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As filed with the Securities and Exchange Commission on April 12, 2024.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
Commission file number 1-12260
Coca-Cola FEMSA, S.A.B. de C.V.
(Exact name of registrant as specified in its charter)

Not Applicable
(Translation of registrant’s name into English)
United Mexican States
(Jurisdiction of incorporation or organization)
Calle Mario Pani No. 100,
Santa Fe Cuajimalpa,
Cuajimalpa de Morelos,
05348, Ciudad de México, Mexico
(Address of principal executive offices)

Jorge Alejandro Collazo Pereda
Calle Mario Pani No. 100,
Santa Fe Cuajimalpa,
Cuajimalpa de Morelos,
05348 Ciudad de México, Mexico
(52-55) 1519-6179
kofmxinves@kof.com.mx
(Name, telephone, e-mail 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 Symbol | Name of Each Exchange on Which Registered
American Depositary Shares, each representing 10 units | KOF | New York Stock Exchange, Inc.
Units, each consisting of 3 Series B shares and 5 Series L shares, without par value | - | New York Stock Exchange, Inc. (not for trading, for listing purposes only)
Series B shares, without par value | - | New York Stock Exchange, Inc. (not for trading, for listing purposes only)
Series L shares, without par value | - | New York Stock Exchange, Inc. (not for trading, for listing purposes only)
2.750% Senior Notes due 2030 | - | New York Stock Exchange, Inc.
1.850% Senior Notes due 2032 | - | New York Stock Exchange, Inc.

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
The number of outstanding shares of each class of capital or common stock as of December 31, 2023 was:

7,936,628,152 |  | Series A shares, without par value
4,668,365,424 |  | Series D shares, without par value
1,575,624,195 |  | Series B shares, without par value
2,626,040,325 |  | Series L shares, without par value

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
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed 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 definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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 mark 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 ☐ IFRS ☒ 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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☒ No

TABLE OF CONTENTS

Introduction | 3
Item 1. | Identity of Directors, Senior Management and Advisers | 4
Item 2. | Offer Statistics and Expected Timetable | 4
Item 3. | Key Information | 4
Dividends and Dividend Policy | 5
Risk Factors | 6
Item 4. | Information on the Company | 15
The Company | 15
Regulation | 29
Bottler Agreements | 39
Description of Property, Plant and Equipment | 41
Significant Subsidiaries | 43
Item 4.A. | Unresolved Staff Comments | 43
Item 5. | Operating and Financial Review and Prospects | 43
Item 6. | Directors, Senior Management and Employees | 58
Item 7. | Major Shareholders and Related Party Transactions | 71
Major Shareholders | 71
Related Party Transactions | 74
Item 8. | Financial Information | 75
Consolidated Statements and Other Financial Information | 76
Legal Proceedings | 76
Item 9. | The Offer and Listing | 76
Trading on the Bolsa Mexicana De Valores, S.A.B. De C.V. and Bolsa Institucional De Valores, S.A. De C.V. | 76
Item 10. | Additional Information | 77
Bylaws | 77
Material Agreements | 84
Taxation | 84
Documents On Display | 87
Item 11. | Quantitative and Qualitative Disclosures about Market Risk | 87
Item 12. | Description of Securities Other than Equity Securities | 91
Item 12.A. | Debt Securities | 91
Item 12.B. | Warrants and Rights | 91
Item 12.C. | Other Securities | 91
Item 12.D. | American Depositary Shares | 92
Item 13. | Defaults, Dividend Arrearages and Delinquencies. | 92
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds. | 92
Item 15. | Controls and Procedures | 92
Item 16.A. | Audit Committee Financial Expert | 95
Item 16.B. | Code of Ethics | 95
Item 16.C. | Principal Accountant Fees and Services | 95
Item 16.D. | Exemptions from the Listing Standards for Audit Committees | 96
Item 16.E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 96
Item 16.F. | Change in Registrant’s Certifying Accountant | 96
Item 16.G. | Corporate Governance | 96
Item 16.H. | Mine Safety Disclosure | 98
Item 16.K. | C y bersecu rity | 98
Item 17. | Financial Statements | 99

- i -

Item 18. | Financial Statements | 99
Item 19. | Exhibits | 99

- ii -

Introduction
References
Unless the context otherwise requires, the terms “Coca-Cola FEMSA,” “our company,” “we,” “us” and “our” are used in this annual report to refer to Coca-Cola FEMSA, S.A.B. de C.V. and its subsidiaries on a consolidated basis.
References herein to “U.S. dollar,” “US$,” “dollar” or “$” are to the lawful currency of the United States of America. References herein to “Mexican pesos” or “Ps.” are to the lawful currency of the United Mexican States, or Mexico.
As used in this annual report:
“Central America” refers to Guatemala, Nicaragua, Costa Rica and Panama.
“South America” refers to Argentina, Brazil, Colombia and Uruguay.
“sparkling beverages” refers to non-alcoholic carbonated beverages.
“still beverages” refers to non-alcoholic non-carbonated beverages.
“U.S.” or “United States” refers to United States of America.
“waters” refers to flavored and non-flavored waters, whether or not carbonated.
References to Coca-Cola trademark beverages in this annual report refer to products described in “Item 4. Information on the Company—The Company—Our Products.”
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 exchange rate for Mexican pesos on December 31, 2023, according to the U.S. Federal Reserve Board. On April 5, 2024, this exchange rate was Ps.16.4809 to US$1.00.
To the extent that estimates are contained in this annual report, we believe such estimates, which are based on internal data, are reliable. Figures in this annual report are rounded, and the totals may therefore not precisely equal the sum of the numbers presented.
Sources
Certain information contained in this annual report has been computed based upon statistics prepared by the local entities such as the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía, or INEGI) and agencies in each country where we operate, the Federal Reserve Bank of New York, the U.S. Federal Reserve Board, the Mexican Central Bank (Banco de México), the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or the CNBV), 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 of 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 The Coca-Cola Company;
•fluctuation in the prices of raw materials;
•changes or interruptions in our information technology systems;
•effects on our business from changes to our various suppliers’ business and demands;
•competition;
3

•significant developments in the countries where we operate;
•fluctuation in currency exchange and interest rates;
•our ability to implement our business expansion strategy and our ability to finance capital expenditures, including our ability to successfully integrate mergers and acquisitions we have completed in recent years and our ability to implement our business strategy;
•economic, political or geopolitical conditions or changes in our regulatory or legal environment, including the impact of existing laws and regulations, changes thereto or the imposition of new taxes, environmental, health, labor, energy, foreign investment and/or antitrust laws or regulations impacting our business, activities and investments;
•adverse weather or natural disasters; and
•health epidemics, pandemics and similar outbreaks, including future outbreak of diseases, or the spread of existing diseases, and their effect on customer behavior and on economic, political, social and other conditions in the countries where we operate and globally.
Forward-looking statements involve inherent risks and uncertainties. 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.
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
We prepared our consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, or IASB, referred to herein as “IFRS.”
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, comprehensive income, changes in equity and cash flows for the years ended December 31, 2023, 2022 and 2021.
Pursuant to IFRS, the information in this annual report presents financial information in nominal terms and Mexican pesos. 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 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 100.0%, according to available indexes in the country. We adjusted 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 consolidated financial statements.
Except when specifically indicated, information in this annual report on Form 20-F is presented as of December 31, 2023 and does not give effect to any transaction subsequent to that date.
4

Dividends and Dividend Policy
The following table sets forth the nominal amount in Mexican pesos of dividends declared, paid and to be paid per share each year and the U.S. dollar amounts on a per share basis actually paid or to be paid to holders of American Depositary Shares, which we refer to as ADSs, on each of the respective payment dates.

Fiscal Year with Respect to which Dividend was Declared(1) |  | Date Dividend Paid or To Be Paid |  | Mexican Pesos per Share or Unit, as applicable (Nominal)(2) |  | U.S. Dollars per Share or Unit, as applicable(3)
2019 |  | May 5, 2020 |  | 2.430(4) |  | 0.102
|  | November 3, 2020 |  | 2.430(4) |  | 0.115
2020 |  | May 4, 2021 |  | 2.520(5) |  | 0.124
|  | November 3, 2021 |  | 2.520(5) |  | 0.121
2021 |  | May 3, 2022 |  | 2.715(6) |  | 0.133
|  | November 3, 2022 |  | 2.715 (6) |  | 0.138
2022 |  | May 3, 2023 |  | 2.900 (7) |  | 0.162
|  | November 3, 2023 |  | 2.900 (7) |  | 0.167
2023 |  | April 16, 2024 |  | 1.520(8) |  | — (9)
|  | July 16, 2024 |  | 1.520(8) |  | — (9)
|  | October 15, 2024 |  | 1.520(8) |  | — (9)
|  | December 9, 2024 |  | 1.520(8) |  | — (9)

(1) The dividends declared for each fiscal year were divided into two or four payments, as noted.
(2) Based on the number of shares outstanding at the time the dividend is paid.
(3) Expressed in U.S. dollars using the applicable exchange rate when the dividend was paid.
(4) Dividend declared per unit. The dividend was Ps.0.6075 per share, or the amount of the dividend declared divided by eight.
(5) Dividend declared per unit. The dividend was Ps.0.6300 per share, or the amount of the dividend declared divided by eight.
(6) Dividend declared per unit. The dividend was Ps.0.6787 per share, or the amount of the dividend declared divided by eight.
(7) Dividend declared per unit. The dividend was Ps.0.7250 per share, or the amount of the dividend declared divided by eight.
(8) Dividend declared per unit. The dividend was Ps.0.7600 per share, or the amount of the dividend declared divided by eight.
(9) Because the dividend declared for the fiscal year 2023 has not been paid at the time of this annual report, the U.S. dollar per share amount has not been determined.
The declaration, amount and payment of dividends are subject to the approval by holders of a majority of our shares (except for our Series L shares, which do not grant the right to vote on the declaration, amount and payment of dividends); provided that, if the amount of dividends exceeds 20.0% of the preceding year’s consolidated net profits, the approval by holders of a majority of our Series D shares is also required. The declaration, amount and payment of dividends is also subject to and dependent generally upon the recommendation of our board of directors, and upon our results, financial condition, capital requirements, general business conditions and the requirements of Mexican law. Accordingly, our historical dividend payments are not necessarily indicative of future dividends. See “Item 10. Additional Information — Bylaws—Dividend Rights.”
We pay all cash dividends in Mexican pesos. Exchange rate fluctuations affect the U.S. dollar amounts received by holders of ADSs as a result of the conversion by the ADS depositary of cash dividends paid on the Series L shares and Series B shares underlying our units represented by such ADSs. In addition, exchange rate fluctuations between the Mexican peso and the U.S. dollar affect the market price of the ADSs.
Under Mexican income tax law, dividends, either in cash or in kind, paid to individuals that are Mexican residents, and to individuals and companies that are non-Mexican residents, on our shares, including the Series L shares and the Series B shares underlying our units, including units represented by ADSs, are subject to a 10.0% Mexican withholding tax, or a lower rate if covered by a tax treaty. Profits that were earned and subject to income tax before January 1, 2014 are exempt from this withholding tax. See “Item 10. Additional Information—Taxation—Mexican Taxation.”
5

Risk Factors
Risks Related to Our Company
Risks related to our relationship with our major shareholders
Our business depends on our relationship with The Coca-Cola Company, and changes in this relationship may adversely affect our business, financial condition and results of operations.
Substantially all of our sales are derived from sales of Coca-Cola trademark beverages. We produce, market, sell and distribute Coca-Cola trademark beverages through standard bottler agreements in the territories where we operate, which we refer to as “our territories.” See “Item 4. Information on the Company—The Company—Our Territories.” We are required to purchase concentrate for all Coca-Cola trademark beverages from affiliates of The Coca-Cola Company, which price is determined from time to time by The Coca-Cola Company in all such territories. We are also required to purchase sweeteners and other raw materials only from companies authorized by The Coca-Cola Company. Increases in the cost, disruption of supply or shortage of ingredients for concentrate could have an adverse effect on our business.
In addition, under our bottler agreements, we are prohibited from bottling or distributing any other beverages without The Coca-Cola Company’s authorization or consent, and we may not transfer control of the bottler rights of any of our territories without prior consent from The Coca-Cola Company.
The Coca-Cola Company makes significant contributions to our marketing expenses, although it is not required to contribute a particular amount. Accordingly, The Coca-Cola Company may discontinue or reduce such contributions at any time.
We depend on The Coca-Cola Company to continue with our bottler agreements. Our 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 4. Information on the Company—Bottler Agreements.” Termination of any such bottler agreement would prevent us from selling Coca-Cola trademark beverages in the affected territory. The foregoing and any other adverse changes in our relationship with The Coca-Cola Company would have an adverse effect on our business, financial condition and results of operations.
The Coca-Cola Company and FEMSA have substantial influence on the conduct of our business, which may result in us taking actions contrary to the interests of our shareholders other than The Coca-Cola Company and FEMSA.
The Coca-Cola Company has substantial influence on the conduct of our business and Fomento Económico Mexicano, S.A.B. de C.V., which we refer to as FEMSA, has control over our company. As of the date of this report, The Coca-Cola Company indirectly owned 27.8% of our outstanding capital stock, representing 32.9% of our capital stock with full voting rights. The Coca-Cola Company is entitled to appoint up to five of our maximum of 21 directors and the vote of at least two of them is required to approve certain actions by our board of directors. As of the date of this report, FEMSA indirectly owned 47.2% of our outstanding capital stock, representing 56.0% of our capital stock with full voting rights. FEMSA is entitled to appoint up to 13 of our maximum of 21 directors and all of our executive officers. The Coca-Cola Company and FEMSA together, or only FEMSA in certain circumstances, have the power to determine the outcome of all actions requiring approval by our board of directors, and FEMSA and The Coca-Cola Company together, or only FEMSA in certain circumstances, have the power to determine the outcome of all actions requiring approval of our shareholders. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.” The interests of The Coca-Cola Company and FEMSA may be different from the interests of our other shareholders, which may result in us taking actions contrary to the interests of such other shareholders.
The reputation of Coca-Cola trademarks and our trademarks and trademark infringement could adversely affect our business.
Substantially all of our sales are derived from sales of Coca-Cola trademark beverages owned by The Coca-Cola Company. Maintenance of the reputation and intellectual property rights of these trademarks and other trademarks that we own is essential to our ability to attract and retain retailers and consumers and is a key driver for our success. We cannot provide any assurances that the legal steps we are taking in our territories are sufficient to protect these intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate these intellectual property rights. Failure to maintain the reputation of the Coca-Cola trademarks and other trademarks that we own or to effectively protect such trademarks could cause customer confusion and have a material adverse effect on our business, financial condition and results of operations.
Risks related to consumer preferences, competition and product safety and quality.
Changes in consumer preferences and public concern about health-related and environmental issues could reduce demand for some of our products.
6

The beverage industry is evolving mainly as a result 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 we operate. 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 our products and additional regulations concerning the labeling or sale of our 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, or HFCS.
In addition, concerns over the environmental impact of plastic may reduce the consumption of our 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, our failure to meet consumers’ preferences, changes in consumption patterns, including as a result of the effects or perceived effects of the use of weight-loss drugs, or our inability to successfully introduce new products or digitize our operations and processes, could reduce demand for some of our products, which would adversely affect our business, financial condition and results of operations. See “Item 4. Information on the Company—The Company—Business Strategy.”
Product safety and quality concerns could negatively affect our business.
The success of our business depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards, which we expect our operations to meet. However, if we fail to meet these standards, particularly as we expand our product offerings our business could be negatively affected. In the future, we may need to recall products if they become contaminated or adulterated by any means or if they are mislabeled. A widespread product recall could result in significant losses due to recall costs, product inventory destruction, and lost sales due to temporary product unavailability, which could also subject us to product liability claims and negative publicity, all of which could harm our business.
Competition could adversely affect our business, financial condition and results of operations.
The beverage industry in the territories where we operate is highly competitive. We face competition from other bottlers of sparkling beverages, such as Pepsi trademark products and other bottlers and distributors of local beverage brands, and from producers of low-cost beverages or “B brands.” We also compete in beverage categories other than sparkling beverages, such as water, juice-based beverages, coffee, teas, milk, value-added dairy products, sports drinks, energy drinks, plant-based beverages, beer and other alcoholic beverages. We expect that we will continue to face strong competition in our beverage categories in all of our territories and anticipate that existing or new competitors may broaden their product lines and extend their geographic scope.
Although competitive conditions are different in each of our territories, we compete 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—The Company—Principal Competitors.” Lower pricing and activities by our competitors may have an adverse effect on our business, financial condition and results of operations.
Risks related to public health crises and weather and climatic conditions
Pandemics and public health crises, may adversely affect our business, financial condition and results of operations.
The occurrence or resurgence of global or regional health crises, such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, such as temporary closures and capacity restrictions at points of sale, including restaurants, cinemas and other venues, or disruptions in supply chains, could have an adverse impact on our business and financial results.
Weather conditions and natural disasters may adversely affect our business, financial condition and results of operations.
Lower temperatures, higher rainfall, other adverse weather conditions such as hurricanes, natural disasters such as earthquakes and floods may negatively impact consumer patterns, which may result in reduced sales of our beverage offerings. Additionally, such adverse weather conditions and natural disasters may affect plant installed capacity, road infrastructure and points of sale in the territories where we operate and limit our ability to produce, sell and distribute our products, thus affecting our business, financial condition and results of operations.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business.
There is increasing concern that a gradual increase in 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
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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 our 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 our beverage products. The effects of climate change and legal or regulatory initiatives to address climate change could have an adverse impact on our business.
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, due to restrictions to access or short supply of energy from clean or renewable sources, or improperly report on our progress toward achieving our carbon footprint reduction goals and commitments, the resulting negative publicity could adversely affect consumer preference and demand for our beverage products.
Risks related to cybersecurity, our information systems, data privacy and social media
If we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, which could have a material adverse effect on our business, financial condition, and results of operations.
We rely on networks, information systems, and other technology, or IT systems, including the Internet and third-party hosted platforms and services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing, collection of payments and storage of client, third-party and employee personal data. We also use IT systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. Because IT systems are critical to many of our operating activities, our business may be impacted by network or hardware failures or impairments, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers or criminal groups (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), or other events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities and generative artificial intelligence. Cybersecurity incidents could result in the unauthorized disclosure of confidential information, regulated individual personal data, or delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely produce or distribute our products. Any severe damage, disruption, or shutdown in our IT systems could adversely affect our business, financial condition, and results of operations.
Our IT systems may be target of attacks. Although the cybersecurity incidents that we have experienced to date have not had a material effect on our business, financial condition or results of operations, such cybersecurity incidents could have a material adverse effect on us in the future. In order to address risks to our IT systems, we invest in specialized personnel, technologies, controls, cyber insurance, and personnel training to prevent these possible impacts. As a means of preventing such impacts, we maintain a cyber risk management program overseen by the audit committee and our senior management. However, there is no assurance that the measures we implement will be sufficient to prevent such incidents.
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
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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.
Negative or inaccurate information concerning or affecting us or the Coca-Cola trademarks may be posted at any time on social media and similar platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications including those often done by influencers, which allow individual access to a broad audience of consumers and other interested persons. 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 our business, financial condition and results of operations. Similarly, sponsorship relationships and associations with influencers could subject us to negative publicity as a result of controversies, ideas, actual or alleged misconduct or actions by individuals, hosts or entities associated with organizations we sponsor or support.
Risks related to raw materials and supply chain
Water shortages or any failure to maintain existing concessions or contracts could adversely affect our business, financial condition and results of operations.
Water is an essential component of all of our products. We obtain water from various sources in our territories, including springs, wells, rivers and municipal and state water companies pursuant to either concessions granted by governments in our various territories (including governments at the federal, state or municipal level) or pursuant to contracts.
We obtain the vast majority of the water used in our 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. Our 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. See “Item 4. Information on the Company—Regulation—Water Supply.” Climate change is causing a rise in temperatures in diverse territories and, as a result, is exacerbating water scarcity and droughts. In some of our territories, our existing water supply may not be sufficient to meet our 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 you that water will be available in sufficient quantities to meet our future production needs or will prove sufficient to meet our water supply needs. Continued water scarcity in the regions where we operate may adversely affect our business, financial condition and results of operations.
Increases in the prices of raw materials, supply chain disruptions or shortages of raw materials could increase our cost of goods sold and may adversely affect our business, financial condition and results of operations.
In addition to water, our most significant raw materials are concentrate, which we acquire from affiliates of The Coca-Cola Company, sweeteners and packaging materials.
Prices for Coca-Cola trademark beverages concentrate are determined by The Coca-Cola Company as a percentage of the weighted average retail price in local currency, net of applicable taxes.
In the past, the concentrate prices for Coca-Cola trademark beverages have been increased in some of the countries where we operate. We may not be successful in negotiating or implementing measures to mitigate the negative effect this may have in the pricing of our products or our results.
The prices for our other raw materials are driven by market prices and local availability, the imposition of import duties and restrictions, fluctuations in exchange rates and inflation. We are also required to meet all of our supply needs (including sweeteners
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and packaging materials) from suppliers approved by The Coca-Cola Company, and The Coca-Cola Company may limit the number of suppliers available to us. Our sales prices are denominated in the local currency of each country where we operate, while the prices of certain materials, including those used in the bottling of our products, mainly polyethylene terephthalate, or PET resin, preforms to make plastic bottles, finished plastic bottles, aluminum cans, HFCS and certain sweeteners, are paid in, or determined with reference to, the U.S. dollar, and therefore may increase if the U.S. dollar appreciates against the applicable local currency. We 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 we will be successful in mitigating any such fluctuations through derivative instruments or otherwise. See “Item 4. Information on the Company—The Company—Raw Materials.”
Our 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 a cyclical behavior and are determined with reference to the U.S. dollar; therefore, high currency volatility may affect our average price for PET resin in local currencies. In addition, international sugar prices have been volatile due to various factors, including shifting demand, availability, climate change and other issues affecting production and distribution. In all of the countries where we operate, other than Brazil, sugar prices are subject to local regulations and other barriers to market entry that cause us to purchase sugar above international market prices. See “Item 4. Information on the Company—The Company—Raw Materials.” We cannot assure you that our raw material prices will not further increase in the future or that we will be successful in mitigating any such increase through derivative instruments or otherwise. Increases in the prices of raw materials would increase our cost of goods sold and adversely affect our business, financial condition and results of operations.
In addition, geopolitical conflicts, including the ongoing military conflict between Israel and Hamas, as well as the ongoing military conflict involving Russia and Ukraine and the resulting economic sanctions imposed on Russia and certain Russian citizens and enterprises have resulted, and could continue to result, in volatile commodity markets, supply chain disruptions and greater risk of cyber incidents across the world. Volatility in commodity markets and supply chain disruptions have increased and may continue to increase the cost of some of our raw materials and therefore have an adverse effect on our 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 bottling operations operate large fleets of trucks and other motor vehicles to distribute and deliver beverage products to our business partners, clients and customers. In addition, we use a significant amount of electricity, natural gas and other energy sources to operate our 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 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 operate, including reforms related to transmission, distribution and other costs, could lead to a substantial increase in our electricity cost. See “Item 4. Information on the Company—Regulation—Other Regulations.”
Risks related to regulatory developments, taxes and legal proceedings
Regulatory developments may adversely affect our business, financial condition and results of operations.
The principal areas in which we are subject to laws and regulations include anti-corruption, anti-bribery, anti-money laundering, water, environment, energy, labor, taxation, health and antitrust. See “Item 4. Information on the Company—Regulation.” In addition, we are also subject to laws and regulations in connection with the sale and distribution of our products including beer and other alcoholic beverages. Changes in existing laws and regulations, the adoption of new laws or regulations, restrictions on the use of certain ingredients or packaging, or a stricter interpretation or enforcement thereof in the countries where we operate 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 currently offer non-refillable and refillable containers across our territories, among other product presentations. Certain legislative and regulatory reforms have been proposed in some of the territories where we operate to restrict the sale of single-use plastics and similar legislation or regulations may be proposed or enacted in the future. See “Item 4. Information on the Company—Regulation—Other Regulation.” Consumers’ increased concerns and changing habits 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 our net operating revenues and profitability.
Voluntary price restraints or statutory price controls have been imposed historically in several of the countries where we operate. 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
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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.
We operate in multiple territories and are subject to complex regulatory frameworks with increased enforcement activities. We maintain a Global Integrity Compliance Program (“GCIP”) that is supervised by our senior management, and employ a Legal Compliance Officer in each country where we operate. Reports on such compliance program are presented to the audit committee of our board of directors on a semi-annual basis. Despite our internal governance and compliance processes, including due diligence processes of third parties, we may be subject to unexpected breaches by our employees, contractors or other agents of our code of ethics, anti-corruption and anti-money laundering policies and other internal guidelines, including instances of fraudulent behavior, corrupt practices and dishonesty by any of them. Our failure to comply with applicable laws and other standards could harm our reputation, subject us to substantial fines, sanctions or penalties and adversely affect our business. There is no assurance that we will be able to comply with changes in any laws and regulations within the timelines established by the relevant regulatory authorities.
Certain taxes could adversely affect our business, financial condition and results of operations.
The countries where we operate may adopt new tax laws or modify existing tax laws to increase taxes applicable to our business or products. Our products are subject to certain taxes in many of the countries where we operate. See “Item 4. Information on the Company—Regulation—Taxation of Beverages.” The imposition of new taxes, increases in existing taxes, or changes in the interpretation of tax laws and regulation by tax authorities may have a material adverse effect on our business, financial condition and results of operations.
Tax legislation in some of the countries where we operate has recently been subject to major changes. See “Item 4. Information on the Company—Regulation—Tax Reforms.” We cannot assure you that these reforms or other reforms adopted by governments in the countries where we operate will not have a material adverse effect on our business, financial condition and results of operations.
Unfavorable outcomes of our legal proceedings could have an adverse effect on our business, financial condition and results of operations.
Our operations have from time to time been and may continue to be subject to investigations and proceedings by antitrust authorities relating to alleged anticompetitive practices, as well as tax, consumer protection, environmental, labor and commercial matters. We cannot assure you that these investigations and proceedings will not have an adverse effect on our business, financial condition and results of operations. See “Item 8. Financial Information—Legal Proceedings.”
Risks related to mergers, acquisitions and business alliances
We may not be able to successfully integrate our acquisitions and business alliances and achieve the expected operational efficiencies or synergies.
We have and we may continue to acquire bottling operations and other businesses, as well as enter into business alliances. Key elements to achieving the benefits and expected synergies of our acquisitions and mergers are the integration of acquired or merged businesses’ operations into our own in a timely and effective manner and the retention of qualified and experienced key personnel. We may incur unforeseen liabilities in connection with acquiring, taking control of, or managing bottling operations and other businesses and may encounter difficulties and unforeseen or additional costs in restructuring and integrating them into our operating structure. Achieving the full benefits of our business alliances is dependent on identifying appropriate business partners and negotiating accretive business agreements. We may not be successful in achieving the full benefits of such business alliances if these key aspects of such alliances are not realized. We cannot assure you that these efforts will be successful or completed as expected by us, and our business, financial condition and results of operations could be adversely affected if we are unable to do so.
Risks Related to the Countries Where We Operate
Adverse economic conditions in the countries where we operate may adversely affect our financial condition and results.
We are a Mexican corporation and our Mexican operations are our single most important geographic territory. We also conduct an important part of our operations in Brazil. For the year ended December 31, 2023, approximately 77.4% of our total revenues were attributable to Mexico and Brazil. Our results are affected by the economic conditions in the countries where we conduct operations. Consumer demand and preferences, real prices and the costs of raw materials are heavily influenced by macroeconomic conditions, which vary by country and may not be correlated. In addition, adverse economic conditions may affect and reduce consumer per capita income, thereby adversely affecting consumer demand for our products as a result of a decrease in consumer purchasing power. 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 business, financial condition and results of operations.
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Some of the countries where we operate are influenced by the U.S. economy. Deterioration in economic conditions in the U.S. economy may affect these economies. In particular, economic conditions in Mexico have been historically correlated with economic conditions in the United States partially as a result of the North American Free Trade Agreement, and more recently, the U.S.-Mexico-Canada Agreement, which came into force on July 1, 2020. Any adverse event affecting the relationship between any of the countries where we operate and the United States, including changes or the termination of any free trade agreement, may have a significant adverse effect on the economy of such countries.
Our business may also be significantly affected by interest rates, inflation rates and exchange rates of the local 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 our products, lower pricing of our products in real terms or a shift to lower margin products. In addition, an increase in interest rates would increase the cost to us of variable rate funding (which, after giving effect to our swap contracts, and calculated by weighting each year’s outstanding debt balance mix, constituted approximately 27.1% of our total debt as of December 31, 2023), which would have an adverse effect on our financial position. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
A continued and prolonged increase in inflation rates in any of the countries where we operate may result in such country being categorized as a hyperinflationary economy for accounting purposes, which would change the manner in which we present and report financial information related to our operations in such country.
For example, Argentina’s economy meets the criteria to be treated as a hyperinflationary economy based on various economic factors, including Argentina’s cumulative inflation over the past three-year period exceeding 100.0%, according to available indexes in the country. Continuing hyperinflation in Argentina may adversely affect our financial position and results of operations.
Depreciation of the local currencies of the countries where we operate relative to the U.S. dollar could adversely affect our financial condition and results.
Depreciation of local currencies relative to the U.S. dollar increases our cost of some of the raw materials we acquire, the price of which may be paid in or determined with reference to U.S. dollars, and of our debt obligations denominated in U.S. dollars and may therefore negatively affect our results, financial position and equity. In addition, depreciation of local currencies of the countries where we operate relative to the U.S. dollar may also potentially increase inflation rates in such countries. Significant fluctuations of local currencies relative to the U.S. dollar have occurred in the past and may continue in the future, negatively affecting our results. Future currency devaluations or the imposition of exchange controls in any of the countries where we operate may potentially increase our operating costs, which could have an adverse effect on our financial position and results of operations. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk.”
A severe depreciation of any currency of the countries where we operate may result in a disruption of the international foreign exchange markets and may limit our ability to transfer or to convert such currencies into U.S. dollars or other currencies for the purpose of making timely payments of interest and principal on our U.S. dollar-denominated indebtedness or obligations in other currencies. While the Mexican government does not restrict 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. Currency fluctuations may have an adverse effect on our results, financial condition and cash flows in future periods.
As part of our financing, treasury and derivatives policies, we maintain hedging initiatives designed to mitigate interest rate, raw materials and foreign currency exchange rate risk. These hedging initiatives are presented by our corporate finance department to the planning and finance committee of our board of directors on a quarterly basis for their review and approval. Even with such efforts, there is no assurance that the hedging and other financial strategies we implement will be sufficient to prevent any adverse effect on our financial position and results of operations as a result of any depreciation of the local currencies of the countries where we operate relative to the U.S. dollar, fluctuations in interest rates or in the price of raw materials.
Political and social events in the countries where we operate and elsewhere and changes in governmental policies may have an adverse effect on our business, financial condition and results of operations.
In recent years, some of the governments in the countries where we operate have implemented and may continue to implement significant changes in laws, public policy or regulations that could affect the political and social conditions in these countries. Any such changes, and similar changes in other countries such as the U.S., may 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. 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
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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.
Risks Related to the units and the ADSs
Our Series L shares have limited voting rights.
Our Series L shares grant the right to vote only in certain circumstances. In general terms, they grant the right to elect up to three of our maximum of 21 directors and only grant the right to vote on specific matters, including certain changes in our corporate form, mergers involving our company when our company is the merged entity or when the principal corporate purpose of the merged entity is not related to the corporate purpose of our company, the cancellation of the registration of our shares on the Mexican Stock Exchange (Bolsa Mexicana de Valores, or BMV) or any other foreign stock exchange, and those matters for which the Mexican Securities Market Law (Ley del Mercado de Valores) expressly grants the right to vote to classes of shares with limited voting rights. As a result, holders of units will not be able to influence our business or operations with respect to the Series L shares they indirectly hold. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders” and “Item 10. Additional Information—Bylaws—Voting Rights, Transfer Restrictions and Certain Minority Rights.”
Holders of ADSs may not be able to vote at our shareholder meetings.
Our units, which are comprised of 3 Series B shares and 5 Series L shares, trade on the New York Stock Exchange (“NYSE”) in the form of ADSs, each representing 10 units. Holders of ADSs may not receive notice of Series L or Series B shareholder meetings from the ADS depositary in sufficient time to enable such holders to return voting instructions to the ADS depositary in a timely manner.
The protections afforded to minority shareholders in Mexico are different from those afforded to minority shareholders in the United States and investors may experience difficulties in enforcing civil liabilities against us or our directors, officers and controlling persons.
Under the Mexican Securities Market Law, the protections afforded to minority shareholders are different from, and may be less than, those afforded to minority shareholders in the United States. Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors or our controlling interest shareholders than it would be for minority shareholders of a U.S. company.
In addition, we are organized under the laws of Mexico and most of our directors, officers and controlling persons reside outside the United States, and all or a substantial portion of our assets and the assets of our directors, officers and controlling persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States on such persons or to enforce judgments against them in U.S. courts or in courts in jurisdictions outside of the United States, in each case, including in any action based on civil liabilities under the U.S. federal securities laws.
The enforceability against our directors, officers and controlling persons in Mexico in actions for enforcement of judgments of U.S. courts, and liabilities predicated solely upon the U.S. federal securities laws will be subject to certain requirements provided for in the Mexican Federal Civil Procedure Code and any applicable treaties. Some of the requirements may include personal service of process and that the judgments of U.S. courts are not against Mexican public policy. The Mexican Securities Market Law, which is considered Mexican public policy, provides that, in the event of actions derived from any breach of the duty of care and the duty of loyalty against our directors and officers, any remedy would be exclusively for the benefit of our company. Therefore, investors would not be directly entitled to any remedies under such actions.
Developments in other countries may adversely affect the market for our securities.
The market value of securities of Mexican companies is, to varying degrees, influenced by economic and securities market conditions in other countries. Although economic conditions are different in each country, investors’ reactions to developments in one country can have effects on the securities of issuers in other countries, including Mexico. Crises in other countries may diminish investor interest in securities of Mexican issuers. For example, the ongoing military conflict involving Russia and Ukraine and the effect of the resulting economic sanctions imposed on Russia and certain Russian citizens and enterprises could affect the market value of our securities.
Holders of units and ADSs in the United States may not be able to participate in any capital 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, treasury stock or mergers, we are generally required to grant our shareholders the right to
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purchase a sufficient number of 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 units or ADSs who are located in the United States to exercise any preemptive rights in any future capital increases unless (1) we file a registration statement with the U.S. Securities and Exchange Commission, or 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, as amended. At the time of any future capital 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 units and 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 that would allow holders of our units or ADSs who are located in the United States to participate in a preemptive rights 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 ADSs is not possible. As a result, the equity interest of such holders of units or ADSs would be diluted proportionately. See “Item 10. Additional Information—Bylaws—Preemptive Rights.”
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Item 4. Information on the Company
The Company
Overview
We are leaders in the beverage market in most of the countries where we operate, being the largest franchise bottler of Coca-Cola trademark products in the world by sales volume, based on publicly available filings and information of our main competitors. In 2023, our sales volume represented approximately 12.2% of the total sales volume of the Coca-Cola system in the world. We produce and distribute Coca-Cola trademark beverages, offering a wide portfolio of brands to approximately 272 million consumers each day. With more than 86,000 employees, we market and sell approximately 4.0 million unit cases per year through more than 2.1 million points of sale. We operate 56 bottling plants and 251 distribution centers. We are committed to generating economic, social and environmental value for all our stakeholders throughout the value chain. We are members 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.
We operate 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.
We also operate in Venezuela through our investment in Coca-Cola FEMSA de Venezuela, S.A., or KOF Venezuela.
Our company 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 Securities Market Law, we became a publicly traded stock corporation with variable capital (sociedad anónima bursátil de capital variable). Our legal name is Coca-Cola FEMSA, S.A.B. de C.V. Our principal executive offices are located at Calle Mario Pani No. 100, Colonia Santa Fe Cuajimalpa, Alcaldía Cuajimalpa de Morelos, 05348, Mexico City, Mexico. Our telephone number at this location is +52 (55) 1519-5000. Our website is www.coca-colafemsa.com.
The following is an overview of our 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, except percentages)
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 |  | 100.0 | % |  | 110,860 |  | 100.0 | %

(1) Includes Mexico, Guatemala, Nicaragua, Costa Rica and Panama.
(2) Includes Colombia, Brazil, Argentina and Uruguay.
Corporate History
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We are a subsidiary of FEMSA, a company that participates in the retail industry through the following divisions: (i) the Proximity Americas Division, operating the OXXO small-format store chain in Latin America, (ii) the Proximity Europe Division, a small-format retail and foodvenience chains in Europe operated by Valora, (iii) the Fuel Division, operating the OXXO Gas chain of retail service stations, and (iv) the Health Division, which includes pharmacy services locations and related operations. FEMSA participates in the beverage industry through us. FEMSA also participates in the financial services industry through its digital division, Digital@FEMSA, which seeks to build innovative digital solutions to address the financial needs of its customers and business partners and to develop and grow digitally-enabled loyalty initiatives. Additionally, FEMSA participates in other non-core businesses, including its logistics and distribution business, point of sale refrigeration, food processing equipment and plastics solutions, which currently are classified by FEMSA as assets held for sale and discontinued operations.
We commenced operations in 1979, when a subsidiary of FEMSA acquired certain sparkling beverage bottlers in Mexico City and surrounding areas. In 1991, FEMSA transferred its ownership in the bottlers to FEMSA Refrescos, S.A. de C.V., our corporate predecessor. In June 1993, a subsidiary of The Coca-Cola Company subscribed for 30.0% of our capital stock in the form of Series D shares. In September 1993, FEMSA sold Series L shares that represented 19.0% of our capital stock to the public, and we listed these shares on the Mexican Stock Exchange and, in the form of ADSs, on the NYSE.
In a series of transactions since 1994, we acquired new territories, brands and other businesses, including Argentina and certain territories in southern Mexico, which today comprise our business.
In May 2003, we acquired Panamerican Beverages Inc., or Panamco, and began producing and distributing Coca-Cola trademark beverages in additional territories in the central, southeastern and northeastern regions of Mexico and in Central America (Guatemala, Nicaragua, Costa Rica and Panama), Colombia, Venezuela and Brazil, along with bottled water, beer and other beverages in some of these territories.
In November 2006, FEMSA acquired 148,000,000 of our Series D shares from certain subsidiaries of The Coca-Cola Company, which increased FEMSA’s ownership to 53.7%.
In November 2007, we acquired together with The Coca-Cola Company 100.0% of the capital stock of Jugos del Valle, S.A.P.I. de C.V., or Jugos del Valle. In 2008, we, The Coca-Cola Company and all Mexican and Brazilian Coca-Cola bottlers entered into a joint business for the Mexican and Brazilian operations, respectively, of Jugos del Valle.
In December 2007 and May 2008, we sold most of our proprietary brands to The Coca-Cola Company. The proprietary brands are now being licensed back to us by The Coca-Cola Company pursuant to our bottler agreements.
In May 2008, we entered into a transaction with The Coca-Cola Company to acquire its wholly owned bottling franchise Refrigerantes Minas Gerais, Ltda., or REMIL, located in the State of Minas Gerais in Brazil.
In July 2008, we acquired the Agua de los Angeles bulk water business in Mexico City and surrounding areas from Grupo Embotellador CIMSA, S.A. de C.V., or Grupo CIMSA, at the time one of the Coca-Cola bottling franchises in Mexico. The trademarks remain with The Coca-Cola Company. We subsequently merged Agua de los Angeles into our bulk water business under the Ciel brand.
In February 2009, we acquired together with The Coca-Cola Company the Brisa bottled water business in Colombia from Bavaria, S.A. We acquired the production assets and the distribution territory, and The Coca-Cola Company acquired the Brisa brand.
In May 2009, we entered into an agreement to manufacture, distribute and sell the Crystal trademark water products in Brazil jointly with The Coca-Cola Company.
In August 2010, we acquired from The Coca-Cola Company, along with other Brazilian Coca-Cola bottlers, Leão Alimentos e Bebidas, Ltda., or Leão Alimentos, manufacturer and distributor of the Matte Leão tea brand, which would later be integrated with the Brazilian operations of Jugos del Valle.
In March 2011, we acquired together with The Coca-Cola Company, Industrias Lácteas, S.A., or Estrella Azul, a Panamanian conglomerate that participated in the dairy and juice-based beverage categories in Panama, which we subsequently sold to Panama Dairy Ventures Ltd. in September 2020.
In October 2011, we merged with Administradora de Acciones del Norte, S.A.P.I. de C.V., or Grupo Tampico, a Mexican Coca-Cola bottler with operations in the states of Tamaulipas, San Luis Potosi, and Veracruz, as well as in parts of the states of Hidalgo, Puebla and Queretaro.
In December 2011, we merged with Corporación de los Angeles, S.A. de C.V., also part of Grupo CIMSA, a Mexican Coca-Cola bottler with operations mainly in the states of Morelos and Mexico, as well as in parts of the states of Guerrero and Michoacan. As
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part of our merger with Grupo CIMSA, we also acquired a minority equity interest in Promotora Industrial Azucarera, S.A de C.V., or PIASA.
In May 2012, we merged with Grupo Fomento Queretano, S.A.P.I. de C.V., or Grupo Fomento Queretano, a Mexican Coca-Cola bottler with operations mainly in the state of Queretaro, as well as in parts of the states of Mexico, Hidalgo and Guanajuato. As part of our merger with Grupo Fomento Queretano, we increased our minority equity interest in PIASA.
In August 2012, we acquired, through Jugos del Valle, an indirect minority participation in Santa Clara Mercantil de Pachuca, S.A. de C.V., or Santa Clara, a producer of milk and value-added dairy products in Mexico.
In January 2013, we acquired, through CIBR Controladora de Sociedades de Bebidas Refrescantes, S. de R.L. de C.V. (formerly Controladora de Inversiones en Bebidas Refrescantes, S.L.), or CIBR, a 51.0% stake in Coca-Cola Beverages Philippines, Inc. (formerly Coca-Cola FEMSA Philippines, Inc.), or KOF Philippines from The Coca-Cola Company. In December 2018, CIBR completed the sale of its stake in KOF Philippines back to The Coca-Cola Company through the exercise of CIBR’s option to sell.
In May 2013, we merged with Grupo Yoli, S.A. de C.V., a Mexican Coca-Cola bottler with operations mainly in the state of Guerrero, as well as in parts of the state of Oaxaca. As part of our merger with Grupo Yoli, we increased our minority equity interest in PIASA.
In August 2013, we acquired Companhia Fluminense de Refrigerantes, or Companhia Fluminense, a Coca-Cola Brazilian franchise that operates in parts of the states of São Paulo, Minas Gerais and Rio de Janeiro in Brazil. As part of our acquisition of Companhia Fluminense, we also acquired an additional minority equity interest in Leão Alimentos.
In October 2013, we acquired Spaipa S.A. Industria Brasileira de Bebidas, or Spaipa, a Brazilian Coca-Cola bottler with operations in the state of Parana and in parts of the state of São Paulo. As part of our acquisition of Spaipa, we increased our minority equity interest in Leão Alimentos and acquired a 50.0% stake in Fountain Água Mineral Ltda., a joint venture to develop water and non-carbonated beverages together with The Coca-Cola Company.
In August 2016, we acquired, through Leão Alimentos, an indirect participation in Trop Frutas do Brasil, Ltda., or Top Frutas (formerly known as Laticínios Verde Campo Ltda.), a producer of milk and dairy products in Brazil.
In December 2016, we acquired Vonpar S.A., or Vonpar, a Brazilian bottler of Coca-Cola trademark products with operations in the states of Rio Grande do Sul and Santa Catarina in Brazil. As part of our acquisition of Vonpar, we increased our minority equity interest in Leão Alimentos.
In March 2017, we acquired together with The Coca-Cola Company, through our Mexican, Brazilian, Argentine, Colombian subsidiaries and also through our interest in Jugos del Valle in Mexico, a participation in the AdeS plant-based beverage businesses. As a result of this acquisition, we have exclusive distribution rights of AdeS plant-based beverages in our territories.
In April 2018, Del Norte Sociedad Controladora de Bebidas Refrescantes, S. de R.L. de C.V. (formerly Compañía Inversionista en Bebidas del Norte, S.L.), one of our subsidiaries, acquired from The Coca-Cola Company, Alimentos y Bebidas Atlántida, S.A., or ABASA, a Guatemalan bottler of Coca-Cola trademark products with operations in the northeast region of Guatemala.
In April 2018, Controladora de Bebidas Refrescantes Moderna, S. de R.L. de C.V. (formerly Compañía de Inversiones Moderna, S.L.), one of our subsidiaries, acquired from The Coca-Cola Company, Comercializadora y Productora de Bebidas Los Volcanes, S.A., or Los Volcanes, a Guatemalan bottler of Coca-Cola trademark products with operations in the southwest region of Guatemala.
In June 2018, Controladora de Sociedades de Bebidas Refrescantes Ibérica, S. de R.L. de C.V. (formerly Inversiones en Bebidas Refrescantes Ibérica, S.L.), one of our subsidiaries, acquired from The Coca-Cola Company, Montevideo Refrescos S.R.L., or Monresa, a Uruguayan bottler of Coca-Cola trademark products.
In January 2022, our Brazilian subsidiary acquired CVI Refrigerantes Ltda. (“CVI”), a Brazilian bottler of Coca-Cola trademark products with operations in the state of Rio Grande do Sul in Brazil. As part of the acquisition of CVI, the minority equity interest of our Brazilian subsidiary in Leão Alimentos increased. Our interest in Trop Frutas also increased due to our acquisition of CVI.
In November 2022, we acquired the Cristal bulk water business from Embotelladoras Bepensa, S.A. de C.V. and affiliates, a Mexican Coca-Cola bottler business group, in the southeast region of Mexico.
Capital Stock
As of the date of this report, (1) FEMSA indirectly owned Series A shares equal to 47.2% of our capital stock (56.0% of our capital stock with full voting rights), and (2) The Coca-Cola Company indirectly owned Series D shares equal to 27.8% of our capital
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stock (32.9% of our capital stock with full voting rights). Series L shares with limited voting rights constituted 15.6% of our capital stock, and Series B shares constituted the remaining 9.4% of our capital stock (the remaining 11.1% of our capital stock with full voting rights).
Business Strategy
We are transforming our company by focusing on implementing a long-term sustainable growth model. Our purpose is to refresh the world anytime, anywhere. Our vision evolved during 2023 to emphasize our commitment to our customers, and sustainable development. To this end, our refreshed vision is to be our customers’ and partners’ preferred commercial platform and ally for growth, fostering a sustainable future.
We have strengthened our longstanding relationship with The Coca-Cola Company 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. See “Item 7. Major Shareholders and Related Party Transactions—Cooperation Framework with The Coca-Cola Company”.
To consolidate our position as a global leader in our industry and strengthen our value proposition for our retail clients and end consumers, we are leveraging our strengths, our rights-to-win, and working on the following six strategic priorities as our guiding principles: (i) grow the core, (ii) be the preferred commercial platform, (iii) strategic M&A, (iv) de-bottleneck our infrastructure and digitize the enterprise, (v) strengthen our customer-centric culture, and (vi) foster a sustainable future.
i.Grow the core. We see more runway to grow our 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. We aim to continue growing our 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. We aim to increase manufacturing and distribution capacity, while implementing best-in-class logistics and distribution enablers.
v.Strengthen our customer-centric culture. We 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.
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vi.Foster a sustainable future. We aim not only to reinforce our environmental initiatives, but also to bolster our social and governance agenda, including community development programs and diversity and inclusion.
Our view on sustainable development is a comprehensive part of our business strategy. We base our 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, and (vii) community development.
Our Territories
The following map shows our territories, giving estimates in each case of the population to which we offer products and the number of retailers of our beverages as of December 31, 2023:
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Our Products
We produce, market, sell and distribute mainly The Coca-Cola Company 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, plant-based drinks) and certain alcoholic beverages, such as Topo Chico hard seltzer.
In addition, through certain distribution agreements, we distribute and sell among other products and categories across certain of our territories, Monster products in all the countries where we operate, Heineken-owned brand beer products, Estrella Galicia beer products, Therezópolis beer products, Campari alcoholic beverages and Perfetti confectionary and chewing gum in our Brazilian territories.
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Since 2021, we have been testing distribution of alcoholic beverages and consumer products in some of our territories. From our ongoing tests we have been learning new shopper and consumption trends, and gathering the necessary insights to strengthen our value proposition for retailers and consumers in the market. This has allowed us to complement our reach, joint consumer value proposition, and provide our 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 we 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
We produce, market, sell and distribute Coca-Cola trademark beverages in each of our territories in containers authorized by The Coca-Cola Company, 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. We use the term presentation to refer to the packaging unit in which we sell our products. Presentation sizes for our Coca-Cola trademark beverages range from a 6.5-ounce personal size to a 3-liter multiple serving size. For all of our products excluding water, we consider 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. We offer both returnable and non-returnable presentations, which allow us to offer portfolio alternatives based on convenience and affordability to implement revenue management strategies and to target specific distribution channels and population segments in our territories. In addition, we sell some Coca-Cola trademark beverage syrups in containers designed for soda fountain use, which we refer to as fountain. We also sell 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 lower average price per unit case than our other beverage products.
In addition, we inform our consumers through front labeling on the nutrient composition and caloric content of our beverages in accordance with local laws and regulations. We voluntarily adhere 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 we operate. See “—Other Regulations.”
Sales Volume and Transactions Overview
We measure 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.
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Our most important brand, Coca-Cola, together with its line of low-calorie products, accounted for 60.2%, 61.2%, and 62.6% of our total sales volume in 2023, 2022 and 2021, respectively.
The following table illustrates our historical sales volume and number of transactions for each of our operations and our consolidated reporting segments for 2023 as compared to 2022.

