of January 1, 2024, the state of Minas Gerais began applying an additional 2.0% charge on sales as a contribution to a poverty eradication fund.
In December 2023, the Brazilian government published a Provisional Measure, to establish that the amount of the credit of a final and unappealable judicial decision, which exceeds the value of R$ 10 million (approximately Ps. 34.9 million as of December 31, 2023) subject to compensation against tax debts, must observe the monthly limitation of 1/60 of the
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total value of the credit. While taxpayers must observe this regulation as of January 1, 2024, this Interim Measure must become law during the following months; otherwise, this command is revoked.
In December 2023, the Brazilian government published a new law to tax investment subsidies granted by municipalities or states of the federation as of January 1, 2024. These subsidies will be taxed by Income Tax and Social Contribution at the combined tax rate of 34% and will be subject to other contributions at the combined tax rate of 9.25%. On the other hand, the Federal Government will grant an income tax credit of 25% of the municipal or state subsidy, limited to the amount of depreciation of such assets applied to approved development or expansion projects that caused such subsidy, provided that certain conditions are met.
In addition, also in December 2023, a Constitutional Amendment was published to implement a comprehensive tax reform in Brazil that will replace the current indirect tax system with a new one, which will be progressively implemented from January 1, 2026 until its full adoption in 2033.Municipal (ISSQN), state (ICMS) and federal (PIS and COFINS) taxes will be replaced by a double VAT (CBS and IBS). Double VAT will apply to all tangible or intangible goods, duties and services; it must be taxed according to the amount charged in the place where it is consumed; It will not be considered in itself in its own taxable base (the tax will not be taxed), and gives the right to record the input tax credit of the previous transaction (without a cumulative system).
There will be a standard rate for all goods and services, with exceptions for certain sectors such as education, health, medicine, public transport, food for human consumption, agricultural products and some others, which will be entitled to tax reductions of 100%, 70% or 40% of the rate yet to be defined. In addition, there will be specific rules for sectors such as fuels and lubricants, automotive, financial services, real estate transactions, health plans, tourism and leisure businesses, among others. During the following months, the executive and legislative branches must enact a series of laws and acts to regulate and detail all procedures, obligations and the double VAT rate.
In addition, from 2027 a special tax (IS) will also be applied on the production, extraction, marketing or import of services or goods harmful to health and the environment. This tax will be applied only once, does not generate a subsequent credit (it is subject to the so-called single-phase system) and will be part of the taxable base of the other tax applied to sales of services and goods. The current excise duty (IPI) will be reduced to zero, except for those products produced in the Manaus Free Trade Zone, in order to maintain the competitiveness and development of the incentivized zone. As in the previous case, a series of laws and acts are expected to regulate and detail all the procedures, obligations and the list of IS rates.
Finally, as of January 1, 2024, new rules will apply to exclusive financial investment funds, investments and foreign currency assets located abroad, held by Brazilian taxpayers. Due to these changes, the government offered the option to Brazilian tax residents to increase the cost of the tax on foreign assets and investments to the current market value by paying a reduced rate on such difference, for those who choose to anticipate potential profits in this gap, by collecting the corresponding income tax with such reduced income tax rate instead of the regular rate on capital gains. For those who opt for this option, the current market value will be your new tax cost basis and a future capital gain, if and when it occurs, will be calculated from this point, rather than the original tax cost basis.
Argentina
On December 13, 2023, the Argentine government issued an executive decree (Decree 29/2023) setting the tax rate of the PAIS (Program for an Inclusive and Solidary Argentina) at 17.5%, applicable to the import of goods (excluding goods from the basic food basket, fuels, lubricants, and other goods related to power generation). This tax is applicable to foreign currency transactions carried out on or after December 13, 2023, and represents an additional cost for Argentine operations. This tariff is also applicable to cargo services and other transportation services for the import or export of goods, or when such services are acquired in Argentina and provided by non-residents.
25.4 Taxation
The following summary contains a description of certain U.S. federal income and Mexican federal tax consequences of the purchase, ownership, and disposition of our units or American Depositary Shares ("ADS") by an owner who is a citizen or resident of the United States, a U.S. domestic corporation, or a person or entity that will otherwise be subject to federal income tax based on net revenue with respect to units or ADSs. which we refer to as a U.S. holder, but is not intended to be a description of all possible tax considerations that may be relevant to a decision to purchase, hold, or dispose of the units or ADSs. In particular, this discussion does not address all Mexican or U.S. federal income tax considerations that may be relevant to a particular investor, nor does it address the special tax rules applicable to certain categories of investors, such as banks, intermediaries, merchants who choose market value, tax-exempt entities,
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insurance companies, certain short-term holders of units or ADSs, or investors who own the units or ADSs as part of a hedging, conversion, or integrated transaction, partnerships or partners therein, nonresident foreign individuals present in the United States for 183 days or more, or investors who have a "functional currency" other than the U.S. dollar. U.S. holders should be aware that the tax consequences of owning units or ADSs may be substantially different for the investors described in the previous sentence. This summary deals only with U.S. holders who will hold the units or ADSs as equity assets and does not address the tax treatment of a U.S. holder who owns or is treated as owning 10.0% or more of the shares by vote or security (including units) of our company.
This summary is based on the federal tax laws of the United States and Mexico in effect as of the date of this annual report, including the provisions of the U.S.-Mexico income tax treaty and its protocols, or the Tax Treaty, which are subject to change. The summary does not address any tax consequences under the laws of any state or municipality in Mexico or the United States, or the laws of any tax jurisdiction other than the federal laws of Mexico and the United States. Holders of the units or ADSs should consult their tax advisors regarding the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of units or ADSs, including, in particular, the effect of any foreign, state or local tax laws.
Mexican Taxation
For purposes of this summary, the term "nonresident holder" means a holder who is not a resident of Mexico and who does not own the units or ADSs in connection with conducting a trade or business through a permanent establishment in Mexico. For the purposes of Mexican taxation, an individual is a resident of Mexico if he or she has established his or her home in Mexico, or if he or she has another household outside of Mexico, but his or her "center of vital interests" (as defined in the Federal Tax Code in Mexico) is located in Mexico. A person's "center of vital interests" is located in Mexico when, among other circumstances, more than 50.0% of that person's total income during a calendar year originates within Mexico. A legal entity is a resident of Mexico if it has its principal place of business or its place of effective administration in Mexico. A Mexican citizen is presumed to be a resident of Mexico unless they can prove otherwise. If a legal entity or an individual is deemed to have a permanent establishment in Mexico for tax purposes, all income attributable to such permanent establishment will be subject to Mexican taxation, in accordance with applicable tax laws.
25.5 Tax Considerations Relating to Units and ADSs
Taxation of dividends. Effective January 1, 2014, in accordance with Mexican income tax laws, dividends, whether in cash or in kind, paid to individuals or non-residents in Mexico, on the Series B shares and Series L shares underlying our units or ADSs, are subject to 10.0% withholding tax, or a lower rate if they are covered by a tax treaty. Profits that have been obtained and are subject to income tax before January 1, 2014 are exempt from this withholding.
Taxation of Disposals of ADSs or Units. As of January 1, 2014, gains from the sale or disposition of shares made on the Mexican Stock Exchange or other securities market approved in Mexico by individuals resident in Mexico will be subject to an income tax rate of 10.0%, and gains from the sale or disposal of interests made on the Mexican Stock Exchange or other approved securities market in Mexico individuals and legal entities that are not residents in Mexico will be subject to a withholding tax of 10.0% in Mexico. The cost at which the shares were acquired prior to January 1, 2014 is calculated using the average closing price per share over the last twenty-two days. If the closing price per share in the last twenty-two days is considered unusual compared to the closing prices in the last six months, then the calculation is made using the average closing price per share over the last six months. However, a holder who is eligible to claim the benefits of any tax treaty will be exempt from Mexican withholding tax on gains made on a sale or other disposition of units, provided certain additional requirements are met.
Gains on the sale or other disposition of shares or ADSs made in a transaction that is not carried out through the Mexican Stock Exchange or other approved securities market in Mexico would generally be subject to Mexican taxation, regardless of the nationality or residence of the transferor. However, under the Tax Treaty, a holder who is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains made on such sale or other disposition of units or ADSs, provided that the holder does not own, directly or indirectly, 25.0% or more of our total share capital (including units represented by ADSs) within the 12-month period preceding such sale or other sale and provided that the owner does not own, directly or indirectly, that the profits are not attributable to a permanent establishment or a fixed base in Mexico. Deposits of units in exchange for ADSs and withdrawals of units in exchange for ADSs will not give rise to Mexican taxes.
Other Mexican Taxes
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There are no Mexican inheritance, gift, inheritance, or value-added taxes applicable to the ownership, transfer, exchange, or disposition of the ADSs or units, although free transfers of units may, in certain circumstances, cause a Mexican federal tax to be imposed on the recipient. There are no Mexican taxes or stamp, issuance, registration or similar duties that must be paid by the owners of the units.
25.6 BEPS Pillar II
The OECD has published the Model Pillar Two rules to facilitate the domestic application of the global minimum tax of 15% in certain jurisdictions in which FEMSA operates. The legislation will become effective in most jurisdictions where the Company operates beginning on January 1, 2024. FEMSA is within the scope of the legislation enacted or substantially enacted and has conducted an assessment of the Company's potential exposure to Second Pillar income taxes.
The Company has applied the mandatory exception to recognizing and disclosing information about deferred tax assets and liabilities arising from Pillar Two income taxes. Furthermore, the Company has reviewed its corporate structure in light of the introduction of Pillar Two Model Rules in various jurisdictions. Since the Company's effective tax rate is well above 15% in all jurisdictions in which it operates, it has determined that it is not subject to Pillar Two "top-up" taxes. Therefore, the consolidated financial statements do not include information required by paragraphs 88A-88D of IAS 12.
The assessment of potential exposure to income taxes in the Second Pillar is based on the most recent tax returns, country-by-country reports and financial statements of the entities that are part of FEMSA. According to the assessment, effective Second Pillar tax rates in most jurisdictions where FEMSA operates are above 15%. However, there are a limited number of jurisdictions where the enabling rules of the Second Pillar are in the process of being issued and implemented and the effective tax rate of the Second Pillar is close to 15%. FEMSA does not expect significant exposure to Second Pillar income taxes in those jurisdictions; however, the development and publication of such rules will be monitored.
The Mexican tax authority, as of December 31, 2023, has not issued rules related to the tax treatment of the Second Pillar.
25.7 Income tax rates
The income tax rates in the countries where the Company operates as of December 31, 2023, 2022 and 2021 were as follows:

|  | 2023 |  | 2022 |  | 2021
Mexico |  | 30.0 | % |  | 30.0 | % |  | 30.0 | %
Guatemala |  | 25.0 | % |  | 25.0 | % |  | 25.0 | %
Costa Rica |  | 30.0 | % |  | 30.0 | % |  | 30.0 | %
Panama |  | 25.0 | % |  | 25.0 | % |  | 25.0 | %
Nicaragua |  | 30.0 | % |  | 30.0 | % |  | 30.0 | %
Colombia |  | 35.0 | % |  | 35.0 | % |  | 31.0 | %
Argentina |  | 35.0 | % |  | 35.0 | % |  | 30.0 | %
Brazil |  | 34.0 | % |  | 34.0 | % |  | 34.0 | %
Chile |  | 27.0 | % |  | 27.0 | % |  | 27.0 | %
Peru |  | 29.5 | % |  | 29.5 | % |  | 29.5 | %
Ecuador |  | 25.0 | % |  | 25.0 | % |  | 25.0 | %
Uruguay |  | 25.0 | % |  | 25.0 | % |  | 25.0 | %
United States |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Switzerland |  | 18.6 | % |  | 18.6 | % |  | 18.6 | %

The management currently has no reason to believe that the tax rates will change in the foreseeable future.
25.8 Income Tax
The major components of income tax expense for the years ended December 31, 2023, 2022 and 2021 are:
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|  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Current tax expense |  | Ps. | 30,413 |  |  | Ps. | 17,007 |  |  | Ps. | 14,244 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |
Origination and reversal of temporary differences |  |  | 247 |  |  |  | (1,164) |  |  |  | 2,390 |
Utilization (benefit) of tax losses, net |  |  | (3,198) |  |  |  | (389) |  |  |  | (1,498) |
Change in the statutory rate |  |  | (172) |  |  |  | (102) |  |  |  | 4 |
Total deferred tax expense (benefit) |  |  | (3,123) |  |  |  | (1,655) |  |  |  | 896 |
Total income taxes |  | Ps. | 27,290 |  |  | Ps. | 15,352 |  |  | Ps. | 15,140 |
Total income taxes attributable to continued operation |  | Ps. | 12,971 |  |  | Ps. | 13,275 |  |  | Ps. | 13,566 |
Total income taxes attributable to discontinued operation |  |  | 14,319 |  |  |  | 2,077 |  |  |  | 1,574 |
|  | Ps. | 27,290 |  |  | Ps. | 15,352 |  |  | Ps. | 15,140 |

Recognized in Consolidated Statement of Other Comprehensive Income (“OCI”)

Income tax related to items charged or |  |  |  |  |  |  |  |  |
recognized directly in OCI during the period: |  | 2023 |  | 2022 |  | 2021
Unrealized gain (loss) on cash flow hedges |  | Ps. | (355) |  |  | Ps. | (1,158) |  |  | Ps. | 992 |
Exchange differences on translation of foreign operations |  |  | (1,951) |  |  |  | (3,742) |  |  |  | (1,730) |
Remeasurements of the net defined benefit liability |  |  | 11 |  |  |  | 383 |  |  |  | 127 |
Share of the other comprehensive income of equity method accounted investees (1) |  |  | 3,108 |  |  |  | 1,129 |  |  |  | 1,506 |
Total income tax expense (benefit) recognized in OCI |  | Ps. | 813 |  |  | Ps. | (3,388) |  |  | Ps. | 895 |

(1)Deferred income taxes related to currency translation adjustment, mark to market of derivative financial instruments and employee benefits for equity method accounted investees which as of December 31, 2023 amounted to Ps. 2,953, Ps. (239), and Ps. 394, respectively.
A reconciliation between tax expense and income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method multiplied by the Mexican domestic tax rate for the years ended December 31, 2023, 2022 and 2021 is as follows:

|  | 2023 | 2022 (Revised) | 2021 (Revised)
Mexican statutory income tax rate |  | 30.0 | % | 30.0 | % | 30.0 | %
Difference between book and tax inflationary values and translation effects |  | (1.7) |  | % | (5.4) |  | % | (4.8) |  | %
Annual inflation tax adjustment |  | 0.2 | % | 7.0 | % | 7.7 | %
Income tax at a rate other than Mexican statutory rates |  | 0.9 | % | 2.8 | % | 0.2 | %
Non-deductible expenses |  | 2.1 | % | 3.8 | % | 2.1 | %
Taxable (non-taxable) income |  | (3.2) | % | 1.4 | % | 2.3 | %
Others |  | 0.1 |  | % | 0.1 |  | % | 0.1 |  | %
Adjustments for previous tax years |  | — | % | 0.4 | % | — | %
Income Tax credits (1) |  | — |  | % | — |  | % | (1.5) |  | %
Tax loss (recognition) write off (2) (3) |  | (3.3) |  | % | (5.5) |  | % | (1.4) |  | %
Sale of investment of Heineken |  | 1.2 | % | — |  | % | — |  | %
Consolidated Effective income tax rate |  | 26.3 | % | 34.6 | % | 34.7 | %
Effective income tax rate from continued operations |  | 22.7 | % | 33.0 | % | 34.3 | %
Effective income tax rate from discontinued operations |  | 3.6 | % | 1.6 | % | 0.4 | %

(1)Favorable position of Brazilian Courts related to a no taxation on financial effects of recovered tax credits from previously won judicial disputes, which allowed a recognition of a deferred tax credit in Brazil in 2021.
(2)During 2022, Coca-Cola FEMSA recognized an amount of Ps.(2,194) as favorable effects on the deferred tax assets of its territories taking into account our expectation that those deferred tax assets will be recovered in the future.
(3)The majority related to tax loss generated in 2023 from a reorganization of the business at Health Division in Chile.
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Deferred Income Tax Related to:

|  | Consolidated Statement |  | Consolidated
|  | of Financial Position as of |  | Income Statements
|  | December 31, 2023 |  | December 31, 2022 |  | 2023 |  | 2022 (Revised) |  | 2021 (Revised)
Expected credit losses |  | Ps. | (356) |  |  | Ps. | (389) |  |  | Ps. | (6) |  |  | Ps. | 21 |  |  | Ps. | (3) |
Inventories |  |  | (61) |  |  |  | (107) |  |  |  | (1) |  |  |  | 99 |  |  |  | (17) |
Other current assets |  |  | 317 |  |  |  | 99 |  |  |  | 92 |  |  |  | (78) |  |  |  | 47 |
Property, plant and equipment, net |  |  | (7,075) |  |  |  | (7,288) |  |  |  | 275 |  |  |  | (1,345) |  |  |  | (1,081) |
Right of use Assets |  |  | (1,166) |  |  |  | (1,433) |  |  |  | 194 |  |  |  | (151) |  |  |  | (482) |
Investments in equity method accounted investees |  |  | (51) |  |  |  | (7,330) |  |  |  | 74 |  |  |  | (58) |  |  |  | (22) |
Other assets |  |  | 315 |  |  |  | (283) |  |  |  | (884) |  |  |  | 36 |  |  |  | (2) |
Finite useful lived intangible assets |  |  | 131 |  |  |  | 3 |  |  |  | 145 |  |  |  | (139) |  |  |  | 498 |
Indefinite lived intangible assets |  |  | 1,499 |  |  |  | 3,693 |  |  |  | (2,161) |  |  |  | 402 |  |  |  | 36 |
Post-employment and other long-term employee benefits |  |  | (821) |  |  |  | (736) |  |  |  | (79) |  |  |  | (71) |  |  |  | (258) |
Derivative financial instruments |  |  | (240) |  |  |  | 420 |  |  |  | (577) |  |  |  | (111) |  |  |  | 738 |
Temporary non-deductible provisions |  |  | (4,602) |  |  |  | (3,971) |  |  |  | (1,006) |  |  |  | 43 |  |  |  | 1,280 |
Employee profit sharing payable |  |  | (1,003) |  |  |  | (871) |  |  |  | (56) |  |  |  | (304) |  |  |  | (393) |
Tax loss carryforwards |  |  | (13,137) |  |  |  | (10,177) |  |  |  | (3,198) |  |  |  | (389) |  |  |  | (1,498) |
Tax credits to recover (1) |  |  | (797) |  |  |  | (1,065) |  |  |  | (73) |  |  |  | 255 |  |  |  | 1,200 |
Cumulative other comprehensive income |  |  | (394) |  |  |  | (218) |  |  |  | — |  |  |  | (417) |  |  |  | — |
Exchange differences on translation of foreign operations in OCI |  |  | 2,000 |  |  |  | 4,603 |  |  |  | — |  |  |  | — |  |  |  | — |
Other liabilities |  |  | (1,785) |  |  |  | (752) |  |  |  | (45) |  |  |  | 322 |  |  |  | 1 |
Lease liabilities |  |  | (446) |  |  |  | (382) |  |  |  | (255) |  |  |  | (272) |  |  |  | 53 |
Liabilities of amortization of goodwill of business acquisition |  |  | 7,445 |  |  |  | 6,117 |  |  |  | — |  |  |  | — |  |  |  | 86 |
Deferred income tax |  |  |  |  |  |  |  | Ps. | (7,561) |  |  | Ps. | (2,157) |  |  | Ps. | 183 |
Deferred tax income net recorded in share of the profit of equity method accounted investees |  |  |  |  |  |  |  |  | 1,601 |  |  |  | 567 |  |  |  | 443 |
Deferred income tax, net |  |  |  |  |  |  |  | Ps. | (5,960) |  |  | Ps. | (1,590) |  |  | Ps. | 626 |
Deferred tax discontinued operations |  |  |  |  |  |  |  | Ps. | 2,838 |  |  | Ps. | (65) |  |  | Ps. | 270 |
Deferred income taxes, net |  | Ps. | (20,227) |  |  | Ps. | (20,067) |  |  |  |  |  |  |  |  |  |
Deferred tax asset before reclassification to assets held for sale |  |  | (29,639) |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax asset from assets held for sale |  |  | 2,041 |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax assets |  | Ps. | (27,598) |  |  | Ps. | (26,890) |  |  |  |  |  |  |  |  |  |
Deferred tax liability before reclassification to assets held for sale |  |  | 7,373 |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax liability from assets held from sale |  |  | (2) |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax liabilities |  | Ps. | 7,371 |  |  | Ps. | 6,823 |  |  |  |  |  |  |  |  |  |

(1)Corresponds to income tax credits arising from dividends received from foreign subsidiaries to be recovered within the next ten years according to the Mexican Income Tax law.
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Income tax related to Accumulated Other Comprehensive Income (“AOCI”)

Income tax related to items charged or |  |  |  |  |  |
recognized directly in AOCI as of the year: |  | 2023 |  | 2022
Unrealized gain on derivative financial instruments |  | Ps. | 324 |  |  | Ps. | 688 |
Remeasurements of the net defined benefit liability |  |  | (221) |  |  |  | (251) |
Exchange differences on translation of foreign operations |  |  | 1,828 |  |  |  | 3,778 |
Gain on hedge of net investments in foreign operations |  |  | 1,401 |  |  |  | 2,216 |
Share of other comprehensive income of associated companies and joint ventures |  |  | — |  |  |  | (3,108) |
Total deferred tax loss related to AOCI |  | Ps. | 3,332 |  |  | Ps. | 3,323 |

The changes in the balance of the net deferred income tax asset are as follows:

|  | 2023 |  | 2022 |  | 2021
Balance at the beginning of the period |  | Ps. | (20,067) |  |  | Ps. | (14,691) |  |  | Ps. | (16,010) |
Deferred tax provision for the period (Note 25.8) |  |  | (5,960) |  |  |  | (1,115) |  |  |  | 622 |
Deferred tax income net recorded in share of the profit of equity method accounted investees |  |  | 2 |  |  |  | (694) |  |  |  | 277 |
Acquisition of subsidiaries |  |  | 1,871 |  |  |  | — |  |  |  | — |
Effects in equity: |  |  |  |  |  |  |  |  |
Unrealized (gain) on cash flow hedges |  |  | (594) |  |  |  | (1,281) |  |  |  | 1,006 |
Exchange differences on translation of foreign operations |  |  | 1,002 |  |  |  | (2,604) |  |  |  | (491) |
Remeasurements of the net defined benefit liability |  |  | 405 |  |  |  | 497 |  |  |  | 380 |
Retained earnings of equity method accounted investees |  |  | 954 |  |  |  | (334) |  |  |  | 32 |
Restatement effect of the period and beginning balances associated with hyperinflationary economies |  |  | 121 |  |  |  | 155 |  |  |  | (507) |
Related discontinued operations |  |  | 2,039 |  |  |  | — |  |  |  | — |
Balance at the end of the period |  | Ps. | (20,227) |  |  | Ps. | (20,067) |  |  | Ps. | (14,691) |