| Sales Volume |  | Transactions
| 2023 |  | 2022 |  | 2023 |  | 2022
| (Millions of unit cases or millions of single units)
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)(4) | 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(4) | 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 | %

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)(4) | 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 | %

The following table illustrates our historical sales volume and number of transactions performance by category for each of our operations and our consolidated reporting segments:
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| 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)(4) | 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(4) | 4.3 | % |  | 5.0 | % |  | 18.0 | % |  | 10.7 | % |  | 5.5 | %
Total | 5.2 | % |  | 6.5 | % |  | 17.6 | % |  | 24.6 | % |  | 7.8 | %
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)(4) | 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(4) | 6.1 | % |  | 3.9 | % |  | 15.5 | % |  | — |  |  | 6.7 | %
Total | 5.6 | % |  | 4.5 | % |  | 16.7 | % |  | — |  |  | 6.4 | %

The following table illustrates our unit case mix by category for each of our operations and our consolidated reporting segments for 2023 as compared to 2022:

| Sparkling Beverages |  | Stills |  | Water(3)
| Year 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)(4) | 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 of CVI from February 2022.
Seasonality
Sales of our products are seasonal in all of the countries where we operate, as our sales volumes generally increase during the summer months of each country and during the year-end holiday season. In Mexico, Central America and Colombia, we typically achieve our highest sales during the months of April through August as well as during the year-end holidays in December. In Brazil,
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Uruguay and Argentina, our highest sales levels occur during the summer months of October through March, including the year-end holidays in December.
Marketing
We, in conjunction with The Coca-Cola Company, have developed a marketing strategy to promote the sale and consumption of our products. We rely extensively on advertising, sales promotions and retailer support programs to target the particular preferences of our consumers. Our 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 our clients’ plans for success. Increasing both cooler coverage and the number of cooler doors among our retailers is important to ensure that our wide variety of products are properly displayed, while strengthening our merchandising capacity in our distribution channels to significantly improve our point-of-sale execution.
Advertising. We advertise in all major communications media. We focus our advertising efforts on increasing brand recognition by consumers and improving our customer relations. National advertising campaigns are designed and proposed by The Coca-Cola Company’s local affiliates in the countries where we operate, with our input at the local or regional level. Point-of-sale merchandising and advertising efforts are proposed and implemented by us, with a focus on increasing our connection with customers and consumers.
Marketing in our Distribution Channels. In order to provide more dynamic and specialized marketing of our products, our strategy is to classify our markets and develop targeted efforts for each consumer segment or distribution channel. Our principal channels are small retailers, “on-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, we tailor our product, price, packaging and distribution strategies to meet the particular needs of and exploit the potential of each channel.
Multi-Segmentation. We have implemented a multi-segmentation strategy in all of our 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 our distribution centers and the retailers to which we sold our 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, we have considered owned and third-party distribution centers managed by us.
We continuously evaluate our distribution model in order to fit with the local dynamics of the marketplace and analyze the way we go to market, recognizing different service needs from our customers, while looking for more efficient distribution models. As part of this strategy, we are rolling out a variety of new distribution models throughout our territories looking for improvements in our distribution network.
We use several sales and distribution models depending on market and 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 our products.
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As part of the pre-sale system, sales personnel also provide merchandising services during retailer visits, which we believe enhance the shopper experience at the point-of-sale. We believe that an adequate number of service visits to retailers and frequency of deliveries are essential elements in an effective selling and distribution system of our products.
We continue to reinforce our presence in digital sales channels such as digital platforms, food aggregators, e-commerce websites and mobile device applications, in an effort to address the growing demand from our business partners through such sales channels. This reinforcement is aligned with our overall digitization and omnichannel strategies.
In 2023, no single customer accounted for more than 10.0% of our consolidated total sales.
Our distribution centers range from large warehousing facilities to small cross-docking facilities. In addition to our fleet of trucks, we distribute our products in certain locations through electric carts and hand-trucks in order to comply with local environmental and traffic regulations. In some of our territories, we rely on third parties to transport our finished products from our bottling plants to our distribution centers and, in some cases, directly to our customers.
Mexico. We have contracted with a subsidiary of FEMSA, Solistica, S.A. de C.V. (“Solistica”), for the transportation of finished products from our bottling plants to our distribution centers in Mexico. Since March 2024, we integrated Solistica’s operations into our Mexican operations. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.” From the distribution centers, we distribute our finished products to retailers mainly through our own fleet of trucks. In designated areas in Mexico, third-party distributors deliver our products to retailers and consumers, allowing us to access these areas on a cost-effective basis.
In Mexico, we sell a majority of our beverages through our traditional distribution channel, which consists of sales at small retail stores to consumers who may take the beverages for consumption at home or elsewhere. We also sell 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, we distribute our finished products to retailers through a combination of our own fleet of trucks and third party distributors, while maintaining control over the selling activities. In designated zones in Brazil, third-party distributors purchase our products and resell them to retailers. In Brazil, we sell a majority of our beverages at small retail stores. We also sell 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. We distribute our finished products to retailers through a combination of our own fleet of trucks and third party distributors. In most of our territories, an important part of our total sales volume is sold through small retailers.
Principal Competitors
Our principal competitors are local Pepsi bottlers and other bottlers and distributors of local beverage brands. We also face competition in many of our territories from producers of low price beverages, commonly referred to as “B brands.” A number of our 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 achieve.
While competitive conditions are different in each of our territories, we compete 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. We compete by seeking to offer products at an attractive price in the different segments in our markets and by building on the value of our brands. We believe that the introduction of new products and new presentations has been a significant competitive advantage that allows us to increase demand for our products, provide different options to consumers and increase new consumption opportunities. See “—Our Products” and “—Packaging.”
Mexico and Central America. Our principal competitor in Mexico is Grupo GEPP, S.A.P.I. de C.V., the exclusive bottler of Pepsi beverage products and subsidiary of 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. Our main competition in the juice category in Mexico is Grupo Jumex. In the water category, our main competitor is Bonafont, a water brand owned by Danone. In addition, we compete with Keurig Dr Pepper in sparkling beverages
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and with other local brands in our Mexican territories, as well as “B brand” producers, such as Embotelladora Aga de Mexico, S.A. de C.V. (Red Cola bottler), that offer various presentations of sparkling and still beverages.
In the countries that comprise our Central America region, our main competitors are Pepsi and Big Cola bottlers. In Guatemala, we compete with The Central American Bottler Corporation (“CBC”), who also has a regional joint venture with AmBev to produce, distribute and sell beer; Cervecería Centroamericana S.A. (CCA) who is focused in beer and stills categories, and AJE Group. In Nicaragua, our principal competitor is AJE Group. We also compete with the joint venture between CBC and AmBev. In Costa Rica, our 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, our main competitor is Cervecería Nacional, S.A., followed by AJE Group. We also face competition from “B brands” offering multiple serving size presentations in some Central American countries.
South America. Our principal competitor in Colombia is Postobón, a local bottler that sells and distributes sparkling beverages (Manzana Postobón, Uva Postobón and Colombiana), still beverages (Hit Juice) and water (Crystal). Postobón also sells Pepsi products and is a vertically integrated producer, the owners of which hold other significant commercial and industrial interests in Colombia. We also compete 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, we compete against AmBev, a company that distributes Pepsi brands, local brands with flavors such as guarana, and proprietary beer brands. We also compete 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, our 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 our main competition. In addition, we compete 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 our main competitor in this segment, followed by the brands Cunnington and Secco pursuing similar low-price strategies.
In Uruguay, our main competitor is Salus, a water brand owned by Danone. We also compete 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, we compete with CCU Inversiones II Ltda, a water, soft drinks and brewery company and finally with some low-priced regional producers.
Raw Materials
Pursuant to our bottler agreements, we are authorized to manufacture, sell and distribute Coca-Cola trademark beverages within specific geographic areas, and we are required to purchase concentrate for all Coca-Cola trademark beverages in all of our territories from affiliates of The Coca-Cola Company and sweeteners and other raw materials from companies authorized by The Coca-Cola Company. 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 The Coca-Cola Company has the right to set the price of concentrates, in practice this percentage has historically been set pursuant to periodic negotiations with The Coca-Cola Company. See “—Bottler Agreements.”
Historically, the concentrate prices for Coca-Cola trademark beverages have been increased in some of the countries where we operate. For example, The Coca-Cola Company increased concentrate prices for certain Coca-Cola trademark beverages in Mexico in 2021 and 2022. These prices in the future may increase 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 7. Major Shareholders and Related Party Transactions—Major Shareholders—Cooperation Framework with The Coca-Cola Company.”
In addition to concentrate, we purchase 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. Our bottler agreements provide that these materials may be purchased only from suppliers approved by The Coca-Cola Company. Prices for certain raw materials, including those used in the bottling of our 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. Our 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. On average, the price that we paid for PET resin in U.S. dollars in 2023 increased 32.5% as compared to 2022 in all our territories. In addition, given that high currency volatility has affected and continues to affect most of our territories, the average price for PET resin in local currencies was higher in all of our territories. In 2023, we purchased certain raw materials in advance, negotiated and locked-in prices in advance and entered into certain derivative transactions which helped us capture opportunities with respect to raw material costs and currency exchange rates.
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Under our agreements with The Coca-Cola Company, we may use raw or refined sugar, artificial sweeteners and HFCS in our products. Sugar prices in all of the countries where we operate, other than Brazil, are subject to local regulations and other barriers to market entry that, in certain countries, often cause us to pay for sugar in excess of international market prices. In recent years, international sugar prices experienced significant volatility. Across our territories, our average price for sugar in U.S. dollars, taking into account our financial hedging activities, increased by approximately 16.4% in 2023 as compared to 2022.
We consider water a raw material in our business. We obtain water for the production of some of our 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 we use is presently in short supply, although the supply of specific materials could be adversely affected by strikes, weather conditions, governmental controls, national emergency situations, pandemics, water shortages or the failure to maintain our existing water concessions.
Mexico and Central America. In Mexico, we mainly purchase 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, we have introduced into our 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 our PET resin strategy and are known as the top PET global suppliers.
We purchase all of our 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. We mainly purchase our 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 we introduced glass bottles from Middle East suppliers such as Saudi Arabian Glass Co. Ltd known as SAGCO.
We purchase 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, we held a 36.4% and 2.7% equity interest in PIASA and Beta San Miguel, respectively. We purchase 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 us 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 our raw materials such as glass and non-returnable plastic bottles are purchased from several local suppliers. We purchase our 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, we acquire plastic non-returnable bottles from Alpla C.R. S.A., and in Nicaragua we acquire such plastic bottles from Alpla Nicaragua, S.A.
South America. In Colombia, we use sugar as a sweetener in all of our caloric beverages, which we buy from several sources. Sugar prices in Colombia increased by 11.0% in U.S. dollars and increased 12.2% in local currency, as compared to 2022. We purchase 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.). We have historically purchased all of our non-returnable glass bottles from O-I Peldar and other global suppliers in the Middle East. We purchase all of our cans from Crown Envases México, S.A. de C.V. and Crown Colombiana, S.A. Grupo Ardila Lulle (owners of our competitor Postobón) owns a minority equity interest in certain of our suppliers, including O-I Peldar and Crown Colombiana, S.A.
In Brazil, we also use sugar as a sweetener in all of our 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 our financial hedging activities, our 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.” We purchase non-returnable glass bottles, plastic bottles and cans from several domestic and international suppliers. We mainly purchase PET resin from local suppliers such as Indorama Ventures Polímeros S.A.
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In Argentina, we mainly use HFCS that we purchase from several different local suppliers as a sweetener in our products. We purchase glass bottles and other raw materials from several domestic sources. We purchase 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.
In Uruguay, we also use sugar as a sweetener in all of our caloric beverages, which is available at Brazil’s local market prices. Sugar prices in Uruguay increased approximately 36.7% in U.S. dollars and increased 13.0% in local currency as compared to 2022. Our main supplier of sugar is Nardini Agroindustrial Ltda., which is based in Brazil. We purchase 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 we purchase 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.).
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Regulation
We are subject to different regulations in each of the territories where we operate. The adoption of new laws or regulations or changes in existing laws or regulations in the countries where we operate may increase our operating and compliance costs, increase our liabilities or impose restrictions on our operations which, in turn, may adversely affect our business, financial condition and financial results.
Taxation of Beverages
As of December 31, 2023 all the countries where we operate, except for Panama, impose value-added tax on the sale of sparkling beverages, with a rate of 16.0% in Mexico, 12.0% in Guatemala, 15.0% in Nicaragua, 13.0% 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 Goias and Santa Catarina, 18.0% in the states of São Paulo, Minas Gerais and Parana and 20.0% in the states of Mato Grosso do Sul and Rio Grande do Sul. The states of Rio de Janeiro, Goias and Parana also charge an additional 2.0% on sales as a contribution to a poverty eradication fund. In Brazil the value-added tax is grossed-up and added, along with federal sales tax, at the taxable basis. In addition, we are responsible for charging and collecting the value-added tax from each of our retailers in Brazil, based on average retail prices for each state where we operate, defined primarily through a survey conducted by the government of each state, which in 2023 represented to us an average taxation of approximately 16.3% over net sales.
Several of the countries where we operate impose excise or other taxes, as follows:
•Mexico imposes an excise tax on the production, sale and import of beverages with added sugar and HFCS, which from January 1, 2023 to December 31, 2023 was Ps.1.5086 per liter. This excise tax is applied only to the first sale, and we are responsible for charging and collecting it. As of January 1, 2024 the excise tax was equal to Ps.1.5737 per liter. This excise tax rate will be in effect until December 31, 2024, and will thereafter 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 sparkling 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 (Instituto Nacional de Desarrollo Rural)) 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 for water and municipalities impose a 1.0% tax on our Nicaraguan gross sales.
•Panama imposes an excise tax of 7.0% 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 concentrate used to produce sugary drinks. In addition, Panama imposes an excise tax of 5.0% on non-carbonated beverages with more than 7.5 grams of sugar or any caloric sweetener per 100 ml, whether imported or produced locally. Beverages derived from dairy products, grains or cereals, nectars, fruit juices and vegetables with natural fruit concentrates are exempt from this tax.
•Argentina imposes an excise tax of 8.7% on sparkling beverages containing less than 5.0% lemon juice or less than 10.0% fruit juice, and an excise tax of 4.2% on sparkling water and flavored sparkling beverages with 10.0% or more fruit juice content, although this excise tax is not applicable to some of our products.
•Brazil assesses an average production excise tax of approximately 2.6% and an average sales tax of approximately 12.0% over net sales. Except for sales to wholesalers, these production and sales taxes apply only to the first sale, and we are responsible for charging and collecting these taxes from each of our retailers. For sales to wholesalers, they are entitled to recover the sales tax and charge this tax again upon the resale of our products to retailers.
•Colombia’s municipalities impose a sales tax that varies between 0.35% and 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. From January 1, 2024 to December 30, 2024, such excise tax increased to 28 Colombian pesos (approximately Ps.0.12 as of December 31, 2023) for beverages that contain 6 to 10 grams of added sugar per 100 ml, and to 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.
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•Uruguay imposes an excise tax of 19.0% on sparkling beverages, an excise tax of 12.0% on fruit juice-based beverages with at least 10.0% natural fruit juice content (or at least 5.0% natural fruit juice content in the case of lemon), and an excise tax of 8.0% on sparkling water and still water.
Tax Reforms
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. Our Brazilian subsidiaries commenced legal proceedings to ascertain their ability to calculate federal sales tax without using the value-added tax as a basis, in accordance with the Brazilian Federal 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. Pursuant to our final favorable resolution of 2019, the federal production and sales taxes together resulted in an average of 14.6% tax over net sales in 2023.
In recent years, the excise tax rate on concentrate in Brazil has undergone recurrent temporary fluctuations. The excise tax rate was increased from 4.0% to 8.0% from February 1, 2021 to February 24, 2022, was reduced 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 purchases of concentrate in the Manaus Free Trade Zone has been affected accordingly.
In December 2022, the Brazilian government published the new transfer pricing rules that will be effective as of 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 Cooperation and Development (OECD). During 2023, the Brazilian government issued regulations to establish the guidelines required to comply with the transfer pricing rules and it is expected to issue further regulation during 2024.
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 18.0%. The state of Minas Gerais started to apply as of January 1, 2024 an additional charge of 2.0% on sales as a contribution to a poverty eradication fund.
In December 2023, the Brazilian government published a provisional measure, to establish the amount of tax credits subject to offset as determined by a final and unappealable court decision that says any credit exceeding the value of 10 million Brazilian reais (approximately Ps.34.9 million as of December 31, 2023) must observe the monthly limitation to be offset by 1/60 of the total value of the tax credit. Even though taxpayers must observe and comply with this regulation as of January 1, 2024, this provisional measure needs to be converted into law by May 31, 2024; or it will be revoked.
In December 2023, the Brazilian government published a new law to become effective on January 1, 2024, that establishes that any subsidies granted by municipalities or the states will be taxed by the income tax and social contribution at the combined tax rate of 34.0% and will be subject to other contributions at a combined tax rate of 9.25%. In addition, the federal Brazilian government will grant an income tax credit of 25.0% on the municipality or state subsidy, limited to the lower of (i) the amount of 25.0% of the tax benefit itself and (ii) 25.0% of the depreciation of such assets applied on development or expansion approved projects which caused such subsidy, provided that certain conditions are met.
Furthermore, in December 2023, the Brazilian government published a constitutional amendment enacting a broad tax reform in Brazil that will replace the current indirect tax system for a new one, to be implemented progressively from January 1, 2026 until its full adoption in 2033. The municipal (ISSQN), state (ICMS) and federal taxes (PIS and COFINS) will be replaced by a dual value-added tax ("VAT") (CBS and IBS). The dual VAT will apply on all tangible and intangible goods, rights and services, and it will be calculated based on the amount charged on the location where the goods are consumed or the rights and services are provided. The dual VAT will not be used as a basis for its own calculation (no tax gross-up), and it will give the right to register the tax credit of the previous transaction. This new tax system is a non-cumulative system. There will be a standard rate for all goods and services, with exceptions for certain sectors such as education, health, public transportation, food for human consumption, agricultural products, among others, that will be entitled to a tax reduction of 100.0%, 70.0% or 40.0% of the tax rate. In the following years, the Brazilian government will issue the specific regulations to implement these constitutional amendments and the corresponding percentages of such dual VAT.
In addition, the constitutional amendment will impose as of 2027 an excise tax (IS) on production, extraction, commercialization or import of services or goods harmful to health and the environment. Such tax will apply only once, will not generate a subsequent tax credit (as it is subject to the so-called monophasic system) and will be used as part of the tax basis of other taxes applied on sales of services and goods. The current excise tax (IPI) will be reduced to zero, except for those products produced at the Manaus Free Trade Zone in order to maintain the competitiveness and development of such incentivized zone. Same as above, it is expected that the Brazilian government issues further regulation in connection with these amendments and the corresponding percentages for such tax.
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Argentina. In June 2021 (with retroactive effects as of January 2021), the Argentine government increased the income tax rate to 35.0% for 2021 onwards and imposed a tax rate of 7.0% on dividends paid to non-resident stockholders and resident individuals.
In December 2023, the Argentine government issued an executive decree (Decree 29/2023) that increased the PAIS (Programa para una Argentina Inclusiva y Solidaria) tax rate to 17.5%, applicable to the import of goods (excluding goods from the market basket goods, fuels, lubricants and other goods related to energy generation). This tax is applicable to foreign currency operations carried out as of December 13, 2023 and represents an additional cost for our Argentine operations. This rate is also applicable to freight services and other transportation services of imported or exported goods, or when such services are acquired in Argentina and provided by non-residents.
Mexico. In April 2021, the Mexican government amended the Federal Labor Law, the Mexican Federal Tax Code and other laws that regulate labor benefits to prohibit the outsourcing of personnel except in certain circumstances such as specialized works or services that are not part of the core business of a company and that are provided by services providers registered with the Ministry of Labor and Social Welfare. As a result of this tax reform, the deduction of expenses related to outsourcing is prohibited as well as the ability to credit the value-added tax generated by the expenses related to the outsourcing and in extreme cases, the outsourcing of personnel may qualify as tax fraud. This reform became effective on September 1, 2021.
In accordance with amendments to Mexican tax laws in effect from January 1, 2022, Mexican issuers are joint and severally liable for taxes payable on gains derived from the sale or disposition of its shares or securities representing its shares, such as ADSs, by major shareholders who are non-Mexican residents with no permanent establishment in Mexico for tax purposes, to other non-Mexican residents with no permanent establishment in Mexico for tax purposes, to the extent that such Mexican issuer fails to provide certain information with respect to such sale or disposition to the Mexican tax authorities. For purposes of these regulations, “major shareholders” are shareholders that are identified in reports submitted by the Mexican issuer to the CNBV on an annual basis as a result of being (i) directors or officers who directly or indirectly own 1.0% or more of the Mexican issuer’s capital stock, (ii) shareholders who directly or indirectly own 5.0% or more of the Mexican issuer’s capital stock or (iii) within the ten largest shareholders of the Mexican issuer based on direct ownership of shares of capital stock. Although in some instances 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 to that effect issued by the Mexican tax authorities. There is currently no obligation by non-Mexican residents to inform Mexican issuers about their sales or dispositions of shares or securities representing shares, which limits our ability to comply with our reporting obligations to the Mexican tax authorities. Therefore, the amount of a potential tax liability is uncertain and difficult to determine given inherent mechanics and procedures, including the application of any tax treaties available, applicable to the trading of publicly-traded securities.
Colombia. In August 2021, a new tax reform became effective in Colombia. This reform increased the income tax rate from 30.0% to 35.0% for 2022 onwards and limited to 50.0% the ability to discount or deduct the municipality sales taxes against income taxes.
In December 2022, a new tax reform was approved in Colombia, which became effective during 2023. The main changes are the following:
•Introduction of an excise tax for beverages with added sugar based on the following schedule:
▪From November 1, 2023 to December 30, 2023 a tax of 18 Colombian pesos (approximately Ps.0.08 as of December 31, 2023) will apply to beverages that contain 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 that contain 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; and
▪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 that contain between 5 grams and 9 grams of added sugar per 100ml 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.
•Introduction of a new tax on single-use plastics, with a rate of 0.00005 on a Tax Value Un it 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 which are not considered part of the market basket goods (currently two of our products fall in this category). However, this tax can be exempted with a circular economy certification to be issued should case recycled resin be
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incorporated into the packaging. In 2023, a legal resolution was issued by Colombian Constitutional Court (Resolution C-526/23) requiring that the person responsible for the payment of such tax is the producer of single-use plastics.
•Increase of the income tax rate as of January 1, 2023, from 20.0% to 35.0% on taxable income obtained from free trade zones within Colombia. This change will be effective on January 1, 2026 if a free trade zone company can demonstrate a 60.0% income increase in 2022 in comparison with 2019 fiscal year. However, the Colombian Constitutional Court ruled that this law shall not be applicable to the entities that have obtained its approval to be considered as a free trade zone company prior to December 13, 2022. Our Colombian subsidiary obtained such approval and was considered a free trade zone company prior to such date.
•Elimination of the possibility of taking as a tax discount the municipality sales taxes against income taxes.
•Increase of the occasional income tax rate from 10.0% to 15.0% applicable on sales of fixed assets and introduction of a stamp tax at a rate between 0.0% to 3.0%, over sales price of real estate and other assets.
•Introduction of a minimum income tax rate of 15.0%, which must be calculated considering an adjusted financial profit or “adjusted income”. The entities that are required to calculate such minimum income tax and if such calculation results in a tax rate higher than 15.0%, such entity shall pay only the regular income tax rate and if the result is lower than 15.0%, such entity shall pay an additional amount to reach the 15.0% rate.
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 became effective to reintroduce the standard debt and credit system for producers, wholesalers, and retailers with a tax rate of 13.0%, therefore our Costa Rican subsidiary is no longer responsible for collecting such tax throughout the entire supply chain.
Uruguay. On December 31, 2021, the Uruguayan government issued an executive decree that increased the excise tax for energy drinks from 19.0% to 22.0%. This increase was effective as of January 2022.
For further information please see Note 24.3 to our consolidated financial statements.
Water Supply
Given that water is an essential resource to carry out all human activity, and given its key role in our business as a beverage bottler company, comprehensive and efficient water management is of utmost importance. As a result, as of December 31, 2023, we had a water use ratio of 1.42 liters of water used per liter of beverage produced, which is a benchmark within The Coca-Cola system. In addition, our goal is to further reduce our water consumption and to return to the environment and our communities the same amount of water used to produce our beverages. With respect to wastewater treatment, all of our bottling plants have their own wastewater treatment plants or have contracted related services to ensure the quality of the waste water discharge.
In Mexico, we obtain water directly from wells pursuant to concessions obtained from the Mexican government for each bottling plant. Water use in Mexico is regulated primarily by the 1992 Water Law (Ley de Aguas Nacionales de 1992), as amended, and regulations issued thereunder, which created the National Water Commission (Comisión Nacional del Agua). The National Water Commission is in charge of overseeing the national system of water use. Under the 1992 Water Law, concessions for the use of a specific volume of ground or surface water generally run from five to fifty-year terms, depending on the supply of groundwater in each region as projected by the National Water Commission. Concessionaires may request concession terms be extended before the expiration of the same. The Mexican government may reduce the volume of ground or surface water granted for use by a concession by whatever volume of water that is not used by the concessionaire for two consecutive years, unless the concessionaire proves that the volume of water not used is because the concessionaire is saving water by an efficient use of it. Our concessions may be terminated if, among other things, we use more water than permitted or we fail to pay required concession-related fees and do not cure such situations in a timely manner. Although we have not undertaken independent studies to confirm the sufficiency of the existing groundwater supply, we believe that our existing concessions satisfy our current water requirements in Mexico.
In addition, the 1992 Water Law provides that plants located in Mexico must pay a fee either to the local governments for the discharge of residual waste water to drainage or to the federal government for the discharge of residual waste water into rivers, oceans or lakes. Pursuant to this law, certain local and federal authorities test the quality of the waste water discharge and charge plants an additional fee for measurements that exceed certain standards published by the National Water Commission. In the case of non-compliance with the law, penalties, including closures, may be imposed. All of our bottling plants located in Mexico meet these standards. See “—Description of Property, Plant and Equipment.”
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In May 2023, the Mexican government amended the 1992 Water Law in order to prioritize water use for human and household consumption. As a result of this amendment, the National Water Commission has the authority to totally or partially reduce the volume of water granted by a concession in case of water shortage. In such event, there may be an adverse effect on our business and results of operations in Mexico.
In Brazil, we obtain water and mineral water from wells pursuant to concessions granted by the Brazilian government for each bottling plant.
According to the Brazilian Constitution and the National Water Resources Policy, water is considered an asset of common use and can only be exploited for the national interest by Brazilians or companies formed under Brazilian law. Concessionaires and users can be held responsible for any damage to the environment. The exploitation and use of mineral water are regulated by the Code of Mining, Decree Law No. 227/67 (Código de Mineração), the Mineral Water Code, Decree Law No. 7841/1945 (Código de Águas Minerais), the National Water Resources Policy, Decree No. 24.643/1934 and Law No. 9433/97 and by regulations issued thereunder. The companies that exploit water are supervised by the National Mining Agency (Agência Nacional de Mineração —ANM) and the National Water Agency (Agência Nacional de Águas) in connection with federal health agencies, as well as state and municipal authorities. We use spring water in our bottling plants where we have obtained all the necessary permits.
In Colombia, in addition to natural spring water for Manantial, we obtain water directly from wells and from utility companies. We are required to have a specific concession to exploit water from natural sources. Our concession to exploit water from natural sources in Colombia was granted by Resolution No. 3485 in May 2014, and expires in December 2024. We will submit a filing to renew the concession. Water use in Colombia is regulated by Decree No. 1076 of 2015.
Pursuant to Law 2294 of 2023, there is no need to obtain a specific permit for the discharge of industrial waste water into the drainage system in Colombia until the end of 2026.
In Argentina, a state water company provides water to our Alcorta bottling plant on a limited basis; however, we believe the authorized amount meets our requirements for this bottling plant. In our Monte Grande bottling plant in Argentina, we pump water from wells, in accordance with Law No. 25.688.
In Uruguay, we acquire water from the local water system, which is managed by the Organism of Sanitary Works (Obras Sanitarias del Estado).
Additionally, we are required by the Uruguayan federal government to discharge all of our water excess to the sanitation system for recollection.
In Nicaragua, the use of water is regulated by the National Water Law (Ley General de Aguas Nacionales). In November 2022, we renewed our concession for the exploitation of wells for five more years, extending the expiration date to November 2027.
In Costa Rica, the use of water is regulated by the Water Law (Ley de Aguas). We extract water from wells granted to us through governmental concessions and have five concessions in Costa Rica which are in full force and effect.
In Guatemala, no license or permits are required to exploit water from the private wells in our own bottling plants.
In Panama, we acquire water from a state water company, and the use of water is regulated by the Panama Use of Water Regulation (Reglamento de Uso de Aguas de Panamá).
Environmental Regulations
In all of our territories, our operations are subject to federal and state laws and regulations relating to the protection of the environment. In Mexico, the principal legislation is the 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 Waste Management (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. In particular, Mexican environmental laws and regulations require that we file periodic reports with respect to hazardous wastes and set forth standards for waste water discharge that apply to our operations. In order to comply with Mexican environmental laws and regulations, we have implemented several programs designed to facilitate compliance with air, waste, noise and energy standards established by current Mexican federal and state environmental laws, including a program
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that installs catalytic converters and liquid petroleum gas in delivery trucks for our operations in Mexico City. See “—The Company—Product Sales and Distribution.”
Also in Mexico, the General Law of Climate Change (Ley General de Cambio Climático), its regulation and certain decrees related to such law, impose upon various industries (including the food and beverage industry) the obligation to report direct or indirect gas emissions exceeding 25,000 tons of carbon dioxide. Currently, we are not required to report these emissions, since we do not exceed this threshold. We cannot assure you that we will not be required to comply with this reporting requirement in the future.
Our Central American operations are subject to several national and local laws and regulations related to the protection of the environment and the disposal of hazardous and toxic materials, as well as water usage. In December 2019, the Costa Rican government enacted Law No. 9,786, which requires that companies that sell, distribute or produce plastic bottles made of single use plastics comply with at least one of the following obligations: (a) produce plastic bottles that contain a percentage of recycled resin, (b) implement a recycling or collection program of the plastic bottles sold by such company, (c) participate in waste management programs appropriate to the relevant industry or product, (d) use or produce packaging or products that minimize the generation of solid waste, or (e) establish strategic partnerships with at least one municipality to improve its collection and waste management programs. This law became enforceable in August 2023, when the related guidelines and regulations were issued by the Ministry of Health, Radiological Protection Office and Environmental Health Department (Ministerio de Salud, Dirección de Protección Radiológica y Salud Ambiental) and we are currently in compliance with these regulations.
Our Colombian operations are subject to several Colombian federal and state laws and regulations related to the protection of the environment and the use of treated water and hazardous materials. These laws include the control of air emissions, noise emissions, use of treated water and strict limitations on the use of chlorofluorocarbons. Law 1407 imposes certain goals on producers for the use and recycling of packaging waste in the form of paper, cardboard, plastic, glass and metal and imposes the obligation to report to the corresponding authorities their progress on such activities and their strategies to achieve the imposed targets. In December 2020, our Colombian subsidiary filed its plan of environmental management of packaging waste and we are currently in compliance with that law. In June 2022, the Colombian government enacted Law 2232, which requires the gradual transition to increasing the amount of recycled resin and the prohibition of certain single-use plastic products. This regulation establishes certain goals for our Colombian operations: (i) by 2025 PET resin water bottles must incorporate at least 50.0% of recycled resin and such percentage will increase to 90.0% by 2030, (ii) PET resin bottles for other beverages must incorporate at least 20.0% recycled resin by 2025 and such percentage will increase to 35.0% by 2030, to 40.0% by 2035 and to 60.0% by 2040 and (iii) by 2030 at least 50.0% of the PET resin bottles, packages and containers placed in the market must be collected by our Colombian subsidiaries through extended producer responsibility schemes. In order to fully enforce Law 2232, the Ministry of Environment and Sustainable Development (Ministerio de Ambiente y Desarrollo Sostenible) must issue the applicable guidelines or regulations. Although this law is already enacted, we are not legally obliged to comply with it until its regulations are enacted. We do not foresee any significant impact in our operations, as we are already taking proactive steps in order to comply with these goals and incorporating recycled resin in our PET resin bottles (both for water and other beverages).
Our Brazilian operations are subject to several federal, state and municipal laws and regulations related to the protection of the environment. Among the most relevant laws and regulations are those dealing with the emission of greenhouse gases, the disposal of wastewater and solid waste, and soil contamination, which impose penalties, such as fines, facility closures and criminal charges depending upon the level of non-compliance. Among other regulations, a municipal regulation of the City of São Paulo, implemented pursuant to Law 13.316/2002, requires us to collect 90.0% of PET resin bottles sold. We are currently unable to collect the entire required volume of PET resin bottles we sell in the City of São Paulo and could be fined and be subject to other sanctions, such as the suspension of operations in any of our bottling plants and/or distribution centers located in the City of São Paulo. In October 2010, the municipal authority of São Paulo levied a fine on our Brazilian operating subsidiary of 250,000 Brazilian reais (Ps.872,363.83 as of December 31, 2023). Our Brazilian subsidiary filed a legal recourse against the imposition of the fine which is still pending resolution. Nevertheless, Law 13.316/2002 was revoked by Law 17.471/2020 and the new provisions require us to implement and operate reverse logistics on certain proportion of products placed on the market, according to certain targets, expecting at least the recovery, by December 2024, of 35.0% of the total volume of packaging placed on the market during 2023. Our Brazilian subsidiary has implemented certain programs to achieve such goal.
Our Argentine operations are subject to federal and municipal laws and regulations relating to the protection of the environment. The most significant of these are regulations concerning waste management, which is regulated by federal Law 24.051 and Law 9111/78, and waste water discharge. Such regulations are enforced by the Ministry of Natural Resources and Sustainable Development (Secretaría de Ambiente y Desarrollo Sustentable) and the Environment Ministry for Sustainable Development (Organismo Provincial para el Desarrollo Sostenible) for the province of Buenos Aires. Our Alcorta bottling plant is in compliance with environmental standards.
In Uruguay, we are subject to laws and regulations relating to the protection of the environment, including regulations concerning waste management and waste water discharge and disposal of hazardous and toxic materials, among others. We own a water treatment plant for the discharge of residual industrial water. We have established a program for recycling solid wastes. The Uruguayan Ministry of Environment (Ministerio de Ambiente) issued an administrative resolution imposing the obligation of achieving high recovery and recycling goals of packaging materials (by 2023 at least 30.0% of such packaging). In order to achieve such goals, the Uruguayan industry agreed with the authorities on a plan referred to as the “Industry Management Plan” that sought to extend the term to set a
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50.0% goal for recovery and recycling by 2025. This plan will result in higher expenditures for our Uruguayan subsidiary in order to comply with such regulations.
We have spent, and may be required to spend in the future, funds for compliance and remediation under local environmental laws and regulations. Currently, we do not believe that such costs will have a material adverse effect on our results or financial condition. However, since environmental laws and regulations and their enforcement are becoming increasingly stringent in our territories, and there is increased recognition by local authorities of the need for higher environmental standards in the countries where we operate, changes in current regulations may result in an increase in costs, which may have an adverse effect on our future results or financial condition. Except as provided herein, currently we are not aware of any significant pending regulatory changes that would require a significant amount of additional remedial capital expenditures.
We do not believe that our business activities pose a material risk to the environment, and we believe that we are in material compliance with all applicable environmental laws and regulations.
Other Regulations
In August 2020, the government of the state of Oaxaca, Mexico amended the Law on the Rights of Girls, Boys and Adolescents of the state of Oaxaca (Ley de los Derechos de Niñas, Niños y Adolescentes del Estado de Oaxaca) to prohibit the distribution, donation, grant gifts, sale and supply of beverages with added sugar and of high-calorie packaged food to minors (including through public and private schools from elementary school through high school), except to the parents or legal guardians of the minors. As of the date of this annual report, this law has not been applied and, when that occurs, we cannot assure you this law will not have an adverse impact on our business and results of operations in Mexico.
In August 2020, the government of the state of Tabasco, Mexico amended the Health Law of the state of Tabasco (Ley de Salud del Estado de Tabasco), Law of Education of the state of Tabasco (Ley de Educación del Estado de Tabasco) to prohibit: (i) the sale or supply to minors (except to parents or legal guardians of minors) certain products, including prepackaged and carbonated beverages with added sugar; and (ii) the sale of (or installing vending machines to sell) prepackaged and carbonated beverages with added sugar, among other products, in public or private schools from elementary schools through high schools, public and private hospitals and health centers. As of the date of this annual report, the government of the state of Tabasco has not issued the applicable guidelines or regulations. As a result, this law has not been applied and, when that occurs, we cannot assure you this law will not have an adverse impact on our business and results of operations in Mexico.
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). As a result, the competent courts have suspended the effects of such increased transmission fees reducing a foreseeable negative impact on our operations.
In October 2020, the CRE approved resolution RES/1094/2020, which modifies the existing rules for the amendment or assignment of power generation 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.
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.
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 are still pending resolution. In January 2024, the Mexican Supreme Court ruled that the amendments to the Mexican Electricity Law were unconstitutional.
In April 2021, the Mexican government amended the Federal Labor Law, the Mexican Federal Tax Code and other laws that regulate labor benefits to, among other things, prohibit the outsourcing of personnel except in certain circumstances such as specialized works or services that are not part of the core business of a company and that are provided by services providers registered with the Ministry of Labor and Social Welfare. We took the applicable measures to be in compliance with these amendments.
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In June 2021, the Colombian government issued Resolution 810 of 2021 which sets forth the nutritional and front labeling requirements for canned or packaged food. In December 2022, the government adopted a labeling model similar to that in Mexico: octagonal seals for prepackaged food and non-alcoholic beverages with excess of sugar, sodium, saturated and trans fat, in addition to octagonal seals on products containing non-caloric sweeteners. The new labeling requirements came into effect in June 2023 and we are required to comply with this regulation not later than in June 2024.We are currently implementing all measures necessary to comply with this new regulation within the required timeframe.
In November 2021, the Argentine government issued a new law which sets forth front labeling requirements for prepackaged food and non-alcoholic beverages. The rules for this law were issued in March 2022, and established a labeling model similar to Mexico: octagonal seals for prepackaged food and non-alcoholic beverages with excess of calories, sugar, sodium, saturated and total fat, in addition to warnings for children on products containing caffeine and non-caloric sweeteners. The new labeling became effective in September 2022. We have been complying with the new labeling requirements.
In April 2023, the Official Mexican Standard (NOM-127-SSA1-2021) came into force, amending the NOM issued in 2000, imposing new parameters that water for human use and consumption must meet, which are stricter than those set forth in the previous NOM. As a result of these new parameters, we will have more stringent requirements in our water efficiency programs, and we will have to reinforce actions to implement water reduction initiatives in Mexico. Despite all these efforts, we cannot assure you that the result of our water reduction initiatives in Mexico will allow us to meet our target of reducing the water use ratio per liter of beverages produced.
In December 2023, the government of the State of Mexico, amended the Código Financiero del Estado de México y Municipios to modify and include certain tax provisions regarding environmental matters applicable as of January 2024. The main change is a new tax for waste water discharge, however, the issuance of the applicable guidelines in order to establish the collection mechanism is still pending. Until such guidelines are enacted we cannot assure that such guidelines will not have an adverse effect on our results or financial condition.
Sustainability Initiatives
Consistent with our business strategy and priorities, we aim to foster a sustainable future. To this end, we have recently updated our sustainable future framework, basing our 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, and (vii) community development.
We acknowledge that we have a role to play in developing our sustainability initiatives to enhance our environmental stewardship and social responsibility toward our people, our communities, and the environment. We have aligned our actions with the sustainable development goals of our communities and value chain, supporting the development of our suppliers while also seeking to improve living conditions and reduce our environmental impact.
In terms of governance, we seek to raise our ethical standards and to implement leading best practices. During 2021 we agreed to establish a Sustainability Committee that began holding sessions in 2022. This committee is comprised of members of our senior leadership team, so as to ensure that all of the relevant areas of our business and all of the countries in which we operate are fully involved in the creation of sustainability initiatives and decisions. Our objective is to continually reinforce our commitment to create value in the social, environmental and corporate governance areas, while positively impacting the communities we serve. The Sustainability Committee is responsible for: (i) guiding the strategy, (ii) creating and implementing public pledges, (iii) management and assignment of resources, (iv) monitoring and supervision, and (v) risk mitigation.
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. All of our bottling facilities are ISO14001 certified, and 84.0% are Zero Waste certified.
Our 2030 projects related to sustainable mobility foresee an increase in the number of commercial electric vehicles in our fleet and an increase in efficiency in fuel consumption over distance covered.
In our Mexican operations, we established a partnership with The Coca-Cola Company and Alpla, our supplier of plastic bottles in Mexico, to create Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”), a PET recycling facility located in Toluca, Mexico. In 2023, this facility recycled 11,794 tons of PET resin. In addition, in 2022, we, together with Alpla, started the construction of a recycling plant located in Tabasco, Mexico, Planta Nueva Ecología de Tabasco (PLANETA), which is expected to start operations
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during 2024. This new plant will operate with state-of-the-art technology to process up to 50,000 tons of post-consumption PET bottles per year and to produce up to 35,000 tons of food grade recycled material, ready to be reused. We have also continued contributing funds to ECOCE, A.C., a nationwide collector of containers and packaging materials. In 2023, ECOCE collected 62.8% of the total PET resin waste in Mexico.
All of our bottling plants located in Mexico have received certain environmental certificates by federal and/or local authorities, which are annually renewed.
Our Costa Rican operations participate in a joint local recycling effort with The Coca-Cola Company at the recycling plant Misión Planeta, located in Alajuela, Costa Rica. This plant collects and recycles non-returnable plastic bottles, Tetrapak and cans. Additionally, our Costa Rican operations recycle, reuse and co-process 100.0% of their waste from its bottling plants, leverage certified suppliers and are in compliance with applicable legislation. Our bottling plants in Costa Rica are certified for ISO 50001, ISO 14061-1 and the Zero Waste Certification (Certificación de Sistemas Basura Cero) granted by The Coca-Cola Company. As part of our sustainable use of water, our Costa Rican operations participate in Agua para el Futuro, a strategic alliance with FEMSA Foundation, FUNDECOR (Fundación para el Desarrollo de la Cordillera Volcánica Central) and the Inter-American Development Bank, among others, whose goal is to “return” to the environment 100.0% of the water we use in our bottling plants, through the conservation and reforestation of key areas that replenish basins in the surrounding area of San Jose. For the fourth year in a row, our Costa Rican operations received the “Bandera Azul Ecologica” award in the climate change category.
In Nicaragua, our Nicaraguan subsidiary is leading a joint effort along with The Coca-Cola Company to collect and recycle non-returnable PET resin bottles in alliance with local recyclers and collectors. Additionally, our Nicaraguan operations recycle, reuse and co-process 95.0% of the waste from its bottling plants.
In Guatemala, our Guatemalan subsidiary and the FEMSA Foundation, participate in FUNCAGUA (Fundación para la conservación del agua de la región metropolitana de Guatemala), as founding partners. Several of this institution’s projects are related to sustainable water use. In addition to FUNCAGUA since July 2023, we also participate in environmental protection efforts in partnership with World Wildlife Fund, with respect to the replenishment of water in three sub-basins in María Linda, Ocosito and Pasabien in Guatemala.
All of our bottling plants in Central America are ISO 14001, ISO 9001:2015, and ISO 45001:2018 certified.
In Brazil, our bottling plant located in Jundiai has been recognized by the Brazilian authorities for its compliance with environmental regulations and for having standards well above those imposed by applicable law. The Itabirito and Maringá bottling plants have a Leadership in Energy and Environmental Design (“LEED”) certification, which is a globally recognized certification of sustainability in business design. In addition, the bottling plants of Jundiai, Mogi das Cruzes, Campo Grande, Marilia, Maringa, Curitiba, Antonio Carlos, Porto Alegre, Itabirito, Santa Maria and Bauru have been certified for ISO 9001; ISO 14001; ISO 45001 and FSSC 22000.
In Colombia, we are engaged in nationwide reforestation programs and campaigns for the collection and recycling of glass and plastic bottles, among other programs with positive environmental impacts. We have also obtained and maintained the ISO 9001, ISO 14001, ISO 45001, ISO 22000, ISO/TS 22000-1 and FSSC 22000 certifications for our bottling plants located in Tocancipa, Medellin, Cali, Bogota, Barranquilla, Bucaramanga and La Calera, as recognition for the highest quality and food harmlessness in our production processes, which is evidence of our strict level of compliance with relevant Colombian regulations. Our bottling plant located in Tocancipa obtained the Leadership in Energy and Environmental Design (“LEED 2009”) certification in April 2017. Additionally, our bottling plants in Colombia received the Zero Waste Certification (Certificación de Sistemas Basura Cero), granted by Icontec and the organization Basura Cero Global. In 2023, the Tocancipa bottling plant received a KAIZEN award from the Kaizen Institute for operational excellence.
Our bottling plants and operative units in Buenos Aires, Argentina are certified for ISO 14001:2004.
Our bottling plant in Montevideo, Uruguay is certified for ISO 14001:2015.
In June 2020, we received the approval from the Science Based Targets Initiative, or the SBTi, for our greenhouse gas, or GHG, emissions reduction targets. SBTi is an international collaboration between the Carbon Disclosure Project, the United Nations Global Compact, the World Resources Institute and the World Wide Fund for Nature. In 2019, we worked in collaboration with our value chain to develop a robust GHG emissions inventory and have defined the following goals, intended to be met by 2030:
•reduce absolute GHG emissions from our operations by 50.0% compared to the 2015 baseline;
•reduce absolute GHG emissions from our value chain, covering purchased goods and services and upstream transportation and distribution by 20.0% compared to the 2015 baseline; and
•achieve 100.0% renewable electricity in our operations.
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The targets we established for our operations are consistent with reductions required to meet the goals of the Paris Agreement and limit global warming to well-below 2ºC above pre-industrial levels. Our target for emissions from our value chain meets the SBTi’s criteria for ambitious value chain goals, meaning it is in line with current best practice.
Pursuant to this public commitment, we made great progress during 2023 by increasing our renewable energy usage from 66.0% to 77.0%. Additionally, as part of our waste management strategies, in 2023, an average of 33.0% of our PET resin packaging was comprised of recycled materials. Furthermore, as part of our waste management strategy, we recycled 98.0% of the total post-industrial waste generated in our bottling facilities.
In September 2020, we issued US$705 million aggregate principal amount of 1.850% senior notes due 2032, or “green bonds”, the proceeds of which are being used to finance and refinance our eligible green projects, including investments and expenditures related to mitigation of climate change risks, efficient use of water resources and hydrological safety, and waste management and recycling of PET plastic bottles. As of December 31, 2023, we allocated 100.0% of green bond net proceeds to projects supporting climate action, water stewardship and a circular economy.
In September 2021, we issued two series of certificados bursátiles in the Mexican local market that are classified as sustainability-linked bonds and require us to achieve certain key performance indicators.
In October 2022, we issued two series of certificados bursátiles in the Mexican local market which were the first social bonds issued in the consumer sector in the Americas, as well as a sustainability bond. For further information, see “Item 5. Operating and Financial Review and Prospects—Summary of Significant Debt Instruments”.
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Bottler Agreements
Coca-Cola Bottler Agreements
Bottler agreements are the standard agreements that The Coca-Cola Company enters into with bottlers in each territory. Pursuant to our bottler agreements, we are authorized to manufacture, sell and distribute Coca-Cola trademark beverages within specific geographic areas, and we are required to purchase concentrate for all Coca-Cola trademark beverages in all of our territories from affiliates of The Coca-Cola Company and sweeteners and other raw materials from companies authorized by The Coca-Cola Company.
These bottler agreements also provide that we will purchase our entire requirement of concentrate for Coca-Cola trademark beverages at prices, terms of payment and on other terms and conditions of supply as determined from time to time by The Coca-Cola Company.The Coca-Cola Company contributed a significant portion of our total marketing expenses in our territories during 2023 and has reiterated its intention to continue providing such support as part of our cooperation framework. Although we believe that The Coca-Cola Company will continue to provide funds for advertising and marketing, it is not obligated to do so. Consequently, future levels of advertising and marketing support provided by The Coca-Cola Company may vary materially from the levels historically provided. See Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—Cooperation Framework with The Coca-Cola Company.
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 the price multipliers used to calculate the cost of concentrate and the currency of payment, among other terms, are set by The Coca-Cola Company, we set the price of products sold to customers at our discretion, subject to the applicability of price restraints imposed by authorities in certain territories. We have the exclusive right to distribute Coca-Cola trademark beverages for sale in our territories in authorized containers as approved under the bottler agreements and currently used by our company. These containers include various configurations of cans and returnable and non-returnable bottles made of glass, aluminum and plastic as well as fountain containers.
The bottler agreements include an acknowledgment by us that The Coca-Cola Company is the sole owner of the trademarks that identify the Coca-Cola trademark beverages and of the formulas with which The Coca-Cola Company’s concentrates are made. Subject to our exclusive right to distribute Coca-Cola trademark beverages in our territories, The Coca-Cola Company reserves the right to import and export Coca-Cola trademark beverages to and from each of our territories. Our bottler agreements do not contain restrictions on The Coca-Cola Company’s ability to set the price of concentrates and do not impose minimum marketing obligations on The Coca-Cola Company. The prices at which we purchase concentrate under the bottler agreements may vary materially from the prices we have historically paid. However, under our bylaws and the shareholders agreement among The Coca-Cola Company and certain of its subsidiaries and certain of FEMSA’s subsidiaries, an adverse action by The Coca-Cola Company under any of the bottler agreements may result in a suspension of certain voting rights of the directors appointed by The Coca-Cola Company. This provides us with limited protection against The Coca-Cola Company’s ability to raise concentrate prices to the extent that such increase is deemed detrimental to us pursuant to such shareholders agreement and our bylaws. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.”
The Coca-Cola Company has the ability, at its sole discretion, to reformulate any of the Coca-Cola trademark beverages and to discontinue any of the Coca-Cola trademark beverages, subject to certain limitations, so long as all Coca-Cola trademark beverages are not discontinued. The Coca-Cola Company may also introduce new beverages in our territories in which case we have a right of first refusal with respect to the manufacturing, packaging, distribution and sale of such new beverages subject to the same obligations as then existing with respect to the Coca-Cola trademark beverages under the bottler agreements. The bottler agreements prohibit us from producing, bottling or handling beverages other than Coca-Cola trademark beverages, or other products or packages that would imitate, infringe upon, or cause confusion with the products, trade dress, containers or trademarks of The Coca-Cola Company, except with the consent of The Coca-Cola Company. The bottler agreements also prohibit us from acquiring or holding an interest in a party that engages in such restricted activities. The bottler agreements impose restrictions concerning the use of certain trademarks, authorized containers, packaging and labeling of The Coca-Cola Company so as to conform to policies approved by The Coca-Cola Company. In particular, we are obligated to:
•maintain plant and equipment, staff and distribution facilities capable of manufacturing, packaging and distributing the Coca-Cola trademark beverages in authorized containers in accordance with our bottler agreements and in sufficient quantities to satisfy fully the demand in our territories;
•undertake adequate quality control measures established by The Coca-Cola Company;
•develop, stimulate and satisfy fully the demand for Coca-Cola trademark beverages using all approved means, which includes the investment in advertising and marketing plans;
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•maintain a sound financial capacity as may be reasonably necessary to assure performance by us and our subsidiaries of our obligations to The Coca-Cola Company; and
•submit annually to The Coca-Cola Company our marketing, management, promotional and advertising plans for the ensuing year.
We have separate bottler agreements with The Coca-Cola Company for each of the territories where we operate, on substantially the same terms and conditions. The bottler agreements are automatically extended for successive ten-year terms unless the following conditions and procedures are complied with: eighteen months prior to the expiration of any ten-year period, either party may elect for any reason, with or without cause, to give notice to the other of its preliminary intention not to renew the agreement. Said notice, however, will not be binding until a final notice of non-renewal is given six months thereafter by either party. During the six-month period between preliminary notice and possible final notice of non-renewal, the parties may reconsider and nonetheless mutually agree in writing to renew the agreement for a further ten-year period. In the event that the decision is not to renew, the bottler agreement will terminate and expire at the end of such ten-year term. The automatic renewal process described above does not require any action. Only the non-renewal requires an action, see Note 3.12 to our consolidated financial statements.
As of the date of this report we had:
•four bottler agreements in Mexico: (i) the agreement for the Valley of Mexico territory, which is up for renewal in June 2033, (ii) the agreement for the southeast territory, which is up for renewal in June 2033, (iii) the agreement for the Bajio territory, which is up for renewal in May 2025, and (iv) the agreement for the Golfo territory, which is up for renewal in May 2025;
•one bottler agreement in Brazil, which is up for renewal in October 2027;
•three bottler agreements in Guatemala, one of which is up for renewal in March 2025 and two in April 2028;
•one bottler agreement in Argentina, which is up for renewal in September 2024;
•two bottler agreements in Colombia, which are up for renewal in June 2024;
•one bottler agreement in Costa Rica, which is up for renewal in September 2027;
•one bottler agreement in Nicaragua, which is up for renewal in May 2026;
•one bottler agreement in Panama, which is up for renewal in November 2024; and
•one bottler agreement in Uruguay, which is up for renewal in June 2028.
As of the date of this report, our investee KOF Venezuela had one bottler agreement, which is up for renewal in August 2026.
The bottler agreements are subject to termination by The Coca-Cola Company in the event of default by us. The default provisions include limitations on the change in ownership or control of our company and the assignment or transfer of the bottler agreements and are designed to preclude any person not acceptable to The Coca-Cola Company from obtaining an assignment of a bottler agreement or from acquiring our company independently of other rights set forth in the shareholders’ agreement. These provisions may prevent changes in our principal shareholders, including mergers or acquisitions involving sales or dispositions of our capital stock, which will involve an effective change of control, without the consent of The Coca-Cola Company. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.”
We have also entered into tradename license agreements with The Coca-Cola Company pursuant to which we are authorized to use certain trademark names of The Coca-Cola Company with our corporate name. These agreements have a ten-year term and are automatically renewed for ten-year terms, but are terminated if we cease to manufacture, market, sell and distribute Coca-Cola trademark products pursuant to the bottler agreements or if the shareholders agreement is terminated. The Coca-Cola Company also has the right to terminate any license agreement if we use its trademark names in a manner not authorized by the bottler agreements.
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Description of Property, Plant and Equipment
As of December 31, 2023, we owned 56 bottling plants. By country, as of such date, we had 28 bottling plants in Mexico, seven in Central America, seven in Colombia, 11 in Brazil, two in Argentina, and one in Uruguay.
As of December 31, 2023, we operated 251 distribution centers, approximately 54.0% of which were in our Mexican territories. As of such date, we owned 83.0% of these distribution centers and leased the remainder. This calculation considers owned and third-party distribution centers managed by us in Mexico. See “—The Company—Product Sales and Distribution.”
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 disaster, including hurricane, hail, earthquake and damages caused by human acts, including explosion, fire, vandalism and riot; 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. We believe that our coverage is consistent with the coverage maintained by similar companies in our industry.
Certain factors may affect utilization levels of our bottling plants, such as seasonality of demand for our products, supply chain planning due to different geographies and different packaging capacities of our production lines. In particular, seasonality and peak months of demand for our products may lead us to have excess capacity during certain months in certain countries.
The table below summarizes installed capacity, average annual utilization and utilization during peak month of our bottling plants by country:

Bottling Plants Summary As of December 31, 2023 |
Country | Installed Capacity (thousands of unit cases)(4) | Average Annual Utilization (%)(1)(2) | Utilization in Peak Month (%)(1) | Utilization in Peak Month (%) Main Packages(1)(3)
Mexico | 2,809,697 |  | 61 | 69 | 74
Guatemala | 231,191 |  | 72 | 81 | 92
Nicaragua | 122,231 |  | 64 | 78 | 82
Costa Rica | 93,208 |  | 53 | 56 | 77
Panama | 72,456 |  | 44 | 51 | 51
Colombia | 733,179 |  | 40 | 43 | 75
Brazil | 1,566,219 |  | 69 | 74 | 74
Argentina | 408,354 |  | 44 | 52 | 63
Uruguay | 135,912 |  | 25 | 32 | 40

(1) Calculated based on each bottling plant’s theoretical capacity assuming total available time in operation and without taking into account ordinary interruptions, such as planned downtime for preventive maintenance, repairs, sanitation, set-ups and changeovers for different flavors and presentations. Additional factors that affect utilization levels include seasonality of demand for our products, supply chain planning due to different geographies and different packaging capacities.
(2) Annualized rate.
(3) Considers the average annual utilization of the main packaging lines in the country (excluding bulk water and fountain), during the peak month.
(4) Installed capacity contractions as compared to 2022 in Mexico, Brazil, and Argentina mostly reflect mix shifts to single-serve and temporary downtime due to line replacements and relocations.
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The table below summarizes our main bottling plants in terms of installed capacity, including their location and facility area:

|  | Main Bottling Plant by Location As of December 31, 2023 |  |
Country |  | Plant |  | Facility Area
|  |  |  | (thousands of sq. meters)
Mexico |  | Toluca, Estado de México |  | 317
|  | León, Guanajuato |  | 124
|  | Morelia, Michoacán |  | 50
|  | Ixtacomitán, Tabasco |  | 117
|  | Apizaco, Tlaxcala |  | 80
|  | Coatepec, Veracruz |  | 142
|  | La Pureza Altamira, Tamaulipas |  | 300
|  | San Juan del Río, Querétaro |  | 84
Guatemala |  | Guatemala City |  | 46
Nicaragua |  | Managua |  | 54
Costa Rica |  | Calle Blancos, San José |  | 52
Panama |  | Panama City |  | 29
Colombia |  | Barranquilla, Atlántico |  | 37
|  | Bogotá, DC |  | 105
|  | Tocancipá, Cundinamarca |  | 298
Brazil |  | Jundiaí, São Paulo |  | 191
|  | Marília, São Paulo |  | 159
|  | Curitiba, Paraná |  | 119
|  | Itabirito, Minas Gerais |  | 320
|  | Porto Alegre, Rio Grande do Sul |  | 196
Argentina |  | Alcorta, Buenos Aires |  | 73
Uruguay |  | Montevideo, Montevideo |  | 120

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Significant Subsidiaries
The table below sets forth all of our direct and indirect significant subsidiaries and the percentage of equity of each subsidiary we owned directly or indirectly as of December 31, 2023:

Name of Company |  | Jurisdiction of Incorporation |  | Percentage Owned |  | Description
Propimex, S. de R.L. de C.V. |  | Mexico |  | 100.0% |  | Distributor of bottled beverages.
Controladora Interamericana de Bebidas, S. de R. L. de C.V. |  | Mexico |  | 100.0% |  | Holding company of manufacturers and distributors of bottled beverages.
Spal Industria Brasileira de Bebidas, S.A. |  | Brazil |  | 84.4% |  | Producer and distributor of bottled beverages.
Servicios Refresqueros del Golfo y Bajío, S. de R.L. de C.V. |  | Mexico |  | 100.0% |  | Producer of bottled beverages.
Embotelladora Mexicana de Bebidas Refrescantes, S. de R.L. de C.V. |  | Mexico |  | 100.0% |  | Producer of bottled beverages.

For further information regarding our investment in associates and joint ventures, see Note 9 to our consolidated financial statements.
Item 4.A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
General
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements including the notes thereto. Our consolidated financial statements were prepared in accordance with IFRS as issued by the IASB.
Average Price Per Unit Case. We use average price per unit case to analyze average pricing trends in the different territories where we operate. We calculate average price per unit case by dividing net sales by total sales volume. Sales of beer in Brazil, which are not included in our sales volumes, are excluded from this calculation.
Effects of Changes in Economic Conditions. Our results are affected by changes in economic conditions in Mexico, Brazil and in the other countries where we operate. For the year ended December 31, 2023, approximately 77.4% of our total revenues were attributable to Mexico and Brazil. Some of these economies continue to be influenced by the U.S. economy, and therefore, deterioration in economic conditions in the U.S. economy may affect these economies. 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 local 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 our products, lower real pricing of our products or a shift to lower margin products. 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.
Treatment of Argentina as a Hyperinflationary Economy. Argentina’s economy meets the criteria 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 100.0%, according to available indexes in the country. We adjusted the financial information of our Argentine operations to recognize inflationary effects and functional currency was converted to Mexican pesos for the periods ended December 31, 2023 and 2022 using the exchange rates at the end of such periods. See Note 3.4 to our consolidated financial statements.
New Accounting Pronouncements
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 27 to our consolidated financial statements.
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Critical Accounting Judgments and Estimates
For a description of the critical accounting judgments and estimates, see Note 2.3 to our consolidated financial statements.
Results
The following table sets forth our consolidated income statements for the years ended December 31, 2023, 2022 and 2021.

| Year Ended December 31,
| 2023 (1) |  | 2023 |  | 2022 |  | 2021
| (in millions of Mexican pesos or millions of U.S. dollars, except per share data)
Net sales | US$ 14,454 |  | 244,264 |  |  | 226,222 |  |  | 193,899 |
Other operating revenues | 49 |  | 824 |  |  | 518 |  |  | 905 |
Total revenues | 14,502 |  | 245,088 |  |  | 226,740 |  |  | 194,804 |
Cost of goods sold | 7,943 |  | 134,228 |  |  | 126,440 |  |  | 106,206 |
Gross profit | 6,560 |  | 110,860 |  |  | 100,300 |  |  | 88,598 |
Administrative expenses | 759 |  | 12,820 |  |  | 11,263 |  |  | 9,012 |
Selling expenses | 3,744 |  | 63,278 |  |  | 57,718 |  |  | 51,708 |
Other income | 117 |  | 1,981 |  |  | 1,473 |  |  | 1,502 |
Other expenses | 192 |  | 3,253 |  |  | 2,456 |  |  | 2,309 |
Interest expense | 420 |  | 7,102 |  |  | 6,500 |  |  | 6,192 |
Interest income | 189 |  | 3,188 |  |  | 2,411 |  |  | 932 |
Foreign exchange (loss) gain, net | (62) |  | (1,046) |  |  | (324) |  |  | 227 |
Gain on monetary position for subsidiaries in hyperinflationary economies | 6 |  | 93 |  |  | 536 |  |  | 734 |
Market value gain (loss) on financial instruments | 10 |  | 169 |  |  | (672) |  |  | 80 |
Income before income taxes and share of the profit of associates and joint ventures accounted for using the equity method | 1,704 |  | 28,792 |  |  | 25,787 |  |  | 22,852 |
Income taxes | 520 |  | 8,781 |  |  | 6,547 |  |  | 6,609 |
Share in the profit of equity accounted investees, net of income taxes | 13 |  | 215 |  |  | 386 |  |  | 88 |
Consolidated net income | 1,197 |  | 20,226 |  |  | 19,626 |  |  | 16,331 |

| Year Ended December 31,
| 2023 (1) |  | 2023 |  | 2022 |  | 2021
| (in millions of Mexican pesos or millions of U.S. dollars, except per share data)
Consolidated net income | 1,197 |  | 20,226 |  | 19,626 |  |  | 16,331 |
Attributable to: |  |  |  |  |  |  |
Equity holders of the parent | 1,156 |  | 19,536 |  | 19,034 |  |  | 15,708 |
Non-controlling interest | 41 |  |  | 690 |  | 592 |  |  | 623 |
Consolidated net income | 1,197 |  | 20,226 |  | 19,626 |  |  | 16,331 |
Per share data |  |  |  |  |  |  |
Earnings per share from(2): |  |  |  |  |  |  |
Basic controlling interest net income | 0.07 |  | 1.16 |  | 1.13 |  |  | 0.93 |
Earnings per share from(3): |  |  |  |  |  |  |
Diluted controlling interest net income | 0.07 |  | 1.16 |  | 1.13 |  |  | 0.93 |

(1) Translation to U.S. dollar amounts at an exchange rate of Ps.16.8998 to US$1.00 solely for the convenience of the reader.
(2) Computed on the basis of the weighted average number of shares outstanding during the period: 16,807 million in 2023, 2022, and 2021.
(3) The diluted earnings per share calculation was computed on the basis of the diluted weighted average number of shares outstanding during the period: 16,807 million in 2023, 2022 and 2021. For further information see Note 3.23 to our consolidated financial statements.
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Operations by Consolidated Reporting Segment
The following table sets forth certain financial information for each of our consolidated reporting segments for the years ended December 31, 2023, 2022 and 2021. See Note 26 to our consolidated financial statements for additional information about all of our consolidated reporting segments.

| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions of Mexican pesos)
Total revenues |  |  |  |  |
Mexico and Central America(1) | 149,362 |  | 131,002 |  |  | 115,794 |
South America(2) | 95,726 |  | 95,738 |  |  | 79,010 |
Gross profit |  |  |  |  |
Mexico and Central America(1) | 71,665 |  | 62,035 |  |  | 57,366 |
South America(2) | 39,195 |  | 38,265 |  |  | 31,232 |

(1) Includes Mexico, Guatemala, Nicaragua, Costa Rica and Panama.
(2) Includes Colombia, Brazil (including the results of CVI from February 2022), Argentina and Uruguay.
Results for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Consolidated Results
The comparability of our 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) our 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, we 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 our 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.
Total Revenues. Our 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, our revenue management initiatives and favorable price mix effects. These effects were partially offset by unfavorable currency translation effects from most of our 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 our territories, including a strong performance in Mexico, Brazil, Colombia and Guatemala in 2023.
•In 2023, sales volume of our sparkling beverage portfolio increased by 5.2%, sales volume of our colas portfolio increased by 6.1%, and sales volume of our flavored sparkling beverage portfolio increased by 2.0%, in each case as compared to 2022.
•Sales volume of our still beverage portfolio increased by 6.5% in 2023 as compared to 2022.
•Sales volume of our bottled water category, excluding bulk water, increased by 17.6% in 2023 as compared to 2022.
•Sales volume of our 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 our operating currencies relative to the Mexican peso. This was partially offset by favorable price-mix effects and revenue management initiatives.
Gross Profit. Our 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 our top-line growth, declining packaging costs, and favorable raw material hedging initiatives. These effects were partially offset by higher sweetener costs across our territories.
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The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to our production facilities, wages and other labor costs associated with labor force employed at our 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.
Administrative and Selling Expenses. Our administrative and selling expenses increased by 10.3% to Ps.76,098 million in 2023 as compared to 2022. Our 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, we continued investing across our territories to support marketplace execution, increase our cooler coverage, and increase our production capacity.
Other Expenses Net. We 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 our consolidated financial statements.
Interest Expense. 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.
Interest Income. Interest income in 2023 was Ps.3,188 million as compared to Ps.2,411 million in 2022. This was mainly driven by increases in interest rates.
Foreign exchange (loss) gain, net. We 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 our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso.
Gain on monetary position for subsidiaries in hyperinflationary economies. We 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.
Market value gain (loss) on financial instruments. We 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.
Income Taxes. In 2023, our effective income tax rate increased to 30.5%, as compared to our 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 our consolidated financial statements.
Share in the Profit (Loss) of Equity Accounted Investees, Net of Taxes. In 2023, we 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, our associate in Mexico and Fountain Agua Mineral Ltda, as compared to a gain of Ps.386 million registered during the previous year.
Net Income (Equity holders of the parent). We 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 our effective tax rate during the year.
Results by Consolidated Reporting Segment
Mexico and Central America
Total Revenues. Total revenues in our Mexico and Central America consolidated reporting segment increased by 14.0% to Ps.149,362 million in 2023 as compared to 2022, mainly as a result of a volume increase in all of our territories across the region coupled with favorable price-mix effects.
Total sales volume in our Mexico and Central America consolidated reporting segment increased by 9.4% to 2,394.8 million unit cases in 2023 as compared to 2022, as a result of a volume increase in all our territories across the region.
•Sales volume of our sparkling beverage portfolio increased by 6.0% in 2023 as compared to 2022, mainly driven by a 6.7% increase in our colas beverage portfolio.
•Sales volume of our still beverage portfolio increased by 7.6% in 2023 as compared to 2022, due to an 8.0% increase in Mexico.
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•Sales volume of bottled water, excluding bulk water, increased by 17.2% in 2023 as compared to 2022, due to increases in both Mexico and Central America.
•Sales volume of our bulk water portfolio increased by 25.9% in 2023 as compared to 2022, due to an increase in both Mexico and Central America.
Sales volume in Mexico increased by 8.7% to 2,052.9 million unit cases in 2023, as compared to 1,889.9 million unit cases in 2022.
•Sales volume of our sparkling beverage portfolio increased 4.4% in 2023 as compared to 2022, driven by a 5.2% increase in our colas portfolio and a 0.9% increase in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 8.0% in 2023 as compared to 2022.
•Sales volume of bottled water, excluding bulk water, increased by 16.6% in 2023 as compared to 2022.
•Sales volume of our bulk water portfolio increased by 25.3% in 2023 as compared to 2022.
Sales volume in Central America increased by 14.2% to 341.9 million unit cases in 2023, as compared to 299.5 million unit cases in 2022, mainly as a result of solid execution, and a solid performance in all our territories across the region.
•Sales volume of our sparkling beverage portfolio increased by 14.0% in 2023 as compared to 2022, driven by a 14.7% increase in colas and 10.7% increase in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 6.0% in 2023 as compared to 2022.
•Sales volume of bottled water, excluding bulk water, increased by 22.7% in 2023 as compared to 2022.
•Sales volume of our bulk water portfolio increased by 287.6% in 2023 as compared to 2022.
Gross Profit. Our gross profit in our Mexico and Central America consolidated reporting segment increased by 15.5% to Ps.71,665 million in 2023 as compared to 2022 and gross profit margin increased 60 basis points to 48.0% as compared to 2022. This gross margin increase was driven mainly by our top-line growth, declining packaging costs and the appreciation of the Mexican Peso as applied to our U.S.dollar-denominated raw material costs. These effects were partially offset by increases in sweeteners costs.
Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in our Mexico and Central America consolidated reporting segment increased by 120 basis points to 32.4% in 2023 as compared to 2022. Administrative and selling expenses, in absolute terms, increased by 18.4% in 2023 as compared to 2022 driven mainly by an increase in operating expenses such as labor, marketing and maintenance.
South America
Total Revenues. Total revenues in our South America consolidated reporting segment decreased slightly to Ps.95,726 million in 2023 as compared to 2022, mainly as a result of volume growth, favorable price-mix and our revenue management initiatives. These factors were partially offset by unfavorable currency translation effects resulting from the depreciation of most of our operating currencies as compared to the Mexican peso. Total revenues for beer amounted to Ps.6,117 million in 2023 as compared to Ps.5,600 million in 2022.
Total sales volume in our South America consolidated reporting segment increased by 5.5% to 1,653.1 million unit cases in 2023 as compared to 2022, mainly as a result of strong volume growth in Brazil, Colombia and Uruguay coupled with a slight volume growth in Argentina.
•Sales volume of our sparkling beverage portfolio increased by 4.3% in 2023 as compared to 2022, mainly driven by a 5.1% increase in our colas portfolio.
•Sales volume of our still beverage portfolio increased by 5.0% in 2023 as compared to 2022, driven mainly by a 46.2% increase in Uruguay and 14.8% increase in Argentina.
•Sales volume of our bottled water category, excluding bulk water, increased by 18.0% in 2023 as compared to 2022, driven mainly by a 52.4% increase in Brazil and a 31.1% increase in Argentina.
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•Sales volume of our bulk water portfolio increased by 10.7% in 2023 as compared to 2022, due to an increase in Colombia and Argentina, partially offset by a decrease in Brazil.
Sales volume in Brazil increased by 5.8% to 1,075.1 million unit cases in 2023, as compared to 1,016.2 million unit cases in 2022.
•Sales volume of our sparkling beverage portfolio increased by 5.6% in 2023 as compared to 2022, as a result of an increase of 6.8% in our colas portfolio and an increase of 2.2% in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 3.4% in 2023 as compared to 2022.
•Sales volume of our bottled water, excluding bulk water, increased by 13.1% in 2023 as compared to 2022.
•Sales volume of our bulk water portfolio decreased by 4.6% in 2023 as compared to 2022.
Sales volume in Colombia increased by 5.3% to 347.6 million unit cases in 2023, as compared to 330.1 million unit cases in 2022.
•Sales volume of our sparkling beverage portfolio increased by 4.0% in 2023 as compared to 2022, mainly driven by a 3.6% growth in colas and 5.7% volume growth in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 2.3% in 2023 as compared to 2022.
•Sales volume of bottled water, excluding bulk water, increased by 15.5% in 2023 as compared to 2022.
•Sales volume of our bulk water portfolio increased by 11.5% in 2023 as compared to 2022.
Sales volume in Argentina increased by 2.7% to 178.7 million unit cases in 2023, as compared to 173.9 million unit cases in 2022.
•Sales volume of our sparkling beverage portfolio decreased by 3.1% in 2023 as compared to 2022, mainly impacted by a 0.9% decrease in colas and 11.7% decrease in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 14.8% in 2023 as compared to 2022.
•Sales volume of bottled water, excluding bulk water, increased by 31.1% in 2023 as compared to 2022.
•Sales volume of our bulk water portfolio increased by 50.7% in 2023 as compared to 2022.
Sales volume in Uruguay increased by 10.9% to 51.7 million unit cases in 2023, as compared to 46.6 million unit cases in 2022.
•Sales volume of our sparkling beverage portfolio increased by 3.3% in 2023 as compared to 2022.
•Sales volume of our still beverage portfolio increased by 46.2% in 2023 as compared to 2022.
•Sales volume of bottled water increased by 52.4% in 2023 as compared to 2022.
Gross Profit. Gross profit in our South America consolidated reporting segment amounted to Ps.39,195 million, an increase of 2.4% in 2023 as compared to 2022, with a 90 basis point margin expansion to 40.9%. This increase in gross profit was mainly driven by a favorable price-mix effect, our raw material hedging strategies and an increase in our top-line, partially offset by an increase in sweeteners costs.
Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in our South America consolidated reporting segment decreased by 40 basis points to 29.0% in 2023 as compared to 2022 driven mainly by savings and efficiencies. Administrative and selling expenses, in absolute terms, decreased by 1.4% in 2023 as compared to 2022.
Results for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
Consolidated Results
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) our 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, we used the exchange rate at December 31, 2022 of 177.16 Argentine pesos per U.S. dollar and the
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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 our 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.
Total Revenues. Our 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, our 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 our 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 our sparkling beverage portfolio increased by 6.4%, sales volume of our colas portfolio increased by 6.1%, and sales volume of our flavored sparkling beverage portfolio increased by 7.5%, in each case as compared to 2021.
•Sales volume of our still beverage portfolio increased by 21.7% in 2022 as compared to 2021.
•Sales volume of our bottled water category, excluding bulk water, increased by 29.0% in 2022 as compared to 2021.
•Sales volume of our 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 our operating currencies relative to the Mexican peso.
Gross Profit. Our 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 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 our production facilities, wages and other labor costs associated with labor force employed at our 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.
Administrative and Selling Expenses. Our administrative and selling expenses increased by 13.6% to Ps.68,981 million in 2022 as compared to 2021. Our 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, we continued investing across our territories to support marketplace execution, increase our cooler coverage, and bolster our returnable presentation base.
Other Expenses Net. We 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 our consolidated financial statements.
Interest Expense. 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.
Interest Income. 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.
Foreign exchange (loss) gain, net. We 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 our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican peso.
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Gain on monetary position for subsidiaries in hyperinflationary economies. We recorded a lower gain in monetary position in inflationary subsidiaries, recording 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 our subsidiary in Argentina.
Market value gain (loss) on financial instruments. We 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 our floating rate financial instruments.
Income Taxes. In 2022, our effective income tax rate decreased to 25.4%, as compared to our 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 our consolidated financial statements.
Share in the Profit (Loss) of Equity Accounted Investees, Net of Taxes. In 2022, we 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, our associate in Mexico, as compared to a gain of Ps.88 million registered during the previous year.
Net Income (Equity holders of the parent). We 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 our effective tax rate during the year.
Results by Consolidated Reporting Segment
Mexico and Central America
Total Revenues. Total revenues in our Mexico and Central America consolidated reporting segment increased by 13.1% to Ps.131,002 million in 2022 as compared to 2021, mainly as a result of a volume increase in all of our territories across the region coupled with favorable price-mix effects and pricing initiatives.
Total sales volume in our Mexico and Central America consolidated reporting segment increased by 6.3% to 2,188.4 million unit cases in 2022 as compared to 2021, as a result of a volume increase in all our territories across the region.
•Sales volume of our sparkling beverage portfolio increased by 4.5% in 2022 as compared to 2021, mainly driven by a 8.3% increase in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 13.1% in 2022 as compared to 2021, due to double-digit increases in both Mexico and Central America.
•Sales volume of bottled water, excluding bulk water, increased by 24.9% in 2022 as compared to 2021, due to double-digit increases in both Mexico and Central America.
•Sales volume of our bulk water portfolio increased by 6.9% in 2022 as compared to 2021, due to a solid performance in Mexico and a double-digit increase in Central America.
Sales volume in Mexico increased by 5.5% to 1,888.9 million unit cases in 2022, as compared to 1,790.0 million unit cases in 2021, mainly as a result of solid volume performance.
•Sales volume of our sparkling beverage portfolio increased 3.4% in 2022 as compared to 2021, driven by a 2.5% increase in our colas portfolio and a 7.6% increase in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 10.5% in 2022 as compared to 2021.
•Sales volume of bottled water, excluding bulk water, increased by 26.8% in 2022 as compared to 2021.
•Sales volume of our bulk water portfolio increased by 6.8% in 2022 as compared to 2021.
Sales volume in Central America increased by 11.8% to 299.5 million unit cases in 2022, as compared to 267.8 million unit cases in 2021, mainly as a result of solid execution, and a solid performance in all our territories across the region.
•Sales volume of our sparkling beverage portfolio increased by 10.3% in 2022 as compared to 2021, driven by a 9.9% increase in colas and 12.0% increase in our flavored sparkling beverage portfolio.
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•Sales volume of our still beverage portfolio increased by 26.8% in 2022 as compared to 2021.
•Sales volume of bottled water, excluding bulk water, increased by 10.1% in 2022 as compared to 2021.
•Sales volume of our bulk water portfolio increased by 39.8% in 2022 as compared to 2021.
Gross Profit. Our gross profit in our Mexico and Central America consolidated reporting segment increased by 8.1% to Ps.62,035 million in 2022 as compared to 2021 and gross profit margin decrease d 210 basis points to 47.4% as compared to 2021. This gross margin contraction was driven mainly by an increase in raw material costs such as PET resin and sweeteners, coupled with higher concentrate costs in Mexico. These effects were partially offset by our pricing initiatives, favorable price-mix effects and our raw material hedging strategies.
Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in our Mexico and Central America consolidated reporting segment decreased by 70 basis points to 31.2% in 2022 as compared to 2021. Administrative and selling expenses, in absolute terms, increased by 7.3% in 2022 as compared to 2021 driven mainly by an increase in variable operating expenses as a result of top-line growth.
South America
Total Revenues. Total revenues in our South America consolidated reporting segment increased by 21.2% to Ps.95,738 million in 2022 as compared to 2021, mainly as a result of volume growth, favorable price-mix and our revenue management initiatives. These factors were partially offset by a decline in beer revenues related to the transition of our beer portfolio in Brazil, and unfavorable currency translation effects resulting from the depreciation of some of our operating currencies as compared to the Mexican peso. In addition, for 2021 this line included other operating revenue due to a favorable determination from the Brazilian tax authorities, which allowed a recognition of a deferred tax credit in Brazil for an amount of Ps.254 million.
Total sales volume in our South America consolidated reporting segment increased by 11.9% to 1,566.8 million unit cases in 2022 as compared to 2021, mainly as a result of double-digit volume growth in Brazil, Colombia and Argentina, coupled with volume growth in Uruguay.
•Sales volume of our sparkling beverage portfolio increased by 8.8% in 2022 as compared to 2021, mainly driven by a 9.4% increase in our colas portfolio.
•Sales volume of our still beverage portfolio increased by 34.7% in 2022 as compared to 2021, driven mainly by a 39.2% increase in Brazil and 34.3% increase in Colombia.
•Sales volume of our bottled water category, excluding bulk water, increased by 33.2% in 2022 as compared to 2021, driven mainly by a 37.3% increase in Brazil and 35.8% increase in Argentina.
•Sales volume of our bulk water portfolio decreased by 4.4% in 2022 as compared to 2021, due to a decline in Colombia and Argentina, partially offset by a double-digit increase in Brazil.
Sales volume in Brazil increased by 12.5% to 1,016.2 million unit cases in 2022, as compared to 903.3 million unit cases in 2021.
•Sales volume of our sparkling beverage portfolio increased by 8.7% in 2022 as compared to 2021, as a result of an increase of 9.9% in our colas portfolio and an increase of 5.3% in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 39.2% in 2022 as compared to 2021.
•Sales volume of our bottled water, excluding bulk water, increased by 37.3% in 2022 as compared to 2021.
•Sales volume of our bulk water portfolio increased by 36.2% in 2022 as compared to 2021.
Sales volume in Colombia increased by 10.8% to 330.1 million unit cases in 2022, as compared to 297.9 million unit cases in 2021.
•Sales volume of our sparkling beverage portfolio increased by 8.5% in 2022 as compared to 2021, mainly driven by a 7.1% growth in colas and 16.1% volume growth in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 34.4% in 2022 as compared to 2021.
•Sales volume of bottled water, excluding bulk water, increased by 27.4% in 2022 as compared to 2021.
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•Sales volume of our bulk water portfolio decreased by 16.9% in 2022 as compared to 2021.
Sales volume in Argentina increased by 11.9% to 173.9 million unit cases in 2022, as compared to 155.4 million unit cases in 2021.
•Sales volume of our sparkling beverage portfolio increased by 11.4% in 2022 as compared to 2021, mainly impacted by a 12.8% increase in colas and 6.4% increase in our flavored sparkling beverage portfolio.
•Sales volume of our still beverage portfolio increased by 11.1% in 2022 as compared to 2021.
•Sales volume of bottled water, excluding bulk water, increased by 35.8% in 2022 as compared to 2021.
•Sales volume of our bulk water portfolio decreased by 28.6% in 2022 as compared to 2021.
Sales volume in Uruguay increased by 7.5% to 46.6 million unit cases in 2022, as compared to 43.4 million unit cases in 2021.
•Sales volume of our sparkling beverage portfolio increased by 4.2% in 2022 as compared to 2021.
•Sales volume of our still beverage portfolio increased by 94.2% in 2022 as compared to 2021.
•Sales volume of bottled water increased by 18.0% in 2022 as compared to 2021.
Gross Profit. Gross profit in our South America consolidated reporting segment amounted to Ps.38,265 million, an increase of 22.5% in 2022 as compared to 2021, with a 50 basis point margin expansion to 40.0%. This increase in gross profit was mainly driven by a favorable price-mix effect, our raw material hedging strategies and an increase in our top-line. These factors were partially offset by the depreciation of the average exchange rate of some of our operating currencies in the consolidated reporting segment as applied to our U.S. dollar-denominated raw material costs. In addition, for 2021 this line included the recognition of an extraordinary benefit of Ps.1,083 million during the second quarter of 2021, related to tax credits on concentrate purchased from the Manaus Free Trade Zone in Brazil.
Administrative and Selling Expenses. Administrative and selling expenses as a percentage of total revenues in our South America consolidated reporting segment increased by 70 basis points to 29.4% in 2022 as compared to 2021 driven mainly by an increase in variable operating expenses as a result of our top-line growth. Administrative and selling expenses, in absolute terms, increased by 24.2% in 2022 as compared to 2021.
Liquidity and Capital Resources
Liquidity. The principal source of our liquidity is cash generated from operations. A significant portion of our sales are on a cash basis with the remainder on a short-term credit basis. We have traditionally been able to rely on cash generated from operations to fund our working capital requirements and our capital expenditures. Our working capital benefits from the fact that most of our sales are made on a cash basis, while we generally pay our suppliers on credit. Historically, we have used a combination of borrowings from Mexican and international banks and bond issuances in the Mexican and international capital markets. Our major cash requirements are obligations to support our ongoing operations and contractual obligations with Mexican and international banks for borrowings and bond issuances in the Mexican and international capital markets, derivative agreements and lease agreements.
Our 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, our cash and cash equivalents were Ps.31,060 million, as compared to Ps.40,277 million as of December 31, 2022. We had cash outflows in 2023 mainly resulting from dividend payments and repayment of debt. As of December 31, 2023, our 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. We believe that these funds, in addition to the cash generated by our operations, are sufficient to meet our operating requirements.
As part of our financing policy, we expect to continue to finance our liquidity needs mainly with cash flows from our operating activities. Nonetheless, as a result of regulations in certain countries where we operate, it may not be beneficial or practicable for us to remit cash generated in local operations to fund cash requirements in other countries. Exchange controls may also increase the real price of remitting cash to fund debt requirements in other countries. In the event that cash in these countries is not sufficient to fund future working capital requirements and capital expenditures, we 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 we may finance our working capital and capital expenditure needs with short-term debt or other borrowings.
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We continuously evaluate opportunities to pursue acquisitions or engage in strategic transactions. We would expect to finance any significant future transactions with a combination of any of cash, long-term indebtedness and the issuance of shares of our company.
Our financing, treasury and derivatives policies provide that the planning and finance committee of our board of directors is responsible for determining the company’s overall financial strategy, including the dividends policy, investments of our funds, cash flow and working capital strategies, mergers and acquisitions, debt and equity issuances, repurchases of stock, financial derivative instruments strategies (only for hedging purposes), purchase and lease of assets and indebtedness of the company, among others; which is ultimately approved by our board of directors and implemented by our corporate finance department.
Sources and Uses of Cash. The following table summarizes the sources and uses of cash for the years ended December 31, 2023, 2022 and 2021, from our consolidated statements of changes in cash flows:

| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions of Mexican pesos)
Net cash flows from operating activities | 42,289 |  | 35,491 |  | 32,721
Net cash flows used in investing activities (1) | (20,070) |  | (19,597) |  | (9,547)
Net cash flows used in financing activities (2) (3) | (26,352) |  | (20,847) |  | (20,263)

(1) Includes purchases of property, plant and equipment in 2023, 2022 and 2021, in the amount of Ps.20,453 million, Ps.17,411 million and Ps.16,059 million, respectively.
(2) Includes proceeds from borrowings in 2023, 2022 and 2021, in the amount of Ps.151 million, Ps.6,089 million and Ps.11,191 million, respectively. In addition, includes repayments of borrowings Ps.8,401 million, Ps.8,432 million and Ps.14,189 million, respectively.
(3)Includes dividends paid in 2023, 2022 and 2021, in the amount of Ps.12,275, Ps.11,463, and Ps.10,649, respectively.
Debt Structure
The following chart sets forth the debt breakdown of our company and its subsidiaries by currency and interest rate type as of December 31, 2023:

Currency |  | Percentage of Total Debt(1)(2) |  | Average Nominal Rate(3) |  | Average Adjusted Rate(1)(4)
Mexican pesos |  | 61.4 | % |  | 8.7 | % |  | 8.8 | %
U.S. dollars |  | 15.8 | % |  | 3.0 | % |  | 4.6 | %
Brazilian reais |  | 21.3 | % |  | 7.8 | % |  | 9.6 | %
Colombian pesos |  | 1.3 | % |  | 6.3 | % |  | 6.3 | %
Argentine pesos |  | 0.1 | % |  | 130.0 | % |  | 130.0 | %
Euros |  | 0.02 | % |  | 17.6 | % |  | 17.6 | %

(1) Includes the effects of our derivative contracts as of December 31, 2023, including cross currency swaps from U.S. dollars to Mexican pesos, U.S. dollars to Brazilian reais and U.S. dollars to Colombian pesos.
(2) Due to rounding, these figures may not add up to 100.0%.
(3) Annual weighted average interest rate per currency as of December 31, 2023.
(4) Annual weighted average interest rate per currency as of December 31, 2023 after giving effect to interest rate swaps and cross currency swaps. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk.”
Summary of Significant Debt Instruments
The following is a brief summary of our significant long-term indebtedness with restrictive covenants outstanding as of the date of this annual report:
Mexican Peso-Denominated Bonds (Certificados Bursátiles).
On June 30, 2017, we issued Ps.8,500 million aggregate principal amount of 10-year fixed rate certificados bursátiles bearing an annual interest rate of 7.87% and due June 2027. This series of certificados bursátiles is guaranteed by 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. (collectively, the “Guarantors”). In August 2021, Distribuidora y Manufacturera del Valle de México, S. de R.L. de C.V. or “Distribuidora,” a former guarantor of our certificados bursátiles, merged with and into Propimex, S. de R.L. de C.V., or “Propimex.”
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As a result, Propimex assumed Distribuidora’s obligations under its guarantee and Distribuidora ceased to be a guarantor of our certificados bursátiles.
On February 7, 2020, we issued (i) Ps.3,000 million aggregate principal amount of 8-year fixed rate certificados bursátiles bearing an annual interest rate of 7.35% and due January 2028, and (ii) Ps.1,727 million aggregate principal amount of 5.5-year floating rate certificados bursátiles, priced at 28-day TIIE plus 0.08% and due August 2025. These series of certificados bursátiles are guaranteed by the Guarantors.
On September 23, 2021, we issued (i) Ps.6,965 million aggregate principal amount of 7-year fixed rate certificados bursátiles bearing an annual interest rate of 7.36% and due September 2028, and (ii) Ps.2,435 million aggregate principal amount of 5-year floating rate certificados bursátiles bearing an annual interest rate equal to 28-day TIIE plus 0.05% and due September 2026, in the Mexican local market. These certificados bursátiles are classified as sustainability-linked bonds and require us to achieve certain key performance indicators, namely achieving a water use ratio of 1.36 by 2024 and 1.26 by 2026. If these indicators are not achieved and verified by an independent third party by the established dates, the interest rate on the bonds will increase by 25 basis points to 7.61% and TIIE plus 0.30%, respectively. These series of certificados bursátiles are guaranteed by the Guarantors.
On October 10, 2022, we issued (i) Ps.5,500 million aggregate principal amount of 7-year fixed rate certificados bursátiles bearing an annual interest rate of 9.95% and due October 2029, classified as a social bond, and (ii) Ps.500 million aggregate principal amount of 4-year floating rate certificados bursátiles bearing an annual interest rate equal to 28-day TIIE plus 0.05% and due October 2026, classified as a sustainability bond in the Mexican local market. These series of c ertificados bursátiles are guaranteed by the Guarantors.
As of the date of this annual report, we had the following certificados bursátiles outstanding in the Mexican securities market:

Issue Year | Maturity |  | Amount |  | Rate
2022 | October 1, 2029 |  | Ps.5,500 million |  | 9.95 | %
2022 | October 5, 2026 |  | Ps.500 million |  | 28-day TIIE + 0.05%
2021 | September 14, 2028 |  | Ps.6,965 million |  | 7.36 | %
2021 | September 17, 2026 |  | Ps.2,435 million |  | 28-day TIIE + 0.05%
2020 | January 28, 2028 |  | Ps.3,000 million |  | 7.35 | %
2020 | August 22, 2025 |  | Ps.1,727 million |  | 28-day TIIE + 0.08 | %
2017 | June 18, 2027 |  | Ps.8,500 million |  | 7.87 | %

Our certificados bursátiles contain reporting obligations pursuant to which we must furnish to the bondholders consolidated audited annual financial reports and consolidated quarterly financial reports.
U.S. Dollar-Denominated Senior Notes
Guarantees for the U.S. Dollar-Denominated Senior Notes
The Guarantors have fully, jointly and severally, irrevocably and unconditionally agreed to guarantee the payment of principal, premium, if any, interest, additional interest and all other amounts with respect to our senior notes.
With respect to each Guarantor, its guarantee of our senior notes will be the unsecured and unsubordinated obligation of such Guarantor. As a result, the guarantee of each such Guarantor will not be secured by any of the assets or properties of such Guarantor and will be effectively subordinated to all of the existing and future secured obligations of such Guarantor to the extent of the value of the assets securing such obligations. In the event of dissolution, liquidation, reorganization, concurso mercantil, bankruptcy, quiebra or other similar proceeding by or against a Guarantor, the guarantee of such Guarantor would rank equal in right of payment with all other existing and future unsecured and unsubordinated obligations of such Guarantor, and junior to certain obligations given preference under applicable law, including tax, labor and social security obligations. Moreover, in such a case, the Guarantors’ guarantees could be challenged under Mexican law on fraudulent conveyance grounds and declared void based upon the Guarantor being deemed not to have received fair consideration in exchange for such guarantee. A challenge of a Guarantor’s obligations under a guarantee on fraudulent conveyance grounds could focus on the benefits, if any, realized by the Guarantors as a result of the issuance of our senior notes. To the extent a guarantee is voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of our senior notes would not have any claim against that Guarantor and would be creditors solely of us and the Guarantors whose obligations under the guarantees were not held unenforceable.
Our senior notes do not restrict our Guarantor’s ability or the ability of our Guarantors’ subsidiaries to incur additional indebtedness in the future.
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As of December 31, 2023:
•we had, on a consolidated basis, Ps.65,214 million of unsecured and unsubordinated indebtedness outstanding, none of which was secured indebtedness,
•we had, on an unconsolidated basis (parent company only), Ps.64,950 million of unsecured and unsubordinated indebtedness outstanding,
•the Guarantors collectively, on an unconsolidated basis, had no indebtedness with third parties, and
•our subsidiaries, other than the Guarantors, had Ps.264 million of unsecured and unsubordinated indebtedness outstanding.
The table below summarizes financial information of the Parent (issuer) and Guarantors (together the obligor group), as of December 31, 2023, and for the twelve-month periods ended December 31, 2023. This summarized financial information is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated.
The accounting policies applied in the summarized financial information are the same as those used in the preparation of the consolidated financial statements (see Note 3). Non-guarantor subsidiary financial information has been excluded from the summarized financial information below.