Tax Loss Carryforwards
The subsidiaries in Mexico, Colombia, Chile, Uruguay, Argentina and Brazil have tax loss carryforwards. Unused tax loss carryforwards, for which a deferred income tax asset has been recognized, may be recovered provided certain requirements are fulfilled. The tax losses carryforwards for which a deferred tax asset has been recorded and their corresponding years of expiration are as follows:

|  | Tax Loss
Year |  | Carryforwards
2024 |  | Ps. | 963
2025 |  |  | 790
2026 |  |  | 635
2027 |  |  | 659
2028 |  |  | 484
2029 |  |  | 2,743
2030 |  |  | 3,323
2031 |  |  | 403
2032 |  |  | 3,283
2033 and thereafter |  |  | 16,567
No expiration (Brazil and Colombia) |  |  | 12,963
|  | Ps. | 42,813

Considering all available evidence, including forecasts, business plans and strategic measures, as of December 31, 2023 and 2022 the Company has decided not to recognize a deferred income tax asset related to temporary differences not recognized in previous tax years. The amount of deferred income tax assets not recognized in previous tax years and adjusted as of December 31, 2023 and 2022 were Ps. 1,547 and Ps 1,816, respectively.
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The Company recorded certain goodwill balances due to business acquisitions that are deductible for Brazilian income tax reporting purposes. The deduction of such goodwill amortization has resulted in the creation of net operating losses (NOLs) in Brazil which have no expiration, but their usage is limited to 30% of Brazilian taxable income in any given year. As of December 31, 2023, the Company believes that it is more likely than not that it will ultimately recover such NOLs through the reversal of temporary differences and future taxable income. Accordingly, the related deferred tax assets have been fully recognized.
The changes in the balance of tax loss carryforwards are as follows:

|  | 2023 |  | 2022
Balance at beginning of the period |  | Ps. | 31,323 |  |  | Ps. | 30,041 |
Derecognized |  |  | (932) |  |  |  | (13,348) |
Increase (1) |  |  | 21,018 |  |  |  | 14,639 |
Usage of tax losses |  |  | (7,281) |  |  |  | (460) |
Translation effect of beginning balances |  |  | (1,315) |  |  |  | 451 |
Balance at end of the period |  | Ps. | 42,813 |  |  | Ps. | 31,323 |

(1)The recognition of tax loss carryforwards from previous years is shown under the item of increases, together with the tax loss carryforwards generated in the same years
Taxes associated with the payment of dividends
There were no withholding taxes associated with the payment of dividends in 2023, 2022 or 2021 by the Company to its shareholders.
Undistributed profits
The Company has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future. As of December 31, 2023, 2022 and 2021, the unrecognized deferred tax liabilities associated with investments in subsidiaries, associates and joint ventures aggregate to Ps. 5,792, Ps. 14,528 and Ps. 19,141, respectively.
Note 26. Other Liabilities, Provisions, Contingencies and Commitments
26.1 Other current liabilities.

|  | December 31, 2023 |  | December 31, 2022
Short-term employee benefits |  | Ps. | 11,808 |  | Ps. | 12,335
Accrued expenses |  |  | 14,151 |  |  | 19,115
Other |  |  | 813 |  |  | 392
Total |  | Ps. | 26,772 |  | Ps. | 31,842

26.2 Other current financial liabilities

|  | December 31, 2023 |  | December 31, 2022
Sundry creditors |  | Ps. | 18,540 |  | Ps. | 16,869
Derivative financial instruments (see Note 21) |  |  | 738 |  |  | 470
Other tax payable |  |  | 11,106 |  |  | 11,275
Other |  |  | 108 |  |  | 136
Total |  | Ps. | 30,492 |  | Ps. | 28,750

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26.3 Other non-current liabilities

|  | December 31, 2023 |  | December 31, 2022
Tax payable |  | Ps. | 1,116 |  | Ps. | 1,045
Debt with former shareholders |  |  | 1,578 |  |  | 1,575
Other |  |  | 1,923 |  |  | 1,676
Total |  | Ps. | 4,617 |  | Ps. | 4,296

26.4 Other non-current financial liabilities

|  | December 31, 2023 |  | December 31, 2022
Derivative financial instruments (see Note 21) |  | Ps. | 8,653 |  | Ps. | 5,651
Security deposits |  |  | 1,012 |  |  | 967
Total |  | Ps. | 9,665 |  | Ps. | 6,618

26.5 Provisions
The Company has various loss contingencies and has recognized provisions for those legal proceedings it believes an unfavorable resolution is probable. Most of these contingencies are the result of the Company’s business acquisitions. The following table presents the nature and amount of the provisions as of December 31, 2023 and 2022:

|  | December 31, 2023 |  | December 31, 2022
Indirect taxes |  | Ps. | 1,649 |  | Ps. | 1,976
Labor |  |  | 1,570 |  |  | 1,703
Legal |  |  | 1,104 |  |  | 1,006
Total (1) |  | Ps. | 4,323 |  | Ps. | 4,685

(1)As it is customary in Brazil, the Company is required to guarantee tax, legal and labor contingencies by guarantee deposits, including those related to business acquisitions. See Note 14.1.
26.6 Changes in the balance of provisions
26.6.1 Indirect taxes

|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Balance at beginning of the period |  | Ps. | 1,976 |  |  | Ps. | 2,845 |  |  | Ps. | 3,153 |
Penalties and other charges (see Note 20) |  |  | 56 |  |  |  | 109 |  |  |  | 77 |
New contingencies (see Note 20) |  |  | 475 |  |  |  | 249 |  |  |  | 314 |
Cancellation and expiration (see Note 20) |  |  | (9) |  |  |  | (738) |  |  |  | (77) |
Payments |  |  | (587) |  |  |  | (473) |  |  |  | (237) |
Effects of changes in foreign exchange rates |  |  | (110) |  |  |  | (16) |  |  |  | (385) |
Discontinuing operations |  |  | (152) |  |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 1,649 |  |  | Ps. | 1,976 |  |  | Ps. | 2,845 |

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26.6.2 Labor

|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Balance at beginning of the period |  | Ps. | 1,703 |  |  | Ps. | 1,807 |  |  | Ps. | 1,857 |
Penalties and other charges (see Note 20) |  |  | 64 |  |  |  | 81 |  |  |  | 309 |
New contingencies (see Note 20) |  |  | 868 |  |  |  | 571 |  |  |  | 526 |
Contingencies added in the business combination |  |  | — |  |  |  | 67 |  |  |  | — |
Cancellation and expiration (see Note 20) |  |  | (525) |  |  |  | (443) |  |  |  | (445) |
Payments |  |  | (308) |  |  |  | (320) |  |  |  | (360) |
Effects of changes in foreign exchange rates |  |  | (155) |  |  |  | (60) |  |  |  | (80) |
Discontinuing operations |  |  | (77) |  |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 1,570 |  |  | Ps. | 1,703 |  |  | Ps. | 1,807 |

26.6.3 Legal

|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Balance at beginning of the period |  | Ps. | 1,006 |  |  | Ps. | 937 |  |  | Ps. | 1,293 |
Penalties and other charges (see Note 20) |  |  | 50 |  |  |  | 63 |  |  |  | 68 |
New contingencies (see Note 20) |  |  | 423 |  |  |  | 141 |  |  |  | 35 |
Contingencies added in the business combination |  |  | — |  |  |  | 158 |  |  |  | — |
Cancellation and expiration (see Note 20) |  |  | (122) |  |  |  | (146) |  |  |  | (364) |
Payments |  |  | (68) |  |  |  | (110) |  |  |  | (97) |
Effects of changes in foreign exchange rates |  |  | (84) |  |  |  | (37) |  |  |  | 2 |
Discontinuing operations |  |  | (101) |  |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 1,104 |  |  | Ps. | 1,006 |  |  | Ps. | 937 |

While provision for all claims has already been made, the actual outcome of the disputes and the timing of the resolution cannot be estimated by the Company at this time.
26.7 Unsettled lawsuits
The Company has entered into several proceedings with its labor unions, tax authorities, and other parties that primarily involve Coca-Cola FEMSA and its subsidiaries. These proceedings have arisen in the ordinary course of business and are common to the industry in which the Company operates. Such contingencies were assessed by the Company as less than probable but more than remote, and the estimated amount including uncertain tax position as of December 31, 2023 is Ps. 140,462, however, the Company believes that the ultimate resolution of such proceedings will not have a material effect on its consolidated financial position or result of operations.
Included in this amount Coca-Cola FEMSA has tax disputes, most of which are related to its Brazilian operations, with loss expectations assessed by management and supported by the analysis of legal counsel considered as possible. The main possible tax contingencies of Brazilian operations amount to approximately Ps. 66,710. This refers to various tax disputes related primarily to: (i) Ps. 10,166 of credits for ICMS (“VAT”); (ii) Ps. 38,150 related to tax credits of “IPI" (Tax on Industrial Products by its Portuguese acronym) over raw materials acquired from Free Trade Zone Manaus; (iii) claims of Ps. 5,188 related to compensation of federal taxes not approved by Tax authorities; (iv) Ps. 9,949 related to questions about the amortization of goodwill generated in acquisition operations; (v) Ps. 2,668 relating to liability over the operations of a third party, former distributor, in the period from 2001 to 2003 and (vi) Ps. 589 related to the exclusion of ICMS ("VAT") from the PIS/COFINS taxable basis. Coca-Cola FEMSA is defending its position in these matters and final decision is pending in court.
After conducting a thorough analysis, during 2021 Coca-Cola FEMSA decided to reverse its temporary decision to suspend tax credits on concentrate purchased from the Manaus Free Trade Zone in Brazil. As a result, during 2021 Coca-
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Cola FEMSA has recognized an extraordinary benefit of Ps. 1,083 million in the cost of goods sold equivalent to the accumulated credit suspended since 2019 and until the first quarter of 2021. This decision was supported by opinions from external advisors.
In recent years in its Mexican and Brazilian territories, Coca-Cola FEMSA has been requested to present certain information regarding possible monopolistic practices. These requests are commonly generated in the ordinary course of business in the soft drink industry where these subsidiaries operate. The Company does not expect any material liability to arise from these contingencies.
26.8 Collateralized contingencies
As is customary in Brazil, Coca-Cola FEMSA has been required by the tax authorities to collateralize tax contingencies currently in litigation amounting to Ps. 13,692, Ps. 13,728 and Ps.10,721 as of December 31, 2023, 2022 and 2021, respectively, by pledging fixed assets and entering into available lines of credit covering the contingencies. Also, as disclosed in Note 9.2, there is some restricted cash in Brazil that relates to short terms deposits in order to fulfill the collateral requirements for accounts payable.
26.9 Commitments
The Company has signed commitments for the purchase of property, plant and equipment of Ps. 3,394, Ps. 2,588 and Ps. 726 as of December 31, 2023, 2022, and 2021 respectively.
Note 27. Information by Segment
The information by segment is presented considering the Company’s business units (as defined in Note 1) based on its products and services, which is consistent with the internal reporting reviewed by the Chief Operating Decision Maker. A segment is a component of the Company that engages in business activities from which it earns revenues, and incurs the related costs and expenses, including revenues, costs and expenses that relate to transactions with any of the Company’s other components. All segments’ operating results are reviewed regularly by the Chief Operating Decision Maker, who makes decisions about the resources that would be allocated to the segment and to assess its performance, and for which financial information is available.
On February 15, 2023, the Company announced a new long-range plan to maximize value creation, as well as a series of decisions resulting from its strategic review process. During 2022, FEMSA carried out a thorough strategic review of its business platform, including the bottom-up definition of long-range plans for each business unit, as well as the top-down analysis of the optimal corporate and capital structure, to ensure full alignment between the Board and management as to how to pursue and maximize value creation.
Consistent with this vision, the Company has determined that the best path to maximize long term value creation is by focusing on its core business verticals which have the highest strategic relevance, growth potential, and financial and competitive strength:
•Retail, with excellent long-term growth opportunities, comprised of Proximity, Health, and Fuel.
•Coca-Cola FEMSA, leveraging its leading competitive position and best in class execution, combined with significant financial strength and strategic opportunities.
•Digital solutions, building a powerful value-added financial ecosystem, while playing a key role in leveraging the connection among FEMSA’s core business units and its customers.
As a result of what is mentioned above, Logistics and Distributions segment, as well as the investment in Heineken are no longer presented as a reportable segment given the divestiture plans and their presentation as discontinued operations (see Note 4) for all periods in these consolidated financial statements.
Inter-segment transfers or transactions are entered into and presented under accounting policies of each segment, which are the same as those applied by the Company. Intercompany operations are eliminated and presented within the consolidation adjustment column included in the tables below.
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a)By Business Unit:

2023 |  | Coca-Cola FEMSA |  | Proximity Americas Division |  | Proximity Europe Division |  | Health Division |  | Fuel Division |  | Discontinued operations |  | Other (1) |  | Consolidation Adjustments |  | Consolidated
Total revenues |  | Ps. | 245,088 |  | Ps. | 278,520 |  | Ps. | 43,552 |  | Ps. | 75,358 |  | Ps. | 58,499 |  | Ps. | — |  | Ps. | 56,875 |  | Ps. | (55,200) |  | Ps. | 702,692
Intercompany revenue |  |  | 8,448 |  |  | 1,735 |  |  | — |  |  | 3 |  |  | 349 |  |  | — |  |  | 44,665 |  |  | (55,200) |  |  | —
Gross profit |  |  | 110,860 |  |  | 117,062 |  |  | 18,622 |  |  | 22,499 |  |  | 7,344 |  |  | — |  |  | 32,647 |  |  | (29,527) |  |  | 279,507
Income before income taxes and share of the profit of equity method accounted investees |  |  | 28,792 |  |  | 2,401 |  |  | 388 |  |  | (166) |  |  | 699 |  |  | — |  |  | 40,139 |  |  | (14,437) |  |  | 57,816
Consolidated net income from continued operations |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 44,439
Consolidated net income from discontinued operations |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 32,238 |  |  | — |  |  | — |  |  | 32,238
Depreciation and amortization (2) |  |  | 10,531 |  |  | 12,937 |  |  | 4,700 |  |  | 3,447 |  |  | 1,137 |  |  | — |  |  | 2,646 |  |  | (1,381) |  |  | 34,017
Non-cash items other than depreciation and amortization |  |  | 1,707 |  |  | 509 |  |  | 148 |  |  | 1,296 |  |  | 13 |  |  | — |  |  | (328) |  |  | 2 |  |  | 3,347
Investments in equity method accounted investees |  |  | 9,246 |  |  | 1,690 |  |  | — |  |  | 1 |  |  | 19 |  |  | — |  |  | 15,291 |  |  | — |  |  | 26,247
Total assets |  |  | 273,512 |  |  | 176,836 |  |  | 39,833 |  |  | 64,888 |  |  | 25,124 |  |  | 25,819 |  |  | 403,265 |  |  | (203,421) |  |  | 805,856
Total liabilities |  |  | 139,808 |  |  | 149,131 |  |  | 37,876 |  |  | 48,357 |  |  | 20,267 |  |  | 11,569 |  |  | 120,707 |  |  | (100,228) |  |  | 427,487
Investments in fixed assets (3) |  |  | 21,396 |  |  | 13,387 |  |  | 1,654 |  |  | 1,750 |  |  | 186 |  |  | — |  |  | 1,659 |  |  | (1,421) |  |  | 38,611

(1)Includes other companies and corporate (see Note 1).
(2)Includes bottle breakage.
(3)Includes acquisitions and disposals of property, plant and equipment, intangible assets, and other long-lived assets. The disposals of property, plant and equipment are for Ps. 400.