2023
In millions of Mexican pesos
| Propimex (7) | La Pureza (1) (7) | CIMSA (2) (7) | RVC (3) (7) | Yoli (4) (7) | CIBSA (5) (7) | Parent Coca-Cola FEMSA, S.A.B. de C.V. (7) | Eliminations (6) | Combined Wholly-owned Guarantors Subsidiaries and Parent
Current assets | Ps.14,977 | Ps.386 | Ps.537 | Ps.715 | Ps.99 | Ps.102 | Ps.21,071 | Ps.(15,837) | Ps.22,050
Current assests balances with consolidated non-obligors | 2,945 | — | — | — | — | — | 4,311 | — | 7,256
Non-current assets (8) | 61,743 | 1,659 | 1,603 | 1,537 | 696 | 1,007 | 111,339 | (22,400) | 157,184
Non-current assests balances with consolidated non-obligors | 237 | — | — | — | 54 | — | 5,768 | (1) | 6,058
Total assets | 79,902 | 2,045 | 2,140 | 2,252 | 845 | 1,109 | 142,489 | (38,234) | 192,548
Current liabilities | 26,267 | 413 | 339 | 454 | 289 | 1 | 3,315 | (15,873) | 15,205
Current liabilities with consolidated non-obligors | 23,119 | 259 | 202 | 324 | 30 | — | 258 | (1) | 24,191
Non-current liabilities | 24,484 | 31 | 11 | 20 | 2 | 15 | 79,592 | (22,539) | 81,616
Non-current liabilities with consolidated non-obligors | — | — | — | — | 36 | — | 22,035 | 164 | 22,235
Total liabilities | 73,870 | 703 | 552 | 798 | 356 | 16 | 105,200 | (38,248) | 143,247
Equity | 6,032 | 1,342 | 1,588 | 1,454 | 492 | 1,093 | 37,289 | 11 | 49,301
Net sales | 122,584 | 3,815 | 3,204 | 4,276 | 2,151 | — | 12,816 | (24,859) | 123,987
Net sales with consolidated non-obligors | — | — | — | — | — | — | 1,567 | — | 1,567
Gross profit | 53,599 | 447 | 399 | 420 | 213 | — | 14,383 | (11,632) | 57,829
Net income | 4,448 | 214 | 197 | 224 | 35 | 61 | 2,234 | (2,959) | 4,454

(1) Comercializadora La Pureza de Bebidas, S. de R.L. de C.V.
(2) Grupo Embotellador Cimsa, S. de R.L. de C.V.
(3) Refrescos Victoria del Centro, S. de R.L. de C.V.
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(4) Yoli de Acapulco, S. de R.L. de C.V.
(5) Controladora Interamericana de Bebidas, S. de R.L. de C.V.
(6) This column includes eliminations of intercompany balances and transactions between the guarantors and parent entity.
(7) Refers to individual balances use for preparation of the consolidated statements.
(8) Excludes the investment in a non- obligor subsidiaries and equity method investees.
5.250% Senior Notes due 2043. On November 26, 2013, we issued US$400 million aggregate principal amount of 5.250% senior notes due November 26, 2043. On January 21, 2014, we issued US$200 million aggregate principal amount of additional notes under this series. On September 13, 2022, we repurchased US$111 million aggregate principal amount of these senior notes. These notes are guaranteed by the Guarantors. The indenture governing these notes imposes certain conditions upon a consolidation or merger by us and restricts the incurrence of liens and the entering into sale and leaseback transactions by us and our significant subsidiaries.
2.750% Senior Notes due 2030. On January 22, 2020, we issued US$1,250 million aggregate principal amount of 2.750% senior notes due January 22, 2030. On September 13, 2022, we repurchased US$209 million aggregate principal amount of these senior notes. These notes are guaranteed by the Guarantors. The indenture governing these notes imposes certain conditions upon a consolidation or merger by us and restricts the incurrence of liens and the entering into sale and leaseback transactions by us and our significant subsidiaries.
1.850% Senior Notes due 2032. On September 1, 2020, we issued US$705 million aggregate principal amount of 1.850% senior notes due September 1, 2032. These bonds are classified as “green bonds” and the proceeds received are being used to finance and refinance our eligible green projects, including investments and expenditures related to mitigation of climate change risks, efficient use of water resources and hydrological safety, and waste management and recycling of PET plastic bottles. These notes are guaranteed by the Guarantors. The indenture governing these notes imposes certain conditions upon a consolidation or merger by us and restricts the incurrence of liens and the entering into sale and leaseback transactions by us and our significant subsidiaries.
For more information about our 2.750% senior notes due 2030 and our 1.850% senior notes due 2032, see Exhibit 2.13—Description of Securities Registered under Section 12 of the Exchange Act.
Bank Loans
As of December 31, 2023, we had a number of bank loans in Brazilian reais, U.S. dollars, Euros and Argentine pesos for an aggregate principal amount of Ps.264 million.
We are in compliance with all of the restrictive covenants in our debt instruments as of the date of this annual report.
Contingencies
We are subject to various claims and contingencies related to tax, labor and other legal proceedings. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. We may have losses related to such tax, labor and other legal proceedings. We periodically assess the probability of loss for such contingencies and accrue a provision and/or disclose 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, we accrue a provision for the estimated loss. See Note 25.5 to our consolidated financial statements. We use outside legal counsel for certain complex legal proceedings. The following table displays the nature and amount of the loss contingencies recorded as of December 31, 2023 and December 31, 2022:

| As of December 31, 2023 | As of December 31, 2022
| (in millions of Mexican pesos) | (in millions of Mexican pesos)
Tax | Ps. 1,348 | Ps. 1,823
Labor | 1,308 | 1,385
Legal | 614 | 679
Total | Ps. 3,270 | Ps. 3,887

In Brazil, we have been required by the relevant authorities to collateralize tax contingencies currently in litigation amounting to Ps.13,692 million, 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.
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In connection with our acquisitions, sellers normally agree to indemnify us against certain contingencies that may arise as a result of the management of the businesses prior to the acquisition, subject to survival provisions and other limitations.
Capital Expenditures
The following table sets forth our capital expenditures, including investment in property, plant and equipment, deferred charges and other investments for the periods indicated on a consolidated basis and by consolidated reporting segment:

| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions of Mexican pesos)
Mexico and Central America(1) | 13,415 |  | 11,759 |  | 9,800
South America(2) | 7,981 |  | 7,906 |  | 4,064
Capital expenditures, net(3) | 21,396 |  | 19,665 |  | 13,865

(1) Includes Mexico, Guatemala, Nicaragua, Costa Rica and Panama.
(2) Includes Colombia, Brazil, Argentina and Uruguay.
(3) Includes disposals of property, plant and equipment, intangible assets, and other long-lived assets of Ps.93 million, Ps.250 million and Ps.57 million during the years ended December 31, 2023, 2022 and 2021, respectively.
In 2023, 2022 and 2021, we focused our 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.
We have budgeted capital expenditures in an amount ranging betwee n 8.0% and 9.0% of total revenues for 2024, which amount will primarily focus on strengthening our infrastructure, especially our manufacturing and distribution capacity, returnable bottles and cases, investments in information technology and investments in assets that increase our presence in the market. As is customary, this amount will depend on market and other conditions across our territories.
We estimate that of our projected capital expenditures for 2024, approximately 36.7% will be for our Mexican territories and the remaining will be for our non-Mexican territories. We believe that internally generated funds will be sufficient to meet our budgeted capital expenditure for 2024.
Historically, The Coca-Cola Company has contributed resources that we generally use for initiatives that promote volume growth of Coca-Cola trademark beverages. Contributions by The Coca-Cola Company are made on a discretionary basis. Although we believe that The Coca-Cola Company will make additional contributions in the future, including assist our capital expenditure program based on past practice and the benefits to The Coca-Cola Company as owner of the Coca-Cola brands from investments that support the strength of the brands in our territories, we can give no assurance that any such contributions will be made.
Hedging Activities
We have entered and continue to 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 of derivative instruments as of December 31, 2023. The fair market value is estimated using market prices that would apply to terminate the contracts at the end of the period and are compared with external sources through bank statements provided by the bank entity, which generally are also our counterparties to the relevant contracts.
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| Fair Value as of December 31, 2023. Assets (liabilities)
| Maturity less than 1 year |  | Maturity 1 – 3 years |  | Maturity 4 – 5 years |  | Maturity in excess of 5 years |  | Total fair value
| (in millions of Mexican pesos)
Cross Currency Swaps |  |  |  |  |  |  |  |  |
U.S. dollars to Mexican pesos | — |  | — |  | (1,192) |  | (683) |  | (1,875)
U.S. dollars to Brazilian reais | — |  | (984) |  | (185) |  | (171) |  | (1,340)
U.S. dollars to Colombian pesos | — |  | 96 |  | — |  | — |  | 96
Interest Rate Swaps |  |  |  |  |  |  |  |  |
U.S. fixed rate to U.S. floating rate | — |  | — |  | — |  | (1,381) |  | (1,381)
Forwards |  |  |  |  |  |  |  |  |
U.S. dollars to Mexican pesos | (274) |  | — |  | — |  | — |  | (274)
U.S. dollars to Brazilian reais | (123) |  | — |  | — |  | — |  | (123)
U.S. dollars to Colombian pesos | (136) |  | — |  | — |  | — |  | (136)
U.S. dollars to Argentine pesos | 36 |  | — |  | — |  | — |  | 36
U.S. dollars to Uruguayan pesos | (7) |  | — |  | — |  | — |  | (7)
U.S. dollars to Costa Rican colones | (10) |  | — |  | — |  | — |  | (10)
Commodity Hedge Contracts |  |  |  |  |  |  |  |  |
Sugar | 76 |  | (72) |  | — |  | — |  | 4
Aluminum | 21 |  | — |  | — |  | — |  | 21

Item 6. Directors, Senior Management and Employees
Directors
Management of our business is vested in our board of directors and in our chief executive officer. In accordance with our bylaws and Article 24 of the Mexican Securities Market Law, our board of directors will consist of no more than 21 directors, elected at the annual ordinary shareholders meeting for terms of one year. Up to 13 directors may be elected by the Series A shares voting as a class; up to five directors may be elected by the Series D shares voting as a class; and up to three directors may be elected by the Series L shares voting as a class. Directors may only be elected by a majority of shareholders of the appropriate series, voting as a class. Our bylaws further provide that for every 10.0% of issued and paid Series B shares held by shareholders, either individually or as a group, such shareholders shall have the right to appoint and revoke one director and her corresponding alternate, pursuant to Article 50 of the Mexican Securities Market Law. The shareholders meeting will decide, in the event the Series B shares, individually or as a group, are entitled to appoint a director, which series of shares is to reduce the number of directors that such series is entitled to appoint; provided that, the number of directors entitled to be appointed by the Series D shares shall remain unchanged, unless otherwise agreed. In accordance with our bylaws and Article 24 of the Mexican Securities Market Law, at least 25.0% of the members of our board of directors must be independent (as defined by the Mexican Securities Market Law). The board of directors may designate interim directors in the case that a director is absent or an elected director and corresponding alternate are unable to serve; the interim directors serve until the next shareholders meeting, at which the shareholders elect a replacement.
Our bylaws provide that the board of directors shall meet at least four times a year. Since our major shareholders amended their shareholders agreement in February 2010, our bylaws were modified accordingly establishing that actions by the board of directors must be approved by at least a majority of the directors present and voting, except under certain limited circumstances which must include the favorable vote of at least two directors elected by the Series D shares. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.” The chairman of the board of directors, the chairman of our audit committee, the chairman of our corporate practices committee, or at least 25.0% of our directors may call a board of directors’ meeting and include matters in the meeting agenda.
At our general ordinary shareholders meeting held on March 19, 2024, the following directors were appointed or confirmed: 9 directors were appointed or confirmed by the Series A shares, 4 directors were appointed or confirmed by the Series D shares and 3 directors were appointed or confirmed by the Series L shares. Our board of directors is currently comprised of 16 members.
See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” for information on relationships with certain directors and senior management.
As of the date of this annual report, our board of directors had the following members:
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Series A Directors

José Antonio Vicente Fernández Carbajal Chairman | Born: | 1954
Gender: | Male
Appointed to the board: | 1993, as director; 2001 as chairman.
| Term: | Through the date of our annual shareholders meeting of 2025.
| Other public companies directorships: | Executive chairman of the board of directors of FEMSA. Member of the board of directors of Industrias Peñoles, S.A.B. de C.V.
| Other current directorships: | Chairman of the board of directors of Fundación FEMSA, A.C. and member of the board of directors of the Massachusetts Institute of Technology, or MIT and of Instituto Tecnológico y de Estudios Superiores de Monterrey, or ITESM. Member of the board of global advisors of the Council for Foreign Relations.
| Career and experience: | He currently serves as Executive Chairman of the board of directors and Chief Executive Officer of FEMSA since July 2023. He joined FEMSA in 1988 and has held several positions such as Deputy Chief Executive Officer, Chief Operating Officer of FEMSA, Commercial Vice President of Cerveceria Cuauhtémoc Moctezuma, Chief Executive Officer of Cadena Comercial OXXO, and Manager of Strategic Planning of Grupo Visa. In 1995, he was appointed Chief Executive Officer of FEMSA and, in 2001, Chairman of the board of directors of FEMSA, serving in both positions 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 corporate governance reinforcement, as well as a strong understanding of Latin American markets.
| Education: | Holds a degree in Industrial Engineering and a Master of Business Administration, or MBA from ITESM.
Javier Gerardo Astaburuaga Sanjines Director | Born: | 1959
Gender: | Male
Appointed to the board: | 2024
| Term: | Through the date of our annual shareholders meeting of 2025.
| Other public companies directorship: | Member of the board of directors of Grupo Acosta Verde, S.A.B. de C.V.
| Career and experience: | He is an independent consultant with extensive experience as Director of Corporate Development, Chief Financial and Corporate Officer of FEMSA, and Co-Chief Executive Officer of FEMSA Cerveza, where he held several senior management positions, including Chief Financial Officer and Chief Sales Officer. His extensive experience in the industry, corporate and financial areas provides a solid vision for key decisions within our company.
| Education: | Bachelor’s degree in Public Accounting from ITESM, accredited as a Certified Public Accountant.
| Alternate director: | Martin Felipe Arias Yaniz
Federico José Reyes García Director | Born: | 1945
Gender: | Male
Appointed to the board: | 1993
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Member of the planning and finance committee.
| Career and experience: | He is an independent consultant. He was Executive Vice President of Corporate Development at FEMSA, where he also held several important positions such as Director of Corporate Development and Chief Financial and Corporate Development Officer. With his considerable track record, he brings a broad vision in corporate governance, financial development and Latin American markets.

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| Education: | Holds a Bachelor’s degree in Administration and Finance from ITESM.
Ricardo Guajardo Touché Independent Director | Born: | 1948
Gender: | Male
Appointed to the board: | 1993
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Chairman of the planning and finance committee.
| Other public companies directorships: | Member of the boards of directors of Grupo Aeroportuario del Sureste, S.A.B. de C.V. and Vitro, S.A.B. de C.V.
| Career and experience: | He is an independent consultant. He was Chairman of the board of directors of Solfi, S.A. de C.V., Chairman and Chief Executive Officer of Grupo Financiero BBVA Bancomer and Chief Executive Officer of Grupo Valores Monterrey. His extensive experience as a consultant to companies in various industries and his knowledge of banking and finance provide him with an effective vision in decision-making as well as global influence and leadership.
| Education: | Holds an Electrical Engineering degree from ITESM and the University of Wisconsin and a Master’s degree from the University of California,Berkeley.
| Alternate director: | Alfonso González Migoya (independent)
Enrique F. Senior Hernández Independent Director | Born: | 1943
Gender: | Male
Appointed to the board: | 2004
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Member of the planning and finance committee.
| Other public companies directorships: | Member of the board of directors of Grupo Televisa, S.A.B. de C.V.
| Other current directorships: | Member of the boards of directors of Cinemark USA, Inc. and Televisa Univision, Inc.
| Career and experience: | Managing Director of Allen & Company, LLC., or Allen & Company. He has served as Executive Vice President and Chief Administrative Officer of Allen & Company since 1980. He has extensive experience in mergers and acquisitions, corporate finance and knowledge of the consumer products and entertainment industries. He also has a broad understanding of corporate governance through his service on other boards.
| Education: | Holds a Bachelor´s degree in Architecture, Electrical Engineering, and Industrial Management from Yale University, an MBA from Harvard University Business School and an Honorary Doctor of Laws degree from Emerson College.
José Henrique Cutrale Director | Born: | 1974
Gender: | Male
Appointed to the board: | 2022
| Term: | Through the date of our annual shareholders meeting of 2025.
| Other current directorships: | Member of the boards of directors of our Brazilian subsidiary SPAL Indústria Brasileira de Bebidas S.A., Sucocítrico Cutrale, Ltda (“Sucocítrico Cutrale”), Burlingtown UK Limited, Cutrale North America, Inc. and Chiquita Holdings Limited.
| Career and experience: | He is an officer of Sucocítrico Cutrale. With his experience in the industry, he brings a vision in global markets and finance.
| Alternate director: | Graziela Cutrale

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Francisco Zambrano Rodríguez Independent Director | Born: | 1953
Gender: | Male
Appointed to the board: | 2003
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca Cola FEMSA’s Committee: | Member of the audit committee.
| Other current directorships: | Member of the boards of directors 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”).
| Career and experience: | He is currently and independent consultant and co-Chief Executive Officer of Desarrollo Inmobiliario, Corporativo Zeta DIVASA and IPFC Inmuebles.He 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 Chemical Engineering Administrator degree from ITESM and an MBA from the University of Texas at Austin.
Luis Alfonso Nicolau Gutiérrez Independent Director | Born: | 1961
Gender: | Male
Appointed to the board: | 2018
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s Committee: | Member of the corporate practices committee.
| Other public companies directorships: | Member of the boards of directors of Grupo Posadas, S.A.B. de C.V., Gentera, S.A.B. de C.V., GCC, S.A.B. de C.V. and Becle, S.A.B. de C.V. (Cuervo).
| Career and experience: | He has been a partner at Ritch, Mueller y Nicolau, S.C. since 1990, specializing in mergers and acquisitions, debt and equity capital markets offerings, and banking and finance transactions.
| Education: | Holds a Law degree from the Escuela Libre de Derecho and a Master´s degree in Law from Columbia University.
Luis Rubio Freidberg Independent Director | Born: | 1955
Gender: | Male
Appointed to the board: | 2017
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Chairman of the corporate practices committee.
| Other public companies directorships: | The India Fund, Inc.
| Other current directorships: | Member of the boards of directors of Xanthus, the Halifax Security Forum, and Chairman of Mexico Evalúa Centro de Análisis de Políticas Públicas, A.C.

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| Career and experience: | With a robust career as an advisor to the Secretary of Finance and Public Credit of the Mexican Republic, Director of Planning for Citibank in Mexico, as well as an author, book editor, contributor to Reforma newspaper and commentator on international, economic and political issues. He brings a global vision on financial, economic, political and social issues.
| Education: | Holds a Bachelor´s degree in political science and public administration from Universidad Iberoamericana and a Master and Ph.D. in Political Science from Brandeis University and, McKinsey MMBA.

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Series D Directors

John Murphy Director | Born: | 1962
Gender: | Male
Appointed to the board: | 2019
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Member of the planning and finance committee.
| Career and experience: | He has served as President and Chief Financial Officer of The Coca-Cola Company since October 2022. He was President of The Coca-Cola Company's Asia Pacific Group from 2016 to 2018, and previously served as President of the South Latin business unit from 2013 to 2016 and President of the Latin Center business unit from 2008 to 2012. Since 1998, when he began his career with The Coca-Cola Company, he has held various positions in general management, finance and strategic planning.
| Education: | Holds a Bachelor´s degree in Business Studies from Trinity College in Dublin and a Diploma in Professional Accounting from the Trinity College in Dublin. He qualified as a chartered accountant of the Irish Institute of Chartered Accountants.
| Alternate director: | Stacy Lynn Apter
José Octavio Reyes Lagunes Director | Born: | 1952
Gender: | Male
Appointed to the board: | 2016
| Term: | Through the date of our annual shareholders meeting of 2025.
| Career and experience: | He was a member of the board of directors and of the corporate governance committee of Mastercard Worldwide and a member of the board of directors of SitWIFI, S.A. de C.V. He also served on the board of directors of Coca-Cola Hellenic Bottling Co. and on the board of directors and associates assembly of Papalote Museo del Niño. In 1975, he began his professional experience at Industrias Resistol, and 5 years later began a career of more than 30 years with The Coca-Cola Company, holding various positions in Mexico, the United States and Brazil. He served as Vice-Chairman of The Coca-Cola Company from 2013 to 2014 and as President of the Latin American Group of The Coca-Cola Company from 2002 to 2012. In 1996, became President for the Mexico Division of The Coca-Cola Company. As a result of his extensive experience in different national and international companies, he offers a unique vision of leadership and management, as well as a high knowledge of corporate governance of public and private companies.
| Education: | He holds a degree in Chemical Engineering from the Universidad Nacional Autónoma de Mexico and an MBA from ITESM.
| Alternate director: | Enrique Rapetti
Nikolaos Koumettis Director | Born: | 1964
Gender: | Male
Appointed to the board: | 2022
| Term: | Through the date of our annual shareholders meeting of 2025.
| Other public companies directorships: | Chairman of the board of directors of Societe BIC.
| Other current directorships: | Canada Goose International.

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| Career and experience: | He is currently President of The Coca-Cola Company's European Operating Unit. He joined The Coca-Cola Company in 2001 as General Manager for Greece and Cyprus and has held various international positions including Regional President for the Adriatic and the Balkans, President of Southeast Europe, President of the Canadian Business Unit, President of Europe, Middle East and Africa. He started his career in marketing and sales with Kraft Jacobs Suchard, Elgeka and Papastros / Phillip Morris. He was member of the board of directors of Coca-Cola Beverages Africa. Through his extensive work history, he brings an international leadership approach to the business, with high expertise in marketing and sales.
| Education: | He holds a Bachelor´s degree of Science of Business Administration from the American College of Greece and a Master´s degree in Science of International Marketing from Strathclyde Business School.
| Alternate director: | Erin L. May
Jennifer Kay Mann Director | Born: | 1972
Gender: | Female
Appointed to the board: | 2023
| Term: | Through the date of our annual shareholders meeting of 2025.
| Other current directorships: | Member of the boards of directors of Morehouse College, Fairlife LLC, American Beverage, and Boys & Girls Club of America.
| Career and experience: | She is currently Executive Vice President and President of North America for The Coca-Cola Company. She served as President of Global Ventures for The Coca-Cola Company and as Chief People Officer and Chief of Staff for The Coca-Cola Company Chairman and CEO James Quincey. Since joining The Coca-Cola Company in 1997, her leadership roles have included Vice President and General Manager of Coca-Cola Freestyle. Jennifer has successfully led high-performing teams at The Coca-Cola Company. She brings leadership and management experience.
| Education: | Holds a Bachelor’s degree in accounting from Georgia State University.
| Alternate director: | Felix Poh

Series L Directors

Victor Alberto Tiburcio Celorio Independent Director | Born: | 1951
Gender: | Male
Appointed to the board: | 2019
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Chairman and Financial Expert of the Audit Committee.
| Other public companies directorships: | Member of the boards of directors of FEMSA, Grupo Palacio de Hierro, S.A.B. de C.V., Fresnillo, PLC and Grupo Nacional Provincial, S.A.B.
| Other directorships: | Member of the boards of directors of Profuturo Afore, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, S.A. de C.V., TankRoom, S.A.P.I. de C.V. and member of the governing board of the Instituto Tecnológico Autónomo de México (“ITAM”) and governing council of Transparencia Mexicana, A.C.
| Career and experience: | He is an independent consultant and was previously a partner of Mancera, S.C. (Ernst & Young Mexico), as well as its Managing Director for 13 years. He is qualified as a “financial expert” under the Sarbanes-Oxley Act. Due to his extensive background, he provides a broad knowledge of 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 a consultant to public and private companies.
| Education: | Holds a Bachelor´s degree in public accounting from Universidad Iberoamericana and an MBA from ITAM.

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Olga Gonzalez Aponte Independent Director | Born: | 1966
Gender: | Female
Appointed to the board: | 2024
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s Committees: | Member of the Audit Committee.
| Other public companies directorships: | Member of the boards of directors of FEMSA and WM Technology, Inc.
| Career and experience: | She is currently Chief Executive Officer and President of Wild Fork US., former Senior Vice President and Chief Financial Officer for Walmart México y Centroamerica. She has held international internal audit and Chief Financial Officer roles for Walmart, Inc. with expat assignments in Chile and Mexico. She has experience in public companies having served as director on the board of directors of Walmart de México y Centroamerica. She has extensive knowledge of finance and auditing, risk management, corporate governance, as well as of the Latin American markets.
| Education: | She holds a bachelor’s degree in accounting from the Pontificia Universidad Católica de Puerto Rico and an MBA from Florida International University.
| Alternate director: | Jaime A. El Koury (independent)
Amy Eschliman Independent Director | Born: | 1973
Gender: | Female
Appointed to the board: | 2023
| Term: | Through the date of our annual shareholders meeting of 2025.
| Coca-Cola FEMSA’s committees: | Member of the Planning and Finance Committee.
| Other current directorships: | Member of the Keen Shoes advisory board.
| Career and experience: | She is currently Chief Digital Officer at Crate & Barrel Holdings, Inc. She was formerly Managing Director at Google Cloud. Prior to Google, she was Senior Vice President of Customer Relationship Management and Senior Vice President of Digital Commerce at Sephora, Vice President, Digital Commerce, at Pottery Barn, within WilliamsSonoma, Inc. Due to her background and leadership positions, she brings diverse skills and knowledge in the innovation, technology and management sectors.
| Education: | She holds a BA in Economics from the University of California, Berkeley and an MBA from Harvard Business School.

The secretary of the board of directors is Alejandro Gil Ortiz and the alternate secretary of the board of directors is Carlos Luis Díaz Sáenz, our general counsel.
In June 2004, José Luis Cutrale directly or through other companies made a capital contribution equivalent to approximately US$50 million to our Brazilian operations in exchange for approximately 16.9% equity stake in these operations. We entered into an agreement with Mr. Cutrale pursuant to which he was invited to serve as a director of our company. Due to the unfortunate death of Mr. Cutrale in 2022, we have agreed to appoint his son, Jose Henrique Cutrale, as member of our board of directors.
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Senior Management
The following are the senior management of our company:

Ian Marcel Craig Garcia Chief Executive Officer | Born: | 1972
Gender: | Male
Joined: | 2003
| Appointed to current position: | 2023
| Business experience with us: | He previously held various senior management positions in the company, including Chief Operating Officer of Brazil, and prior to that, Chief Operating Officer of Argentina. He also held the positions of Chief Finance Officer and Strategic Planning for the South America Division, Chief Finance Officer, Director of Planning and Corporate Affairs in the Mercosur Region, and Corporate Director of Finance and Treasury at Coca-Cola FEMSA.
| Other business experience: | With his experience within the group, he worked in a Corporate Finance position and in the Beer Division in a Supply Chain position. Also worked in other companies in the area of strategic planning.
| Education: | He holds a BS degree in Industrial Engineering from the ITESM, an MBA from the Booth School of Business at the University of Chicago, and a Master’s degree in International Business Law from the ITESM.
Gerardo Cruz Celaya Chief Financial Officer | Born: | 1977
Gender: | Male
Joined: | 2003
| Appointed to current position: | 2023
| Business experience with us: | He held various senior management positions in the company's finance area, including Corporate Director of Finance and Treasury, Director of Planning and Finance for Latin America, and Chief Finance Officer for Coca-Cola FEMSA Colombia. In addition to his responsibilities as Chief Financial Officer, Gerardo supervises our supplier, risk management, and sustainable bonds strategies. Throughout his career, Gerardo has been a strong advocate for inclusion and diversity. As President of Coca-Cola FEMSA’s inclusion and diversity board for the past two years, he has played a pivotal role in enhancing the company’s commitment to creating a more inclusive and welcoming workplace for all.
| Education: | He holds a BA degree in Economics and a Master's degree in Applied Statistics both from the ITESM.
Antonio Diaz Caneja Guillen Human Resources Officer | Born: | 1978
Gender: | Male
Joined: | 2003
| Appointed to current position: | 2023
| Business experience with us: | With his experience dedicated to Human Resources at the company, he has overseen topics including employee well-being, talent development, human rights, and diversity, equity, and inclusion. He has served as Corporate Compensation Manager, Corporate Labor Development Manager, Director of Organizational Effectiveness for Coca-Cola FEMSA Philippines, Corporate Director of Labor and Social Development, and Director of Human Resources in Colombia, and Director of Human Resources for our Latin America division.
| Education: | Holds a BA degree in Business Administration and Management from the Universidad Iberoamericana.
Catherine Nicole Reuben Hatounian Corporate Affairs Officer | Born: | 1971
Gender: | Female
Joined: | 2014
| Appointed to current position: | 2023

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| Business experience with us: | Covering institutional and regulatory areas as well as ESG issues, throughout her career at Coca-Cola FEMSA. Before assuming her current role, she held different positions including Director of Corporate Affairs for Coca-Cola FEMSA México, Corporate Director of Regulatory Affairs and Institutional Relations, and Manager of Corporate Affairs for Coca-Cola FEMSA Central America, with responsibilities in Guatemala, Nicaragua, Costa Rica, and Panama.
| Other business experience: | Previously, Catherine was Executive Director of the Costa Rican-American Chamber of Commerce and worked in the Foreign Investment Promotion Agency of Costa Rica (CINDE) supporting companies interested in nearshoring opportunities.
| Education: | She holds a BA degree with a double major in Economics and Business Administration & Finance from Universidad Nacional de Costa Rica. She has studies in Political Communication from Universidad San Judas Tadeo in Costa Rica, as well as a Sustainability Certificate from MIT.
Rafael Ramos Casas Chief Supply Chain and Engineering Officer | Born: | 1961
Gender: | Male
Joined: | 1999
| Appointed to current position: | 2018
| Business experience with us: | He held various positions within our Mexican operations. As part of his responsibilities as Chief Supply Chain and Engineering Officer, he leads our environmental stewardship strategy across our operations.
| Other business experience: | With his experience in the beverage industry, he previously served in several senior management positions, including Manufacturing Director for Southeast Mexico, Supply Chain Director for Mexico and Central America, and Supply Chain Director of FEMSA Comercio.
| Education: | Holds a BS degree in Biochemical Engineering and a Master’s degree in Business Administration of Agricultural Enterprises both from the ITESM.
Washington Fabricio Ponce García Chief Operating Officer—Mexico | Born: | 1968
Gender: | Male
Joined: | 1998
Appointed to current position: | 2019
| Business experience with us: | With his experience in the beverage industry, he previously served in several senior management positions, including President and Chief Operating Officer of the Philippines Operation, Director of Operations in Colombia, Managing Director of Central America, Argentina, and Colombia, and Director of Strategic Planning for Latin America Region.
| Other business experience: | Prior to joining Coca-Cola FEMSA, he worked as a Senior Consultant in Bain & Company, and as Managing Director for Heineken in Brazil.
| Education: | Holds a Master´s degree in Economics from INCAE, Business School in Costa Rica.
Aitor Ocejo Zubizarreta Chief Operating Officer—Latin America | Born: | 1974
Gender: | Male
Joined: | 2000
Appointed to current position: | 2023
| Business experience with us: | He has served in several senior management positions, including Director of Operations in Guatemala, Director of Operations in Venezuela, Commercial and Business Development in Venezuela, and several strategic operational and marketing positions in Mexico, as well as other roles including Corporate Inorganic Acquisitions and Corporate Commercial Development.
| Other business experience: | With his experience in the beverage industry, he served in several senior management positions at The Coca-Cola Company.
| Education: | Holds a BS degree in Industrial Engineering from Universidad Iberoamericana.

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Eduardo Pereyra Mendez Chief Operating Officer—Brazil | Born: | 1973
Gender: | Male
Joined: | 1996
| Appointed to current position: | 2023
| Business experience with us: | With his experience in the beverage industry, he previously served in several senior management positions, including Director of Operations in Colombia, Commercial Director in Venezuela, Brazil, and Colombia, and Regional Manager in Mexico and Colombia.
| Education: | Holds a BS degree in Industrial Engineering from ITESM and has an MBA from the Adolfo Ibañez University of Chile, and an Advanced Management Program, or AMP from the Universidad de Navarra, IESE.
Gabriel Coindreau Montemayor Strategic Planning Officer | Born: | 1970
Gender: | Male
Joined: | 2000
Appointed to current position: | 2023
| Business experience with us: | With extensive strategic planning experience, he previously served in several strategic positions, including Corporate Director of Strategic Projects and Initiatives, Corporate Director of Planning and Organizational Development, Managing Director for Coca-Cola FEMSA Colombia and Central America, as well as different positions in the Corporate Strategic Planning and Human Resources Departments.
| Education: | Holds a BS degree in Electronics Engineering and Communications from the ITESM.
Nicolas Bertelloni Chief Growth Officer | Born: | 1981
Gender: | Male
Joined: | 2004
Appointed to current position: | 2023
| Business experience with us: | He possesses extensive expertise in the areas of marketing and market intelligence, particularly in leading teams during times of transformation and crisis. Previously, he held various roles within the organization, including Director of Marketing for the Brazil and Mexico Divisions, and Director of Operations for Argentina and Uruguay.
| Other business experience: | Head of Pricing and Marketing Mix Modeling at Nielsen Brazil between 2015 and 2016.
| Education: | He holds a BA degree in Business Administration and a BA degree in Economics both from Universidad de Buenos Aires. Additionally, he completed post-graduate studies in International Economics from Institut für Weltwirtschaft in Germany and an MBA from Fundação Getúlio Vargas in Brazil.
Ignacio Echevarría Mendiguren Digital and Technology Officer | Born: | 1967
Gender: | Male
Joined: | 2018
Appointed to current position: | 2021
| Business experience with us: | Joined the company in 2018 as Information Technology Director.

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| Other business experience: | With his experience in the IT industry, he began his professional career as a technology consultant for consumer companies at Arthur Andersen. He has served as a board member for several startups and in the financial sector Banco Compartamos and the Gentera Foundation. He joined the beverage industry years ago where he has collaborated on digital transformation projects in 13 African countries (Equatorial Bottler Company), 15 European countries (Coca-Cola European Partners), and 10 countries in Latin America (Coca-Cola FEMSA).
| Education: | Holds a BS degree in Industrial Engineering from The School of Industrial Engineering of Barcelona and an MBA from IE Business School in Madrid.

Diversity, Equity and Inclusion on the Board of Directors and Senior Management
Our board of directors is comprised of 16 board members and eight alternates, 75.0% of which are men and 25.0% of which are women. Of our senior management, 90.0% are men and 10.0% are women.
We have a corporate human resources policy that fosters inclusion, diversity, equal opportunities and non-discrimination, including gender distinction. This policy was approved by our board of directors and all of our employees are required to comply with it. Our human resources officer, Antonio Diaz Caneja Guillen, is responsible for enforcing such policy.
Compensation of Directors and Officers
For the year ended December 31, 2023, the aggregate compensation paid to our executive officers and senior management was approximately Ps. 1,949 million. The aggregate compensation amount includes cash bonus awards and bonuses paid to certain of our executive officers and senior management pursuant to our incentive plan for stock purchases. See “—Bonus Program.”
The aggregate compensation for directors during 2023 was Ps.14.9 million. For each meeting attended in 2023, we paid US$13,000 to each director with foreign residence and nationality and US$9,000 to all other directors.
We paid US$5,000 t o each of the members of the audit, finance and planning and the corporate practices committees per each meeting attended, and we paid US$6,500 to the chairman of the audit committee per meeting attended.
Our executive officers and senior management participate in our benefit plans in the same terms as our other employees. Members of our board of directors do not participate in our benefit plans. As of December 31, 2023, amounts accrued for all employees under our pension and retirement plans were Ps.4,028 million, of which Ps.1,303 million are already funded.
Bonus Program
Cash-based payment bonus plan. This bonus plan is part of our short-term incentive plan for the benefit of all our executives, including executive officers and senior management. The program is based on a combination of global and individual key performance indicators established at the beginning of the year for each eligible participant in accordance with their level of responsibility. In 2022 and 2021, as instructed by the corporate practices committee, 50.0% of the annual bonus was based on our company’s evaluation metric the Economic Value Added, or EVA, methodology and the remaining 50.0% was based on individual performance.
For 2023 onwards, the annual bonus is calculated differently. Fifty percent of the annual bonus will be evaluated based on certain annual targets established by our company regarding earnings before interest and taxes (“EBIT”) and working capital, and the other 50.0% will remain being evaluated based on individual performance.
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. The bonuses are recorded as expenses in the income statement and are paid in cash the following year.
Share-based payment bonus plan. This stock bonus plan is part of our long-term incentive plan for the benefit of our executive officers and senior management. This plan uses as its main evaluation metric the EVA methodology. Under the EVA 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, based on the executive’s level of responsibility in the organization. We make 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 (as instructed by the corporate practices committee). The acquired shares are deposited in a trust, and the executive officers and senior management can access them one year after they are vested, at 1/3 per year
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over a three-year period. Seventy percent of the annual executive bonus under our stock incentive plan must be used to purchase our company’s shares and the remaining 30.0% must be used to purchase FEMSA shares.
During the years ended December 31, 2023, 2022 and 2021, the company recorded the cash-based and share-based bonus expense to the eligible participants pursuant to the bonus programs amounted to Ps.1,283 million, Ps.1,853 million, and Ps.1,132 million, respectively.
Board Practices and Committees
Our bylaws state that the board of directors will meet at least four times a year to discuss our operating results and progress in achieving strategic objectives. It is the practice of our board of directors to meet following the end of each quarter. 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 for up to 30 days until successors are appointed. If no successor is appointed during this period, the board of directors may appoint interim members, who will be ratified or substituted at the next shareholders meeting after such event occurs. None of the members of our board of directors or senior management of our subsidiaries has service agreements providing for benefits upon termination of employment.
Our board of directors is supported by committees, which are working groups approved at our annual shareholders meeting that analyze issues and provide recommendations to the board of directors regarding their respective areas of focus. The executive officers and senior management interact periodically with the committees to address management issues. The following are the three committees of the board of directors:
•Planning and Finance Committee. The planning and finance committee works with management to set our annual and long-term strategic and financial plans and monitors adherence to these plans. It is responsible for setting our optimal capital structure and recommends the appropriate level of borrowing as well as the issuance of securities. Financial risk management is another responsibility of the planning and finance committee. Ricardo Guajardo Touché is the chairman of the planning and finance committee. The other members include: Martín Felipe Arias Yaniz, Federico José Reyes García, John Murphy, Amy Eschliman, and Enrique F. Senior Hernández.
•Audit Committee. The audit committee is responsible for reviewing the accuracy and integrity of quarterly and annual financial statements in accordance with accounting, internal control and auditing requirements. The audit committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditor, who reports directly to the audit committee (such appointment and compensation being subject to the approval of our board of directors); the internal auditing function also reports to the audit committee. 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. To carry out its duties, the audit committee may hire independent counsel and other advisors. As necessary, we compensate the independent auditor and any outside advisor hired by the audit committee and provide funding for ordinary administrative expenses incurred by the audit committee in the course of its duties. Victor Alberto Tiburcio Celorio is the chairman of the audit committee and the “audit committee financial expert”. Pursuant to the Mexican Securities Market Law, the chairman of the audit committee is elected at our shareholders meeting. The other members are: Alfonso González Migoya, Olga Gonzalez Aponte, and Francisco Zambrano Rodríguez. Each member of the audit committee is an independent director, as required by the Mexican Securities Market Law and applicable NYSE listing standards.
•Corporate Practices Committee. The corporate practices committee, which consists exclusively of independent directors, is responsible for preventing or reducing the risk of performing operations that could damage the value of our company or that benefit a particular group of shareholders. The committee may call a shareholders meeting and include matters on the agenda for that meeting that it deems appropriate, approve policies on related party transactions, approve the compensation plan of the chief executive officer, senior management and relevant officers, and support our board of directors in the elaboration of related reports. The chairman of the corporate practices committee is Luis Rubio Freidberg. Pursuant to the Mexican Securities Market Law, the chairman of the corporate practices committee is elected at our shareholders meeting. The other members include: Jaime A. El Koury and Luis A. Nicolau Gutiérrez.
Employees
As of December 31, 2023, our headcount was as follows: 57,467 in Mexico and Central America, and 46,774 in South America. In the headcount, we include indirect employees. The table below sets forth headcount by category for the periods indicated:
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| As of December 31,
| 2023 |  | 2022 |  | 2021
Executives | 1,061 |  | 1,013 |  | 895
Non-union | 28,612 |  | 28,894 |  | 26,926
Union | 57,138 |  | 50,538 |  | 45,939
Indirect employees | 17,430 |  | 16,766 |  | 9,994
Total | 104,241 |  | 97,211 |  | 83,754

As of December 31, 2023, approximately 65.8% of our employees, most of whom were employed in Mexico, were members of labor unions. We had 246 separate collective bargaining agreements with 110 labor unions. In general, we believe we have a good relationship with the labor unions throughout our operations. See “Item 8. Financial Information—Consolidated Statements and Other Financial Information.”
Share Ownership
None of our directors, alternate directors or executive officers is the beneficial owner of more than 1.0% of any class of our capital stock. See Note 17.2 to our consolidated financial statements.
Insurance Policies for Employees
We maintain a number of different types of insurance policies for all employees. These policies mitigate the risk of having to pay death benefits in the event of an industrial accident. We maintain directors’ and officers’ insurance policies covering all directors and certain key executive officers for liabilities incurred in their capacities as directors and officers.
Item 7. Major Shareholders and Related Party Transactions
Major Shareholders
As of the date of this report, our outstanding capital stock consists of four classes of securities: Series A shares held by FEMSA, Series D shares held by The Coca-Cola Company, and Series B and Series L shares held by the public, which trade as units (each unit consisting of 3 Series B shares and 5 Series L shares). The following table sets forth our major shareholders:

Owner | Outstanding Capital Stock |  | Percentage Ownership of Outstanding Capital Stock |  | Percentage of Voting Rights
FEMSA (Series A shares)(1) | 7,936,628,152 |  | 47.2 | % |  | 56.0 | %
The Coca-Cola Company (Series D Shares)(2) | 4,668,365,424 |  | 27.8 | % |  | 32.9 | %
Public (Series B shares)(3) | 1,575,624,195 |  | 9.4 | % |  | 11.1 | %
Public (Series L shares)(3) | 2,626,040,325 |  | 15.6 | % |  | — | %
Total | 16,806,658,096 |  | 100.0 | % |  | 100.0 | %

(1) FEMSA owns these shares through its wholly owned subsidiary Compañía Internacional de Bebidas, S.A. de C.V. Approximately 74.86% of the voting stock of
FEMSA is owned by the technical committee and trust participants under Irrevocable Trust No. 463 established at Banco Invex, S.A. Institución de Banca
Múltiple, Invex Grupo Financiero, as Trustee. 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
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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).
(2) The Coca-Cola Company indirectly owns these shares through its wholly owned subsidiaries, The Inmex Corporation and Dulux CBAI 2003 B.V.
(3) Series B shares and Series L shares trade together as units (each unit consisting of 3 Series B shares and 5 Series L shares). Series B shares grant full voting rights and Series L shares only grant the right to vote in limited circumstances. Holders of ADSs are entitled, subject to certain exceptions, to instruct The Bank of New York Mellon, the ADS depositary, as to the voting rights pertaining to the Series B shares and the limited voting rights pertaining to the Series L shares, in each case underlying our units represented by ADSs. See “Item 10. Additional Information—Bylaws.”
As of the date of this annual report and based on public filings with the SEC the Bill and Melinda Gates Foundation Trust held 62,147,190 units, or 11.83% of the total amount of our units, which represented 186,441,570 Series B shares, or 11.83% of the total amount of our Series B shares, and 310,735,950 Series L shares, or 11.83% of the total amount of our Series L shares.
Our Series A shares, owned by FEMSA, are held in Mexico and our Series D shares, owned by The Coca-Cola Company, are held outside of Mexico.
As of the date of this report, we had approximately 25,169,539 ADSs outstanding, representing 47.9% of the total amount of our units, or 47.9% of the total amount of our Series B shares and 47.9% of the total amount of our Series L shares, held by approximately 319 registered holders (including The Depositary Trust Company) with registered addresses outside of Mexico.
The Shareholders Agreement
We operate pursuant to a shareholders agreement among two subsidiaries of FEMSA, The Coca-Cola Company and certain of its subsidiaries.
This agreement, together with our bylaws, sets forth the basic rules pursuant to which we operate.
In February 2010, our main shareholders, FEMSA and The Coca-Cola Company, amended the shareholders agreement, and our bylaws were amended accordingly. The amendment mainly related to changes in the voting requirements for decisions on: (1) ordinary operations within an annual business plan and (2) 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 20.0% 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 the Series D shares. Any decision on extraordinary matters, as they are defined by our bylaws and which include any new business acquisition, business combinations or any change in the existing line of business, among other things, 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 The Coca-Cola Company.
Under our bylaws and shareholders agreement, our Series A shares, Series D shares and Series B shares are the only shares with full voting rights. The shareholders agreement also sets forth the principal shareholders’ understanding as to the effect of adverse actions of The Coca-Cola Company under the bottler agreements. Our bylaws and shareholders agreement provide that a majority of the directors appointed by the holders of Series A shares, upon making a reasonable, good faith determination that any action of The Coca-Cola Company under any bottler agreement between The Coca-Cola Company and our company or any of our subsidiaries is materially adverse to our business interests and that The Coca-Cola Company has failed to cure such action within 60 days of notice, may declare a “simple majority period,” as defined in our bylaws, at any time within 90 days after giving notice. During the simple majority period certain decisions, namely the approval of material changes in our 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 Series D directors would otherwise be required, can be made by a simple majority vote of our entire board of directors, without requiring the presence or approval of any Series D director. A majority of the 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 our bylaws regarding proposed transfers of 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 our company: (1) a change in control in a principal shareholder, (2) the existence of irreconcilable differences between the principal shareholders or (3) the occurrence of certain specified events of default.
In the event that (1) one of the principal shareholders buys the other’s interest in our company in any of the circumstances described above or (2) the beneficial ownership of The Coca-Cola Company or FEMSA is reduced below 20.0% of our outstanding
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voting stock, and upon the request of the shareholder whose interest is not so reduced, the shareholders agreement will be terminated and our 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 our growth. It states that it is The Coca-Cola Company’s intention that we 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 we expand by acquiring additional bottler territories in Mexico and other Latin American countries in the event any become available through horizontal growth. In addition, The Coca-Cola Company has agreed, subject to a number of conditions, that if it obtains ownership of a bottler territory that fits with our operations, it will give us the option to acquire such territory. The Coca-Cola Company has also agreed to support reasonable and sound modifications to our capital structure to support horizontal growth. The Coca-Cola Company’s agreement as to horizontal growth expires upon either the elimination of the super-majority voting requirements described above or The Coca-Cola Company’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, we established certain understandings primarily relating to operational and business issues with both The Coca-Cola Company and FEMSA that were memorialized in writing prior to completion of the acquisition. Although The Coca-Cola Memorandum has not been amended, we continue to develop our relationship with The Coca-Cola Company (i.e. through, inter alia, acquisitions and taking on new product categories), and we therefore believe that The Coca-Cola 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 two subsidiaries of FEMSA and The Coca-Cola Company and certain of its subsidiaries will continue in place. On February 1, 2010, FEMSA amended its shareholders agreement with The Coca-Cola Company. See “—The Shareholders Agreement.”
•FEMSA will continue to consolidate our financial results under Mexican financial reporting standards. We have complied with Mexican law by transitioning to IFRS as of 2011 and FEMSA currently consolidates our financial results under IFRS.
•The Coca-Cola Company and FEMSA will continue to discuss in good faith the possibility of implementing changes to our capital structure in the future.
•The Coca-Cola Company may require the establishment of a different long-term strategy for Brazil. If, after taking into account our performance in Brazil, The Coca-Cola Company does not consider us to be part of this long-term strategic solution for Brazil, then we will sell our Brazilian franchise to The Coca-Cola Company 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 our business in Brazil and the fact that The Coca-Cola Company authorized us to acquire five Coca-Cola bottlers in Brazil from 2008 to 2022 and participate in the acquisition of the Brazilian operations of Jugos del Valle, Leão Alimentos, Trop Frutas, the AdeS business in Brazil, among others, we believe that this provision is no longer applicable.
•We would like to keep open strategic alternatives that relate to the integration of sparkling beverages and beer. The Coca-Cola Company, FEMSA and we would explore these alternatives on a market-by-market basis at the appropriate time.
•The Coca-Cola Company agreed to sell to a subsidiary of FEMSA sufficient shares to permit FEMSA to beneficially own 51.0% of our outstanding capital stock (assuming that this subsidiary of FEMSA does not sell any shares and that there are no issuances of our stock other than as contemplated by the acquisition). As a result of this understanding, in November 2006, FEMSA acquired, through a subsidiary, 148,000,000 of our Series D shares from certain subsidiaries of The Coca-Cola Company, representing 9.4% of the total outstanding voting shares and 8.0% of our total outstanding equity, 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.
•We may be entering some markets where significant infrastructure investment may be required. The Coca-Cola Company and FEMSA 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 FEMSA and The Coca-
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Cola Company 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 July 2016, we announced a new, comprehensive cooperation framework with The Coca-Cola Company. 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 generate profitable growth. The cooperation framework contemplates the following main objectives:
•Long-term guidelines in relationship economics. Concentrate prices for sparkling beverages in Mexico gradually increased from July 2017 through July 2019.
•Other Concentrate Price Adjustments. Potential future concentrate price adjustments for sparkling beverages and flavored water in Mexico will consider investment and profitability levels that are beneficial both to us and The Coca-Cola Company.
•Marketing and commercial strategies. We and The Coca-Cola Company are committed to implement marketing and commercial strategies, and productivity programs to maximize profitability. We believe 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 our relationship and combined strategy, in 2021, we and The Coca-Cola Company agreed to enhance the Cooperation Framework. This enhancement includes additional drivers to grow the business and strengthen our successful and longstanding partnership.
This update contemplates the following main objectives:
•Growth principles. We and The Coca-Cola Company agreed to continuously build and align ambitious business growth plans to increase our 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 our 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 our territories will be based on mutual consensus between The Coca-Cola Company and us 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 businesses and ventures.
•Potential new business and ventures. As the Coca-Cola system continues to evolve, leveraging our sales and distribution network, we 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.
Related Party Transactions
We believe that our transactions with related parties are on terms comparable to those that would result from arm’s length negotiations with unaffiliated parties and are reviewed and approved by our corporate practices committee and our board of directors.
FEMSA
We regularly engage in transactions with FEMSA and its subsidiaries, including sales of our products. The aggregate amount of these sales was Ps.8,453 million, Ps.6,539 million and Ps.5,489 million in 2023, 2022 and 2021, respectively. Substantially all of these sales consist of sales to FEMSA Comercio, which operates OXXO, the chain of convenience stores.
We also purchase products and receive services from FEMSA and its subsidiaries. The aggregate amount of these purchases was Ps.9,547 million, Ps.10,129 million and Ps.7,447 million in 2023, 2022 and 2021, respectively. These amounts principally relate to assets such as coolers and services provided to us by FEMSA. In 2017, we renewed our service agreement with a subsidiary of
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FEMSA, which provides for the continued provision of administrative services relating to insurance, legal and tax advice, consulting and advisory services, relations with governmental authorities and certain administrative and internal auditing services that it has been providing since June 1993. In November 2000, we entered into a service agreement with a subsidiary of FEMSA, Solistica, for the transportation of finished products from our bottling plants to our distribution centers within Mexico. Since March 2024, we integrated Solistica’s operations into our Mexican operations. Additionally, FEMSA, through its strategic businesses unit, provides logistics services, point-of-sale refrigeration solutions and plastics solutions to us in the countries where we operate.
FEMSA is also a party to the understandings we have with The Coca-Cola Company relating to specified operational and business issues. A summary of these understandings is set forth under “—Major Shareholders—The Coca-Cola Memorandum.”
The Coca-Cola Company
We regularly engage in transactions with The Coca-Cola Company and its affiliates. We purchase all of our concentrate requirements for Coca-Cola trademark beverages from affiliates of The Coca-Cola Company. Total purchases from The Coca-Cola Company for concentrates were Ps.46,461 million, Ps.43,717 million and Ps.37,213 million in 2023, 2022 and 2021, respectively. Our company and The Coca-Cola Company develop an annual marketing strategy to promote the sale and consumption of our products. In order to implement this strategy, we and The Coca-Cola Company first develop an allocation of marketing expenditures amongst ourselves, which we monitor and track during the year. At the end of the year, we review the actual marketing expenditures and pay or receive a reimbursement from The Coca-Cola Company in accordance with the agreed-upon allocation. Contributions received from The Coca-Cola Company were Ps.2,450 million, Ps.1,170 million and Ps.2,437 million in 2023, 2022 and 2021, respectively. The Coca-Cola Company also makes contributions to us that we generally use for initiatives that promote volume growth of Coca-Cola trademark beverages.
In December 2007 and May 2008, we sold most of our proprietary brands to The Coca-Cola Company. The proprietary brands are licensed back to us by The Coca-Cola Company pursuant to our bottler agreements.
We purchase products from Jugos del Valle, a joint business acquired together with The Coca-Cola Company, in the amount of Ps.3,718 million, 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 our product portfolio. As of the date of this report, we held a 28.2% interest in Jugos del Valle.
We purchase products from Leão Alimentos, a business acquired together with The Coca-Cola Company, 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 our product portfolio. As of the date of this report, we held a 25.1% indirect interest in Leão Alimentos.
See “Item 4. Information on the Company—The Company—Corporate History” for a description of certain acquisitions that we have completed together with The Coca-Cola Company.
Associated Companies
We also regularly engage in transactions with companies in which we own an equity interest that are not affiliated with The Coca-Cola Company, as described under “—The Coca-Cola Company.” We believe these transactions are on terms comparable to those that would result from arm’s length negotiations with unaffiliated third parties.
In Mexico, we purchase canned sparkling beverages from Industria Envasadora de Querétaro, S.A. de C.V., or IEQSA, in which, as of the date of this report, we held a 26.5% equity interest. We purchased Ps.843 million, Ps.577 million and Ps.234 million in canned sparkling beverages from IEQSA in 2023, 2022 and 2021, respectively. We also purchase sugar from Beta San Miguel and PIASA, both sugar-cane producers in which, as of the date of this report, we held a 2.7% and 36.4% equity interest, respectively. We purchased Ps.917 million, Ps.724 million and Ps.938 million in sugar from Beta San Miguel in 2023, 2022 and 2021, respectively. We purchased Ps.2,841 million, Ps.2,841 million and Ps.2,213 million in sugar from PIASA in 2023, 2022 and 2021, respectively.
Other Related Party Transactions
José Antonio Fernández Carbajal, our chairman of the board of directors, is also a member of the board of directors of ITESM, a Mexican private university that routinely receives donations from us.
See Notes 6.3 and 14 to our consolidated financial statements for more information on our related party transactions, including transactions with parties that fall within the related party definition pursuant to IFRS rules.
Item 8. Financial Information
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Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See “Item 18. Financial Statements” beginning on page F-1.
Dividend Policy
For a discussion of our dividend policy, see “Item 3. Key Information—Dividends and Dividend Policy.”
Significant Changes
No significant changes have occurred since the date of the annual consolidated financial statements included in this annual report.
Legal Proceedings
We are party to various legal proceedings in the ordinary course of business, including in relation to antitrust, labor, tax and commercial matters. We believe we had appropriate provisions as required under IFRS for these legal proceedings as of December 31, 2023. 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 could have, or has had, a material adverse effect on our company. Other legal proceedings that are pending against us or that involve us or our subsidiaries are incidental to the conduct of our and their business. We believe that the ultimate resolution of such other proceedings individually or in an aggregate basis would not have a material adverse effect on our consolidated financial condition or results. For further information, see Notes 24.2.1, 25.7 and 25.8 to our consolidated financial statements.
Tax Proceeding against KOF Costa Rica. In 2013, the Costa Rican National Institute of Rural Development (Instituto Nacional de Desarrollo Rural or the INDER)) questioned our 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), our 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. We filed, through an administrative procedure, an appeal against such requirement, which was denied. We have contested this claim through a legal proceeding, which is still pending resolution. We have also filed a motion for a stay of execution until the legal proceeding is resolved, whereby we deposited a guarantee in an escrow account in favor of the INDER. Such motion was resolved in our favor.
For a description of other unsettled lawsuits with tax authorities and other parties, see Note 25.7 to our consolidated financial statements.
Item 9. The Offer and Listing
ADSs representing our units are listed and trade on the NYSE, and our units are listed and trade on the Mexican Stock Exchange. Each ADS represents 10 units, each unit consisting of 3 Series B shares and 5 Series L shares, in each case deposited under the deposit agreement with the ADS depositary, as amended. Our 2.750% Senior Notes due 2030 and our 1.850% Senior Notes due 2032 are also listed and trade on the NYSE. For more information about our securities, see Exhibit 2.13—Description of Securities Registered under Section 12 of the Exchange Act.
The NYSE trading symbol for the ADSs is “KOF” and the Mexican Stock Exchange trading symbol for our units is “KOF UBL”.
Trading on the Bolsa Mexicana de Valores, S.A.B. de C.V. and Bolsa Institucional de Valores, S.A. de C.V.
The Mexican Stock Exchange or the Bolsa Mexicana de Valores, S.A.B. de C.V. and the Bolsa Institucional de Valores, S.A. de C.V. are both located in Mexico City, and are the two operating stock exchanges in Mexico. Trading takes place principally through automated systems that are open between the hours of 8:30 a.m. and 3:00 p.m. Mexico City time, each business day. During daylight savings time, trading hours change to match the NYSE trading hours, opening at 7:30 a.m. and closing at 2:00 p.m. local time. Both stock exchanges operate 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 units represented by ADSs that are directly or indirectly quoted on a stock exchange outside of Mexico.
Settlement is effected two business days after a stock transaction. Deferred settlement, even by mutual agreement, is not permitted without the approval of the Mexican Stock Exchange or the Bolsa Institucional de Valores, S.A. de C.V. Most securities traded on the Mexican Stock Exchange and on the Bolsa Institucional de Valores, S.A. de C.V., including our units, are on deposit with S.D.