2022 (Revised) |  | Coca-Cola FEMSA |  | Proximity Americas Division |  | Proximity Europe Division |  | Health Division |  | Fuel Division |  | Discontinued operations |  | Other (1) |  | Consolidation Adjustments |  | Consolidated
Total revenues |  | Ps. | 226,740 |  |  | Ps. | 233,958 |  |  | Ps. | 9,809 |  |  | Ps. | 74,800 |  |  | Ps. | 51,813 |  |  | Ps. | — |  |  | Ps. | 21,280 |  |  | Ps. | (21,392) |  |  | Ps. | 597,008 |
Intercompany revenue |  |  | 6,489 |  |  |  | 74 |  |  |  | — |  |  |  | — |  |  |  | 311 |  |  |  | — |  |  |  | 14,518 |  |  |  | (21,392) |  |  |  | — |
Gross profit |  |  | 100,300 |  |  |  | 97,586 |  |  |  | 4,599 |  |  |  | 21,983 |  |  |  | 6,560 |  |  |  | — |  |  |  | (3,785) |  |  |  | 14,275 |  |  |  | 241,518 |
Income before income taxes and share of the profit of equity method accounted investees |  |  | 25,787 |  |  |  | 5,661 |  |  |  | 218 |  |  |  | 1,659 |  |  |  | 1,543 |  |  |  | — |  |  |  | (27,939) |  |  |  | 39,567 |  |  |  | 46,496 |
Consolidated net income from continued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33,320 |
Consolidated net income from discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,423 |  |  |  | — |  |  |  | — |  |  |  | 1,423 |
Depreciation and amortization (2) |  |  | 10,425 |  |  |  | 11,571 |  |  |  | 826 |  |  |  | 3,291 |  |  |  | 1,062 |  |  |  | — |  |  |  | 719 |  |  |  | (575) |  |  |  | 27,319 |
Non-cash items other than depreciation and amortization |  |  | 1,738 |  |  |  | 511 |  |  |  | 6 |  |  |  | 394 |  |  |  | 59 |  |  |  | — |  |  |  | 272 |  |  |  | 68 |  |  |  | 3,048 |
Investments in equity method accounted investees (4) |  |  | 8,452 |  |  |  | 2,650 |  |  |  | — |  |  |  | 1 |  |  |  | 19 |  |  |  | — |  |  |  | 265 |  |  |  | — |  |  |  | 103,669 |
Total assets |  |  | 277,995 |  |  |  | 143,877 |  |  |  | 38,759 |  |  |  | 60,960 |  |  |  | 24,102 |  |  |  | 179,277 |  |  |  | 162,788 |  |  |  | (88,943) |  |  |  | 798,815 |
Total liabilities |  |  | 146,119 |  |  |  | 119,991 |  |  |  | 36,647 |  |  |  | 47,798 |  |  |  | 19,574 |  |  |  | 45,094 |  |  |  | 134,742 |  |  |  | (88,951) |  |  |  | 461,014 |
Investments in fixed assets (3) |  |  | 19,665 |  |  |  | 9,957 |  |  |  | 544 |  |  |  | 2,868 |  |  |  | 157 |  |  |  | 1,140 |  |  |  | 1,047 |  |  |  | (968) |  |  |  | 34,410 |

(1)Includes other companies and corporate (see Note 1).
(2)Includes bottle breakage.
(3)Includes acquisitions and disposals of property, plant and equipment, intangible assets, and other long-lived assets. The disposals of property, plant and equipment are for Ps. 308.
(4)Includes Company's investment in Heineken for an amount of Ps. 92,282.

2021 (Revised) |  | Coca-Cola FEMSA |  | Proximity Division |  | Health Division |  | Fuel Division |  | Discontinued operations |  | Other (1) |  | Consolidation Adjustments |  | Consolidated
Total revenues |  | Ps. | 194,804 |  |  | Ps. | 198,586 |  |  | Ps. | 73,027 |  |  | Ps. | 39,922 |  |  | Ps. | — |  |  | Ps. | 19,365 |  |  | Ps. | (20,244) |  |  | Ps. | 505,460 |
Intercompany revenue |  |  | 5,428 |  |  |  | 520 |  |  |  | — |  |  |  | 57 |  |  |  | — |  |  |  | 14,239 |  |  |  | (20,244) |  |  |  | — |
Gross profit |  |  | 88,598 |  |  |  | 84,196 |  |  |  | 21,736 |  |  |  | 5,269 |  |  |  | — |  |  |  | 11,519 |  |  |  | (5,134) |  |  |  | 206,184 |
Income before income taxes and share of the profit of equity method accounted investees |  |  | 22,852 |  |  |  | 12,580 |  |  |  | 1,068 |  |  |  | 455 |  |  |  | — |  |  |  | 6,217 |  |  |  | (182) |  |  |  | 42,990 |
Consolidated net income from continued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 29,414 |
Consolidated net income from discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8,264 |  |  |  | — |  |  |  | — |  |  |  | 8,264 |
Depreciation and amortization (2) |  |  | 9,834 |  |  |  | 10,869 |  |  |  | 3,355 |  |  |  | 972 |  |  |  | — |  |  |  | 494 |  |  |  | (129) |  |  |  | 25,395 |
Non-cash items other than depreciation and amortization |  |  | 1,613 |  |  |  | 448 |  |  |  | 111 |  |  |  | 14 |  |  |  | — |  |  |  | 255 |  |  |  | — |  |  |  | 2,441 |
Investments in equity method accounted investees (4) |  |  | 7,494 |  |  |  | 2,899 |  |  |  | — |  |  |  | 19 |  |  |  | — |  |  |  | 538 |  |  |  | — |  |  |  | 107,299 |
Total assets |  |  | 271,567 |  |  |  | 129,821 |  |  |  | 57,463 |  |  |  | 19,878 |  |  |  | 165,874 |  |  |  | 166,984 |  |  |  | (74,087) |  |  |  | 737,500 |
Total liabilities |  |  | 143,995 |  |  |  | 110,765 |  |  |  | 44,037 |  |  |  | 16,503 |  |  |  | 32,628 |  |  |  | 128,568 |  |  |  | (74,113) |  |  |  | 402,383 |
Investments in fixed assets (3) |  |  | 13,865 |  |  |  | 7,179 |  |  |  | 2,049 |  |  |  | 243 |  |  |  | 557 |  |  |  | 474 |  |  |  | (312) |  |  |  | 24,055 |

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(1)Includes other companies and corporate (see Note 1).
(2)Includes bottle breakage.
(3)Includes acquisitions and disposals of property, plant and equipment, intangible assets, and other long-lived assets. The disposals of property, plant and equipment are for Ps. 208.
(4)Includes Company's investment in Heineken for an amount of Ps. 96,349.
b)By Geographic Area:
The Company aggregates geographic areas to report geographical information: (i) Mexico and Central America (comprising the following countries: Mexico, Guatemala, Nicaragua, Costa Rica and Panama), (ii) the United States, (iii) South America (comprising the following countries: Brazil, Argentina, Colombia, Chile, Ecuador, Peru and Uruguay) and (iv) Europe (comprised of the Company’s equity method investment in Heineken Group until 2022 and Valora). For further information related to aggregated geographic areas see Note 28.2 Disaggregation of revenue.
Geographic disclosure for the Company’s non-current assets is as follow:

|  | 2023 |  | 2022
Mexico and Central America (1) |  | Ps. | 305,204 |  | Ps. | 245,222
United States (2) |  |  | 36 |  |  | 61,164
South America (3) |  |  | 114,051 |  |  | 121,398
Europe (4) (5) |  |  | 30,406 |  |  | 144,582
Consolidated |  | Ps. | 449,697 |  | Ps. | 572,366

(1)Domestic (Mexico only) non-current assets were Ps. 295,770 and Ps. 237,832, as of December 31, 2023 and 2022, respectively.
(2)In 2023 the Company finalized the merger of Envoy Solutions, LLC into BradyIFS, keeping an economic interest of 37% in IFS TopCo. See Note 10.
(3)South America non-current assets includes Brazil, Argentina, Colombia, Chile, Uruguay and Ecuador. Brazilian non-current assets were Ps. 61,223 and Ps. 67,848, as of December 31, 2023 and 2022, respectively. Colombia’s non-current assets were Ps. 13,479 and Ps. 17,092, as of December 31, 2023 and 2022, respectively. Argentina’s non-current assets were Ps. 2,898 and Ps. 4,895, as of December 31, 2023 and 2022, respectively. Chile’s non-current assets were Ps. 30,885 and Ps. 30,272, as of December 31, 2023 and 2022, respectively. Uruguay’s non-current assets were Ps. 2,070 and Ps. 3,403, as of December 31, 2023 and 2022, respectively. Ecuador’s non-current assets were Ps. 3,496 and Ps. 3,737, as of December 31, 2023 and 2022, respectively.
(4)On October 7, 2022, the Company completed the acquisition of Valora Holding AG.
(5)During 2023 the Company sold its investment in Heineken Group. See Note 4.
Note 28. Revenues
28.1 Nature of goods sold and services
The information sets below described the core activities of the business units from which the Company generates its revenues. According to the revenue standard, the performance obligation for the Company’s business units is satisfied at
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a point when the control of goods and services is transferred to the customers. For detailed information about business segments, see Note 27.

Segment | Product or Service | Nature, timing to fulfill the performance obligation and significant payment terms
Coca-Cola FEMSA | Beverages sales | Includes the delivery of beverages to customers and wholesalers. The transaction prices are assigned to each product on sale based on its own sale price separately, net of promotions and discounts. The performance obligation is satisfied at the point in time the product on sale is delivered to the customer.
Services revenues | Includes the rendering of manufacturing services, logistic and administrative services. The transaction prices are assigned to each product on sale based on its own sale price if sold separately. The performance obligation is satisfied at the point in time the service is delivered to the customer.
Proximity Americas Division | Products sales | Operates the largest chain of small-format stores in Mexico and Latin America including as some of its principal products as beers, cigarettes, sodas, other beverages and snacks. The performance obligation is satisfied at the time of the sale or at the moment the control of the product is transferred and the payment is made by the customer.
Commercial revenues | Includes mainly the commercialization of spaces into within stores, and revenues related to promotions and financial services. The performance obligation is satisfied at the point in time the service is rendered to the customer.
Proximity Europe Division | Products sales | Operates a chain of small-box retail and foodvenience in Switzerland, Germany, Austria, Luxembourg and the Netherlands including as some of its principal products as tobacco, lottery products, snacks, press, food, fresh products, pretzels and drinks. The performance obligation is satisfied at the time of the sale or at the moment the control of the product is transferred and the payment is made by the customer.
Services revenues | Includes mainly the revenues related to financial services. The performance obligation is satisfied at the point in time the service is rendered to the customer.
Health Division | Product sales | The core products include patent and generic formulas of medicines, beauty products, medical supplements, housing and personnel care products. The performance obligation is satisfied at the point in time of the sale or at the moment the control of the product is transferred to the customer.
Services revenues | Rendering of services adding value as financial institutions, medical consultation and some financial services. The performance obligation is satisfied at the point in time of the rendering or the control is transferred to the customer.
Fuel Division | Product sales | The core products are sold in the retail service stations as fuels, diesel, motor oils and other car care products. The performance obligation is satisfied at the point in time on sale and/or the control is transferred to the customer.
Others | Production and sale of commercial refrigeration, plastic solutions, sale of equipment for food processing. Integral logistic services. | Involves the production, commercialization of refrigerators including its delivery and installation and offering of integral maintenance services at the point of sale. Also includes the design, manufacturing, and recycling of plastic products. In addition, it includes the sale of equipment for food processing, storage and weighing. The revenue recognition is performed at the time in which the corresponding installation is concluded. Rendering a wide range of logistic services and maintenance of vehicles to subsidiaries and customers. The operations are on a daily, monthly or based upon the customer’s request. The revenue is recognized progressively during the time the service is rendered in a period no greater than a month. The recognition of revenue in other business lines is performed at the point of sale or in time the control of the product is transferred to the customer.

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28.2 Disaggregation of revenue
The information sets below describe the disaggregation of revenue from external customers by geographic area, business unit and products and services categories in which the Company operates. The timing in which the revenues are recognized by the business units in the Company, is mainly at the point in the time in which control of goods is transferred, or over time when the services are rendered, in its entirety to the customer.

|  | Coca-Cola FEMSA | Proximity Americas Division | Proximity Europe Division | Health Division | Fuel Division | Other |  | Total
| 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021 |  | 2023 | 2022 (Revised) | 2021 (Revised)
By geographic areas: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexico and Central America (1) | Ps. | 149,362 |  | Ps. | 131,002 |  | Ps. | 115,794 |  |  | Ps. | 272,456 |  | Ps. | 229,331 |  | Ps. | 195,990 |  |  | Ps. | — |  | Ps. | — |  | Ps. | — |  |  | Ps. | 20,908 |  | Ps. | 21,212 |  | Ps. | 10,814 |  |  | Ps. | 58,499 |  | Ps. | 51,813 |  | Ps. | 39,922 |  |  | Ps. | 56,875 |  | Ps. | 21,280 |  | Ps. | 19,365 |  |  | Ps. | 558,100 |  | Ps. | 454,638 |  | Ps. | 381,885 |
United States (2) |  | — |  |  | — |  |  | — |  |  |  | 15 |  |  | 17 |  |  | 11 |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | 15 |  |  | 17 |  |  | 11 |
South America (3) |  | 95,726 |  |  | 95,738 |  |  | 79,010 |  |  |  | 6,049 |  |  | 4,610 |  |  | 2,585 |  |  |  | — |  |  | — |  |  | — |  |  |  | 54,450 |  |  | 53,588 |  |  | 62,213 |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | 156,225 |  |  | 153,936 |  |  | 143,808 |
Europe |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | 43,552 |  |  | 9,809 |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | 43,552 |  |  | 9,809 |  |  | — |
Total revenues |  | 245,088 |  |  | 226,740 |  |  | 194,804 |  |  |  | 278,520 |  |  | 233,958 |  |  | 198,586 |  |  |  | 43,552 |  |  | 9,809 |  |  | — |  |  |  | 75,358 |  |  | 74,800 |  |  | 73,027 |  |  |  | 58,499 |  |  | 51,813 |  |  | 39,922 |  |  |  | 56,875 |  |  | 21,280 |  |  | 19,365 |  |  |  | 757,892 |  |  | 618,400 |  |  | 525,704 |
Consolidation adjustments |  | 8,448 |  |  | 6,489 |  |  | 5,428 |  |  |  | 1,735 |  |  | 74 |  |  | 520 |  |  |  | — |  |  | — |  |  | — |  |  |  | 3 |  |  | — |  |  | — |  |  |  | 349 |  |  | 311 |  |  | 57 |  |  |  | 44,665 |  |  | 14,518 |  |  | 14,239 |  |  |  | 55,200 |  |  | 21,392 |  |  | 20,244 |
Consolidated revenues |  | 236,640 |  |  | 220,251 |  |  | 189,376 |  |  |  | 276,785 |  |  | 233,884 |  |  | 198,066 |  |  |  | 43,552 |  |  | 9,809 |  |  | — |  |  |  | 75,355 |  |  | 74,800 |  |  | 73,027 |  |  |  | 58,150 |  |  | 51,502 |  |  | 39,865 |  |  |  | 12,210 |  |  | 6,762 |  |  | 5,126 |  |  |  | 702,692 |  |  | 597,008 |  |  | 505,460 |
By products and/or services |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Products sold at a point-in time | Ps. | 245,088 |  | Ps. | 226,740 |  | Ps. | 194,804 |  |  | Ps. | 278,520 |  | Ps. | 233,958 |  | Ps. | 198,586 |  |  | Ps. | 43,552 |  | Ps. | 9,809 |  | Ps. | — |  |  | Ps. | 75,358 |  | Ps. | 74,800 |  | Ps. | 73,027 |  |  | Ps. | 57,616 |  | Ps. | 51,697 |  | Ps. | 39,585 |  |  | Ps. | 56,875 |  | Ps. | 21,280 |  | Ps. | 19,365 |  |  | Ps. | 757,009 |  | Ps. | 618,284 |  | Ps. | 525,367 |
Services revenues over time |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |  |  | 883 |  |  | 116 |  |  | 337 |  |  |  | — |  |  | — |  |  | — |  |  |  | 883 |  |  | 116 |  |  | 337 |
Consolidation adjustments |  | 8,448 |  |  | 6,489 |  |  | 5,428 |  |  |  | 1,735 |  |  | 74 |  |  | 520 |  |  |  | — |  |  | — |  |  | — |  |  |  | 3 |  |  | — |  |  | — |  |  |  | 349 |  |  | 311 |  |  | 57 |  |  |  | 44,665 |  |  | 14,518 |  |  | 14,239 |  |  |  | 55,200 |  |  | 21,392 |  |  | 20,244 |
Consolidated revenues |  | 236,640 |  |  | 220,251 |  |  | 189,376 |  |  |  | 276,785 |  |  | 233,884 |  |  | 198,066 |  |  |  | 43,552 |  |  | 9,809 |  |  | — |  |  |  | 75,355 |  |  | 74,800 |  |  | 73,027 |  |  |  | 58,150 |  |  | 51,502 |  |  | 39,865 |  |  |  | 12,210 |  |  | 6,762 |  |  | 5,126 |  |  |  | 702,692 |  |  | 597,008 |  |  | 505,460 |