Indeval Instituto 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 transactions on the Mexican Stock Exchange and on the Bolsa Institucional de Valores, S.A. de C.V.
Item 10. Additional Information
Bylaws
The following is a summary of the material provisions of our bylaws and applicable Mexican law. The most recent amendments to our bylaws were approved on January 31, 2019, March 8, 2019 and July 12, 2021. For a description of the provisions of our bylaws relating to our board of directors and senior management, see “Item 6. Directors, Senior Management and Employees.”
The main changes made to our bylaws on January 31, 2019 were the following:
•Article 6 was amended to:
•include the number of shares of our minimum fixed capital stock issued as a result of the Stock Split approved in the shareholders meeting held on such date;
•modify the limitations on share ownership of Series A shares from representing no less than 51.0% of the outstanding common shares with full voting rights to representing no less than 50.1% of the outstanding common shares with full voting rights;
•modify the limitations on share ownership of Series B shares and Series D shares from jointly representing no more than 49.0% of the outstanding common shares with full voting rights to representing no more than 49.9% of the outstanding common shares with full voting rights; and
•include the possibility to unwind in 2024 the units of shares allowing Series B shares and Series L shares to trade separately, through a special shareholders meeting that will require 75.0% of each of the Series B shares and the Series L shares to be present or represented at the meeting, and the favorable vote of holders that represent 51.0% of each of the Series L shares and Series B shares, such unwind becoming effective one year after the approval.
•Several other articles were amended to implement and give effect to the issuance of our units, each unit being comprised of 3 Series B shares and 5 Series L shares.
•Article 26 was amended to provide that the shareholders meeting will determine which series of shares is to reduce the number of directors that such series is entitled to appoint; provided that, the number of directors entitled to be appointed by holders of Series D shares shall remain unchanged, unless otherwise agreed.
On March 8, 2019, Article 25 and Article 26 of our bylaws were amended to include that Series A shareholders are entitled to appoint up to 13 directors and Series D shareholders are entitled to appoint up to 5 directors. Previously, Series A shareholders appointed 13 directors and Series D shareholders appointed 5 directors.
Additionally, on July 12, 2021, Articles 2 and 29 of our bylaws were amended to (i) modify our corporate purpose to more accurately describe our current activities and (ii) modify the installation and approval procedures of our board of directors setting forth the manner in which the board of directors convenes through the use of remote communication.
In this summary of our bylaws, references to the rights or restrictions of holders of Series B shares or holders of Series L shares refer to the rights and restrictions that apply to the holders of our units, as the indirect holders of the Series B shares and Series L shares comprising such units.
Organization and Register
We were incorporated on October 30, 1991, as a stock corporation with variable capital (sociedad anónima de capital variable) in accordance with the Mexican General Corporations Law (Ley General de Sociedades Mercantiles). On December 5, 2006, we became a publicly traded stock corporation with variable capital (sociedad anónima bursátil de capital variable) and amended our bylaws in accordance with the Mexican Securities Market Law. We were registered in the Public Registry of Property and Commerce (Registro Público de la Propiedad y del Comercio) of Monterrey, Nuevo León, Mexico on November 22, 1991 under commercial file number 2986, folio 171, volume 365, third book of the commercial section. In addition, due to the change of address of our company to
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Mexico City, we have also been registered in the Public Registry of Property and Commerce of Mexico City since June 28, 1993 under commercial file number 176,543.
Purposes
The main corporate purposes of our company include the following:
•to establish, promote, create and participate in corporations or companies of any type either domestic or foreign, through the subscription and/or acquisition of shares, quotas, assets and rights in such entities, and in any form dispose of and carry out all types of commercial transactions and agreements with respect to such shares, quotas, assets and rights;
•to subscribe, issue, own, buy, sell and carry out all types of transactions involving bonds, shares, equity, negotiable instruments and securities of any type;
•to acquire, use, buy, sell and/or dispose of concessions, permits, franchises, authorizations, trademarks, tradenames, utility models, distinctive signs, commercial names, copyrights, patents, inventions and processes;
•to lend or borrow with or without any guarantees, through interest-bearing loan agreements or any other type of agreement, and to draw, accept, make, endorse and guarantee negotiable instruments, issue bonds secured with real property or unsecured, and to make us jointly liable, to grant security of any type (aval and surety bonds) with regard to obligations entered into by us or by third parties; and
•to contract professional and/or specialized services of any kind, and in general, to perform the acts, enter into the agreements and carry out other transactions as may be necessary or conducive to our corporate purpose.
Voting Rights, Transfer Restrictions and Certain Minority Rights
Series A shares and Series D shares have full voting rights and are subject to transfer restrictions. Series B shares have full voting rights, and Series L shares have limited voting rights. Series B shares and Series L shares are freely transferable in the form of units, for so long as Series B shares and Series L shares trade together as units. If the units are unwound, as described below, the underlying Series B shares and Series L shares will be freely transferable on an individual basis. None of our shares are exchangeable for shares of a different series. The rights of all series of our capital stock are substantially identical except as provided herein.
Under our bylaws, holders of Series L shares are entitled to vote in limited circumstances. They may appoint for election and elect up to three of our maximum of 21 directors and, in certain circumstances where holders of Series L shares have not voted for the director elected by holders of the majority of these series of shares, they may be entitled to elect and remove one director, through a general shareholders meeting, for every 10.0% they own of all issued, subscribed and paid shares of our capital stock, pursuant to the Mexican Securities Market Law, up to a maximum number of three directors out of the total of 21 directors. See “Item 6. Directors, Senior Management and Employees.” In addition, they are entitled to vote on certain matters, including certain changes in our corporate form, mergers involving our company when our company is the merged entity or when the principal corporate purpose of the merged entity is not related to the corporate purpose of our company, and the cancellation of the registration of our shares in the Mexican Stock Exchange or any other foreign stock exchange.
Pursuant to the Mexican Securities Market Law, minority shareholders are entitled to a number of protections. These protections include provisions that permit:
•holders of 10.0% of our outstanding capital stock entitled to vote, including in a limited or restricted manner, either individually or as a group, to require the chairman of the board of directors or the chairmen of the Audit or Corporate Practices Committees to call a shareholders meeting;
•holders of 5.0% of our outstanding capital stock, either individually or as a group, to bring an action for liability against our directors, the secretary of the board of directors and certain key officers;
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•holders of 10.0% of our outstanding capital stock who are entitled to vote, including in a limited or restricted manner, either individually or as a group, to request at any shareholders meeting that resolutions be postponed with respect to any matter on which they considered they were not sufficiently informed;
•holders of 20.0% of our outstanding capital stock, either individually or as a group, to oppose any resolution adopted at a shareholders meeting in which they are entitled to 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 (1) the challenged resolution violates Mexican law or our bylaws, (2) the opposing shareholders neither attended the meeting nor voted in favor of the challenged resolution and (3) the opposing shareholders deliver a bond to the court to secure payment for 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
•for every 10.0% of our outstanding capital stock who are entitled to vote, including in a limited or restricted manner, held either individually or as a group, to appoint one member of our board of directors and one alternate member of our board of directors up to the maximum number of directors that each series is entitled to appoint under our bylaws; if a holder or group of holders of Series B shares are entitled to appoint a director, the shareholders meeting will reduce the number of directors entitled to be appointed by holders of another series of shares; provided that, the number of directors entitled to be appointed by holders of Series D shares will remain unchanged, unless otherwise agreed.
Shareholders Meetings
General shareholders meetings may be ordinary meetings or extraordinary meetings. Extraordinary meetings are those called to consider certain specific matters as provided in the Mexican General Corporations Law, including: amendments to our bylaws, liquidation, dissolution, merger and transformation from one form of company to another, issuance of preferred stock and increases and reductions of the fixed portion of our capital stock. In addition, our bylaws require an extraordinary meeting to consider the cancellation of the registration of our equity securities with the National Securities Registry (Registro Nacional de Valores or RNV) maintained by the CNBV and the delisting of our equity securities from the Mexican Stock Exchange or any other foreign stock exchanges on which our equity securities may be listed, the amortization of distributable earnings into capital stock, and issuances of treasury shares for future subscription and payment. All other matters, including increases or decreases affecting the variable portion of our capital stock, are considered at an ordinary meeting.
Pursuant to Mexican law, an ordinary annual meeting must be held at least once each year (1) to consider the approval of our financial statements for the preceding fiscal year, (2) to determine the allocation of the profits of the preceding fiscal year and (3) to appoint, remove or ratify the members of our board of directors. The holders of Series A, Series D and Series B shares are entitled to vote in such ordinary annual meeting regarding all three matters mentioned above, and the holders of Series L shares are exclusively entitled to vote in relation to the appointment of members of the board of directors (i.e. up to three directors and their respective alternate directors). Further, any transaction to be entered into by us or our subsidiaries within the following fiscal year that represents 20.0% or more of our consolidated assets must be approved at an ordinary shareholders meeting at which holders of Series L shares are entitled to vote.
The quorum for ordinary and extraordinary meetings at which holders of Series L shares are not entitled to vote is 76.0% of the holders of our fully subscribed and paid voting shares. Resolutions adopted at such ordinary or extraordinary shareholders meetings are valid when adopted with the affirmative vote of holders of at least a majority of our fully subscribed and paid voting shares voting (and not abstaining) at the meeting, including the affirmative vote of holders of a majority of the Series D shares. However, for a shareholders meeting to vote on a payment of dividends in an amount not to exceed 20.0% of the preceding years’ consolidated net profits, the approval of our financial statements for the preceding fiscal year with an unqualified auditor’s opinion, or our normal operations plan, our bylaws only require a quorum of a majority of our fully subscribed and paid voting shares and resolutions are validly adopted at such meeting with the affirmative vote of a majority of the holders of our voting shares voting (and not abstaining) at the meeting.
Under our bylaws, holders of Series B shares are entitled to vote on all matters discussed at an ordinary or extraordinary meeting. These holders are entitled to elect and remove one director for every 10.0% of all issued, subscribed and paid shares of our capital stock that they may hold either individually or as a group, up to a maximum number of three directors out of the total of 21 directors.
The quorum for an extraordinary meeting at which holders of Series L shares are entitled to vote is 82.0% of all of our fully subscribed and paid shares, and resolutions issued at such extraordinary meeting are valid when adopted with the affirmative vote of
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holders of at least a majority of our fully subscribed and paid shares voting (and not abstaining) at the meeting. The following matters may be approved in such a meeting:
•changes in our corporate form from one type of company to another (other than changing from a variable capital to fixed-capital corporation and vice versa); and
•any merger where we are not the surviving entity or any merger with an entity whose principal corporate purposes are different from those of the Registrant or its subsidiaries.
Series L shares will also be entitled to vote on any other matters for which the Mexican Securities Market Law expressly allows Series L shares to vote.
In the event of 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 95.0% of the holders of our outstanding capital stock, our bylaws and the Mexican Securities Market Law require us to make a public offer to acquire these shares prior to their cancellation.
Holders of Series L shares may attend, but not address, meetings of shareholders at which they are not entitled to vote.
Holders of our shares in the form of ADSs will receive notice of shareholders meetings from the ADS depositary in sufficient time to enable such holders to return voting instructions to the ADS depositary in a timely manner. Our past practice, which we intend to continue, has been to inform the depositary to timely notify holders of our shares in the form of ADSs of upcoming votes and ask for their instructions.
Mexican law provides for a special meeting of shareholders to allow holders of shares of a specific series to vote as a class on any action that would prejudice exclusively the rights of holders 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. Holders of Series A, Series B, Series D and Series L shares at their respective special meetings or at an annual ordinary meeting, must appoint, remove or ratify directors, as well as determine their compensation. The quorum for special meetings of any series of shares is 75.0% of the holders of the fully subscribed and paid shares of the series entitled to attend such special meeting. Except for resolutions to unwind the units into individual Series B and Series L shares as described above, resolutions adopted at a special shareholders meeting are valid when adopted by the holders of at least a majority of the fully subscribed and paid shares of the series entitled to attend such special meeting. Resolutions to unwind the units into individual Series B shares and Series L shares as described above are valid when adopted by the holders of at least 51.0% of each of the fully subscribed and paid Series B shares and Series L shares.
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. For every 10.0% or more of our capital stock held by holders, either individually or as a group, such holders may require the chairman of the board of directors, or the chairmen of the audit committee or corporate practices committee to call a shareholders meeting. A notice of meeting and an agenda must be published in a newspaper of general circulation in Mexico City or in the electronic system maintained by the Mexican Ministry of Economy at least 15 days prior to 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. All relevant information relating to the shareholders meeting must be made available to shareholders starting on the date of publication of the notice. To attend a meeting, shareholders must deposit their shares with the corresponding trust institution or with Indeval, or an institution for the deposit of securities prior to the meeting as indicated in the notice. If entitled to attend the meeting, a shareholder may be represented by an attorney-in-fact or vote by proxy.
Additional Transfer Restrictions Applicable to Series A and Series D Shares
Our bylaws provide that no holder of Series A or Series D shares may sell its shares unless it has disclosed the terms of the proposed sale and the name of the proposed buyer and has previously offered to sell the shares to the holders of the other series for the same price and terms as it intended to sell the shares to a third party. If the shareholders being offered shares do not choose to purchase the shares within 90 days of the offer, the selling shareholder is free to sell the shares to the third party at the price and under the specified terms. In addition, our bylaws impose certain procedures in connection with the pledge of any Series A or Series D shares to any financial institution that are designed, among other things, to ensure that the pledged shares will be offered to the holders of the other series at market value prior to any foreclosure. Finally, a proposed transfer of Series A or Series D shares other than a proposed sale or a pledge, or a change of control of a holder of Series A or Series D shares to a company that is a subsidiary of a principal shareholder, would not trigger rights of first refusal to purchase the shares at market value. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.”
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Dividend Rights
At the annual ordinary meeting of holders of Series A, Series B, and Series D shares, the board of directors submits our financial statements for the previous fiscal year, together with a report thereon by the board of directors. Once the holders have approved the financial statements, they determine the allocation of our net income for the preceding year. Mexican law requires the allocation of at least 5.0% of net income to a legal reserve, which is not subsequently available for distribution until the amount of the legal reserve equals 20.0% of our capital stock. Thereafter, the holders of Series A, Series B and Series D shares may determine and allocate a certain percentage of net income to any general or special reserve, including a reserve for open-market purchases of our shares. The remainder of net income is available for distribution in the form of dividends to the shareholders.
All shares outstanding and fully paid (including Series L shares) at the time a dividend or other distribution is declared are entitled to share equally in the dividend or other distribution. No series of shares is entitled to a preferred dividend. Shares that are only partially paid, participate in a dividend or other distributions proportionately based on the amount actually paid at the time of the dividend or other distributions. Treasury shares are not entitled to dividends or other distributions.
Change in Capital
According to our bylaws, any change in our authorized capital stock requires a resolution of a shareholders meeting. We are permitted to issue shares representing fixed capital and shares representing variable capital. The fixed portion of our capital stock may be increased or decreased only by amendment of our bylaws adopted by a resolution at an extraordinary shareholders meeting. The variable portion of our capital stock may be increased or decreased by resolution of an ordinary shareholders meeting without amending our bylaws. All changes in the fixed or variable capital have to be registered in our capital variation registry book, as required by the applicable law.
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 equity. Treasury stock may only be sold through a public offering.
Preemptive Rights
The Mexican Securities Market Law permits the issuance and sale of shares through a public offering without granting shareholders preemptive rights, if permitted by the bylaws and upon, among other things, authorization of the CNBV and the approval of the extraordinary shareholders meeting called for such purpose. Under Mexican law and our bylaws, except in limited circumstances (including mergers, sale of repurchased shares, convertible securities into shares and capital increases by means of payment in kind for shares or shares issued in return for the cancellation of debt), 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 sufficient to maintain 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 through an electronic system of the Mexican Ministry of Economy. 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 as provided in the deposit agreement with the ADSs depositary, as amended. 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.
Limitations on Share Ownership
Our bylaws provide that Series A shares must at all times constitute no less than 50.1% of all outstanding common shares with full voting rights (excluding Series L shares) and may only be held by Mexican investors. Under our bylaws, in the event Series A shares are subscribed or acquired by any other shareholders holding shares of any other series, and the shareholder is of a citizenship other than Mexican, these Series A shares are automatically converted into shares of the same series of stock that this shareholder owns, and this conversion will be considered perfected at the same time as the subscription or acquisition. Additionally our bylaws provide that Series B shares jointly with the Series D shares shall not exceed 49.9% of all outstanding common shares with full voting rights (excluding Series L shares).
Other Provisions
Authority of the Board of Directors. The board of directors is our main managing body and is authorized to take any action in connection with our operations not expressly reserved to our shareholders. Pursuant to our bylaws, the board of directors must approve, observing at all moments their duty of care and duty of loyalty, among other matters the following:
•any related party transactions outside the ordinary course of our business;
•significant asset transfers, mergers or acquisitions;
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•guarantees or collateral that represent more than 30.0% of our consolidated assets;
•appointment of officers and senior management deemed necessary, as well as the creation of the necessary committees;
•the annual business plan and the five-year business plan and any modifications thereto;
•internal policies;
•the compensation of our chief executive officer and the senior management reporting directly to the chief executive officer; and
•other transactions that represent more than 1.0% of our consolidated assets.
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 the directors voting (and not abstaining). The majority of the members, which shall include the vote of at least two Series D shares directors, shall approve any extraordinary decision including any new business acquisition or combination or any change in the existing line of business, among others. In addition, the board of directors may meet virtually, in person or in hybrid meetings.
Redemption. Our fully paid shares are subject to redemption in connection with either (1) a reduction of capital stock or (2) a redemption with distributable earnings, which, in either case, must be approved by our shareholders. The shares subject to any such redemption would be selected by us by lot or in the case of redemption with distributable earnings, by purchasing shares by means of a tender offer conducted on the Mexican Stock Exchange, in accordance with the Mexican General Corporations Law and the Mexican Securities Market Law.
Repurchase of Shares. According to our bylaws, and subject to the provisions of the Mexican Securities Market Law and under rules promulgated by the CNBV, we may freely repurchase our own shares for a maximum amount in Mexican pesos previously approved by our shareholders meeting.
In accordance with the Mexican Securities 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 our shares are (1) considered to be Mexican with respect to such shares that they acquire or hold and (2) 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. Under this provision, a non-Mexican holder of our shares (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 commence 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 invokes governmental protections in violation of this agreement, its shares may be forfeited to the benefit of the Mexican state.
Duration. Our bylaws provide that our company’s term is for 99 years from its date of incorporation, unless extended through a resolution of an extraordinary shareholders meeting.
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, to appear at board of directors’ meetings to report 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
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•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 with their duty of care if such failure causes economic damage to us or our subsidiaries and the director (1) failed to attend board of directors or committee meetings and as a result of, such failure, the board of directors is unable to take action, unless such absence is approved by the shareholders meeting, (2) 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 prohibited from doing so or required to do so to maintain confidentiality, and (3) failed to comply with the duties imposed by the Mexican Securities Market Law or our bylaws.
Fiduciary Duties—Duty of Loyalty. The Mexican Securities 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 transactions without complying with the requirements of the Mexican Securities 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 a third party, without the prior approval of the board of directors.
Appraisal Rights. Whenever the shareholders approve a change of corporate purpose, change of nationality or change the corporate form of our company, 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 at a price per share calculated as specified under applicable Mexican law, provided that it exercises its right within 15 days following the adjournment of the meeting at which the change was approved. In this case, the shareholder would be entitled to the reimbursement of its shares, in proportion to our assets in accordance with the last approved balance sheet. Because holders of Series L shares are not entitled to vote on certain types of these changes, these withdrawal rights are available to holders of Series L shares in fewer cases than to holders of other series of our capital stock.
Liquidation. Upon our liquidation, one or more liquidators may be appointed to wind up our affairs. All fully paid and outstanding shares of capital stock (including Series L and Series B shares) will be entitled to participate equally in any distribution upon liquidation. Shares that are only partially paid will be entitled to participate in any distribution upon liquidation in the proportion that they have been paid at the time of liquidation. There are no liquidation preferences for any series of our shares.
Actions Against Directors. Shareholders (including holders of Series L and Series B shares) representing, in the aggregate, not less than 5.0% of the capital stock may directly bring an action against directors.
In the event of actions resulting from any breach of the duty of care and the duty of loyalty, liability is exclusively in our favor. The Mexican Securities 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 Securities Market Law provides that the members of the board of directors will not incur, individually or jointly, in liability for damages and losses caused to our company, when their acts were made in good faith, provided that (1) the directors complied with the requirements of the Mexican Securities Market Law and with our bylaws, (2) the decision making or voting was based on information provided by the relevant officers, the external auditor or the independent experts, whose
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capacity and credibility do not offer reasonable doubt, (3) the negative economic effects could not have been foreseen, based on the information available, and (4) the resolutions of the shareholders meeting were observed.
Limited Liability. The liability of shareholders for our company’s losses is limited to their participation in our company.
Material Agreements
We manufacture, package, distribute and sell Coca-Cola trademark beverages under bottler agreements with The Coca-Cola Company. In addition, pursuant to a tradename license agreement with The Coca-Cola Company, we are authorized to use certain trademark names of The Coca-Cola Company in our corporate name. For a discussion of the terms of these agreements, see “Item 4. Information on the Company—Bottler Agreements.”
We operate pursuant to a shareholders agreement, as amended from time to time, among certain subsidiaries of FEMSA, The Coca-Cola Company and certain of its subsidiaries. For a discussion of the terms of this agreement, see “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—The Shareholders Agreement.”
We purchase the majority of our non-returnable plastic bottles from Alpla, a provider authorized by The Coca-Cola Company, pursuant to an agreement we entered into in April 1998 for our original operations in Mexico. Under this agreement, we rent plant space to Alpla, where it produces plastic bottles to certain specifications and quantities for our use.
In July 2015, we executed certain agreements with DXC Technology (formerly Hewlett Packard) to provide technology services in all of our territories which will be extended until June 2024. In addition, in December 2022, we executed a Central Computing Master Services Agreement for host and storage services which will be in force until December 2026.
In 2016 and 2017, we entered into certain distribution agreements with Monster Energy Company to sell and distribute Monster trademark energy drinks in most of our territories. These agreements have a ten-year term and are automatically renewed for up to two five-year terms.
Since 1993 we have distributed and sold Heineken beer products in our Brazilian territories pursuant to our agreement with Heineken Brazil. This agreement was scheduled to expire in 2022. However, in February 2021, we entered into a new distribution agreement with Heineken Brazil that replaced our previous distribution agreement with Heineken Brazil. Pursuant to this new distribution agreement, we continue to sell and distribute Kaiser, Bavaria and Sol beer brands in Brazil and added the premium brand Eisenbahn and other international brands to our portfolio and have ceased to sell and distribute Heineken and Amstel beer brands in most of our territories in Brazil. In addition, we now have 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 new 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, we 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 judgements resulting from such legal proceeding.
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.
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.
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 ADSs by 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 the units or ADSs, which we refer to as a U.S. holder, 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 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, dealers, traders who elect to mark to market, tax- exempt entities, insurance companies, certain short-term holders of units or ADSs or investors who hold the units or ADSs as part of a hedge, straddle, conversion or integrated transaction, partnerships or partners therein, non-resident alien 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 holding the units or ADSs may be materially different for investors described in the preceding sentence. This
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summary deals only with U.S. holders that will hold the units or ADSs as capital assets and does not address the tax treatment of a U.S. holder that owns or is treated as owning 10.0% or more of the shares by vote or value (including units) 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 and the protocols thereto, 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 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 the units or ADSs should consult their tax advisers as to 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 “non-resident holder” means a holder that is not a resident of Mexico and that does not hold the units, or ADSs in connection with the conduct of a trade or business through a permanent establishment 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 or her “center of vital interests” (as defined in the Mexican Tax Code) is located in Mexico. The “center of vital interests” of an individual is situated in Mexico when, among other circumstances, more than 50.0% of that person’s total income during a calendar year originates from within Mexico. A legal entity is a resident of Mexico if it has 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 such a person 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 such a permanent establishment will be subject to Mexican taxes, in accordance with applicable tax laws.
Tax Considerations Relating to the Units and the ADSs
Taxation of Dividends. Effective as of January 1, 2014, under Mexican income tax laws, dividends, either in cash or in kind, paid to individuals that are Mexican residents or individuals or companies that are non-Mexican residents, on the Series B shares and Series L shares underlying our units or ADSs, are subject to a 10.0% withholding tax, or a lower rate if covered by a tax treaty. Profits that were earned and subject to income tax before January 1, 2014 are exempt from this withholding tax.
Taxation of Dispositions of ADSs or Units. Effective as of January 1, 2014, gains from the sale or disposition of units carried out on the Mexican Stock Exchange or another approved securities market in Mexico by individuals that are Mexican residents will be subject to an income tax rate of 10.0%, and gains from the sale or disposition of units carried out on the Mexican Stock Exchange or another approved securities market in Mexico by individuals and companies that are non-Mexican residents will be subject to a 10.0% Mexican withholding tax. The cost at which shares were acquired prior to January 1, 2014, is calculated by using the average closing price per share in the last twenty-two days. If the closing price per share in the last twenty-two days is considered unusual as compared to the closing prices in the last six months, then the calculation is made using the average closing price per share in the last six months. However, a holder that is eligible to claim benefits from any tax treaty will be exempt from Mexican withholding tax on gains realized on a sale or other disposition of units, provided certain additional requirements are met.
Gains on the sale or other disposition of units or ADSs made in a transaction that is not carried out through the Mexican Stock Exchange or other approved securities market in Mexico generally would be subject to Mexican tax, 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 such a sale or other disposition of units or ADSs, so long as the holder did not own, directly or indirectly, 25.0% or more of our total capital stock (including units represented by ADSs) within the 12-month period preceding such sale or other disposition and provided that the gains 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 tax.
Other Mexican Taxes
There are no Mexican inheritance, gift, succession or value-added taxes applicable to the ownership, transfer, exchange or disposition of the ADSs or units, although gratuitous transfers of units may in certain circumstances cause a Mexican federal tax to be imposed upon the recipient. There are no Mexican stamp, issue, registration or similar taxes or duties payable by holders of units.
United States Taxation
Tax Considerations Relating to the Units and the ADSs
In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners of the units represented by those ADSs.
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Taxation of Dividends. The gross amount of any distributions paid to holders of our units or the 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 U.S. holder, in the case of our units, or by the depositary, in the case of our units represented by ADSs, 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 included 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 U.S. holder, in the case of our units, or by the depositary, in the case of our units represented by ADSs (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 own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received by a U.S. holder or depositary that are converted into U.S. dollars on a date subsequent to receipt.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual U.S. holder of our units or ADSs generally is subject to taxation at the preferential rates applicable to long-term capital gains if the dividends are “qualified dividends.” Dividends paid to holders of our units or ADSs will be treated as qualified dividends if (1) 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 (2) the issuer was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company. 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 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 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 U.S. holders of additional units with respect to their units or 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. A gain or loss realized by a U.S. holder on the sale or other disposition of ADSs or units 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 or units. Any such gain or loss will be a long-term capital gain or loss if the ADSs or units were held for more than one year on the date of such sale. Long-term capital gain recognized by a U.S. holder that is an individual is subject to reduced rates of federal income taxation. The deduction of capital loss is subject to limitations for U.S. federal income tax purposes. Deposits and withdrawals of units by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
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A U.S. holder generally will not be entitled to credit any Mexican tax imposed on the sale or other disposition of the ADSs or units 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 or units 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 or units 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 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 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 or units and any Mexican tax imposed on such sale or disposition.
United States Backup Withholding and Information Reporting. A U.S. holder of units or 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 units or ADSs unless such holder (1) comes within certain exempt categories and demonstrates this fact when so required, or (2) 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.
Specified Foreign Financial Assets. Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the taxable year, or US$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 units and 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 units or 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 units or 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 the units or ADSs, or any gain realized on the sale of units or 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.
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. Filings we make electronically with the SEC are available to the public on the Internet at the SEC’s website at www.sec.gov and at our website at www.coca-colafemsa.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
As part of our risk management strategy, we use derivative financial instruments with the purpose of (1) achieving a desired liability structure with a balanced risk profile, (2) managing the exposure to raw material costs and (3) hedging balance sheet and cash flow exposures to foreign currency fluctuation. We do not use derivative financial instruments for speculative or profit-generating purposes. We track the fair value (mark to market) of our derivative financial instruments and its possible changes using scenario analyses.
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Interest Rate Risk
Interest rate risk exists principally with respect to our indebtedness that bears interest at floating rates. As of December 31, 2023, we had total indebtedness of Ps.65,214 million, of which 92.8% bore interest at fixed interest rates and 7.2% bore interest at variable interest rates. After giving effect to our swap contracts, as of December 31, 2023, 27.1% (or 21.9% calculated based on the weighted average life of our outstanding debt), was variable-rate. The interest rate on our variable rate debt denominated in Mexican pesos has historically been determined by reference to the TIIE; the interest rate on our variable rate debt denominated in Colombian pesos is generally determined by reference to the Banking Reference Index, or IBR for its initials in Spanish; the interest rate on our variable rate debt denominated in Argentine pesos is generally determined by reference to the Buenos Aires Deposits of Large Amounts Rate, or BADLAR; and the interest rate on our variable rate debt denominated in Brazilian reais is generally determined by reference to the Brazilian Interbank Deposit Rate (Certificado de Depósitos Interfinanceiros). If these reference rates increase, our interest payments would consequently increase.
The table below provides information about our financial instruments that are sensitive to changes in interest rates, without giving effect to interest rate swaps. The table presents weighted average interest rates by expected contractual maturity dates. Weighted average variable rates are based on the reference rates on December 31, 2023, plus spreads, contracted by us. The instruments’ actual payments are denominated in U.S. dollars, Mexican pesos, Brazilian reais, Colombian pesos, Argentine pesos and Euros. All of the payments in the table are presented in Mexican pesos, our reporting currency, converted at an exchange rate of Ps.16.8935 per U.S. dollar reported by Banco de México quoted to us by dealers for the settlement of obligations in foreign currencies on December 31, 2023.
The table below also includes the fair value of total debt based on the discounted value of contractual cash flows. The discount rate is estimated using rates currently offered for debt with similar terms and remaining maturities. Furthermore, the fair value of notes payable is based on quoted market prices on December 31, 2023. As of December 31, 2023, the fair value represents a gain amount of Ps.4,141 million.
Principal by Year of Maturity

| As of December 31, 2023 |  | As of December 31, 2022
| 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 and thereafter |  | Total Carrying Value as of December 31, 2023 |  | Total Fair Value as of December 31, 2023 |  | Total Carrying Value
Short and Long-Term Debt and Notes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate Debt and Notes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. dollars (Notes) (1) | — |  | — |  | — |  | — |  | 36,352 |  | 36,352 |  | 33,719 |  | 41,431
Interest Rate(2) |  |  |  |  |  |  |  |  | 3.05 | % |  | 3.05 | % |  |  |  | 3.06 | %
U.S. dollars (Bank Loans) | 25 |  | 115 |  | — |  | — |  | — |  | 140 |  | 140 |  | 92
Interest Rate(2) | 6.81 | % |  | 6.73 | % |  |  |  |  |  |  |  | 6.74 | % |  |  |  | 6.81 | %
Mexican pesos (Certificados Bursátiles) | — |  | — |  | — |  | 8,495 |  | 15,451 |  | 23,946 |  | 22,439 |  | 31,437
Interest Rate(2) |  |  |  |  |  |  | 7.87 | % |  | 8.28 | % |  | 8.13 | % |  |  |  | 7.50 | %
Brazilian reais (Bank Loans) | 21 |  | — |  | — |  | — |  | — |  | 21 |  | 20 |  | 56
Interest Rate(2) | 6.90 | % |  | 6.70 | % |  |  |  |  |  |  |  | 6.90 | % |  |  |  | 6.96 | %
Uruguayan pesos (Bank Loans) | — |  | — |  | — |  | — |  | — |  | — |  | — |  | 976
Interest Rate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 6.27 | %
Argentine pesos (Bank Loans) | 73 |  | — |  | — |  | — |  | — |  | 73 |  | 73 |  | —
Interest Rate(2) | 130.00 | % |  |  |  |  |  |  |  |  |  | 130.00 | % |  |  |  |
Euros (Bank Loans) | 15 |  | — |  | — |  | — |  | — |  | 15 |  | 15 |  | —
Interest Rate(2) | 17.60 | % |  |  |  |  |  |  |  |  |  | 17.60 | % |  |  |  |
Total Fixed Rate | 135 | — | 115 | — | — | — | 8,495 | — | 51,803 | — | 60,547 | — | 56,407 | — | 73,993

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| As of December 31, 2023 |  | As of December 31, 2022
| 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 and thereafter |  | Total Carrying Value as of December 31, 2023 |  | Total Fair Value as of December 31, 2023 |  | Total Carrying Value
| (in millions of Mexican pesos, except percentages)
Variable Rate Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mexican pesos (Certificados Bursátiles) | — |  | 1,728 |  | 2,925 |  | — |  | — |  | 4,653 |  | 4,650 |  | 4,650
Interest Rate(2) |  |  | 11.59 | % |  | 11.55 | % |  |  |  |  |  | 11.57 | % |  |  |  | 10.41 | %
Brazilian reais (Bank Loans) | 6 |  | 6 |  | 2 |  | — |  | — |  | 14 |  | 15 |  | 28
Interest Rate(2) | 8.81 | % |  | 8.94 | % |  | 8.94 | % |  |  |  |  |  | 8.88 | % |  |  |  | 9.77 | %
Total Variable Rate | 6 | — | 1,734 | — | 2,927 | — | — | — | — | — | 4,667 | — | 4,666 | — | 4,678
Total Debt | 141 |  | 1,849 |  | 2,927 |  | 8,495 |  | 51,803 |  | 65,214 |  | 61,073 |  | 78,669

| As of December 31, 2023 |  | As of December 31, 2022
| 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 and thereafter |  | Total Carrying Value |  | Total Fair Value |  | Total Carrying Value
| (in millions of Mexican pesos, except percentages)
Derivative Financial Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-Currency Swaps (Mexican pesos) |  |  |  |  |  |  |  |  |  |  |  |  | (1,874) |  |
Notional to pay | — |  | — |  | — |  | 7,048 |  | 6,650 |  | 13,697 |  |  |  | 12,477
Notional to receive | — |  | — |  | — |  | 5,913 |  | 6,031 |  | 11,944 |  |  |  | 12,198
Interest pay rate | — |  | — |  | — |  | 9.67 | % |  | 7.50 | % |  | 8.62 | % |  |  |  | 8.82 | %
Interest receive rate | — |  | — |  | — |  | 4.00 | % |  | 2.67 | % |  | 3.33 | % |  |  |  | 3.52 | %
Cross-Currency Swaps (Brazilian reais) |  |  |  |  |  |  |  |  |  |  |  |  | (1,341) |  |
Notional to pay | — |  | — |  | 4,679 |  | 1,766 |  | 8,195 |  | 14,640 |  |  |  | 13,985
Notional to receive | — |  | — |  | 4,223 |  | 1,689 |  | 8,109 |  | 14,022 |  |  |  | 16,070
Interest pay rate | — |  | — |  | 17.44 | % |  | 12.11 | % |  | 8.03 | % |  | 11.53 | % |  |  |  | 10.69 | %
Interest receive rate | — |  | — |  |  | 2.12 | % |  | 2.75 | % |  | 2.75 | % |  | 2.56 | % |  |  |  | 3.10 | %
Cross-Currency Swaps (Colombian pesos) |  |  |  |  |  |  |  |  |  |  |  |  | 96 |  |
Notional to pay | — |  | — |  | 916 |  | — |  | — |  | 916 |  |  |  | 1,116
Notional to receive | — |  | — |  | 987 |  | — |  | — |  | 987 |  |  |  | 1,476
Interest pay rate | — |  | — |  | 6.26 | % |  | — |  | — |  | 6.26 | % |  |  |  | 6.84 | %
Interest receive rate | — |  | — |  | 2.75 | % |  | — |  | — |  |  | 2.75 | % |  |  |  | 2.62 | %
Interest Rate Swap (U.S. dollars) |  |  |  |  |  |  |  |  | 8,447 |  | 8,447 |  | (1,381) |  | 9,681
Interest pay rate | — |  | — |  | — |  | — |  | L6m + 0.0947%, SOFR + 0.2593% |  | L6m + 0.0947%, SOFR + 0.2593% |  |  |  | L6m+0.0947%
Interest rate receive | — |  |  | — |  |  | — |  |  | — |  | 1.85 | % |  | 1.85 | % |  |  |  | 1.85 | %

(1) We have used interest rate derivatives that have been designated as fair value hedge relationships 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) in financial instruments” in the period in which they occur. Since 2022, the Company is applying fair value hedging to the hedged portion of the 1.850% Senior Notes of US$705 million, which are linked to an interest rate swap. The hedging gain or loss adjusts the carrying amount of the hedged item and will be recognized in the consolidated income statements under “market value gain (loss) in financial instruments”. For the years ended on December 31, 2023, and 2022, the Company recorded in the consolidated income statements a loss of Ps.371 million and a gain of Ps.1,647 million, respectively. As of December 31, 2023, and 2022 the carrying value of the 1.850% Senior Note of US$705 million is being reduced by an amount of Ps.1,277 million and Ps.1,647 million respectively, stemming from the impacts of fair value hedging.
(2) Interest rates are weighted average contractual annual rates.
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A hypothetical, instantaneous and unfavorable change of 100 basis points in the average interest rate applicable to our variable-rate financial instruments held during 2023 would have increased our interest expense by Ps.187 million, or 3.2% over our interest expense of 2023, assuming no additional debt is incurred during such period, in each case after giving effect to all of our interest rate swap and cross-currency swap agreements.
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 in 2023

Currency | %
Mexican peso | 50.0 | %
Brazilian real | 27.3 | %
Central America (1) | 10.9 | %
Colombian peso | 7.2 | %
Argentine peso | 2.7 | %
Uruguayan peso | 1.8 | %

(1) Includes Guatemalan Quetzales, Nicaraguan Cordobas, Costa Rican Colones and Panamanian Balboas.
We estimate that approximately 17.6% of our consolidated costs of goods sold are denominated in or linked to the U.S. dollar. Substantially all of our costs denominated in a foreign currency, other than the functional currency of each country where we operate, are denominated in U.S. dollars. During 2023, we entered into forwards to hedge part of our Mexican peso, Brazilian real, Colombian peso, Uruguayan peso and Argentine peso fluctuation risk relative to our raw material costs denominated in U.S. dollars. We selectively hedge our exposure to the U.S. dollar with respect to certain local currencies, our U.S. dollar-denominated debt obligations and the purchase of certain U.S. dollar-denominated raw materials. This estimate also considers the forward agreements to hedge the net investment in foreign operations and applies hedge accounting to foreign currency differences arising between the functional currency of our 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. These instruments are considered hedges for accounting purposes. As of December 31, 2023, 61.4% of our indebtedness was denominated in Mexican pesos, 21.3% in Brazilian reais, 15.8% in U.S. dollars, 1.3% in Colombian pesos, 0.1% in Argentine pesos, and 0.02% in Euros (including the effects of our derivative contracts as of December 31, 2023, including cross currency swaps from U.S. dollars to Mexican pesos, U.S. dollars to Brazilian reais and U.S. dollar to Colombian pesos). 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 of the debt service obligations with respect to our foreign currency-denominated debt. During 2023, we hedged our net investment in foreign operations, as described in Note 20 of our consolidated financial statements. See also “Item 3. Key Information—Risk Factors—Depreciation of the local currencies of the countries where we operate relative to the U.S. dollar could adversely affect our financial condition and results.”
A hypothetical and instantaneous 10.0% depreciation in the value of each local currency in the countries where we operate relative to the U.S. dollar occurring on December 31, 2023, would have resulted in a foreign exchange gain of Ps.515 million, based on our U.S. dollar-denominated indebtedness, cross-currency swap agreements and U.S. dollar cash balance.
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As of April 5, 2024, the currencies of all the countries where we operate have appreciated or depreciated relative to the U.S. dollar compared to December 31, 2023 as follows:

| Exchange Rate As of April 5, 2024 |  | Depreciation or (Appreciation)
Mexico | 16.48 |  | (2.48) | %
Guatemala | 7.79 |  | (0.53) | %
Nicaragua | 36.62 |  | — | %
Costa Rica | 506.51 |  | (3.87) | %
Panama | 1.00 |  | — | %
Colombia | 3,775.37 |  | (1.22) | %
Brazil | 5.05 |  | 4.34 | %
Argentina | 862.55 |  | 6.69 | %
Uruguay | 38.52 |  | (1.28) | %

A hypothetical, instantaneous and unfavorable 10.0% devaluation in the value of the currencies of each of the countries where we operate relative to the Mexican peso as of December 31, 2023, would produce a reduction in equity of approximately the following amounts:

| Reduction in Equity
| (in millions of Mexican pesos)
Colombia | 450
Brazil | 4,487
Argentina | 136
Central America (1) | 1,353
Uruguay | 253

(1) Includes Guatemala, Nicaragua, Costa Rica and Panama.
Equity Risk
As of December 31, 2023, we did not have any equity derivative agreements.
Commodity Price Risk
During 2023, we entered into futures contracts to hedge the cost of sugar and aluminum in Brazil, we entered into forward contracts to hedge the cost of sugar in Uruguay and swap contracts to hedge the cost of aluminum in Mexico. The notional value of the sugar hedges was Ps.3,338 million as of December 31, 2023, with a positive fair value of Ps.5 million with maturities in 2024 and 2025. The notional value of the aluminum hedges was Ps.647 million as of December 31, 2023, with a positive fair value of Ps.21 million with maturities in 2024. See Note 20.4 to our consolidated financial statements.
Item 12. Description of Securities Other than Equity Securities
Item 12.A. Debt Securities
Not applicable.
Item 12.B. Warrants and Rights
Not applicable.
Item 12.C. Other Securities
Not applicable.
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Item 12.D. American Depositary Shares
The Bank of New York Mellon serves as the depositary for the ADSs. Holders of ADSs, evidenced by American Depositary Receipts, or 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 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 ADRs, including in connection with share distributions | Up to US$5.00 per 100 ADSs (or portion thereof)
Withdrawal of shares underlying ADSs | Up to US$5.00 per 100 ADSs (or portion thereof)
Registration for the transfer of shares | Registration or transfer fees that may from time to time be in effect

In addition, holders may be required to pay a fee for the distribution or sale of securities. Such fee (which may be deducted from such proceeds) would be for an amount equal to the lesser of (1) the fee for the issuance of ADSs that would be charged as if the securities were treated as deposited shares and (2) the amount of such proceeds.
Direct and indirect reimbursements by the depositary
The depositary may reimburse us for certain expenses we incur in connection with the ADS program, subject to a ceiling agreed between us and the depositary. These reimbursable expenses may include listing fees, fees payable to service providers for the distribution of material to ADR holders and dividend fees. There were no reimbursements for the year ended December 31, 2023.
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
Item 15. Controls and Procedures
(a) Disclosure Controls and Procedures
We have evaluated, with the participation of our chief executive officer and chief 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 chief executive officer and chief 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 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 chief executive officer and chief 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 Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated 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 IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions or our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, 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 consolidated 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 framework in Internal Controls—Integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
(c) Attestation Report of the Registered Public Accounting Firm
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Coca-Cola FEMSA, S.A.B. de C.V.
Opinion on Internal Control Over Financial Reporting
We have audited Coca-Cola FEMSA, 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, Coca-Cola FEMSA, 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.
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 income statements, 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 12, 2024 expressed an unqualified opinion thereon.
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 principle s. 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
Ernst & Young Global Limited
/s/ MANCERA, S.C.
Mexico City, Mexico
April 12, 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 16.A. Audit Committee Financial Expert
Our shareholders and our board of directors have designated Victor Alberto Tiburcio Celorio, an independent director as required by the Mexican Securities Market Law and applicable New York Stock Exchange listing standards, as an “audit committee financial expert” within the meaning of this Item 16.A. See “Item 6. Directors, Senior Management and Employees—Directors.”
Item 16.B. Code of Ethics
We have adopted a code of ethics, within the meaning of this Item 16.B of Form 20-F under the Securities Exchange Act of 1934, as amended. Our code of ethics applies to members of our board of directors, employees and all persons acting on behalf of Coca-Cola FEMSA, as well as any third party with which Coca-Cola FEMSA engages. Our code of ethics is available on our website at www.coca-colafemsa.com. If we amend the provisions of our code of ethics, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address. In accordance with our code of ethics, we have developed a whistleblower system available to our employees, suppliers and the general public, to which complaints may be reported.
Item 16.C. Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table summarizes the aggregate fees billed to us by Mancera, S.C. and other Ernst & Young practices (collectively, Ernst & Young) 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 | 96 |  | 80 |  | 77
Audit-related fees | 8 |  | 17 |  | 19
Tax fees | 6 |  | 10 |  | 8
Total fees | 110 |  | 107 |  | 104

Audit Fees. Audit fees in the above table are the aggregate fees billed by Ernst & Young in connection with the audit of our annual financial statements and the review of our quarterly financial information and statutory audits.
Audit-related Fees. Audit-related fees in the above table are the aggregate fees billed by Ernst & Young for assurance and other services related to the performance of the audit, mainly in connection with debt issuances and other audit related services.
Tax Fees. Tax fees in the above table are fees billed by Ernst & Young for services based upon existing facts and prior transactions in order to assist us in documenting, computing and obtaining government approval for amounts included in tax filings such as transfer pricing documentation and requests for technical advice from taxing authorities.
All Other Fees. For the years ended December 31, 2023, 2022 and 2021, there were no other fees.
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 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 audit committee are briefed on matters discussed by the different committees of our board of directors.
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Item 16.D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not directly purchase any of our equity securities in 2023. The following table presents purchases of units consisting of 3 Series B shares and 5 Series L shares in 2023 by trusts that FEMSA administers in connection with our bonus incentive plans, which purchases may be deemed to be purchases by an affiliated purchaser of us. See “Item 6. Directors, Senior Management and Employees—Bonus Program.”
Purchases of Equity Securities

| Total Number of Units Purchased by trusts that FEMSA administers in connection with our bonus incentive plans |  | Average Price Paid per Unit |  | Total Number of Units Purchased as part of Publicly Announced Plans or Programs |  | Maximum Number (or Appropriate U.S. Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs
Total | 1,138,903 |  |  | 128.6283 |  | — |  | —

Item 16.F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16.G. 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 Securities Market Law and the regulations issued by the CNBV. We also disclose the extent to which we comply with the Mexican Code of Best Corporate Practices (Código de Mejores Prácticas Corporativas), which was created by a group of Mexican business leaders and was endorsed by the BMV.
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. There is an exemption for “controlled companies” (companies in which more than 50.0% of the voting power is held by an individual, group or another company rather than the public), which would include our company if we were a U.S. issuer. | Directors Independence: Pursuant to the Mexican Securities Market Law, we are required to have a board of directors with a maximum of 21 members, 25.0% of whom must be independent. The Mexican Securities 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 Securities 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 Securities 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. As a “controlled company,” we would be exempt from this requirement if we were a U.S. issuer. | Nominating/Corporate Governance Committee: We are not required to have a nominating committee, and the Mexican Code of Best Corporate Practices does not provide for a nominating committee. However, Mexican law requires us to have a Corporate Practices Committee with at least 3 members. Our Corporate Practices Committee is comprised of three members, and as required by the Mexican Securities Market Law and our bylaws, the three members are independent and the chairman of this committee is elected by our shareholders meeting.
Compensation committee: A compensation committee composed entirely of independent directors is required. As a “controlled company,” we would be exempt from this requirement if we were a U.S. issuer. | Compensation committee: We do not have a committee that exclusively oversees compensation issues. Our Corporate Practices 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.
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: Mexican law requires us to have an Audit Committee with at least three members. We have an Audit Committee of three members. As required by the Mexican Securities Market Law, each member of the Audit Committee is an independent director, and its chairman is elected by our 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.
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 16.B of SEC Form 20-F. Our code of ethics applies to the members of our board of directors, employees and all persons acting on behalf of Coca-Cola FEMSA, as well as any third party with which Coca-Cola FEMSA engages. Our code of ethics is available on our website at www.coca-colafemsa.com. If we amend the provisions of our code of ethics, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.