(1)Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 456,709, Ps. 418,807 and Ps. 355,920 during the years ended December 31, 2023, 2022 and 2021, respectively.
(2)In 2023 the Company finalized the merger of Envoy Solutions, LLC into BradyIFS, keeping an economic interest of 37% in IFS TopCo. The revenues from this business unit were reclassified to discontinued operations for the years ended December 31, 2023, 2022 and 2021.
(3)South America includes Brazil, Argentina, Colombia, Chile, Uruguay and Ecuador. South America revenues include Brazilian revenues of Ps. 53,573, Ps. 70,737 and Ps. 59,973 during the years ended December 31, 2023, 2022 and 2021, respectively. South America revenues include Colombia’s revenues of Ps. 57,432, Ps. 45,733 and Ps. 17,548 during the years ended December 31, 2023, 2022 and 2021, respectively. South America revenues include Argentina’s revenues of Ps. 6,673, Ps. 11,034 and Ps. 8,546 during the years ended December 31, 2023, 2022 and 2021, respectively. South America revenues include Chile’s revenues of Ps. 35,437, Ps. 35,423 and Ps. 54,709 during the years ended December 31, 2023, 2022 and 2021, respectively. South America revenues include Uruguay’s revenues of Ps. 4,415, Ps. 3,886 and Ps. 3,371 during the years ended December 31, 2023, 2022 and 2021, respectively. South America revenues include Ecuador’s revenue of Ps. 8,986, Ps. 9,791 and Ps. 9,079 during the year ended in December 31, 2023, 2022 and 2021, respectively.
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28.3 Contract balances
As of December 31, 2023 and 2022, no significant cost was incurred to obtain or perform on a contract that might be capitalized as contract assets. No significant contacts have been entered into for which the Company has not performed all the obligations as well as additional costs associate with them.
28.4 Transaction price assigned to remaining performance obligations
There were not other performance obligations identified in customer contracts from the ones included in the transaction price. The Company considers highly probable the variable considerations identified per each business unit; therefore it is not expected that a significant reversion of the revenue amount could occurs.
Note 29. Future Impact of Recently Issued Accounting Standards not yet in Effect
The Company has not applied the following standards, amendments and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable when they become effective.
Classification of Liabilities as Current or Non-current - Amendments to IAS 1
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:
•What is meant by a right to defer settlement
•That a right to defer must exist at the end of the reporting period
•That classification is unaffected by the likelihood that an entity will exercise its deferral right
•That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification
The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and must be applied retrospectively. The Company is currently assessing the impact the amendments will have on current practice and whether existing loan agreements may require renegotiation.
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
The amendments to IFRS 16 specify the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right-of-use it retains. The amendments are applied retrospectively for annual periods beginning on or after January 1, 2024. Early application is permitted. The Company is currently assessing the impact the amendments will have on current practice.
The Enhancement and Standardization of Climate-Related Disclosures for Investors
On March 6, 2024, the Securities and Exchange Commission (SEC) issued the final rule on The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule mandates the disclosure of information regarding a registrant’s climate-related risks that have materially impacted or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. The Company is currently assessing the impact of this rule for disclosure to investors.
Note 30. Subsequent Events
As part of FEMSA Forward strategy, the Company started its Share Repurchase Program. On February 15, 2024, the Board of Directors has approved to submit to the 2024 Annual Shareholders Meeting the proposal to double its maximum share buyback capacity from the currently existing authorization.
In line with its Capital Allocation strategy, on March 15, 2024, the Company entered into an accelerated share repurchase ("ASR") agreement with a financial institution in the U.S. to repurchase certain of its shares through the acquisition of ADSs. Under the terms of the ASR agreement, the Company agreed to repurchase from such financial
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institution an aggregate amount of USD $400 million of its ADSs. On March 19, 2024, the Company received an initial delivery of approximately 20% of the ADSs subject to the ASR agreement. The total number of ADSs ultimately repurchased under the ASR agreement will be based on the daily volume-weighted average price of its ADSs during the term of the ASR agreement, subject to certain limitations. The final settlement of the ASR agreement is expected to be completed no later than the third quarter of 2024.
On March 22, 2024, the Company's shareholders at the Annual Shareholders Meeting approved a dividend of Ps. 0.9161 per FEMSAUB unit and Ps. 1.0993 per FEMSAUBD unit (Ps. 10.9931 per ADS) by paying four quarterly installments; as well as an additional dividend to be paid in four quarterly installments of Ps. 0.6418 per FEMSAUB unit and Ps. 0.7701 per FEMSAUBD unit (Ps. 7.7010 per ADS). Additionally, the Company's shareholders authorized the purchase of up to Ps. 34,000 of the Company's common stock during the fiscal year 2024, amount which did not exceed the total balance of the Company's net income, including retained earnings, as of such date.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders, the Supervisory Board, and the Executive Board of Heineken N.V.
Opinion on the Financial Statements
We have audited the consolidated statement of financial position of Heineken N.V. and subsidiaries (the "Company") as of December 31, 2022, the related consolidated income statement, other comprehensive income, cash flows, and changes in equity for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements") (not presented herein). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte Accountants B.V.
Amsterdam, the Netherlands
February 14, 2023
We have served as the Company’s auditor since 2015.