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Item 16.H. Mine Safety Disclosure
Not applicable.
Item 16.K. Cybersecurity
Risk Management and Strategy
Our cybersecurity risk management program includes development, implementation and improvement of policies and procedures to safeguard confidentiality, integrity and availability of information and critical data and systems (“cybersecurity risk management program”), to ensure regulatory, contractual and operational compliance.
Our cybersecurity risk management program identifies cybersecurity risks, and evaluates their nature and severity, as well as identifies mitigations and assesses the impact of those mitigations on residual risk. The cybersecurity risk management program consists of our information security policy, guidelines, and standards.
Our cybersecurity risk management program was developed in accordance with, and aligned to, international standards, best practices, and worldwide frameworks such as the International Organization for Standardizations (ISO) 27001 and the National Institute of Standards and Technology Cyber Security Framework (NIST) SP 800-53, among others, reflecting our commitment to upholding the highest benchmark of information security and resilience.
We utilize policies, processes, software, training programs and hardware solutions to protect and monitor our environment on all critical systems, firewalls, intrusion detection and prevention systems, vulnerability and penetration testing, multifactor authentication, antimalware, patch-management, identity management systems and access control solutions.
We also carry insurance that provides protection against the potential losses arising from a cybersecurity incident.
We have a Cyber Incident Response Plan (“CIRP”) which coordinates the activities to prepare for, detect, respond to and recover from cybersecurity incidents while ensuring business continuity, including processes to triage, assess severity for, escalate, contain, investigate and remediate the incident, as well as to comply with potentially applicable legal obligations. Our CIRP facilitates cross-functional coordination across the Company.
Our cybersecurity team periodically conducts risks and control evaluations and tests to identify threats and vulnerabilities, and then determine the likelihood and impact for each risk using a qualitative risk assessment methodology. Risks are identified from various sources, including vulnerability scans, penetration tests, vendors risk assessments, internal compliance assessments. We monitor our infrastructure and applications to identify evolving cyber threats, scan for vulnerabilities and mitigate risks.
Our cybersecurity risk management program further includes review and assessment by external, independent third parties, who assess and report on our cybersecurity program, and internal incident response preparedness and help identify areas for continued focus and improvement.
We conduct continuous internal cybersecurity audits that report directly to the board’s audit committee, while independent evaluations, including audits from FEMSA and The Coca-Cola Company, offer critical insights into our maturity and security status.
We verify and evaluate the security measures and controls of our vendors and suppliers, and we continue to evolve our oversight processes to mature how we identify and manage cybersecurity risks associated with such vendors and suppliers.
In an effort to detect and defend against cyber threats, we annually provide our employees with various cybersecurity and data protection training programs, as well as security awareness education and training.
Governance
Our cybersecurity risk management program benefits from oversight by various governance entities, including to the audit committee of our board of directors, a cybersecurity steering committee (“cybersecurity committee”), and a Chief Information Security Officer (“CISO”) who leads our cybersecurity strategy. Such program is supervised by our CISO, who reports directly to our Chief Financial Officer and functionally reports also to our Chief Information Officer. The CISO and his team are responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture and processes.
Our CISO has extensive experience in cybersecurity and information security, working since 2002 in different roles such as CISO, cybersecurity operation director, cybersecurity architect, information risk manager, defining, assessing, and managing cybersecurity programs and cybersecurity risks and operations. Our CISO has a Bachelor’s degree in Information Systems (ITESM),

diplomas in Business Administration (IPADE) and Information Security (ITESM), and certain diplomas, postgraduate studies and recognized international certifications in Information Security. Our CISO reports directly to the audit committee or the board of directors on our cybersecurity program and efforts to prevent, detect, mitigate, and remediate issues.
The CISO chairs our cybersecurity committee, a cross-functional management committee that drives awareness, ownership and alignment across broad governance and risk stakeholder groups for effective cybersecurity risk management. The cybersecurity committee is sponsored by several members of the senior leadership team and is comprised of members from our legal, information technology, cybersecurity, commercial, finance, manufacture and human resources functions, among others. Subject matter experts are also invited, as appropriate. The cybersecurity committee meets at least quarterly and has responsibility for oversight and validation of our cybersecurity strategic direction, risks and threats, priorities, resource allocation, capabilities and planning.
The CISO present updates to the audit committee quarterly and, as necessary, to our board of directors. These regular reports include detailed updates on our cybersecurity strategy, priorities and the company´s performance preparing for, preventing, detecting, responding to and recovering from cyber incidents. The CISO also promptly informs and updates our board of directors about any information security incidents that may pose significant risk to us. Our program is periodically evaluated by external experts, and the results of those reviews are reported to the audit committee.
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 that they will not be materially affected in the future by such risks and any future material incidents.
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
Reference is made to Item 19(a) for a list of all financial statements filed as part of this annual report.
Item 19. Exhibits
(a) List of Financial Statements

| Page
Report of Mancera S.C., a Member Practice of Ernst & Young Global (PCAOB ID: 01284) | 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 202 1 | F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021 | F-6
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023, 2022 and 2021 | F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 | F-8
Notes to the Audited Consolidated Financial Statements* | F-10

* All supplementary schedules relating to the registrant are omitted because they are not required or because the required information, where material, is contained in the Financial Statements or Notes thereto.
(b) List of Exhibits

Exhibit No. | Description
Exhibit 1.1 | Amended and restated bylaws (Estatutos Sociales) of Coca-Cola FEMSA, S.A.B. de C.V., approved July 12, 2021 (English translation) (incorporated by reference to Exhibit 1.1 to the Registration Statement on Form 8-A/A filed on April 10, 2019 (File No. 1-12260)).
Exhibit 2.1 | Form of Amended and Restated Deposit Agreement by and among Coca-Cola FEMSA, S.A.B. de C.V., The Bank of New York Mellon, as ADS depositary and owners and beneficial owners of American Depositary Receipts (incorporated by reference to Exhibit 1 to the Registration Statement on Form F-6 filed on April 1, 2019 (File No. 333-230650)).
Exhibit 2.2 | Indenture dated as of February 5, 2010 among Coca-Cola FEMSA, S.A.B. de C.V., 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)).
Exhibit 2.3 | First Supplemental Indenture dated as of February 5, 2010 among Coca-Cola FEMSA, S.A.B. de C.V., 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)).

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Exhibit 2.4 | Second Supplemental Indenture dated as of April 1, 2011 among Coca-Cola FEMSA, S.A.B. de C.V., 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 Exhibit 2.4 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 17, 2011 (File No. 1-12260)).
Exhibit 2.5 | Third Supplemental Indenture dated as of September 6, 2013 among Coca-Cola FEMSA, S.A.B. de C.V., 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. de R.L. 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)).
Exhibit 2.6 | Fourth Supplemental Indenture dated as of October 18, 2013 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., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V. and Yoli de Acapulco, S. de R.L. 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)).
Exhibit 2.7 | Fifth Supplemental Indenture dated as of November 26, 2013 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., Servicios Integrados Inmuebles del Golfo, 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, 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 (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Form 6-K filed on December 5, 2013 (File No.1-12260)).
Exhibit 2.8 | Sixth Supplemental Indenture dated as of January 21, 2014 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., Servicios Integrados Inmuebles del Golfo, 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, 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 (incorporated by reference to Exhibit 4.1 to Coca-Cola FEMSA’s Form 6-K filed on January 27, 2014 (File No.1-12260)).
Exhibit 2.9 | 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)).
Exhibit 2.10 | 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)).
Exhibit 2.11 | 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)).
Exhibit 2.12 | 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)).
Exhibit 2.13 | Description of Securities Registered Under Section 12 of the Exchange Act (incorporated by reference to Exhibit 2.13 to Coca-Cola FEMSA's Annual Report on Form 20-F filed on April 8, 2022 (File No. 1-12260).
Exhibit 4.1 | Amended and Restated Shareholders Agreement dated as of July 6, 2002, by and among Compañia Internacional de Bebidas, S.A. de C.V., Grupo Industrial Emprex, S.A. de C.V., The Coca-Cola Company and The Inmex Corporation, (incorporated by reference to Exhibit 4.13 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).
Exhibit 4.2 | First Amendment, dated May 6, 2003, to the Amended and Restated Shareholders Agreement, dated as of July 6, 2002, among Compañia Internacional de Bebidas, S.A. de C.V., Grupo Industrial Emprex, S.A. de C.V., The Coca-Cola Company, The Inmex Corporation, 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)).

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Exhibit 4.3 | Second Amendment, dated as of February 1, 2010, to the to the Amended and Restated Shareholders Agreement, dated as of July 6, 2002, by and among Compañia Internacional de Bebidas, S.A. de C.V., Grupo Industrial Emprex, S.A. de C.V., The Coca-Cola Company, The Inmex Corporation 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)).
Exhibit 4.4 | Amended and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in the valley of Mexico (incorporated by reference to Exhibit 4.3 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).
Exhibit 4.5 | Supplemental Agreement, dated June 21, 1993, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in the valley of Mexico (with English translation) (incorporated by reference to Exhibit 10.3 to Coca-Cola FEMSA’s Registration Statement on Form F-1 filed on August 13, 1993 (File No. 33-67380)).†
Exhibit 4.6 | Amended and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in the southeast of Mexico (incorporated by reference to Exhibit 4.5 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).
Exhibit 4.7 | Supplemental Agreement, dated June 21, 1993, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in the southeast of Mexico (with English translation) (incorporated by reference to Exhibit 10.4 to Coca-Cola FEMSA’s Registration Statement on Form F-1 filed on August 13, 1993 (File No. 33-67380)).†
Exhibit 4.8 | Bottler Agreement and Side Letter dated June 1, 2005, between Panamco Golfo, S.A. de C.V. and The Coca-Cola Company with respect to operations in Golfo, Mexico (English translation) (incorporated by reference to Exhibit 4.7 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 18, 2006 (File No. 1-12260)).
Exhibit 4.9 | Bottler Agreement and Side Letter dated June 1, 2005, between Panamco Bajio, S.A. de C.V., and The Coca-Cola Company with respect to operations in Bajio, Mexico (English translation) (incorporated by reference to Exhibit 4.8 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on April 18, 2006 (File No. 1-12260)).
Exhibit 4.10 | Bottler Agreement, dated August 22, 1994, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in Argentina (with English translation) (incorporated by reference to Exhibit 10.1 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 30, 1995 (File No. 1-12260)).†
Exhibit 4.11 | Supplemental Agreement, dated August 22, 1994, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in Argentina (with English translation) (incorporated by reference to Exhibit 10.2 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 30, 1995 (File No. 1-12260)).†
Exhibit 4.12 | Amendments, dated May 17 and July 20, 1995, to Bottler Agreement and Letter of Agreement, dated August 22, 1994, each with respect to operations in Argentina, between Coca-Cola FEMSA and The Coca-Cola Company (with English translation) (incorporated by reference to Exhibit 10.3 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).†
Exhibit 4.13 | Bottler Agreement, dated December 1, 1995, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in SIRSA (with English translation) (incorporated by reference to Exhibit 10.4 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).†
Exhibit 4.14 | Supplemental Agreement, dated December 1, 1995, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in SIRSA (with English translation) (incorporated by reference to Exhibit 10.6 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).†
Exhibit 4.15 | Amendment, dated February 1, 1996, to Bottler Agreement between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company with respect to operations in SIRSA, dated December 1, 1995 (with English translation) (incorporated by reference to Exhibit 10.5 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).†
Exhibit 4.16 | Amendment, dated May 22, 1998, to Bottler Agreement with respect to the former SIRSA territory, dated December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company (with English translation) (incorporated by reference to Exhibit 4.12 to Coca-Cola FEMSA’s Annual Report on Form 20-F filed on June 20, 2001 (File No. 1-12260)).†
Exhibit 4.17 | Coca-Cola Tradename License Agreement dated June 21, 1993, between Coca-Cola FEMSA, S.A.B. de C.V. and The Coca-Cola Company (with English translation) (incorporated by reference to Exhibit 10.40 to FEMSA’s Registration Statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).†
Exhibit 4.18 | 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 Exhibit 10.3 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 4.19 | 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 Exhibit 10.6 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 4.20 | 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 Exhibit 10.7 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 4.22 | 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)).*†
Exhibit 4.23 | Services Agreement, dated November 7, 2000, between Coca-Cola FEMSA, S.A.B. de C.V. and FEMSA Logística (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)).†

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Exhibit 4.24 | 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 Exhibit 10.8 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 4.25 | 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 Exhibit 10.9 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 4.26 | Memorandum of Understanding, dated as of March 11, 2003, by and among Panamerican Beverages, S.A. de C.V., as seller, and The Coca-Cola Company, as buyer (incorporated by reference to Exhibit 10.14 of Propimex’s (formerly Panamerican Beverages Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 1-12290)).
Exhibit 7.1 | The Coca-Cola Company memorandum, to Steve Heyer from José 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)).
Exhibit 8.1 | Significant Subsidiaries.
Exhibit 12.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 12, 2024.
Exhibit 12.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 12, 2024.
Exhibit 13.1 | Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 12, 2024.
Exhibit 15.1 | Consent letter of Mancera, S.C., a member practice of Ernst & Young Global.
Exhibit 17.1 | Issuer of Guaranteed Securities.
Exhibit 97.1 | Clawback Policy

* Portions of Exhibit 4.22 were omitted pursuant to a request for confidential treatment. Such omitted portions were filed separately with the Securities and Exchange Commission.
† 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 long-term debt of Coca-Cola FEMSA, none of which authorizes securities in a total amount that exceeds 10.0% of the total assets of Coca-Cola FEMSA. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements upon request by the SEC.
102

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.

Coca-Cola FEMSA, S.A.B. de C.V.
By: | /s/ Gerardo Cruz Celaya
| Gerardo Cruz Celaya
| Chief Financial Officer

Date: April 12, 2024

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Coca-Cola FEMSA, S.A.B. de C.V.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Coca-Cola FEMSA, 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, 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 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 12, 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 provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matters 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.
F-1

|  | Impairment Tests for Cash-Generating Units Containing Goodwill, Distribution Rights and Other indefinite lived intangible assets – 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 Colombia. The related disclosures are included in Note 2.3.1.1, Note 3.14 and Note 12 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 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 Company’s distribution rights, goodwill and other indefinite lived intangible assets impairment review processes, including controls over management’s review of the significant assumptions described above, projected financial information and the valuation model use 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 impairment model, reconciling the carrying value to the general ledger and comparing the prospective 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 analyses 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 adecuacy of the related disclosures provided in Note 2.3.1.1, Note 3.14 and Note 12 to the consolidated financial statements.

/s/ Mancera, S.C.
A member practice of
Ernst & Young Global Limited
We have served as the Company’s auditor since 2008
Mexico City, Mexico
April 12, 2024
F-2

COCA-COLA FEMSA, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Financial Position
At December 31, 2023 and 2022
In millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps. )

| Note | December 2023 (1) | December 2023 | December 2022
ASSETS |  |  |  |
CURRENT ASSETS |  |  |  |
Cash and cash equivalents | 5 | $ 1,838 | Ps. 31,060 | Ps. 40,277
Trade receivables, net | 6 | 1,050 | 17,749 |  | 16,318
Inventories | 7 | 703 | 11,880 |  | 11,888
Recoverable income tax | 24 | 133 | 2,244 |  | 2,718
Other recoverable taxes | 24 | 188 | 3,181 |  | 3,194
Other current financial assets | 8 | 34 | 567 |  | 2,911
Other current assets | 8 | 63 | 1,057 |  | 1,906
Total current assets |  | 4,008 | 67,738 |  | 79,212
NON CURRENT ASSETS |  |  |  |
Investments accounted for using the equity method | 9 | 547 | 9,246 |  | 8,452
Right-of-use assets | 10 | 141 | 2,388 |  | 2,069
Property, plant and equipment, net | 11 | 4,659 | 78,730 |  | 71,205
Intangible assets, net | 12 | 5,986 | 101,162 |  | 103,122
Deferred tax assets | 24 | 460 | 7,771 |  | 7,975
Other non-current financial assets | 13 | 47 | 792 |  | 730
Other non-current assets | 13 | 337 | 5,693 |  | 5,230 |
Total non-current assets |  | 12,177 | 205,782 |  | 198,783
TOTAL ASSETS |  | $ 16,185 | Ps. 273,520 | Ps. 277,995
LIABILITIES AND EQUITY |  |  |  |
CURRENT LIABILITIES |  |  |  |
Bank loans and notes payable | 18 | $ 5 | Ps. 88 | Ps. —
Current portion of non-current debt | 18 | 3 | 52 | 8,524
Current portion of lease liabilities | 10 | 44 | 752 | 472
Interest payable |  | 45 | 764 | 862
Suppliers |  | 1,618 | 27,351 | 26,835
Other current liabilities | 25 | 804 | 13,589 | 11,850
Income tax payable |  | 127 | 2,139 | 952
Other taxes payable |  | 482 | 8,142 | 7,029
Other current financial liabilities | 25 | 121 | 2,039 | 1,436
Total current liabilities |  | 3,250 | 54,916 | 57,960
NON-CURRENT LIABILITIES |  |  |  |
Bank loans and notes payable | 18 | 3,851 | 65,074 | 70,145
Post-employment and other non-current employee benefits | 16 | 211 | 3,560 | 3,709
Non-current portion of lease liabilities | 10 | 105 | 1,769 | 1,663
Deferred tax liabilities | 24 | 197 | 3,321 | 2,839
Other non-current financial liabilities | 25 | 323 | 5,464 | 3,863

F-3

Provisions | 25 | 193 | 3,270 | 3,887
Other non-current liabilities | 25 | 144 | 2,441 | 2,053
Total non-current liabilities |  | 5,024 | 84,899 | 88,159
TOTAL LIABILITIES |  | 8,273 | 139,815 | 146,119
EQUITY |  |  |  |
Common stock |  | 122 | 2,060 | 2,060
Additional paid-in capital |  | 2,696 | 45,560 | 45,560
Retained earnings |  | 5,681 | 96,003 | 88,664
Other equity instruments |  | (135) | (2,283) | (2,187)
Accumulated other comprehensive income |  | (847) | (14,315) | (8,712)
Equity attributable to equity holders of the parent |  | 7,516 | 127,025 | 125,385
Non-controlling interest in consolidated subsidiaries | 21 | 395 | 6,680 | 6,491
TOTAL EQUITY |  | 7,912 | 133,705 | 131,876
TOTAL LIABILITIES AND EQUITY |  | $ 16,185 | Ps. 273,520 | Ps. 277,995

(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.
F-4

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 |  | $ | 14,454 |  | Ps. | 244,264 |  | Ps. | 226,222 |  | Ps. | 193,899 |
Other operating revenues |  | 49 |  | 824 |  | 518 |  | 905 |
Total revenues |  | 14,502 |  | 245,088 |  | 226,740 |  | 194,804 |
Cost of goods sold |  | 7,943 |  | 134,228 |  | 126,440 |  | 106,206 |
Gross profit |  | 6,560 |  | 110,860 |  | 100,300 |  | 88,598 |
Administrative expenses |  | 759 |  | 12,820 |  | 11,263 |  | 9,012 |
Selling expenses |  | 3,744 |  | 63,278 |  | 57,718 |  | 51,708 |
Other income | 19 | 117 |  | 1,981 |  | 1,473 |  | 1,502 |
Other expenses | 19 | 192 |  | 3,253 |  | 2,456 |  | 2,309 |
Interest expense | 18 | 420 |  | 7,102 |  | 6,500 |  | 6,192 |
Interest income |  | 189 |  | 3,188 |  | 2,411 |  | 932 |
Foreign exchange (loss) gain, net |  | (62) |  | (1,046) |  | (324) |  | 227 |
Gain on monetary position for subsidiaries in hyperinflationary economies |  | 6 |  | 93 |  | 536 |  | 734 |
Market value gain (loss) on financial instruments | 20 | 10 |  | 169 |  | (672) |  | 80 |
Income before income taxes and share of the profit of associates and joint ventures accounted for using the equity method |  | 1,704 |  | 28,792 |  | 25,787 |  | 22,852 |
Income taxes | 24 | 520 |  | 8,781 |  | 6,547 |  | 6,609 |
Share in the profit of equity accounted investees, net of income taxes | 9 | 13 |  | 215 |  | 386 |  | 88 |
Consolidated net income |  | $ | 1,197 |  | Ps. | 20,226 |  | Ps. | 19,626 |  | Ps. | 16,331 |
Attributable to: |  |  |  |  |
Equity holders of the parent |  | 1,156 |  | Ps. | 19,536 |  | Ps. | 19,034 |  | Ps. | 15,708 |
Non-controlling interest |  | 41 |  | 690 |  | 592 |  | 623 |
Consolidated net income |  | $ | 1,197 |  | Ps. | 20,226 |  | Ps. | 19,626 |  | Ps. | 16,331 |
Earnings per share- Equity holders of the parent (U.S. dollars and Mexican pesos): |  |  |  |  |
Basic controlling interest net income | 23 | 0.07 |  | 1.16 | 1.13 |  | 0.93 |
Diluted controlling interest net income | 23 | 0.07 |  | 1.16 | 1.13 |  | 0.93 |

(1) Convenience translation to U.S. dollars ($) – See Note 2.2.3
The accompanying notes are an integral part of these consolidated income statements.
F-5

Consolidated Statements of Comprehensive Income
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 |  | $ 1,197 | Ps. 20,226 | Ps. 19,626 | Ps. 16,331
Other comprehensive income, net of income tax |  |  |  |  |
Other comprehensive income to be reclassified to profit or loss in subsequent periods: |  |  |  |  |
Valuation of the effective portion of derivative financial instruments, net of income tax | 20 | (23) | (389) | (1,448) | 1,836
Financial instruments held to maturity |  | 6 | 101 | — | —
Exchange differences on the translation of foreign operations and associates |  | (343) | (5,789) | (2,685) | (1,943)
Other comprehensive income to be reclassified to profit or loss in subsequent periods |  | (360) | (6,077) | (4,133) | (107)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: |  |  |  |  |
Loss from equity financial asset classified at FVOCI |  | (12) | (198) | (54) | (393)
Re-measurements of the net defined benefit liability, net of income taxes | 16 | 9 | 153 | 328 | (67)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods |  | (3) | (45) | 274 | (460)
Total other comprehensive (loss), net of income tax |  | (362) | (6,122) | (3,859) | (567)
Attributable to: |  |  |  |  |
Equity holders of the parent |  | (338) | (5,711) | (3,792) | (444)
Non-controlling interest |  | (24) | (411) | (67) | (123)
Total other comprehensive (loss), net of income tax |  | (362) | (6,122) | (3,859) | (567)
Consolidated comprehensive income for the year, net of income tax |  | $ 835 | Ps. 14,104 | Ps. 15,767 | Ps. 15,764
Attributable to: |  |  |  |  |
Equity holders of the parent |  | $ 818 | Ps. 13,825 | Ps. 15,242 | Ps. 15,264
Non-controlling interest |  | 17 | 279 |  | 525 | 500
Consolidated comprehensive income for the year, net of income tax |  | $ 835 | Ps. 14,104 | Ps. 15,767 | Ps. 15,764

(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.
F-6

Consolidated Statements of Changes in Equity
For the years ended December 31, 2023, 2022 and 2021
In millions of Mexican pesos ( Ps.)

| Note | Common stock | Additional paid-in capital | Retained earnings | Other equity instruments | Valuation of the effective portion of derivative financial instruments | Exchange differences on translation of foreign operations and associates | 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 |  | 2,060 |  | 45,560 |  | 75,917 |  | (1,740) |  | (525) |  | (3,225) |  | (1,173) |  | 116,874 |  | 5,583 |  | 122,457 |
Consolidated net income |  | — |  | — |  | 15,708 |  | — |  | — |  | — |  | — |  | 15,708 |  | 623 |  | 16,331 |
Other comprehensive (loss) income, net of income tax |  | — |  | — |  | — |  | (393) |  | 1,749 |  | (1,733) |  | (67) |  | (444) |  | (123) |  | (567) |
Total comprehensive (loss) income, net of income tax |  | — |  | — |  | 15,708 |  | (393) |  | 1,749 |  | (1,733) |  | (67) |  | 15,264 |  | 500 |  | 15,764 |
Dividends declared | 22 | — |  | — |  | (10,588) |  | — |  | — |  | — |  | — |  | (10,588) |  | (61) |  | (10,649) |
Balances as of December 31, 2021 |  | 2,060 |  | 45,560 |  | 81,037 |  | (2,133) |  | 1,224 |  | (4,958) |  | (1,240) |  | 121,550 |  | 6,022 |  | 127,572 |
Consolidated net income |  | — |  | — |  | 19,034 |  | — |  | — |  | — |  | — |  | 19,034 |  | 592 |  | 19,626 |
Other comprehensive (loss) income, net of income tax |  | — |  | — |  | — |  | (54) |  | (1,344) |  | (2,722) |  | 328 |  | (3,792) |  | (67) |  | (3,859) |
Total comprehensive (loss) income, net of income tax |  | — |  | — |  | 19,034 |  | (54) |  | (1,344) |  | (2,722) |  | 328 |  | 15,242 |  | 525 |  | 15,767 |
Dividends declared | 22 | — |  | — |  | (11,407) |  | — |  | — |  | — |  | — |  | (11,407) |  | (56) |  | (11,463) |
Balances as of December 31, 2022 |  | 2,060 |  | 45,560 |  | 88,664 |  | (2,187) |  | (120) |  | (7,680) |  | (912) |  | 125,385 |  | 6,491 |  | 131,876 |
Consolidated net income |  | — |  | — |  | 19,536 |  | — |  | — |  | — |  | — |  | 19,536 |  | 690 |  | 20,226 |
Other comprehensive (loss) income, net of income tax |  | — |  | — |  | (12) |  | (96) |  | (343) |  | (5,425) |  | 165 |  | (5,711) |  | (411) |  | (6,122) |
Total comprehensive (loss) income, net of income tax |  | — |  | — |  | 19,524 |  | (96) |  | (343) |  | (5,425) |  | 165 |  | 13,825 |  | 279 |  | 14,104 |
Dividends declared | 22 | — |  | — |  | (12,185) |  | — |  | — |  | — |  | — |  | (12,185) |  | (90) |  | (12,275) |
Balances as of December 31, 2023 |  | Ps. 2,060 | Ps.45,560 | Ps.96,003 | Ps.(2,283) | Ps.(463) | Ps.(13,105) | Ps.(747) | Ps.127,025 | Ps.6,680 | Ps.133,705

The accompanying notes are an integral part of these consolidated statements of changes in equity.
F-7

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 | 2021
OPERATING ACTIVITIES: |  |  |  |  |
Income before income taxes |  | $ 1,717 | Ps. 29,007 | Ps. 26,173 | Ps. 22,940
Adjustments for: |  |  |  |  |
Non-cash operating expenses (income) |  | 5 |  | 79 |  | 471 |  | (653) |
Depreciation | 11 | 528 |  | 8,919 |  | 8,997 |  | 8,284 |
Depreciation right-of-use assets | 10 | 46 |  | 776 |  | 660 |  | 662 |
Amortization | 12 | 49 |  | 836 |  | 768 |  | 888 |
Amortization prepaid expenses |  | 52 |  | 887 |  | 890 |  | 687 |
Gain on sale of long-lived assets, net | 19 | (6) |  | (94) |  | (250) |  | (58) |
Loss on the retirement of long-lived assets | 19 | 11 |  | 186 |  | 177 |  | 199 |
Loss on the retirement of intangible assets |  | — |  | 1 |  | — |  | 3 |
Share of the (profit) of associates and joint ventures accounted for using the equity method, net of income taxes | 9 | (13) |  | (215) |  | (386) |  | (88) |
Interest income |  | (189) |  | (3,188) |  | (2,411) |  | (932) |
Interest expense | 18 | 420 |  | 7,102 |  | 6,500 |  | 6,192 |
Foreign exchange loss (income), net |  | 62 |  | 1,046 |  | 324 |  | (227) |
Non-cash movements in post-employment and other non-current employee benefits obligations |  | 20 |  | 338 |  | 299 |  | 328 |
Impairment on equity investments |  | 8 |  | 143 |  | — |  | 250 |
Monetary position gain, net |  | (6) |  | (93) |  | (536) |  | (734) |
Market value (gain) loss on financial instruments | 20 | (10) |  | (169) |  | 672 |  | (80) |
Increase / decrease: |  |  |  |  |
Accounts receivable and other current assets |  | (95) |  | (1,605) |  | (3,420) |  | (2,041) |
Other current financial assets |  | (34) |  | (573) |  | (514) |  | (550) |
Inventories |  | (46) |  | (779) |  | (179) |  | (2,262) |
Suppliers and other accounts payable |  | 221 |  | 3,742 |  | 3,420 |  | 4,448 |
Other liabilities |  | 24 |  | 403 |  | (424) |  | (401) |
Employee benefits paid | 16 | (32) |  | (544) |  | (483) |  | (471) |
Other taxes |  | 82 |  | 1,384 |  | 41 |  | 2,443 |
Income taxes paid |  | (314) |  | (5,300) |  | (5,298) |  | (6,106) |
Net cash flows generated from operating activities |  | Ps. 2,502 | Ps. 42,289 | Ps. 35,491 | Ps. 32,721
INVESTING ACTIVITIES: |  |  |  |  |
Business acquisition and mergers, net of cash acquired | 4 | — |  | — |  | (2,356) |  | — |
Interest collected |  | 189 |  | 3,188 |  | 2,411 |  | 932 |
Acquisitions of property, plant and equipment | 11 | (1,161) |  | (19,613) |  | (16,756) |  | (9,344) |
Proceeds from the sale of long-lived assets |  | 11 |  | 178 |  | 323 |  | 259 |
Acquisitions of intangible assets | 12 | (60) |  | (1,019) |  | (979) |  | (645) |
Other non-current assets |  | (95) |  | (1,603) |  | (1,698) |  | (766) |
Dividends received from investments in associates and joint ventures | 9 | 5 |  | 79 |  | 16 |  | 16 |
Investments in other entities and financial assets |  | (76) |  | (1,280) |  | (558) |  | 1 |
Net cash flows used in investing activities |  | $ (1,188) | Ps. (20,070) | Ps. (19,597) | Ps. (9,547)
FINANCING ACTIVITIES: |  |  |  |  |
Proceeds from borrowings | 18 | 9 | 151 | 6,089 | 11,191
Repayments of borrowings | 18 | (497) | (8,401) | (8,432) | (14,189)

F-8

Interest paid |  | (268) | (4,537) | (4,724) | (4,646)
Dividends paid |  | (726) | (12,275) | (11,463) | (10,649)
Interest paid on lease liabilities | 18 | (16) | (278) | (139) | (101)
Payments of leases | 18 | (41) | (690) | (631) | (629)
Financing instruments |  | (19) | (322) | (1,547) | (1,240)
Net cash flows used in financing activities |  | $ (1,559) | Ps. (26,352) | Ps. (20,847) | Ps. (20,263)
Net (decrease)/increase in cash and cash equivalents |  | (245) | (4,133) | (4,953) |  | 2,911 |
Cash and cash equivalents at the beginning of the period |  | 2,383 |  | 40,277 |  | 47,248 |  | 43,497 |
Effects of exchange rate changes and inflation effects on cash and cash equivalents held in foreign currencies |  | (301) |  | (5,084) |  | (2,018) |  | 840 |
Cash and cash equivalents at the end of the period |  | $ 1,838 | Ps. 31,060 | Ps. 40,277 | Ps. 47,248

(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.
F-9

Notes to the Consolidated Statements
For the years ended December 31, 2023, 2022 and 2021
Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)
Note 1. Activities of the Company
Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA”) is a Mexican corporation, mainly engaged in acquiring, holding and transferring all types of bonds, shares and marketable securities. Coca-Cola FEMSA and its subsidiaries (the “Company”), are mainly engaged in the production, distribution and marketing of certain Coca-Cola trademark beverages in Mexico, Central America (Guatemala, Nicaragua, Costa Rica and Panama), Colombia, Brazil, Uruguay, Argentina. The Coca-Cola trademark beverages include: sparkling beverages (colas and flavored sparkling beverages), waters and other beverages (including juice drinks, coffee, teas, milk, value-added dairy, sports drinks, energy drinks, alcoholic beverages and plant-based drinks). In addition, the Company distributes and sells Heineken-owned brand beer products, Estrella Galicia and Therezópolis beer products in our Brazilian territories and Monster products in all of the countries where we operate. Additionally, we started testing distribution of leading spirits, consumer brands and other alcoholic products in some of the countries where the Company operates.
Coca-Cola FEMSA is indirectly owned by Fomento Economico Mexicano, S.A.B. de C.V. (“FEMSA”), which holds 47.2% of its capital stock and 56% of its voting shares and The Coca-Cola Company (“TCCC”), which indirectly owns 27.8% of its capital stock and 32.9% of its voting shares. The remaining Coca-Cola FEMSA shares trade on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV: KOF UBL”) as series “L” shares which represents 15.6% of our common equity and its American Depositary Shares (“ADS”) (equivalent to ten series “L” shares) trade on the New York Stock Exchange, Inc (“NYSE: KOF”) as series “B” which represents 9.4% of the Company´s common equity. The address of its registered office and principal place of business is Mario Pani No. 100, Colonia Santa Fe Cuajimalpa, Alcaldía Cuajimalpa de Morelos, 05348, Mexico City, Mexico.
As of December 31, 2023 and 2022 the most significant subsidiaries which the Company controls are:

Company | Activity | Country | Ownership percentage 2023 | Ownership percentage 2022
Propimex, S. de R.L. de C.V. | Distribution | Mexico | 100.0% | 100.0%
Controladora Interamericana de Bebidas, S. de R. L. de C.V. | Holding | Mexico | 100.0% | 100.0%
Spal Industria Brasileira de Bebidas, S.A. | Production and distribution | Brazil | 84.4% | 84.4%
Servicios Refresqueros del Golfo y Bajio, S. de R.L. de C.V. | Production | Mexico | 100.0% | 100.0%
Embotelladora Mexicana de Bebidas Refrescantes, S. de R.L. de C.V. | Production | Mexico | 100.0% | 100.0%

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”).
The Company’s consolidated financial statements and notes were author ized for issuance by the Company’s Chief Executive Officer Ian Marcel Craig García and Chief Financial Officer Gerardo Cruz Celaya. These consolidated financial statements and notes were then approved by the Company’s Board of Directors on March 13, 2024, and by the Shareholders meeting on March 19, 2024. 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 Financial Officer on April 12, 2024 and subsequent events have been considered through that date (see Note 28).
The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
2.2 Basis of measurement and presentation
The consolidated financial statements have been prepared on the historical cost basis except for the following:
• Derivative financial instruments
• Trust assets of post-employment and other non-current employee benefit plans
F-10

The carrying values of recognized assets and liabilities that are 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 relationship.
The financial statements of subsidiaries in a hyperinflationary economy are stated in terms of the measuring unit current at the end of the reporting period.
2.2.1 Presentation of consolidated income statements
The Company classifies its costs and expenses by function in the consolidated income statements in order to conform to industry practices.
2.2.2 Presentation of consolidated statements of cash flows
The Company presents its consolidated statement of cash flows using the indirect method.
2.2.3 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 and 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 exchange rate of Ps. 16.8998 per U.S. dollar as published by the Federal Reserve Bank of New York at the last date in 2023 for which information is available. This arithmetic conversion should not be construed a representation that the amounts expressed in Mexican pesos may be converted into U.S. dollars at that or any other exchange rate, in addition, numeric figures shown as dollar totals may not be an arithmetic aggregation of preceding figures due to rounding. As of March 8, 2024 (the last date for which information is available before the issuance of these financial statements) such exchange rate was Ps.16.8082 per U.S. dollar, an appreciation of 0.54% since December 31, 2023.
2.3 Critical accounting judgments and estimates
In 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 observable from other sources. The estimates and associated assumptions are based on historical experience and other factors considered relevant. Actual results may differ from these estimates.
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 the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
2.3.1 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key 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 within the next financial year. 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 are reflected in the assumptions when they occur.
2.3.1.1 Impairment of indefinite lived intangible assets, goodwill and other depreciable long-lived assets
Intangible assets with indefinite life as well as goodwill are subject to impairment tests annually or whenever indicators of impairment are present. 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 calculation is 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. In order to determine whether such assets are impaired, the Company calculates an estimation of the value in use of the cash-generating units 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 and its value in use in the period the related impairment is determined.
The Company assesses at each reporting date or annually whether there is an indication that a depreciable long-lived asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. When the carrying amount of an asset or CGU in which the asset is assigned exceeds its recoverable amount, the asset or CGU is considered impaired and is written down to its recoverable amount, which is determined based on its value in use. In assessing value in use, the estimated future cash flows expected to be generated from the use of an asset or CGU are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs to sell, recent market transactions are considered, if available. If recent market transactions are not available, an appropriate valuation model is used.
F-11

These calculations are corroborated by valuation multiples 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 3.14 and 12.
2.3.1.2 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 25.5. 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, 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.
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 recognizes related tax provisions based on management’s estimates with respect to the likelihood of material tax exposures and the probable amount of the liability.
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.
The amount of uncertain income tax positions is included in Note 25.7.
2.3.1.3 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 measured as the sum of the acquisition-date fair values of the assets transferred by the Company, 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 payment arrangements of the acquiree or share-based payment arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2, Share- based Payment at the acquisition date, see Note 3.22;
• 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 indemnifiable 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 CGUs' cash flows, in the computation of weighted average cost of capital (WACC) and estimation of inflation during the operation of intangible assets with indefinite life, mainly, distribution rights.
2.4 Changes in accounting policies
The Company has applied the following amendments to the standards on January 1, 2023.
Definition of Accounting Estimates - Amendments to IAS 8
The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
F-12

The amendments had no impact on the Company’s consolidated financial statements.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities apply materiality judgments 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.
The amendments have had an impact on the Company’s disclosures of accounting policies, but not on the measurement, recognition or presentation of any items in the consolidated financial statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
The amendments to IAS 12 Income Tax narrow the scope of the initial recognition exception, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.
The amendments had no impact on the Company’s consolidated financial statements.
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 Recoverable taxes, Taxes payable and 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 Recoverable income tax was presented together with Other recoverable taxes; 2) The income tax payable was presented together with Other taxes payable; and 3) 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 assets and current and non-current liabilities initially reported.

| Balance as at December 31, 2022 (as initially reported) | Effects of reclassification | Balance as at December 31, 2022 (adjusted)
CURRENT ASSETS |  |  |
Recoverable taxes | 5,912 | (5,912) | —
Recoverable income tax | — | 2,718 | 2,718
Other recoverable taxes | — | 3,194 | 3,194
CURRENT LIABILITIES |  |  |
Taxes payable | 7,981 | (7,981) | —
Income tax payable | — | 952 | 952
Other taxes payable | — | 7,029 | 7,029
NON-CURRENT LIABILITIES |  |  |
Provisions and other non-current liabilities | 5,940 | (5,940) | —
Provisions | — | 3,887 | 3,887
Other non-current liabilities | — | 2,053 | 2,053

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 has the ability to affect those returns through its power over the investee.
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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 arrangement with the other vote holders of the investee
•Rights arising from other contractual arrangements
•The Company’s voting rights and potential voting rights
The Company re-assesses whether 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, revenues and expenses of a subsidiary acquired or disposed of during the year 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 other comprehensive income (OCI) are attributed to the equity holders of the parent of the Company and to 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, revenues, 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 they are recognized entirely in equity without applying acquisition accounting. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are measured at carrying amount and reflected 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. When evaluating control, the Company considers substantive potential voting rights. 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 at 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 acquired and the liabilities assumed. If, after reassessment, 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 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 issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.
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Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognized in consolidated net income.
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 for which the accounting is incomplete and discloses that its allocation is preliminary in nature. Those provisional amounts are adjusted 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 re-measures 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 other comprehensive income shall be recognized on the same basis as required if the Company had disposed directly of the previously held equity interest.
The Company sometimes obtains control of an acquiree without transferring consideration. The acquisition method of accounting for a business combination applies to those combinations, which may take the following forms:
i.The acquiree repurchases a sufficient number of its own shares for the Company to obtain control.
i.Minority veto rights expire that previously kept the Company from controlling an acquiree in which it held the majority voting rights.
ii.The Company and the acquiree agree to combine their businesses by contract 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 and consolidation of foreign operations investments in associates and joint ventures
In preparing the financial statements of each individual foreign operation, associate and joint venture, 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 remeasured 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.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for:
•The variations in the net investment in foreign operations generated by exchange rate fluctuation are included in other comprehensive income, which is recorded in equity as part of the cumulative exchange differences on translation of foreign operations and associates within the accumulated other comprehensive income.
•Exchange differences on transactions entered into in order to hedge certain foreign currency risks.
Foreign exchange differences on monetary items are recognized in profit or loss. Their classification in the consolidated income statement depends on their nature. Differences arising from fluctuations related to operating activities are presented in the “other expenses” line (see Note 19) while fluctuations related to non-operating activities such as financing activities are presented as part of “foreign exchange income (loss)” line in the consolidated income statement.
For incorporation into the Company’s consolidated financial statements, each foreign operation, associate or joint venture’s individual financial statements are translated into Mexican pesos, as follows:
•For hyperinflationary economic environments, the inflation effects of the origin country are recognized pursuant to 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 statement and comprehensive income; and
•For 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 statement and comprehensive income is translated using the exchange rate at the date of each transaction. The Company uses the average exchange rate of each month only 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 operations 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 operations and associates is reclassified to profit or loss.
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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 are recognized in equity as part of the exchange differences on translation of foreign operations and associates.
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.

|  | Exchange Rates of Local Currencies Translated to Mexican Pesos (1)
|  | Average Exchange Rate for | Exchange Rate as of December 31,
Country or Zone | Functional currency | 2023 | 2022 | 2021 | 2023 | 2022
Mexico | Mexican peso | 1.00 | 1.00 | 1.00 | 1.00 | 1.00
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 | Balboa | 17.77 | 20.13 | 20.28 | 16.89 | 19.36
Colombia | Colombian peso | 0.004 | 0.005 | 0.005 | 0.004 | 0.004
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 | Real | 3.56 | 3.90 | 3.76 | 3.49 | 3.71
Uruguay | Uruguayan peso | 0.46 | 0.49 | 0.47 | 0.43 | 0.48

(1)Exchange rates published by the central bank of each country
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
•Recognizing the monetary position gain or loss in the consolidated income statement in the caption “Gain on monetary position for subsidiaries in hyperinflationary economies”.
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 indexes that exist in the country. The financial information for our Argentine subsidiary has been adjusted to recognize the inflationary effects since January 1, 2018.
The Company restates the financial information of its Argentinian subsidiary using the Consumer Price Index (“CPI”) of the country.
The FACPCE (Federacion Argentina de Consejos Profesionales de Ciencias Economicas) 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 with the Wholesale Domestic Price Index
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(“WDPI) until this date, and computing November and December 2015 using the CPI- of Ciudad del Gran Buenos Aires (“CGBA”) variation).
As of December 31, 2023, 2022, and 2021, the operations of the Company are classified as follows:

Country | Cumulative Inflation 2021-2023 | Type of Economy | Cumulative Inflation 2020-2022 | 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 | 815.6% | Hyperinflationary | 300.3% | Hyperinflationary | 216.1% | Hyperinflationary
Brazil | 21.8% | Non-hyperinflationary | 21.7% | Non-hyperinflationary | 20.0% | Non-hyperinflationary
Uruguay | 22.9% | Non-hyperinflationary | 27.9% | Non-hyperinflationary | 28.5% | Non-hyperinflationary

3.5 Cash and cash equivalents
Cash consists of deposits in bank accounts which 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.
The Company also maintains restricted cash held as collateral to meet certain contractual obligations (see Note 8.2). Restricted cash is presented within other current financial assets given that the restrictions are short-term in nature.
3.6 Financial assets
Financial assets are classified within the following business models depending on Management’s objective: (i) "held to maturity to collect contractual cash flows", (ii) "held to collect contractual cash flows and sell financial assets" and (iii) "Others or held for trading" or as derivatives assigned in hedging instruments with an effective hedge, as appropriate. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company performs a portfolio – level assessment of the business model objective for which a financial asset is held to reflect the best way in which the business manages the financial asset and the way the information is provided to the management of the Company. The information that is considered within the evaluation includes:
•The policies and objectives of the Company in relation to the portfolio and the practical implementation of said 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, unless the asset is measured at fair value through profit or loss, in which case, transaction costs are booked in the consolidation income statement. 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 a party to the contractual provisions of the instrument.
The fair value of a financial asset is measured using assumptions that would be used by market participants when valuing the asset, assuming that market participants act in their best economic interest.
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The 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.
3.6.1 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”):
•Its business model is to hold it to maturity to collect 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”).
The amortized cost of a financial asset is the amount of the initial recognition minus 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, adjusted for impairment loss. The financial product, exchange fluctuation and impairment are recognized in results. Any profit or loss is also recognized in the same way in results.
3.6.1.1 Effective interest rate method (“ERR”)
The effective interest rate method is a method to calculate the amortized cost of loans, accounts receivable and other financial assets (designated as held-to-maturity) and to allocate interest income / expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that represents 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 the initial recognition.
3.6.2 Financial assets at fair value with changes in other comprehensive income (“FVOCI”)
A financial asset is measured as FVOCI if it meets the following two conditions and isn’t designated as FVTPL:
•Its business model is to hold it to maturity to collect contractual cash flows and sells; and
•The contractual terms are solely principal and interest payment.
These assets are subsequently measured at fair value. The financial product calculated using the Internal Rate of return (“IRR”), the exchange rate fluctuation and the impairment are recognized in profit and loss. Other gains and losses, related to changes in fair value are recognized in OCI. In cases 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 is made at the level of each investment. Equity instruments are subsequently measured at fair value. Dividends are recognized as profit in profit and loss unless the dividend clearly represents a recovery part of the investment cost. 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.
3.6.3 Financial assets at fair value through profit and 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 be sold in the short term. Derivatives, including embedded derivatives are also designated as held for trading unless they are designated as effective hedging instruments as defined in IFRS 9. Financial assets as FVTPL are recorded in the consolidated statements of financial position at fair value with the net changes in the fair value presented as interest expense (negative changes in fair value) or interest income (positive net changes in fair value) in the consolidated income statement.
3.6.4 Evaluation that contractual cash flows are SPPI
In order to classify a financial asset within one of the three different categories, the Company determines whether the contractual cash flows of the asset are solely principal and interest payments. The Company considers the contractual terms of the financial instrument
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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. To make this evaluation, the Company considers the following:
•Contingent events that would change the cash flows amount or timing;
•Terms that can adjust the contractual coupon rate, including variable interest rate characteristics;
•Payment and extension features; and
•Characteristics that limit the Company's right to obtain cash flows from certain assets.
A prepayment feature is consistent with the characteristics of SPPIs if the prepayment amount substantially represents the amounts of the unpaid principal and interest, which can include reasonable compensation for early termination of the contract. Additionally, a financial asset with a prepayment feature that is acquired or originated with a premium or discount to its contractual amount is consistent with the characteristics of SPPI if at initial recognition the fair value of the prepaid characteristic is insignificant and the prepayment amount represents substantially the contractual amount and accrued interest (but not paid); which may include additional compensation for the early contract termination..
3.6.5 Loans and receivables
Loans and receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. Loans and receivables with a stated term (including trade and other receivables) are measured at amortized cost using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. For the years ended December 31, 2023, 2022 and 2021 the interest income on loans and receivables recognized in the interest income line item within the consolidated income statements i s Ps. 1, Ps. — and Ps. 6, respectively.
3.6.6 Other financial assets
Other financial assets include investments in other entities and derivative financial instruments. Other financial assets with a stated term are measured at amortized cost using the effective interest method, less any impairment.
3.6.7 Financial assets impairment
The Company recognizes impairment due to expected credit loss (“ECL”) for financial assets measured at amortized cost and reduces the carrying amount.
Impairment losses on accounts receivable are always measured at an amount equal to ECL for the remaining life, whether or not it has a significant financing component.
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. This includes qualitative and quantitative information and analysis, based on historical experience and an informed credit assessment of the Company.
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 using the original financial asset effective interest rate.
The Company annually evaluates the reasonableness to determine if there was objective evidence of impairment. Some objective evidence that financial assets were impaired includes:
•Non-payment or delinquency of a debtor;
•Restructuring of an amount corresponding to the Company under terms that the Company would not otherwise consider;
•Indicators that a debtor or client will enter into bankruptcy;
•Adverse changes in the status of debtor or client payments;
•The disappearance of an active market for an instrument due to financial difficulties; or
•Evident information indicating that there was a measurable decrease in the expected cash flows of a group of financial assets.
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For an investment in an equity instrument, objective evidence of impairment includes a significant or prolonged decrease in its fair value lower than the carrying amount.
The impairment loss on financial assets measured at amortized cost is recognized in the consolidated income statement reducing the carrying amount, and for financial assets measured at FVOCI, the impairment loss is recognized within OCI.
3.6.8 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 the asset cash flows or has assumed an obligation to pay the full received cash flows 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 or retained substantially all the asset risks and benefits, but has transferred control of the asset.
3.6.9 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
3.7 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 in order to reduce its exposure to the risk of exchange rate fluctuations between the U.S. Dollar 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 derivative financial instruments and hedging activities in the consolidated statement of financial position as either an asset or liability measured at fair value, 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, recognized in the financial sector. Management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments. Changes in the fair value of derivative financial instruments are recorded each year 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.
3.7.1 Hedge accounting
The Company designates certain hedging instruments, which include derivatives to cover foreign currency risk, as either cash flow hedges, fair value hedges or hedges of net investment in a foreign business. 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.
To qualify for hedge accounting, the hedging relationship must meet all of the following requirements:
• there is an economic relationship between the hedged item and the hedging instrument
• the effect of credit risk does not dominate the value changes that result from that economic relationship, and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.
3.7.2 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 OCI 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 consolidated net income and is included in the “market value gain (loss) on financial instruments” line item within the consolidated income statements.
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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 profit and loss, in the same line of the consolidated statement of income 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 other comprehensive income and accumulated 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.
3.7.3 Fair value hedges
For hedge items carried at fair value the change in the fair value of a hedging derivative is recognized in profit and loss as foreign exchange gain or loss, as they relate to foreign currency risk. 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, 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 any adjustment to carrying value is amortized through profit or loss over the remaining term of the hedge using the effective interest rate (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.
3.7.4 Hedge of net investment in a foreign business
The Company designates certain derivatives as a hedge of its net investment in foreign operations and applies hedge accounting to foreign currency differences arising between the functional 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. 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 on 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 a net investment is disposed, the corresponding accumulated foreign currency translation effect is recognized as part of the gain or loss on disposal within the consolidated income statement. As of December 31, 2023, the Company does not have net investment hedges in foreign operations, as described in Note 20. During 2022, the Company designated certain derivatives as a hedge for its net investment in foreign operations and applied hedging accounting to foreign currency differences that arose between the functional currency of its foreign investments and the controlling company's functional currency (Mexican peso).
3.8 Fair value measurement
The Company measures financial instruments, such as derivatives, and certain non-financial assets such as trust assets of labor obligations at fair value at each balance sheet date. Also, fair values of bank loans and notes payable measured at amortized cost are disclosed in Note 18.
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 either:
•In the principal market for the asset or liability, or
•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.
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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 has the ability to 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 shall be 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 on a recurring basis, 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 measurement, such as those described in Note 20 and unquoted liabilities such as debt described in Note 18.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
3.9 Inventories and cost of goods sold
Inventories are measured at the lower of cost and net realizable value. 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.
Cost of goods sold is based on the weighted average cost of the inventories at the time of sale. 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.
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 recent market data to assess the estimated future demand for goods.
3.10 Other current assets
Other current assets, which will be realized within a period of less than one year from the reporting date, are comprised of prepaid assets, and agreements with customers.
Prepaid assets principally consist of, advertising, promotional and insurance costs, and are recognized as other current assets at the time of the cash disbursement, and are derecognized from the consolidated statement of financial position and recognized in the appropriate consolidated income statement caption when the risks and rewards of the related goods have been transferred to the Company or services have been received, respectively.
The Company has prepaid advertising costs which consist of television and radio advertising airtime paid in advance. These prepaid costs 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.
The Company has agreements with customers for the right to sell and promote the Company’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 the 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.
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3.11 Investments accounted for using the equity method
3.11.1 Investments in associates
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 without 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 amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate since the acquisition date. The financial statements of the associates are prepared for the same reporting period as the Company.
If the Company holds, directly or indirectly, 20% 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% of the voting power of the investee, it is presumed that the Company does not have significant influence, unless such influence can be clearly demonstrated. Decisions regarding the propriety of utilizing the equity method of accounting for a less than 20% owned corporate investee require 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% 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 to the investee of essential technical information.
Management also considers the existence and effect of potential voting rights that are currently exercisable or currently convertible when assessing whether the Company has significant influence.
In addition, the Company evaluates the following indicators that provide evidence of significant influence:
• the Company’s extent of ownership is significant relative to other shareholdings (i.e. a lack of concentration of other shareholders);
• the Company’s significant shareholders, its parent, fellow subsidiaries, or officers of the Company, hold additional investment in the investee; and
• the Company is a part of an investee’s board of director committees, such as the executive committee or the finance committee.
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 zero and recognition of further losses is discontinued except to the extent that the Company has a legal or constructive obligation or has made payments on behalf of the associate.
After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. 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 impairment as the difference between the recoverable amount of the investment and its carrying value and recognizes the amount in other expenses line in the consolidated statements of income.
3.11.2 Joint arrangements
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 joint ventures as investments and accounts for those investments using the equity method.
Upon loss of joint control over the joint venture, the Company measures and recognizes any retained investment at its fair value.
As of December 31, 2023 and 2022 the Company did not have any interests in joint operations.
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3.11.3 Investment in Venezuela
The Company accounts for its investment in Venezuela using fair value through OCI using Level 3 inputs. In 2023, the Company recognized a fair value loss on the investment of Ps. 164. As of December 31, 2023, 2022 and 2021 the fair value of Venezuela investment was Ps. 0. and the accumulated losses recognized in the “other equity instruments” amounted for Ps. 1,777, Ps. 1,613 and Ps. 1,553 respectively.
3.12 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.
Major maintenance costs are capitalized as part of total acquisition cost, which implies an increase of the assets’ useful life. Routine maintenance and repair costs are expensed as incurred.
Construction in progress consists of long-lived assets not yet in service, 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. Where an item of property, plant and equipment comprises major components having different useful lives, the components are accounted for and depreciated separately.
Property, plant and equipment, including returnable bottles which are expected to provide benefits over a period of 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.
During 2022, the Company 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 estimations were applied prospectively.
The estimated useful lives of the Company’s principal assets are as follows:

| 2023 | 2022
Buildings | 20 - 50 | 20 - 50
Machinery and equipment | 5 - 25 | 5 - 25
Distribution equipment | 4 - 14 | 4 - 14
Refrigeration equipment | 7 - 10 | 7 - 10
Returnable bottles | 1.5 - 4 | 1.5 - 4
Other equipment | 3 - 10 | 3 - 10

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:
The Company 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 and for countries with hyperinflationary economies, restated according to IAS 29. Depreciation of returnable bottles is computed using the straight-line method over their estimated useful lives.
There are two types of returnable bottles:
◦Those that are in the Company’s control within its facilities, plants and distribution centers; and
◦Those that have been placed in the hands of customers and still belong to the Company.
Returnable bottles that have been placed in the hands of customers are subject to an agreement with a retailer pursuant to which the Company retains ownership. These bottles are monitored by sales personnel during periodic visits to retailers and the Company has the
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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.
The Company’s returnable bottles are depreciated according to their estimated useful lives: 4 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.
3.13 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 at 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 information technology 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. Expenditures that do not fulfill the requirements for capitalization are expensed as incurred.
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 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 exceeds their recoverable value. The Company’s intangible assets with an indefinite life mainly consist of rights to produce and distribute Coca-Cola trademark products in the Company’s territories. These rights are contained in agreements that are standard contracts that The Coca-Cola Company has with its bottlers. These bottler agreements are treated as indefinite-lived intangible assets because the Company has determined they are perpetual in nature, considering the following factors: i) the past records of renewals, ii) bottler agreements are automatically renewable for ten-year terms at no cost, and iii) the renewal process does not require any action from either party (only non-renewal requires an action, among others).
As of December 31, 2023, the Company 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, the Company had one bottler agreement in Brazil, which is up for renewal in October 2027. As of December 31, 2023, the Company had three bottler agreements in Guatemala, which are up for renewal in March 2025 (one contract) and April 2028 (two contracts).
In addition the Company had one bottler agreement in each country which is 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.
As of December 31, 2023 our investee KOF Venezuela 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 the Company from selling Coca-Cola trademark beverages in the affected territory and would have an adverse effect on the Company´s business, financial conditions, results from operations and prospects.
3.14 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 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 in order 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 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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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 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 there was no impairment related to goodwill recognized.
3.15 Leases
The Company evaluates whether a contract is, or contains a lease when the contract transfers the right to control an identified asset during a period in exchange for consideration.
The Company evaluates whether a contract is a lease agreement when:
•The contract involves the use of an identified asset - this can be specified explicitly or implicitly, and must be physically distinct or represent substantially the entire capacity of a physically distinct asset. If the lessor has substantive substitution rights, the asset is not identified;
•The Company has the right to receive substantially all the economic benefits of the use of the asset throughout the period of use;
•The Company has the right to direct the use of the asset when it has the right to make the most relevant decisions about 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 it: i) it has the right to operate the asset; or ii) it designed the asset in a way that pre-determines for what purpose it will be used.
As a leasee
Initial measurement
On the start date of the lease, the Company recognizes a right-of-use asset and a leasing liability. The right-of-use asset is initially measured at cost, which includes the initial amount of the lease liability adjusted for any lease payment made during or before the initial application date. The right-of-use asset considers the incurred initial direct costs and an estimate of the costs to dismantle and eliminate the underlying asset, or to restore the underlying asset or the place where it is located, less any lease incentive received.
The lease liability is initially measured at the present value of future lease payments to be made over the lease term. Such payments are discounted using the incremental borrowing rate (IBR) of the Company, when the Company cannot readily determine the interest rate implicit in its leases. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Company estimates the 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).
Lease payments included in the measurement of the lease liability include the following:
•Fixed payments, including payments that are substantially fixed;
•Variable lease payments that depend on an index or a rate, initially measured using the index or the rate as of the lease commencement date;
•The price related to a purchase option that the Company is reasonably certain it will exercise an option to extend the contractual agreement and penalties for early termination of the lease agreement, unless the Company has reasonable certainty of not terminating early, considering all the facts and circumstances that create an economic incentive for the Company to exercise, or not, such options;
•Amounts payable for residual value guarantees.
The Company does not recognize a right-of-use asset and lease liability for those short-term agreements with a contractual period of 12 months or less and leases of low-value assets, mainly information technology equipment used by employees, such as laptops and
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desktops, handheld devices and printers. The Company recognizes the lease payments associated with these agreements 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 lease term. In addition, the right-of-use asset is periodically evaluated for impairment losses, if any, and evaluated for some lease liability remeasurements.
Lease liabilities are subsequently measured at amortized cost using the effective interest rate method. The Company re-measures the lease liability without modifying the discount rate when there is a modification in future lease payments under a residual value guarantee or if the modification arises from a change in the index or rate when there are variable payments. The lease liability is measured again using a new incremental borrowing rate at the date of modification when:
•An option to extend or terminate the agreement is exercised by modifying the non-cancelable 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 re-measured, an adjustment is made to the corresponding carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the asset has been reduced to zero.
A modification to the lease agreement is accounted for as a separate agreement if the following two 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 of the lease is increased by an amount proportional to the independent price of the increase in scope and by any adjustment to that independent price to reflect the contract circumstances.
In the consolidated income statement, the interest expense of the lease liability is presented as a component of the interest expense, unless they are directly attributable to qualified assets, in which case they are capitalized according to the Company’s financing cost accounting policy.
Improvements in leased properties are recognized as part of property, plant and equipment in the consolidated statement of financial position and amortized using the straight-line method, over the shorter of the useful life of the asset and the term of the related lease.
3.16 Financial liabilities and equity instruments
3.16.1 Classification as debt or equity
Debt and equity instruments issued by a group entity 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.
3.16.2 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 when the proceeds are received, net of direct issue costs.
Repurchase of the Company’s own equity instruments are recognized and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
3.16.3 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 3.7.
Subsequent measurement
The measurement of financial liabilities depends on their classification as described below:
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Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated income statements when the liabilities are derecognized.
Amortized cost is calculated considering 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 statements of income.
De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled 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 de-recognition 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.
3.17 Provisions
Provisions are recognized when the Company has a present obligation (contractual or implied) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reasonable 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, the amounts are discounted to present value 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. more likely than 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 realized, see Note 25.5.
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 and 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.
3.18 Post-employment and other short and long-term employee benefits
Post-employment and other non-current employee benefits include obligations for pension and post-employment plans and seniority premiums.
In Mexico, the economic 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 prior to the vesting of their seniority premium benefit.
For defined benefit retirement plans and other non-current employee benefits, such as the Company’s sponsored pension and retirement plans and seniority premiums, 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 re-measurements effects of the Company’s defined benefit obligation such as actuarial gains and losses and return on plan assets are recognized directly in other comprehensive income (“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 and seniority premiums through irrevocable trusts of which the employees are named as beneficiaries, which serve to decrease the funded status of such plans’ related obligations.
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Costs related to compensated absences, such as vacations and vacation premiums, are recognized on an accrual basis.
A settlement occurs when the Company enters into a transaction that eliminates all further legal or constructive obligations or part or all of the benefits provided under a defined benefit plan. A curtailment arises from an isolated event such as 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.
Profit sharing to employees (“PTU” for its acronym in Spanish) is paid by the Mexican subsidiaries to its eligible employees. PTU is computed at the rate of 10% of the individual company taxable income. PTU in Mexico is calculated 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 exempt from taxes for the employees 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.
3.19 Revenue recognition
The Company recognizes revenue when it has transferred to the customer control over the good sold or the service rendered. Control refers to the ability of the customer to direct and obtain substantially all the transferred product’s benefits. Also, it implies that the customer has the ability to prevent a third-party from directing the use and obtaining substantially all the benefits of the transferred product. Coca-Cola FEMSA’s management applies the following considerations to analyze the moment in which the control of the good sold or the service is transferred to the customer:
•Identify the contract (written, spoken or according to the conventional business practices).
•Evaluate the goods and services promised in the customer’s contract and identify the related performance obligations.
•Consider the contract terms and the commonly accepted practices in the business to determine the transaction price. The transaction price is the consideration that the Company expects to be entitled to for transferring the goods and services to the customer, excluding the amount collected for third parties, such as taxes directly related to the sales. The consideration promised in a customer’s contract may include a fixed amount, variable amounts or both.
•Allocate the transaction price to each performance obligation (to each good or service that is different) for an amount that represents the part of the benefit that the Company expects to receive in exchange for the right of transferring the promised goods or services to the customer.
•Recognize revenue when (or while) it satisfied the performance obligation through the transfer of the promised goods or services engaged.
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. 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 Company generates revenues from the following principal 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 in which the revenue is recognized at the point of time those products were sold to the customers.
Rendering of services.
Includes the revenues of distribution services that the Company recognizes as revenues as the related performance obligation is satisfied. The Company recognizes revenues for rendering of services over time in which the performance obligation is satisfied according with the following conditions:
•The customer receives and consumes simultaneously the benefits, as the Company satisfies the performance obligation;
•The customer controls the related assets, even if the Company improves them;
•The revenues can be measured reliably; and
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•It is probable that economic benefits will flow to the Company.

Sources of Revenue | For the year ended December 31, 2023 | For the year ended December 31, 2022 | For the year ended December 31, 2021
Sale of products | Ps. 244,264 | Ps. 226,222 | Ps. 193,899
Services rendered | 23 | 15 | 321
Other operating revenues | 801 | 503 | 584
Revenue from contracts with customers | Ps. 245,088 | Ps. 226,740 | Ps. 194,804

Variable consideration
The Company estimates the amount of consideration to which it 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 entered 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 recorded 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 not a significant financing component due to the fact that the majority of sales are made in cash for the Traditional Channel or on credit period of 0-90 days for the Modern Channel.
Contracts costs.
As disclosed on note 3.10, 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 wouldn’t 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.
3.20 Administrative and selling expenses
Administrative expenses include labor costs (salaries and other benefits, like employee profit sharing “PTU”) of employees not directly involved in the sale 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 (salaries and other related benefits), outbound freight costs, warehousing costs of finished products, depreciation of returnable bottles in the distribution process, depreciation and maintenance of trucks and other distribution facilities and equipment.
• Sales: labor costs (salaries and other benefits including PTU) and sales commissions paid to sales personnel;
• Marketing: promotional expenses and advertising costs.
3.21 Income taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes are charged to 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.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.
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3.21.1 Current income taxes
Current income taxes are recorded in the results of the year they are incurred.
3.21.2 Deferred income taxes
Deferred taxes are 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, and reversal of existing taxable temporary differences will be available. Such deferred tax assets and liabilities are not recognized if the temporary difference arises 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 goodwill is 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 and reversal of existing taxable temporary differences 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 non-current asset or liability, regardless of when the temporary differences are expected to reverse.
Deferred tax relating to items recognized in other comprehensive income is recognized in correlation to the underlying transaction in OCI.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
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 way the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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 24.3.
3.21.3 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.
Where the amount of tax payable is uncertain, the Company establishes income tax provisions based on management’s estimates with respect to
the likelihood of material tax exposures and the probable amount of the liability.
3.22 Share-based payments transactions
Senior executives of the Company receive remuneration in the form of share-based payment transactions, whereby 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
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and Coca-Cola FEMSA shares or options (as instructed by the Corporate Practices Committee). The acquired shares are deposited in a trust, and the executive officers and senior management can access them one year after they are vested at 33% per year over a three-year period. Seventy percent of the annual executive bonus under our stock incentive plan must be used to purchase our company’s shares and the remaining thirty percent must be used to purchase FEMSA shares. During the years ended December 31, 2023, 2022 and 2021, no stock options were granted to executives.
This incentive plan is accounted for as equity settled transaction, net of cash contributions made by the Company.. The award of equity instruments is granted for a fixed monetary value.
Share-based payments to employees are measured at the fair value of the equity instruments at the grant date and accounted as equity contributions from FEMSA. The cash contributions made by the Company are accounted as reduction to the equity contributions. Any excess of cash contributions made is recorded as a financial asset (See Note 13.1). The fair value determined at the grant date of the share-based payments is recognized as expense based on the graded vesting method over the three-year vesting period.
3.23 Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its shares. As described in Note 23, the Company has potentially dilutive shares and therefore presents its basic and diluted earnings per share. Basic EPS is calculated by dividing the consolidated net income 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 year. Diluted EPS is calculated by dividing the consolidated net income attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Earnings per share for all periods are adjusted to give effect to capital contributions, bonus issues, share splits or reverse share splits if they occur during any of periods presented and subsequent to the latest balance sheet date until the issuance date of the consolidated financial statements.
Note 4. Business Combinations
4.1 Business Combinations
The Company consummated certain business acquisitions during 2022 that were recorded using the acquisition method of accounting. The results of the acquired operations have been included in the consolidated financial statements since the date on which the Company obtained control of the respective business, as disclosed below. Therefore, the consolidated income statements and the consolidated statements of financial position in the year of such acquisitions are not comparable in this respect with previous periods.
The consolidated statement of cash flows for the year ended December 31, 2022, shows the consideration paid for the business combinations, net of the cash acquired in those acquisitions.
4.1.1 Business Acquisitions
During 2022 the Company had the following acquisitions:
1) On January 24, 2022, the Company, through its Brazilian subsidiary Spal Industria Brasileira de Bebidas, S.A. completed the acquisition of 100% of CVI Refrigerantes Ltda. (herein “CVI”), to expand its geographic footprint, for Ps. 1,948 in an 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 Financial Statements since the acquisition date;
The 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. 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 | Ps. 1,947
Consideration not paid on acquisition date | (186)
Consideration paid in acquisition date, net | Ps. 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.
2) On November 30, 2022, the Company 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 an 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.
Note 5. Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and cash equivalents, including 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 consist of the following:

| 2023 | 2022
Cash and bank balances | Ps. 6,101 | Ps. 5,828
Cash equivalents (see Note 3.5) | 24,959 | 34,449
Total | Ps. 31,060 | Ps. 40,277

Note 6. Trade Receivables, Net

| 2023 | 2022
Trade receivables | Ps. 15,022 | Ps. 13,432
The Coca-Cola Company (related party) (See Note 14) | 378 | 776
Loans to employees | 76 | 84
FEMSA and subsidiaries (related parties) (See Note 14) | 1,460 | 746
Other related parties (See Note 14) | — | 182
Other sundry accounts receivable | 1,390 | 1,636
Allowance for expected credit losses | (577) | (538)
| Ps. 17,749 | Ps. 16,318

6.1 Trade receivables
Trade receivable representing rights arising from sales and loans to employees or any other similar concept, are presented on the consolidated statement of financial position net of discounts and the allowance for expected credit losses.
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Coca-Cola FEMSA has accounts receivable from The Coca-Cola Company primarily arising from the latter’s participation in advertising and promotional programs.
Because less than the 1.7% of the trade receivables is unrecoverable, the Company does not have any customers classified as “high risk” which would be eligible to have special management conditions for the credit risk. As of December 31, 2023, the Company does not have a representative group of customers directly related to the expected credit loss.
The allowance for expected credit losses is calculated with an expected losses model that recognizes the impairment losses through all the contract life. Because they are generally short-term trade receivables, the Company defined a model with a simplified expected loss focus through a parametric model. The parameters used in the model are:
•Breach probability;
•Losses severity;
•Financing rate;
•Special recovery rate; and
•Breach exposure.
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 carrying value of trade receivables approximates its fair value as of December 31, 2023 and 2022.
The Company recognizes an allowance for expected credit losses at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar credit loss patterns.
6.2 Changes in the allowance for expected credit losses
For the years ended as of December 31, 2023, 2022 and 2021, the Company had an allowance for Ps. 577, Ps. 538 and Ps. 531, respectively.
For the years ended as of December 31, 2023, 2022 and 2021, changes in allowance for expected credit losses are comprised of the following:

| 2023 | 2022 | 2021
Balance at the beginning of the year | Ps. 538 | Ps. 531 | Ps. 515
Allowance for the year | 29 | 14 | 35
Charges and write-offs of uncollectible accounts | 23 | 38 | 6
Effects of changes in foreign exchange rates | (13) | (45) | (25)
Balance at the end of the year | Ps. 577 | Ps. 538 | Ps. 531

6.3 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.
Note 7. Inventories

| 2023 | 2022
Finished products | Ps. 6,293 | Ps. 5,693
Raw materials | 3,624 | 4,288
Non strategic spare parts | 1,004 | 922
Inventories in transit | 107 | 204
Packing materials | 538 | 420
Other | 314 | 361
| Ps. 11,880 | Ps. 11,888

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For the years ended as of December 31, 2023, 2022 and 2021, the Company recognized write-downs of its inventories for Ps. 165, Ps. 80 and Ps. 45, respectively to net realizable value.
For the years ended as of December 31, 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 | 2021
Finished goods and work in progress | Ps. 28,682 | Ps. 25,073 | Ps. 23,756
Raw materials and packing materials | 90,919 | 85,171 | 69,309
Total | Ps. 119,601 | Ps. 110,244 | Ps. 93,065

Note 8. Other Current Assets and Other Current Financial Assets
8.1 Other Current Assets:

| 2023 | 2022
Prepaid expenses | Ps. 902 | Ps. 1,695
Agreements with customers, net of accumulated amortization | 126 | 208
Others | 29 | 3
| Ps. 1,057 | Ps. 1,906

Prepaid expenses as of December 31, 2023 and 2022 are as follows:

| 2023 | 2022
Advances to suppliers | Ps. 789 | Ps. 1,478
Advertising and promotional expenses paid in advance | 96 | 117
Prepaid insurance | 17 | 100
| Ps. 902 | Ps. 1,695

Advertising and promotional expenses recorded in the consolidated income statements for the years ended December 31, 2023, 2022 and 2021, were Ps. 4,691 Ps. 3,983 and Ps. 5,413 respectively.
8.2 Other Current Financial Assets:

| 2023 | 2022
Restricted cash (1) | Ps. 304 | Ps. 243
Derivative financial instruments (See Note 20) | 263 | 2,668
| Ps. 567 | Ps. 2,911

(1) Restricted cash in Brazil is held in U.S. dollars and relates to short term deposits in order to fulfill the collateral requirements for accounts payable.
Note 9. Investments in Other Entities
As of December 31, 2023 and 2022 the investment in other entities is comprised of the following:

| 2023 | 2022
Investment in Associates and Joint Ventures | Ps. 9,246 | Ps. 8,452

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Details of the investment in associates and joint ventures accounted for under the equity method at the end of the reporting period are as follows:

|  |  | Ownership Percentage | Carrying Amount
Investee | Principal Activity | Place of Incorporation | 2023 | 2022 | 2023 | 2022
Joint ventures: |  |  |  |  |  |
Compañía Panameña de Bebidas, S.A.P.I. de C.V. | Beverages | Mexico | 50.0 | % | 50.0 | % | Ps. — | Ps. —
Dispensadoras de Café, S.A.P.I. de C.V. | Services | Mexico | 50.0 | % | 50.0 | % | 223 | 189
Fountain Agua Mineral, LTDA | 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”) (1) | Sugar production | Mexico | 36.4 | % | 36.4% | 3,454 | 3,632
Jugos del Valle, S.A.P.I. de C.V. (1) | Beverages | Mexico | 28.2 | % | 29.3% | 2,831 | 2,267
Leao Alimentos e Bebidas, LTDA (1) | Beverages | Brazil | 25.1 | % | 25.1% | 298 | 388
Industria Envasadora de Querétaro, S.A. de C.V. (“IEQSA”) (1) | Canned bottling | Mexico | 26.5 | % | 26.5% | 215 | 157
Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”) (1) | Recycling | Mexico | 35.0 | % | 35.0% | 99 | 100
Alimentos de Soja S.A.U. | Beverages | Argentina | 10.7 | % | 10.7% | 23 | 282
Others | Various | Various | Various | Various | 156 | 107
|  |  |  |  | Ps. 9,246 | Ps. 8,452

Accounting method:
(1) The Company has significant influence due to the fact that it has power to participate in the financial and operating policy decisions of the investee.
During 2023 the Company received dividends from Promotora Mexicana de Embotelladores, S.A. de C.V. ("PIASA") for the amount of Ps. 79.
During 2023 the Company 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 our ownership decreased due to a corporate restructuring.
During 2023, the Company 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 the Company 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, our ownership in Jugos del Valle, S.A.P.I. de C.V. increased due to a corporate restructuring and our ownership in Leao Alimentos e Bebidas, LTDA, Trop Frutas do Brasil, LTDA increased due to acquisition of CVI.
During 2022 the Company received dividends from Industria Envasadora de Querétaro, S.A. de C.V. ("IEQSA") for the amount of Ps. 16.
During 2021 the Company made capital contributions to Jugos del Valle, S.A.P.I. de C.V. for the amounts 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 the Company reduced its capital on Leao Alimentos e Bebidas, LTDA for the amount of Ps. 46, and there were no changes in the ownership percentage as a result of the capital reduction.
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During 2021, the Company recognized an impairment on its investment in Trop Frutas Do Brasil LTDA. for the amount of Ps. 250 recognized in the South America segment.
On September 30, 2020, the Company 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 it 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 and calculated its net present value.
For the years ended December 31, 2023, 2022 and 2021 the equity earnings recognized for associates 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 were Ps. 190, Ps. 192 and Ps. 3, respectively.
Note 10. Leases
For the years ended as of December 31, 2023 and 2022, the change in the Company’s right-of-use assets, is as follows:

| 2023 | 2022
Balance at beginning of the period | Ps. 2,069 | Ps. 1,472
Additions | 586 | 1,083
Remeasurements | 812 | 476
Additions from business combinations | — | 13
Disposals | (271) | (296)
Depreciation | (776) | (660)
Hyperinflationary economies effect | 6 | 13
Effects of changes in foreign exchange rates | (38) | (32)
Balance at end of the period | Ps. 2,388 | Ps. 2,069

As of December 31, 2023 and 2022, the lease liabilities are integrated as follows:

| 2023 | 2022
Maturity analysis – contractual undiscounted cash flows |  |
Less than one year | Ps. 966 | Ps. 675
One to three years | 1,386 | 928
More than three years | 1,353 | 1,462
Total undiscounted lease liabilities on December 31 | Ps. 3,705 | Ps. 3,065
Lease liabilities included in the statement of financial position on December 31 | 2,521 | 2,135
Current | Ps. 752 | Ps. 472
Non-Current | Ps. 1,769 | Ps. 1,663

For the years ended as of December 31, 2023 and 2022, the change in the Company’s lease liabilities, is as follows:
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| 2023 | 2022
Balance at beginning of the period | Ps. 2,135 | Ps. 1,505
Additions | 586 | 1,083
Remeasurements | 812 | 476
Additions from business combinations | — | 13
Disposals | (277) | (309)
Payments | (690) | (631)
Foreign exchange effects | (20) | 17
Effects of changes in foreign exchange rates | (25) | (19)
Balance at end of the period | Ps. 2,521 | Ps. 2,135

The total lease payments during 2023, 2022 and 2021 were Ps. 968, Ps. 763, and Ps. 730, respectively; out of which, Ps. 278, Ps. 132, and Ps. 101, represented the interest expense reported in the consolidated income statements for the years ended on December 31, 2023, 2022 and 2021, respectively.
The expenses for the low value assets and short-term leases reported in the consolidated income statements recognized in operating expenses for the years ended on December 31, 2023, 2022 and 2021 were Ps. 190, Ps. 116 and Ps. 183, respectively.
As of December 31, 2023, 2022 and 2021 the weighted average incremental borrowing rate was 10.18%, 9.29% and 7.18%, respectively.
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Note 11. Property, plant & 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. 5,240 | Ps. 18,653 | Ps. 39,664 | Ps. 20,202 | Ps. 17,924 | Ps. 5,894 | Ps. 737 | Ps. 851 | Ps. 109,165
Additions (1) | — | 21 | 61 | 427 | 3,655 | 7,911 | — | 217 | 12,292
Transfer of completed projects in progress | — | 731 | 4,791 | 1,351 | 31 | (7,001) | 95 | 2 | —
Disposals | (6) | (20) | (2,680) | (1,614) | (2,299) | — | (62) | (16) | (6,697)
Effects of changes in foreign exchange rates | (144) | (637) | (1,919) | (556) | (365) | (70) | (22) | (77) | (3,790)
Changes in value on the recognition of inflation effects | 140 | 326 | 1,260 | 319 | 487 | — | 138 | 321 | 2,991
Cost as of December 31, 2021 | Ps. 5,230 | Ps. 19,074 | Ps. 41,177 | Ps. 20,129 | Ps. 19,433 | Ps. 6,734 | Ps. 886 | Ps. 1,298 | Ps. 113,961
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, 2022 | Ps. 5,230 | Ps. 19,074 | Ps. 41,177 | Ps. 20,129 | Ps. 19,433 | Ps. 6,734 | Ps. 886 | Ps. 1,298 | Ps. 113,961
Additions (1) | 267 | 38 | 399 | 939 | 4,123 | 12,641 | 26 | 294 | 18,727
Additions from business combinations | 36 | 289 | 365 | 126 | 8 | 482 | — | — | 1,306
Transfer of completed projects in progress | 139 | 1,477 | 4,248 | 2,485 | 645 | (9,023) | 27 | 2 | —
Disposals | (18) | (209) | (858) | (1,072) | (381) | — | (27) | (9) | (2,574)
Effects of changes in foreign exchange rates | (424) | (1,157) | (3,225) | (1,277) | (1,708) | (438) | (15) | (172) | (8,416)
Changes in value on the recognition of inflation effects | 222 | 735 | 2,474 | 536 | 849 | 7 | — | — | 4,823
Cost as of December 31, 2022 | Ps. 5,452 | Ps. 20,247 | Ps. 44,580 | Ps. 21,866 | Ps. 22,969 | Ps. 10,403 | Ps. 897 | Ps. 1,413 | Ps. 127,827
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, 2023 | Ps. 5,452 | Ps. 20,247 | Ps. 44,580 | Ps. 21,866 | Ps. 22,969 | Ps. 10,403 | Ps. 897 | Ps. 1,413 | Ps. 127,827
Additions (1) | 1 | 27 | 211 | 855 | 2,782 | 15,939 | — | 297 | 20,112
Transfer of completed projects in progress | 72 | 1,506 | 5,415 | 2,346 | 2,110 | (11,109) | (331) | (9) | —
Disposals | (8) | (44) | (1,071) | (1,245) | (270) | (2) | — | (3) | (2,643)
Effects of changes in foreign exchange rates | (475) | (1,908) | (4,788) | (1,298) | (2,155) | (550) | (51) | (116) | (11,341)
Changes in value on the recognition of inflation effects | 177 | 592 | 1,895 | 400 | 655 | 128 | — | — | 3,847
Cost as of December 31, 2023 | Ps. 5,219 | Ps. 20,420 | Ps. 46,242 | Ps. 22,924 | Ps. 26,091 | Ps. 14,809 | Ps. 515 | Ps. 1,582 | Ps. 137,802

(1) Total includes Ps. 499 , Ps. 1,971 and Ps. 3,784 outstanding payment to suppliers, as of December 31, 2023, 2022 and 2021 respectively
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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. (5,043) | Ps. (19,842) | Ps. (11,859) | Ps. (12,153) | Ps. — | Ps. (379) | Ps. (429) | Ps. (49,705)
Depreciation for the year | — | (484) | (2,793) | (2,097) | (2,708) | — | (80) | (122) | (8,284)
Disposals | — | 6 | 2,336 | 1,493 | 2,390 | — | 62 | 10 | 6,297
Effects of changes in foreign exchange rates | — | 162 | 867 | 372 | 222 | — | 8 | 48 | 1,679
Changes in value on the recognition of inflation effects | — | (139) | (946) | (209) | (427) | — | (6) | (38) | (1,765)
Accumulated depreciation as of December 31, 2021 | Ps. — | Ps. (5,498) | Ps. (20,378) | Ps. (12,300) | Ps. (12,676) | Ps. — | Ps. (395) | Ps. (531) | Ps. (51,778)
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, 2022 | Ps. — | Ps. (5,498) | Ps. (20,378) | Ps. (12,300) | Ps. (12,676) | Ps. — | Ps. (395) | Ps. (531) | Ps. (51,778)
Depreciation for the year | — | (835) | (3,331) | (1,437) | (3,234) | — | (25) | (135) | (8,997)
Disposals | — | 194 | 854 | 936 | 306 | — | 26 | 7 | 2,323
Effects of changes in foreign exchange rates | — | 340 | 2,193 | 860 | 1,274 | — | 7 | 143 | 4,817
Changes in value on the recognition of inflation effects | — | (244) | (1,605) | (354) | (745) | — | (5) | (34) | (2,987)
Accumulated depreciation as of December 31, 2022 | Ps. — | Ps. (6,043) | Ps. (22,267) | Ps. (12,295) | Ps. (15,075) | Ps. — | Ps. (392) | Ps. (550) | Ps. (56,622)
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, 2023 | Ps. — | Ps. (6,043) | Ps. (22,267) | Ps. (12,295) | Ps. (15,075) | Ps. — | Ps. (392) | Ps. (550) | Ps. (56,622)
Depreciation for the year |  | (555) | (3,101) | (1,844) | (3,256) |  | (15) | (148) | (8,919)
Disposals |  | 26 | 825 | 1,260 | 261 |  | — | 1 | 2,373
Effects of changes in foreign exchange rates |  | 640 | 3,087 | 793 | 1,783 |  | 117 | 114 | 6,534
Changes in value on the recognition of inflation effects |  | (218) | (1,264) | (291) | (649) |  | (2) | (14) | (2,438)
Accumulated depreciation as of December 31, 2023 | Ps. — | Ps. (6,150) | Ps. (22,720) | Ps. (12,377) | Ps. (16,936) | Ps. — | Ps. (292) | Ps. (597) | Ps. (59,072)

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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. 5,230 | Ps. 13,576 | Ps. 20,799 | Ps. 7,829 | Ps. 6,757 | Ps. 6,734 | Ps. 491 | Ps. 767 | Ps. 62,183
As of December 31, 2022 | Ps. 5,452 | Ps. 14,204 | Ps. 22,313 | Ps. 9,571 | Ps. 7,894 | Ps. 10,403 | Ps. 505 | Ps. 863 | Ps. 71,205
As of December 31, 2023 | Ps. 5,219 | Ps. 14,270 | Ps. 23,522 | Ps. 10,547 | Ps. 9,155 | Ps. 14,809 | Ps. 223 | Ps. 985 | Ps. 78,730

Note 12. Intangible Assets

| Rights to Produce and Distribute Coca-Cola trademark Products | Goodwill | Other indefinite lived intangible assets | Technology costs and management systems | Development systems | Other amortizable | Total
Balance as of January 1, 2021 | Ps. 77,396 | Ps. 23,431 | Ps. 1,148 | Ps. 6,709 | Ps. 176 | Ps. 737 | Ps. 109,597
Purchases (1) | — | — | 135 | 370 | 673 | 113 | 1,291
Transfer | — | — | — | 255 | (469) | 214 | —
Disposals | — | — | (3) | — | — | — | (3)
Effect of movements in exchange rates | (1,257) | (522) | (88) | (374) | (5) | (24) | (2,270)
Changes in value on the recognition of inflation effects | — | — | — | — | — | 62 | 62
Cost as of December 31, 2021 | Ps. 76,139 | Ps. 22,909 | Ps. 1,192 | Ps. 6,960 | Ps. 375 | Ps. 1,102 | Ps. 108,677
Balance as of January 1, 2022 | Ps. 76,139 | Ps. 22,909 | Ps. 1,192 | Ps. 6,960 | Ps. 375 | Ps. 1,102 | Ps. 108,677
Purchases (1) | — | — | — | 46 | 1,138 | 4 | 1,188
Additions from business combinations (See Note 4.1.1) | 1,116 | 205 | — | 17 | — | — | 1,338
Transfer | — | — | — | 65 | (158) | 93 | —
Disposals | — | — | — | (775) | — | — | (775)
Effect of movements in exchange rates | (756) | 144 | (150) | (51) | (13) | (70) | (896)
Changes in value on the recognition of inflation effects | — | — | — | — | — | 80 | 80
Cost as of December 31, 2022 | Ps. 76,499 | Ps. 23,258 | Ps. 1,042 | Ps. 6,262 | Ps. 1,342 | Ps. 1,209 | Ps. 109,612
Balance as of January 1, 2023 | Ps. 76,499 | Ps. 23,258 | Ps. 1,042 | Ps. 6,262 | Ps. 1,342 | Ps. 1,209 | Ps. 109,612
Purchases (1) | — | — | 4 | 385 | 963 | 25 | 1,377
Transfer | (224) | — | 224 | 307 | (708) | 401 | —
Disposals | — | (2) | — | (1) | — | (61) | (64)
Effect of movements in exchange rates | (1,568) | (916) | 44 | (77) | (30) | (158) | (2,705)
Changes in value on the recognition of inflation effects | — | — | — | — | — | 70 | 70
Cost as of December 31, 2023 | Ps. 74,707 | Ps. 22,340 | Ps. 1,314 | Ps. 6,876 | Ps. 1,567 | Ps. 1,486 | Ps. 108,290
| Rights to Produce and Distribute Coca-Cola trademark Products | Goodwill | Other indefinite lived intangible assets | Technology costs and management systems | Development systems | Other amortizable | Total
Accumulated amortization |  |  |  |  |  |  |
Balance as of January 1, 2021 | Ps. (745) | Ps. — | Ps. — | Ps. (4,353) | Ps. — | Ps. (528) | Ps. (5,626)
Amortization expense | — | — | — | (594) | — | (294) | (888)

F-41

Disposals | — | — | — | — | — | — | —
Effect of movements in exchange rate | — | — | — | 53 | — | 10 | 63
Changes in value on the recognition of inflation effects | — | — | — | (52) | — | — | (52)
Balance as of December 31, 2021 | Ps. (745) | Ps. — | Ps. — | Ps. (4,946) | Ps. — | Ps. (812) | Ps. (6,503)
Amortization expense | — | — | — | (522) | — | (246) | (768)
Disposals | — | — | — | 775 | — | — | 775
Effect of movements in exchange rate | — | — | — | 96 | — | 5 | 101
Changes in value on the recognition of inflation effects | — | — | — | (94) | — | (1) | (95)
Balance as of December 31, 2022 | Ps. (745) | Ps. — | Ps. — | Ps. (4,691) | Ps. — | Ps. (1,054) | Ps. (6,490)
Amortization expense |  |  |  | (518) | — | (318) | (836)
Disposals |  |  |  | — | — | 59 | 59
Effect of movements in exchange rate |  |  |  | 205 | — | 12 | 217
Changes in value on the recognition of inflation effects - amortization |  |  |  | (78) | — | — | (78)
Balance as of December 31, 2023 | Ps. (745) | Ps. — | Ps. — | Ps. (5,082) | Ps. — | Ps. (1,301) | Ps. (7,128)
Balance as of December 31, 2021 | Ps. 75,394 | Ps. 22,909 | Ps. 1,192 | Ps. 2,014 | Ps. 375 | Ps. 290 | Ps. 102,174
Balance as of December 31, 2022 | Ps. 75,754 | Ps. 23,258 | Ps. 1,042 | Ps. 1,571 | Ps. 1,342 | Ps. 155 | Ps. 103,122
Balance as of December 31, 2023 | Ps. 73,962 | Ps. 22,340 | Ps. 1,314 | Ps. 1,794 | Ps. 1,567 | Ps. 185 | Ps. 101,162

The Company’s intangible assets such as technology costs and management systems are subject to amortization with a range in useful lives from 3 to 12 years.
For the year ended December 31, 2023, the amortization of intangible assets is recognized in cost of goods sold, selling expenses and administrative expenses and amounted to Ps. 12, Ps.93 and Ps. 731, respectively.
For the year ended December 31, 2022, the amortization of intangible assets is recognized in cost of goods sold, selling expenses and administrative expenses and amounted to Ps. 13, Ps.84 and Ps.671, respectively.
For the year ended December 31, 2021, the amortization of intangible assets is recognized in cost of goods sold, selling expenses and administrative expenses and amounted to Ps. 15, Ps.108 and Ps.765, respectively.
(1) Total includes Ps. 359 , Ps. 209 and Ps. 176 outstanding payment to suppliers, as of December 31, 2023, 2022 and 2021 respectively
F-42

Impairment Tests for Cash-Generating Units Containing Goodwill, Distribution Rights and Other indefinite lived intangible assets
For the purpose of impairment testing, goodwill, distribution rights, and other indefinite lived intangible assets 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:

| 2023 | 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 the Company 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 weighted average cost of capital (“WACC”) used to discount the projected flows.
To determine the discount rate, the Company uses the WACC as determined for each of the cash generating units in real terms and as described in the following paragraphs.
The estimated discount rates consider market participants’ assumptions. Market participants were selected considering the size, operations and characteristics of the businesses that management believes are similar to those of the Company.
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 the Company 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 the Company’s investors. The cost of debt is based on the interest-bearing borrowings the Company 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 discount 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 adjustment.
F-43

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 Volume Growth Rates 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 test as of December 31, 2022 were as follows:

CGU | Pre-tax WACC | Post –tax WACC | Expected Annual Long-Term Inflation 2023-2027 | Expected Volume Growth Rates 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
As of December 31, 2023, the Company performed 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.
F-44

Goodwill, Distribution Rights and Other in definite lived intangible assets

CGU | Change in WACC | Change in Volume Growth CAGR(1) | Effect on Valuation
Mexico | +0.6p.p | -1.0% | Passes by 3.2x
Brazil | +0.8p.p | -1.0% | Passes by 0.9x
Colombia | +0.9p.p | -1.0% | Passes by 1.1x
Argentina | +3.3p.p | -1.0% | Passes by 0.9x
Guatemala | +0.7p.p | -1.0% | Passes by 5.4x
Costa Rica | +0.8p.p | -1.0% | Passes by 4.0x
Nicaragua | +3.3p.p | -1.0% | Passes by 0.8x
Panama | +0.7p.p | -1.0% | Passes by 2.2x
Uruguay | +0.3p.p | -1.0% | Passes by 2.0x

(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). The Company consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing.
F-45

Note 13. Other non-current assets and other non-current financial assets
13.1 Other Non-Current Assets:

| 2023 | 2022
Non-current prepaid advertising expenses | Ps. 238 | Ps. 184
Guarantee deposits (1) | 1,111 | 1,294
Prepaid bonuses | 400 | 325
Advances to acquire property, plant and equipment | 1,432 | 976
Shared based payment in excess of capital contribution (See Note 3.22 and Note 17.2) | 534 | 360
Indemnifiable contingencies from business combinations (2) | 1,030 | 1,555
Recoverable tax | 809 | 486
Other | 139 | 50
| Ps. 5,693 | Ps. 5,230

(1) Mainly in Brazil, the Company is required to guarantee tax, legal and labor contingencies with guarantee deposits. See Note 25.6.
(2) Corresponds to indemnification of certain tax contingencies in Brazil that are warranted by former Vonpar owners (a subsidiary acquired in 2016) in accordance with the share purchase agreement. The Company has also recognized these tax contingencies as liabilities in the same amount, see Note 25.6.1
13.2 Other Non-Current Financial Assets:

| 2023 | 2022
Long-term notes receivable | Ps. 696 | Ps. 139
Derivative financial instruments (See Note 20) | 96 | 591
| Ps. 792 | Ps. 730

Long-term notes receivable are held to maturity, investments in other entities are recorded at cost and derivative financial instruments are recognized at fair value.
Note 14. Balances and Transactions with Related Parties and Affiliated Companies
The consolidated statements of financial position and income include the following balances and transactions with related parties and affiliated companies:

| 2023 | 2022
Balances: |  |
Assets (current included in accounts receivable) |  |
Due from FEMSA and its subsidiaries (See Note 6) (1) (3) | Ps. 1,460 | Ps. 746
Due from The Coca-Cola Company (See Note 6) (1) | 378 | 776
Due from Heineken Group (1) | — | 175
Other receivables (1) | — | 7
| Ps. 1,838 | Ps. 1,704
| 2023 | 2022
Liabilities (current included in suppliers and other liabilities and loans) |  |
Due to FEMSA and its subsidiaries (2) (3) | Ps. 1,275 | Ps. 1,454
Due to The Coca-Cola Company (2) | 1,196 | 1,248
Due to Heineken Group (2) | — | 495
Other payables (2) (4) | 802 | 818
| Ps. 3,273 | Ps. 4,015
(1) Presented within trade receivables |  |
(2) Recorded within accounts payable and suppliers |  |
(3) Parent |  |
(4) This amount for 2022 includes Ps. 342 payable to Promotora Industrial Azucarera

F-46

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 the uncollectibility of balances due from related parties.
Details of transactions between the Company and other related parties are disclosed as follows:

Transactions | 2023 | 2022 | 2021
Income: |  |  |
Sales to affiliated parties | 8,459 | 6,546 | 5,489
Heineken | — |  | 2 | 3
Expenses: |  |  |
Purchases and other expenses from FEMSA | 9,547 | 10,129 | 7,447
Purchases of concentrate from The Coca-Cola Company | 46,461 | 43,717 | 37,213
Purchases of raw material, beer and operating expenses from Heineken | — |  | 5,036 | 11,635
Advertisement expense paid to The Coca-Cola Company | 869 | 545 | 1,482
Purchases from Jugos del Valle | 3,718 | 3,234 | 2,918
Purchase of sugar from Promotora Industrial Azucarera, S.A. de C.V. | 2,841 | 2,841 | 2,213
Purchase of sugar from Beta San Miguel | 917 | 724 | 938
Purchase of canned products from Industria Envasadora de Queretaro, S.A. de C.V... | 843 | 577 | 234
Purchase of inventories from Fountain Agua Mineral Ltda | 638 | — |  | — |
Purchase of inventories from Leao Alimentos e Bebidas, LTDA | 181 | 215 | 1,320
Purchase of resine from Industria Mexicana de Reciclaje, S.A. de C.V. | 458 | 504 | 416
Donations to Instituto Tecnologico y de Estudios Superiores de Monterrey, A.C. (1) (2) | 1 | 110 | — |
Donations to Fundación Femsa, A.C. | 285 | 173 | 230
Other expenses with related parties | — |  | — |  | 156

(1) One or more members of the Board of Directors or senior management of the Company are also members of the Board of Directors or senior management of the counterparties to these transactions.
(2) These donations were made to ITESM through Fundación FEMSA.
The aggregate compensation paid to executive officers and senior management of the Company, recognized as an expense during the reporting period were as follows:

| 2023 | 2022 | 2021
Current compensation and employee benefits | Ps. 1,091 | Ps. 1,071 | Ps. 737
Termination benefits | 539 | 18 | —
Shared based payments (See Note 17.2) | 319 | 326 | 276

Note 15. Balances and Transactions in Foreign Currencies
Assets, liabilities and transactions denominated in foreign currencies are those realized in a currency different from the functional currency of the Company. As of December 31, 2023 and 2022, assets and liabilities denominated in foreign currencies, expressed in Mexican pesos (contractual amounts) are as follows:

| Assets | Liabilities
Balances | Current | Non-current | Current | Non-current
As of December 31, 2023 |  |  |  |
U.S. dollars | 15,850 | 97 | 4,053 | 37,892
Euros |  |  | 180 |
As of December 31, 2022 |  |  |  |
U.S. dollars | 21,358 | 70 | 8,777 | 43,359
Euros | — | — | 214 | —

F-47

For the years ended December 31, 2023, 2022 and 2021 transactions denominated in foreign currencies, expressed in Mexican pesos (contractual amounts) are as follows:

Transactions | Revenues | Purchases of Raw Materials | Interest Expense | Other
Year ended December 31, 2023 U.S. dollars | 1,468 | 18,075 | 1,257 | 4,065
Year ended December 31, 2022 U.S. dollars | 830 | 17,285 | 1,148 | 2,973
Year ended December 31, 2021 U.S. dollars | 452 | 14,420 | 1,749 | 2,509

Note 16. Post-Employment and Other Non-current Employee Benefits
The Company has various labor liabilities for employee benefits in connection with pension and retirement plans, seniority premiums. 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.
16.1 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. In Mexico, actuarial calculations for pension and retirement plans and seniority premiums, as well as the associated cost for the period, were determined using the following long-term assumptions:

Mexico | 2023 | 2022 | 2021
Financial: |  |  |
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset) | 10.2 | % | 9.9 | % | 8.0 | %
Salary increase: (Non-Union/Union) | 4.8 | % | 4.8 | % | 4.5 | %
Future pension increase | 3.8 | % | 3.8 | % | 3.5 | %
Biometric: |  |  |
Mortality | EMSSA 2009 (1) | EMSSA 2009 (1) | EMSSA 2009 (1)
Disability | IMSS 97 (2) | IMSS 97 (2) | IMSS 97 (2)
Normal retirement age | 60 years | 60 years | 60 years
Rest of employee turnover | BMAR2007 (3) | BMAR2007 (3) | BMAR2007 (3)

(1) EMSSA. Mexican Experience of Social Security (for its initials in Spanish)
(2) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social (for its initials in Spanish)
(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 the Mexican Federal Government Treasury Bond (known as CETES in Mexico) because there is no deep market in high quality corporate obligations in Mexico.
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
2024 | Ps. 396 | Ps. 88
2025 | 222 | 77
2026 | 253 | 81
2027 | 346 | 88
2028 | 311 | 91
2029 - 2032 | 2,356 | 533

F-48

16.2 Balances of the liabilities for post-employment and other non-current employee benefits

| 2023 | 2022
Pension and Retirement Plans: |  |
Vested benefit obligation | Ps. 653 | Ps. 715
Non-vested benefit obligation | 2,091 | 2,196
Accumulated benefit obligation | 2,744 | 2,911
Excess of projected defined benefit obligation over accumulated benefit obligation | 1,284 | 1,288
Defined benefit obligation | 4,028 | 4,199
Pension plan funds at fair value | (1,303) | (1,288)
Net defined benefit liability | Ps. 2,725 | Ps. 2,911
Seniority Premiums: |  |
Vested benefit obligation | Ps. 320 | Ps. 279
Non-vested benefit obligation | 344 | 255
Accumulated benefit obligation | 664 | 534
Excess of projected defined benefit obligation over accumulated benefit obligation | 294 | 392
Defined benefit obligation | 958 | 926
Seniority premium plan funds at fair value | (123) | (128)
Net defined benefit liability | Ps. 835 | Ps. 798
Total post-employment and other non-current employee benefits | Ps. 3,560 | Ps. 3,709

16.3 Trust assets
Trust assets consist of fixed and variable return financial instruments recorded at fair value, which are invested as follows:

Type of instrument | 2023 | 2022
Fixed return: |  |
Traded securities | 27 | % | 24 | %
Life annuities | 18 | % | 17 | %
Bank instruments | 5 | % | 5 | %
Federal government instruments | 36 | % | 40 | %
Variable return: |  |
Publicly traded shares | 14 | % | 14 | %
| 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 fund assets must be invested in Federal Government instruments, 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 the monitoring and supervision of the benefit trust. 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 plan 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 so as to invest in assets whose expected return coincides with the estimated future payments.
Since the Mexican Tax Law limits the plan’s asset investment in related parties to 10% 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.
F-49

As of December 31, 2023 and 2022, the average duration of the Pension and Retirement Plan was of 20.1 years and 19.5 years, respectively; and the average duration of the Seniority Premiums Plan was of 16.8 years and 16.8 years, respectively.
During 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 2024.
16.4 Amounts recognized in the consolidated income statements and the consolidated statements of changes in equity

| Consolidated income statement | Accumulated OCI
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 net of taxes
Pension and retirement plans | Ps. 233 | Ps. 155 | Ps. (126) | Ps. 222 | Ps. 625
Seniority premiums | 87 | 8 | (7) | 75 | 122
Total | Ps. 320 | Ps. 163 | Ps. (133) | Ps. 297 | Ps. 747
| Consolidated Income statement | Accumulated OCI
2022 | 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 net of taxes
Pension and retirement plans | Ps. 246 | Ps. 47 | Ps. (85) | Ps. 141 | Ps. 804
Seniority premiums | 94 | 6 | (9) | 145 | 108
Total | Ps. 340 | Ps. 53 | Ps. (94) | Ps. 286 | Ps. 912
| Consolidated Income statement | Accumulated OCI
2021 | 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 net of taxes
Pension and retirement plans | Ps. 244 | Ps. — | Ps. — | Ps. 197 | Ps. 1,038
Seniority premiums | 84 | — | — | 51 | 202
Total | Ps. 328 | Ps. — | Ps. — | Ps. 248 | Ps. 1,240

Remeasurements of the net defined benefit liability recognized in other comprehensive income are as follows (amounts are net of tax):

| 2023 | 2022 | 2021
Amount accumulated in other comprehensive income as of the beginning of the periods | Ps. 912 | Ps. 1,240 | Ps. 1,173
Recognized during the year (obligation liability and plan assets) | 101 | 124 | 680
Actuarial (gains) losses arising from changes in financial assumptions | (148) | (375) | (550)
Actuarial gains arising from changes in demographic assumptions | (5) | 1 | —
Foreign exchange rate valuation (gain) loss | (101) | (78) | 9
Adjustment from employees transferred | — | — | (72)
Effect on settlement | (12) | — | —
Amount accumulated in other comprehensive income as of the end of the period, net of tax | Ps. 747 | Ps. 912 | Ps. 1,240

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.
F-50

16.5 Changes in the balance of the defined benefit obligation for post-employment and other non-current employee benefits

| 2023 | 2022 | 2021
Pension and Retirement Plans: |  |  |
Balance at beginning of year | Ps. 4,199 | Ps. 4,515 | Ps. 4,311
Current service cost | 233 |  | 246 |  | 244 |
Effect of curtailment | (144) |  | (86) |  | — |
Interest expense | 346 |  | 317 |  | 291 |
Actuarial (gains) or losses | (214) |  | (355) |  | 5 |
Foreign exchange (gain) loss | (151) |  | (134) |  | 18 |
Benefits paid | (378) |  | (355) |  | (364) |
Past service cost | 137 |  | 47 |  | 10 |
Business acquisitions | — |  | 4 |  | — |
Balance at end of year | Ps. 4,028 | Ps. 4,199 | Ps. 4,515
Seniority Premiums: |  |  |
Balance at beginning of year | Ps. 926 | Ps. 978 | Ps. 865
Current service cost | 87 |  | 94 |  | 84 |
Effect of curtailment | (14) |  | (9) |  | — |
Interest expense | 88 |  | 76 |  | 62 |
Actuarial (gains) or losses | 29 |  | (97) |  | 74 |
Benefits paid | (166) |  | (128) |  | (107) |
Past service cost | 8 |  | 6 |  | — |
Business acquisitions | — |  | 6 |  | — |
Balance at end of year | Ps. 958 | Ps. 926 | Ps. 978

16.6 Changes in the balance of trust assets

| 2023 | 2022 | 2021
Pension and retirement plans: |  |  |
Balance at beginning of year | Ps. 1,288 | Ps. 1,234 | Ps. 1,201
Actual return on trust assets | 41 | 50 | 33
Foreign exchange gain | (4) | — | —
Life annuities | 9 |  | — |  | — |
Benefits paid | — | 4 | —
Plan amendments | Ps. (31) | Ps. — | Ps. —
Balance at end of year | Ps. 1,303 | Ps. 1,288 | Ps. 1,234
Seniority premiums |  |  |
Balance at beginning of year | Ps. 128 | Ps. 133 | Ps. 137
Actual return on trust assets | (5) | (5) | (4)
Balance at end of year | Ps. 123 | Ps. 128 | Ps. 133

As a result of the Company’s investments in life annuities plans, management does not expect the Company will need to make material contributions to the trust assets in order to meet its future obligations.
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16.7 Variation in assumptions
The Company considers that the relevant actuarial assumptions that are subject to sensitivity are the discount rate and the salary increase rate because they have the most significant impact:
• 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.
The following table presents the impact in absolute terms of a variation of 1.0% in the assumptions on the net defined benefit liability associated with the Company’s defined benefit plans for post-employment and other non-current employee benefits. The sensitivity of this 1.0% on the significant actuarial assumptions is based on projected long-term discount rates for Mexico and yield curve projections of long-term Mexican government bonds - CETES:

+1.0% |  |  | Consolidated income statement | Accumulated OCI
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset) | 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. 211 | Ps. 144 | Ps. (118) | Ps. 173 | Ps. 634
Seniority premiums | Ps. 80 | Ps. 7 | Ps. (6) | Ps. 67 | Ps. 117
Total | Ps. 291 | Ps. 151 | Ps. (124) | Ps. 240 | Ps. 751
Expected salary increase | 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. 253 | Ps. 171 | Ps. (134) | Ps. 249 | Ps. 681
Seniority premiums | Ps. 93 | Ps. 9 | Ps. (8) | Ps. 82 | Ps. 143
Total | Ps. 346 | Ps. 180 | Ps. (142) | Ps. 331 | Ps. 824

- 1.0% |  |  | Consolidated income statement | Accumulated OCI
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset) | 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. 250 | Ps. 167 | Ps. (136) | Ps. 261 | Ps. 692
Seniority premiums | Ps. 94 | Ps. 8 | Ps. (7) | Ps. 85 | Ps. 137
Total | Ps. 344 | Ps. 175 | Ps. (143) | Ps. 346 | Ps. 829
Expected salary increase | 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. 209 | Ps. 139 | Ps. (116) | Ps. 187 | Ps. 672
Seniority premiums | Ps. 80 | Ps. 7 | Ps. (6) | Ps. 69 | Ps. 115
Total | Ps. 289 | Ps. 146 | Ps. (122) | Ps. 256 | Ps. 787

16.8 Employee benefits expense
On April 23, 2021, Mexican government enacted changes to several labor laws in order to regulate labor outsourcing. For the year ended December 31, 2023 t he amount recorded to expense was of Ps. 1,059 compared to Ps.1,069 in 2022.
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For the years ended December 31, 2023, 2022 and 2021, employee benefits expenses recognized in the consolidated income statements are as follows:

| 2023 | 2022 | 2021
Included in cost of goods sold: |  |  |
Wages and salaries | Ps. 5,204 | Ps. 4,956 | Ps. 4,301
Social security costs | 1,628 | 1,522 | 1,359
Employee profit sharing | 139 | 145 | 57
Pension and seniority premium costs (See Note 16.4) | 24 | 2 | 52
Share-based payment expense (See Note 17.2) | 8 | 6 | 19
Included in selling and distribution expenses: |  |  |
Wages and salaries | 20,090 | 18,403 | 16,627
Social security costs | 5,912 | 5,272 | 4,787
Employee profit sharing | 756 | 862 | 959
Pension and seniority premium costs (See Note 16.4) | 232 | 250 | 235
Share-based payment expense (See Note 17.2) |  | — | 32
Included in administrative expenses: |  |  |
Wages and salaries | 3,090 | 3,250 | 2,788
Social security costs | 750 | 710 | 581
Employee profit sharing | 164 | 62 | 52
Pension and seniority premium costs (See Note 16.4) | 95 | 47 | 41
Share-based payment expense (See Note 17.2) | 311 | 320 | 225
Total employee benefits expense | Ps. 38,403 | Ps. 35,807 | Ps. 32,115

Note 17. Bonus Programs
17.1 Quantitative and qualitative objectives
The bonus program for executives is based on achieving certain goals established annually by management and directors, which include quantitative and qualitative objectives and special projects.
Until 2022, the quantitative objectives were represented approximately 50% of the bonus and are based on the Economic Value Added (“EVA”) methodology. For 2023 onwards, 50% of the annual bonus is evaluated based on certain annual targets established by the Company regarding earnings before interest and taxes (“EBIT”) and working capital. The objective established for the executives at each entity is based on a combination of the EBIT and working capital generated by the entity and by the Company and the EBIT and working capital generated by the Company’s parent FEMSA. 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 amounts are 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 incentive plan target is expressed in months of salary, and the final amount payable is computed based on a percentage of achievement of the goals established every year. The bonuses are recognized in the consolidated income statement in the year earned and are paid in cash the following year. During the years ended December 31, 2023, 2022 and 2021 the bonus expense recorded amounted to Ps. 964, Ps. 1,527 and Ps. 856, respectively.
17.2 Share-based payment bonus plan
The Company has a stock incentive plan for the benefit of its senior executives. This plan uses the EVA as its main evaluation metric. Under the EVA stock incentive plan, eligible executives are entitled to receive a special annual bonus (fixed amount), to purchase FEMSA and Coca-Cola FEMSA shares or options, based on the executive’s responsibility in the organization, their business’ EVA result achieved, and their individual performance. The acquired shares or options are deposited in a trust, and the executives may access them one year after they are vested at 33% per year. Fifty percent of Coca-Cola FEMSA’s annual executive bonus is to be used to purchase FEMSA shares or options and the remaining 50% to purchase Coca-Cola FEMSA shares or options. During the years ended December 31, 2023, 2022 and 2021, no stock options were granted to executives.
The special bonus is granted to the eligible executive on an annual basis and after withholding applicable taxes. The Company contributes the individual executive’s special bonus (after taxes) in cash to the Administrative Trust (which is controlled and
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consolidated by FEMSA), which then uses the funds to purchase FEMSA and Coca-Cola FEMSA shares (as instructed by the Corporate Practices Committee), which are then allocated to such executive.
Coca-Cola FEMSA accounts for its share-based payment bonus plan as an equity-settled share-based payment transaction, since it is its parent company, FEMSA, who ultimately grants and settles with shares these obligations due to executives.
At December 31, 2023 the shares granted under the Company’s executive incentive plans are as follows:

| Number of shares |
Incentive Plan | FEMSA | KOF | Vesting period
2019 | 312,006 | 457,338 | 2020-2022
2020 | 666,281 | 956,926 | 2021-2023
2021 | 780,524 | 1,197,820 | 2022-2024
2022 | 856,664 | 1,289,204 | 2023-2025
2023 | 926,288 | 1,134,810 | 2024-2026
Total | 3,541,763 | 5,036,098 |

For the years ended December 31, 2023, 2022 and 2021, the total expense recognized for the period arising from share-based payment transactions, using the grant date model, was of Ps. 319 Ps. 326 and Ps. 276, respectively.
As of December 31, 2023 and 2022, the asset related to the excess of the contributions paid by the Company in comparison to the equity contribution from FEMSA is recorded by the Company in its consolidated statements of financial position amounted to Ps. 534 and Ps. 360 respectively, these amounts have been fully contributed to the trust. see Note 13.
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Note 18. Bank Loans and Notes Payables

Expressed in millions of mexican pesos. (1) | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 and following years | Carrying value as of December 31, 2023 | Fair value as of December 31, 2023 | Carrying value as of December 31, 2022
Short- term debt:
Fixed rate debt: |  |  |  |  |  |  |  |  |
Argentine pesos |  |  |  |  |  |  |  |  |
Bank loans | 73 | — | — | — | — | — | 73 | 73 | —
Interest rate | 130.00% | — | — | — | — | — | 130.00% | — | —
Euros |  |  |  |  |  |  |  |  |
Bank loans | 15 | — | — | — | — | — | 15 | 15 | —
Interest rate | 17.60% | — | — | — | — | — | 17.60% | — | —
Subtotal | 88 | — | — | — | — | — | 88 | 88 | —
Short- term debt | 88 | — | — | — | — | — | 88 | 88 | —
Long term debt:
Fixed rate debt: |  |  |  |  |  |  |  |  |
U.S. Dollar |  |  |  |  |  |  |  |  |
Yankee bonds (2) | — | — | — | — | — | 36,352 | 36,352 | 33,719 | 41,429
Interest rate | — | — | — | — | — | 3.05% | 3.05% | — | 3.06%
Bank loans | 25 | 115 | — | — | — | — | 140 | 140 | 92
Interest rate | 6.81% | 6.73% | — | — | — | — | 6.74% | — | 6.81%
Mexican pesos |  |  |  |  |  |  |  |  |
Senior notes | — | — | — | 8,495 | 9,960 | 5,491 | 23,946 | 22,439 | 31,438
Interest rate | — | — | — | 7.87% | 7.36% | 9.95% | 8.13% | — | 7.50%
Brazilian reais |  |  |  |  |  |  |  |  |
Bank loans | 21 | 0 | — | — | — | — | 21 | 21 | 56
Interest rate | 6.90% | 6.70% | — | — | — | — | 6.90% | — | 6.96%
Uruguayan pesos |  |  |  |  |  |  |  |  |
Bank loans | — | — | — | — | — | — | — | — | 976
Interest rate | — | — | — | — | — | — | — | — | 6.27%
Subtotal | 46 | 115 | — | 8,495 | 9,960 | 41,843 | 60,459 | 56,319 | 73,991
Variable rate debt: |  |  |  |  |  |  |  |  |
Mexican pesos |  |  |  |  |  |  |  |  |

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Expressed in millions of mexican pesos. (1) | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 and following years | Carrying value as of December 31, 2023 | Fair value as of December 31, 2023 | Carrying value as of December 31, 2022
Senior notes | — | 1,728 | 2,925 | — | — | — | 4,653 | 4,650 | 4,650
Interest rate | — | 11.59% | 11.55% | — | — | — | 11.57% | — | 10.41%
Brazilian reais |  |  |  |  |  |  |  |  |
Bank loans | 6 | 6 | 2 | — | — | — | 14 | 15 | 28
Interest rate | 8.81% | 8.94% | 8.94% | — | — | — | 8.88% | — | 9.77%
Subtotal | 6 | 1,734 | 2,927 | — | — | — | 4,667 | 4,666 | 4,678
Long term debt | 52 | 1,849 | 2,927 | 8,495 | 9,960 | 41,843 | 65,126 | 60,985 | 78,669
Current portion of long term debt | 52 | — | — | — | — | — | 52 | — | 8,524
Long- term debt | — | 1,849 | 2,927 | 8,495 | 9,960 | 41,843 | 65,074 | 60,985 | 70,145

(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 the Company 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) in financial instruments” in the period in which they occur. Since 2022, the Company is applying fair value hedging to the hedged portion of the Senior Notes of US$ 705, which are linked to an interest rate swap. The hedging gain or loss will adjust the carrying amount of the hedged item and will be recognized in the consolidated income statements under “market value gain (loss) in financial instruments”. For the years ended on December 31, 2023, and 2022, the Company recorded in the consolidated income statements a loss of Ps. 371 and a gain of Ps. 1,647, respectively. As of December 31, 2023, and 2022 the carrying value of the Senior Note of US$ 705 is being reduced by an amount of Ps. 1,277 and 1,647 respectively, stemming from the impacts of fair value hedging.
The fair value of bank loans is calculated based on the discounted value of contractual cash flows whereby the discount rate is estimated using rates currently offered for 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.
For the years ended December 31, 2023, 2022 and 2021, the interest expense related to the bank loans and notes payable is comprised as follows and included in the consolidated income statement under the interest expense caption:

| 2023 | 2022 | 2021
Interest on debts and borrowings | Ps. 4,215 | Ps. 4,104 | Ps. 4,544
Finance charges for employee benefits (See Note 16.4) | 297 | 286 | 248
Derivative instruments (Interest) | 2,086 | 1,706 | 1,097
Interest expense for leases (See Note 10) | 278 | 132 | 101
Finance operating charges | 226 | 272 | 202
| Ps. 7,102 | Ps. 6,500 | Ps. 6,192

The Company has the following debt bonds: a) registered with the Mexican stock exchange: i) Ps. 8,500 (nominal amount) with a maturity date in 2027 and fixed interest rate of 7.87%, ii) Ps. 1,727 (nominal amount) with a maturity date in 2025 and floating interest rate of Equilibrium Interbank Interest Rate (TIIE) + 0.08%, iii) Ps. 3,000 (nominal
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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% and b) registered with the SEC: i) Senior notes of US. $ 1,041 with interest at a fixed rate of 2.75% and maturity date 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 all of which are guaranteed by the Company´s 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. (“Guarantors”).
In September 2021, the Company issued the first SLB in the Mexican Market on a dual-tranche transaction for an amount of Ps. 9,400; such bonds were used to prepay bank loans in Mexico with maturity dates in 2025 and 2026. 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 (2024 and 2026), the interest rate on the bonds will increase by 25 basis points. As of December 31, 2023 the Company continues monitoring and expects to meet these key performance indicators,
During 2022, the Company 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, the Company 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.
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18.1 Reconciliation of liabilities arising from financing activities.

|  | Cash flows |  | Non-cash impact |
| Carrying Value at December 31, 2022 | Repayments | Proceeds |  | New leases | Others | Fair value in Hedge Instruments | Foreign Exchange movement | Translation Effect | Carrying Value at December 31, 2023
Short-term bank loans | Ps. — | Ps. (1) | Ps. 87 |  |  |  |  | Ps. 24 | Ps. (22) | Ps. 88
Total short-term from financing activities | Ps. — | Ps. (1) | Ps. 87 |  | Ps. — | Ps. — | Ps. — | Ps. 24 | Ps. (22) | Ps. 88
Long-term bank loans | 1,152 | (900) | 64 |  |  |  |  | 152 | (293) | 175
Long-term notes payable | 77,517 | (7,500) | — |  |  | 78 | 371 | (5,515) |  | 64,951
Total long-term from financing activities | Ps. 78,669 | Ps. (8,400) | Ps. 64 |  | Ps. — | Ps. 78 | Ps. 371 | Ps. (5,363) | Ps. (293) | Ps. 65,126
Lease liabilities | Ps. 2,135 | Ps. (690) | Ps. — |  | Ps. 586 | Ps. 535 | Ps. — | Ps. (20) | Ps. (28) | Ps. 2,521
Total from financing activities | Ps. 80,804 | Ps. (9,091) | Ps. 151 |  | Ps. 586 | Ps. 613 | Ps. 371 | Ps. (5,359) | Ps. (343) | Ps. 67,735

|  | Cash flows |  | Non-cash impact |
| Carrying Value at December 31, 2021 | Repayments | Proceeds |  | New leases | Others | Fair value in Hedge Instruments | Foreign Exchange movement | Translation Effect | Carrying Value at December 31, 2022
Short-term bank loans | Ps. 645 | Ps. (521) | Ps. — |  | Ps. — | Ps. — | Ps. — | Ps. — | Ps. (124) | Ps. —
Total short-term from financing activities | Ps. 645 | Ps. (521) | Ps. — |  | Ps. — | Ps. — | Ps. — | Ps. — | Ps. (124) | Ps. —
Long-term bank loans | 1,284 | (314) | 89 |  | — | — | — | 17 | 76 | 1,152
Long-term notes payable | 83,853 | (7,597) | 6,000 |  | — | (272) | (1,647) | (2,820) | — | 77,517
Total long-term from financing activities | Ps.85,137 | Ps.(7,911) | Ps.6,089 |  | Ps.— | Ps.(272) | Ps.(1,647) | Ps.(2,803) | Ps.76 | Ps.78,669
Lease liabilities | Ps. 1,505 | Ps. (631) | Ps. — |  | Ps. 1,083 | Ps. 180 | Ps. — | Ps. 17 | Ps. (19) | Ps. 2,135
Total from financing activities | Ps. 87,287 | Ps. (9,063) | Ps. 6,089 |  | Ps. 1,083 | Ps. (92) | Ps. (1,647) | Ps. (2,786) | Ps. (67) | Ps. 80,804

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Note 19. Other Income and Expenses

| 2023 | 2022 | 2021
Other income: |  |  |
Gain on sale of long-lived assets | Ps. 178 | Ps. 324 | Ps. 259
Cancellation of contingencies (See Note 25.6) | 1,079 | 641 | 745
Foreign exchange gain related to operating activities | 339 | 105 | —
Other | 385 | 403 | 498
| Ps. 1,981 | Ps. 1,473 | Ps. 1,502
Other expenses: |  |  |
Provisions for contingencies (See Note 25.6) | Ps. 1,306 | Ps. 1,146 | Ps. 938
Loss on the retirement of long-lived assets | 186 | 177 | 199
Loss on sale of long-lived assets | 84 | 74 | 201
Loss on the retirement of intangible assets | 1 | — | 3
Impairment on equity investments (See Note 9) | 143 | — | 250
Severance payments | 202 | 224 | 233
Donations | 345 | 302 | 258
Foreign exchange losses related to operating activities | — | — | 61
Other | 986 | 533 | 166
| Ps. 3,253 | Ps. 2,456 | Ps. 2,309

Note 20. Financial Instruments
Fair Value of Financial Instruments
The Company measures the fair value of its financial assets and liabilities using level 1 and 2 inputs. The following table summarizes the Company’s financial assets and liabilities measured at fair value, as of December 31, 2023 and 2022:

| 2023 | 2022
| Level 1 | Level 2 | Level 1 | Level 2
Derivative financial instruments asset (See Note 8.2, Note 13.2) | Ps. 228 | Ps. 131 | Ps. 351 | Ps. 2,907
Derivative financial instruments liability (See Note 25.1, Note 25.3) | 202 | 5,146 | 64 | 3,565
Trust assets of labor obligations (See Note 16.2) | 1,426 |  | 1,416 |

Impact of hedging on equity
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Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:

| Foreign exchange forward contracts | Cross-currency swaps | Commodity price contracts | Total holders of the parent | Non-controlling interest | Total
As at December 31, 2021 | Ps. 20 | Ps. 905 | Ps. 299 | Ps. 1,224 | Ps. 90 | Ps. 1,314
Financial instruments – purchases | (470) | 79 | (49) | (440) | (37) | (477)
Change in fair value of financial instruments recognized in OCI | (442) | (2,331) | 282 | (2,491) | (185) | (2,676)
Amount reclassified from OCI to profit or loss | 526 | — | (613) | (87) | (33) | (120)
Foreign currency revaluation of the net foreign operations | — | 1,086 | — | 1,086 | 97 | 1,183
Effects of changes in foreign exchange rates | 4 | 3 | 2 | 9 | 1 | 10
Income tax effect | 96 | 358 | 125 | 579 | 53 | 632
As at December 31, 2022 | Ps. (266) | Ps. 100 | Ps. 46 | Ps. (120) | Ps. (14) | Ps. (134)
Financial instruments – purchases | (502) | (228) | (124) | (854) | (55) | (909)
Change in fair value of financial instruments recognized in OCI | (1,454) | (2,667) | 271 | (3,850) | (148) | (3,998)
Amount reclassified from OCI to profit or loss | 1,807 | — | (363) | 1,444 | (16) | 1,428
Foreign currency revaluation of the net foreign operations | — | 2,703 | — | 2,703 | 150 | 2,853
Effects of changes in foreign exchange rates | 5 | (1) | (2) | 2 | (1) | 1
Income tax effect | 78 | 64 | 70 | 212 | 24 | 236
As at December 31, 2023 | Ps. (332) | Ps. (29) | Ps. (102) | Ps. (463) | Ps. (60) | Ps. (523)

20.1 Forward agreements to purchase foreign currency
The Company enters into forward agreements to reduce its exposure to the risk of exchange rate fluctuations of the Mexican peso and other currencies.
The forward agreements have been designated as cash flow hedges and 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. Changes in the fair value of these forwards agreements are recorded as part of “cumulative other comprehensive income”. Net gain or loss on expired forward agreements is recognized as part of foreign exchange or cost of goods sold, depending on the nature of the hedge in the consolidated income statements.
Net changes in the fair value of forward agreements that do not meet the criteria for hedge accounting are recorded in the consolidated income statements under the caption “market value gain (loss) on financial instruments”.
At December 31, 2023, the Company had the following outstanding forward agreements to purchase foreign currency:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2024 | Ps. 10,700 | Ps. (550) | Ps. 36

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

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2023 | Ps. 10,778 | Ps. (397) | Ps. 61

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20.2 Cross-currency swaps
The Company has cross-currency swaps contracts to reduce the risk of interest rate and exchange rate fluctuation in its debt denominated in USD. Cross-currency swaps are designated as hedge instruments when the Company changes the debt profile to the functional currency to reduce the exchange rate fluctuation risk.
The fair value is estimated using market prices that would apply to terminate the contracts at the end of the period. For accounting purposes, the cross-currency swaps are recorded as either, cash flow hedges or fair value hedges. The exchange rate fluctuations of the notional amount of those cross-currency swaps and the accrued interest are recorded in the consolidated income statements. The fair value changes excluding exchange rate fluctuation and accrued interest, when designated as cash flow hedges, are recorded in the consolidated statement of financial position in “cumulative other comprehensive income”. If the swaps are designated as fair value hedges the changes, are recorded in the consolidated income statements in “market value gain (loss) on financial instruments”.
At December 31, 2023, the Company had the following outstanding cross-currency swap agreements:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2026 | Ps. 5,210 | Ps. (984) | Ps. 96
2027 | 7,602 | (1,377) |
2030 | 13,633 | (803) |
2032 | 507 | (51) |

At December 31, 2022, the Company had the following outstanding cross-currency swap agreements:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2023 | Ps. 11,381 | Ps. — | Ps. 2,278
2026 | 5,971 | (918) | 364
2027 | 8,713 | (418) | 95
2030 | 3,679 | (104) | 110

20.3 Interest Rate swaps
The Company has entered into various interest rate swaps associated with its debt denominated in USD. These interest rate swaps are designated as fair value hedges and the fair value changes are recorded in the consolidated income statement in the “market value gain (loss) on financial instruments”. Since 2022, the Company is applying fair value hedging to the hedged portion of the Senior Notes of US$ 705, which are linked to an interest rate swap. The hedging gain or loss will adjust the carrying amount of the hedged item and will be recognized in the consolidated income statements under “market value gain (loss) in financial instruments”. For the years ended on December 31, 2023, and 2022, the Company recorded in the consolidated income statements a loss of Ps. 371 and a gain of Ps. 1,647, respectively. A s of December 31, 2023, and 2022 the carrying value of the Senior Note of US$ 705 is being reduced by an amount of Ps. 1,277 and 1,647 respectively, stemming from the impacts of fair value hedging.
At December 31, 2023, the Company had the following outstanding interest rate swap agreements:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2032 | Ps. 8,447 | Ps. (1,381) | Ps. —

At December 31, 2022, the Company had the following outstanding interest rate swap agreements:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2032 | Ps. 9,681 | Ps. (1,728) | Ps. —

20.4 Commodity price contracts
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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 prevailing market conditions to terminate the contracts at the end of the period. These instruments are designated as cash flow hedges and the changes in their fair value are recorded as part of “cumulative other comprehensive income”.
The fair value of expired or sold commodity contracts is recorded in cost of goods sold with the hedged raw materials.
As of December 31, 2023, the Company had the following aluminum price contracts:

|  | Fair Value
Maturity Date | Notional Amount | (Liability) | Asset
2024 | Ps. 647 | Ps. — | Ps. 21

As of December 31, 2023, the Company had the following sugar price contracts:

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

As of December 31, 2022, the Company had the following aluminum price contracts:

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

As of December 31, 2022, the Company had the following sugar price contracts:

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

20.5 Sale 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 it 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 fair value using an income approach. As of December 31, 2023 and 2022, the financial assets recognized in the consolidated statement of financial position has a total value of Ps. 0 and Ps. 5, respectively.
20.6 Net effects of expired contracts that met hedging criteria

Derivative | Impact in consolidated income statement - Gain (Loss) | 2023 | 2022 | 2021
Cross currency swaps | Interest expense | Ps. (392) | Ps. (1) | Ps. —
Cross currency swaps | Foreign exchange | (747) | (5) | —
Forward agreements to purchase foreign currency | Cost of good sold | (1,834) | (681) | (788)
Commodity Price contracts | Cost of good sold | 430 | 614 | 1,245

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20.7 Net effect of changes in fair value of derivative financial instruments that are designated as a Fair Value Hedge

Derivative | Impact in consolidated income statement | 2023 | 2022 | 2021
Cross currency swaps and interest rate swaps | Market value (loss) on financial instruments | Ps. 141 | Ps. (2,270) | Ps. 80

20.8 Financial Risk management
The Company has exposure to the following financial risks:
•Market risk;
•Interest rate risk;
•Liquidity risk; and
•Credit risk
20.8.1 Market risk
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and commodity prices. The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk, interest rates risk and commodity prices risk including:
• Forward Agreements to Purchase Foreign Currency in order to reduce its exposure to the risk of exchange rate fluctuations.
• Cross-Currency Swaps in order to reduce its exposure to the risk of exchange rate fluctuations and interest rate changes.
• Commodity price contracts in order to reduce its exposure to the risk of fluctuation in the costs of certain raw materials.
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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, which the Company is exposed to as it relates to foreign exchange rates, interest rates and commodity prices, which it considers in its existing hedging strategy:

Forward agreements to purchase U.S. Dollar (MXN/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (11) | % | Ps. (465) |
2022 | (10) | % | (512) |
2021 | (11) | % | (298) | —
Forward agreements to purchase U.S. Dollar (BRL/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (12) | % | Ps. (521) |
2022 | (18) | % | (550) |
2021 | (16) | % | (284) | —
Forward agreements to purchase U.S. Dollar (COP/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (16) | % | Ps. (225) |
2022 | (17) | % | (112) |
2021 | (11) | % | (81) | —
Forward agreements to purchase U.S. Dollar (ARS/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (55) | % | Ps. (140) |
2022 | (3) | % | (10) |
2021 | (1) | % | (3) | —
Forward agreements to purchase U.S. Dollar (UYU/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (5) | % | Ps. (20) |
2022 | (7) | % | (25) |
2021 | (4) | % | (7) | —
Forward agreements to purchase U.S. Dollar (CRC/USD) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (7) | % | Ps. (15) |
2022 | (7) | % | (24) | —
2021 | (3) | % | (10) | —
Cross currency swaps (USD to MXN) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (11) | % | Ps. (1,314) |
2022 | (10) | % | (1,220) |
2021 | (11) | % | (1,645) | —
Cross currency swaps (USD to BRL) | Change in USD rate | Effect on equity | Profit and loss effect
2023 | (12) | % | Ps. (1,683) |
2022 | (18) | % | (2,893) |
2021 | (16) | % | (2,300) | —
Sugar price contracts | Change on sugar Price | Effect on equity | Profit and loss effect
2023 | (29) | % | Ps. (765) |
2022 | (22) | % | (333) |
2021 | (28) | % | (714) | —
Aluminum price contracts | Change on Aluminum price | Effect on equity | Profit and loss effect
2023 | (22) | % | Ps. (147) |
2022 | (35) | % | (189) |
2021 | (24) | % | (39) | —

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20.8.2 Interest rate risk
Interest rate risk is the risk that the expected cash flows 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 ra tes. The risk is managed by the Company by trying to maintain a mix between fixed and variable rate borrowings, and by the use of the different derivative financial instruments. In addition, the Company regularly evaluates its hedging activities according to its interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.
The following disclosures provide a sensitivity analysis of the interest rate risks considered reasonably possible for the following fiscal year, according with its existing floating rate borrowings and derivative financial floating rate instruments at the end of the reporting period:

Interest Rate Risk | Change in rate | Effect on profit or (loss)
2023 | +100 bps | Ps. (187)
2022 | +100 bps | (203)
2021 | +100 bps | (160)

20.8.3 Liquidity risk
The Company’s principal source of liquidity has generally been cash generated from its operations. A significant majority of the Company’s sales are on a cash basis. The Company has traditionally been able to rely on cash generated from operations to fund its capital requirements and its capital expenditures. The Company’s working capital benefits from the fact that most of its sales are made on a cash basis, while it generally pays its suppliers on credit. In recent periods, the Company has mainly used cash generated from operations to fund business acquisitions. The Company has also used a combination of borrowings from Mexican and international banks and public debt issuances in the Mexican and international capital markets to fund business acquisitions.
Ultimate responsibility for liquidity risk management rests with the Company’s Finance Committee, which has established what it believes is an appropriate liquidity risk management framework for the evaluation of the Company’s short-, medium- and long-term funding and liquidity requirements. The Company manages liquidity risk by maintaining what it believes is adequate reserves, and continuously monitoring forecasted and actual cash flows and by maintaining a conservative debt maturity profile.
The Company has access to credit from local and international banking institutions in order to face treasury needs. The Company has the highest rating for Mexican companies (AAA) given by independent rating agencies, allowing the Company to access capital markets in case it needs resources.
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 beneficial or, practicable to remit cash generated in local operations to fund cash requirements in other countries. In the event that cash from operations in such countries would not be enough to fund future working capital requirements and capital expenditures, management may decide, or be required, to fund cash requirements in such countries through local borrowings rather than remitting funds from another country. In the future management may finance the Company´s our 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 strategic transactions. The Company would expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness and capital stock.
See Note 18 for a disclosure of the Company’s maturity dates associated with its non-current financial liabilities as of December 31, 2023.
The following table reflects all contractually fixed and variable payoffs for settlement, repayments and interest resulting from recognized financial liabilities. It includes expected net cash outflows and inflows from derivative financial liabilities (assets) 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 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 without fixed amounts or timing are based on economic conditions (like interest rates and foreign exchange rates) existing at December 31, 2023.
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(In millions of Ps) | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 and thereafter
Notes and bonds | Ps. — | Ps. 1,727 | Ps. 2,925 | Ps. 8,494 | Ps. 9,960 | Ps. 41,845
Loans from banks | 140 | 121 | 2 | — | — | —
Derivatives financial liabilities (assets) | 417 | 72 | 889 | 1,377 | 2,234 | —

The Company generally makes payments associated with its financial liabilities with cash generated from its operations.
20.8.4 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 is spread amongst approved counterparties.
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 6).
The credit risk for liquid funds and derivative financial instruments is limited because the counterparties are highly rated banks as designated by international credit rating agencies.
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 a Credit Support Annex (“CSA”) that establishes margin requirements. As of December 31, 2023 the Company concluded that the maximum exposure to credit risk related with derivative financial instruments is not significant given the high credit rating of its counterparties.
20.10 Cash Flow hedges
The Company determines the existence of an economic relationship between the hedging instruments and the hedged items 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 ineffectiveness 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 expected exposure amount.
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As of December 31, 2023, the Company’s financial instruments used to hedge its exposure to foreign exchange rates, interest rates and commodity risks were as follows:

| Maturity |
| 1-6 months | 6-12 months | More than 12 |
Foreign exchange currency risk |  |  |  |
Foreign exchange currency forward contracts |  |  |  |
Notional amount (in millions of pesos) | 3,045 | 1,781 | — |
Average exchange rate MXN/USD | 18.42 | 18.40 | — |
Notional amount (in millions of pesos) | 2,486 | 1,370 | — |
Average exchange rate BRL/USD | 5.10 | 5.07 | — |
Notional amount (in millions of pesos) | 757 | 334 | — |
Average exchange rate COP/USD | 4,436 | 4,316 | — |
Notional amount (in millions of pesos) | 150 | — | — |
Average exchange rate ARS/USD | 668.06 | — | — |
Notional amount (in millions of pesos) | 344 | 163 | — |
Average exchange rate UYU/USD | 40.18 | 40.66 | — |
Notional amount (in millions of pesos) | 154 | 117 | — |
Average exchange rate CRC/USD | 558.89 | 556.00 | — |
Notional amount (in millions of pesos) | — | — | — |
Average exchange rate ARS/MXN | — | — | — |
Foreign exchange currency swap contracts |  |  |  |
Notional amount (in millions of pesos) | — | — | 11,944 |
Average exchange rate MXN/USD | — | — | 19.37 |
Notional amount (in millions of pesos) | — | — | 14,022 |
Average exchange rate BRL/USD | — | — | 5.05 |
Notional amount (in millions of pesos) | — | — | 987 |
Average exchange rate COP/USD | — | — | 3,550 |
Interest rate risk |  |  |  |
Interest rate swaps |  |  |  |
Notional amount (in millions of pesos) | — | — | 8,447 |
Average interest rate | — | — | 0.16 | % |
Commodities risk |  |  |  |
Aluminum (in millions of pesos) | 298 | 349 | — |
Average price (USD/Ton) | 2,304.43 | 2,363.73 | — |
Sugar (in millions of pesos) | 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, interest rates and commodity risks were as follows:

| Maturity
| 1-6 months | 6-12 months | More than 12
Foreign exchange currency risk |  |  |
Foreign exchange currency forward contracts |  |  |
Notional amount (in millions of pesos) | 3,405 | 2,474 | —
Average exchange rate MXN/USD | 20.71 | 20.86 | —
Notional amount (in millions of pesos) | 1,857 | 746 | —
Average exchange rate BRL/USD | 5.34 | 5.55 | —
Notional amount (in millions of pesos) | 407 | 207 | —
Average exchange rate COP/USD | 4,502.00 | 4,977.00 | —
Notional amount (in millions of pesos) | 437 | — | —
Average exchange rate ARS/USD | 231.40 | — | —
Notional amount (in millions of pesos) | 299 | 139 | —
Average exchange rate UYU/USD | 42.51 | 42.74 | —
Notional amount (in millions of pesos) | 332 | 182 | —
Average exchange rate CRC/USD | 686.50 | 664.50 | —
Notional amount (in millions of pesos) | 293 | — | —
Average exchange rate ARS/MXN | 10.57 | — | —
Foreign exchange currency swap contracts |  |  |
Notional amount (in millions of pesos) | — | 1,743 | 10,455
Average exchange rate MXN/USD | — | 19.08 | 19.84
Notional amount (in millions of pesos) | — | 9,294 | 6,777
Average exchange rate BRL/USD | — | 4.00 | 5.28
Notional amount (in millions of pesos) | 345 | — | 1,131
Average exchange rate COP/USD | 3,926.00 | — | 3,550.00
Interest rate risk |  |  |
Interest rate swaps |  |  |
Notional amount (in millions of pesos) | — | — | 9,681
Average interest rate | — |  | — |  | 0.16 | %
Commodities risk |  |  |
Aluminum (in millions of pesos) | 294 | 368 | —
Average price (USD/Ton) | 2,483.00 | 2,480.00 | —
Sugar (in millions of pesos) | 1,058 | 631 | 468
Average price (USD cent/Lb) | 17.62 | 17.08 | 17.14

Note 21. Non-Controlling Interest in Consolidated Subsidiaries
An analysis of Coca-Cola FEMSA’s non-controlling interest in its consolidated subsidiaries as of December 31, 2023, 2022 and 2021 is as follows:

| 2023 | 2022 | 2021
Mexico | Ps. 5,459 | Ps. 5,337 | Ps. 5,200
Colombia | 80 | 16 | 19
Brazil | 1,141 | 1,138 | 803
| Ps. 6,680 | Ps. 6,491 | Ps. 6,022

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Non-controlling interests in Mexico primarily represent the individual results of a Mexican holding company Kristine Overseas, S.A.P.I. de C.V. This entity also has non-controlling stakes in certain Brazilian subsidiaries.
The changes in Coca-Cola FEMSA’s non-controlling interest were as follows:

| 2023 | 2022 | 2021
Balance at beginning of the period | Ps. 6,491 | Ps. 6,022 | Ps. 5,583
Net income of non-controlling interest | 690 | 592 | 623
Exchange differences on translation of foreign operations | (365) | 37 | (210)
Valuation of the effective portion of derivative financial instruments, net of taxes | (46) | (104) | 87
Dividends paid | (90) | (56) | (61)
Balance at end of the period | Ps. 6,680 | Ps. 6,491 | Ps. 6,022

Note 22. Equity
22.1 Equity accounts
As of December 31, 2023 and 2022, the common stock of Coca-Cola FEMSA is represented by 16,806,658,096 common shares, with no par value. Fixed capital stock is Ps. 934 (nominal value) and variable capital is unlimited.
The characteristics of the common shares are as follows:
• Series “A” and series “D” shares are ordinary, have all voting rights and are subject to transfer restrictions;
• Series “A” shares may only be acquired by Mexican individuals and may not represent less than 50.1% of the ordinary shares.
• Series “D” shares have no foreign ownership restrictions and may not represent more than 49.9% of the ordinary shares.
• Series “B” and series “L” are free of transference jointly as long as they are listed as linked units. In case the related units are unlinked, the types B shares and the types L share will each be free transfer.
The capital stock of the Company is as follows:

Series of shares | Shareholders | Outstanding shares | % of the capital stock | % of ordinary shares with full voting rights
A | Wholly-owned subsidiary of Fomento Económico Mexicano, S.A.B. de C.V. | 7,936,628,152 |  | 47.22% | 55.97%
D | Wholly-owned subsidiaries of The Coca-Cola Company | 4,668,365,424 |  | 27.78% | 32.92%
B | Public float | 1,575,624,195 |  | 9.38% | 11.11%
L | Public float | 2,626,040,325 |  | 15.63% | 0%
Total |  | 16,806,658,096 |  | 100.00% | 100.00%

As of December 31, 2023, 2022 and 2021, the number of each share series representing Coca-Cola FEMSA’s common stock is comprised as follows:

| Outstanding Shares |  |
Series of shares | 2023 | 2022 | 2021 |  |
A | 7,936,628,152 |  | 7,936,628,152 |  | 7,936,628,152 |  |  |
D | 4,668,365,424 |  | 4,668,365,424 |  | 4,668,365,424 |  |  |
B | 1,575,624,195 |  | 1,575,624,195 |  | 1,575,624,195 |  |  |
L | 2,626,040,325 |  | 2,626,040,325 |  | 2,626,040,325 |  |  |
| 16,806,658,096 |  | 16,806,658,096 |  | 16,806,658,096 |  |  |

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The net income of the Company is subject to the legal requirement that 5% thereof be transferred to a legal reserve until such reserve amounts to 20% of common stock at nominal value. This reserve may not be distributed to shareholders during the existence of the Company. As of December 31, 2023, 2022 and 2021, this reserve was Ps.412, Ps.412 and Ps.412, respectively, and included in retained earnings.
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 for 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. 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 Company’s consolidated balances of CUFIN at December 31, 2023, that are not subject to withholding tax, amounted to Ps. 7,925 .
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 (1) | 2023 | 2022 | 2021
A | 5,754 |  | 5,387 |  | 5,000 |
D | 3,385 |  | 3,169 |  | 2,941 |
L | 1,904 |  | 1,782 |  | 1,654 |
B | 1,142 |  | 1,069 |  | 993 |
| 12,185 |  | 11,407 |  | 10,588 |

(1) At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 27, 2023, the shareholders declared a dividend of Ps. 12,185 that was paid on May 3, 2023 and November 3, 2023. This represents a dividend of Ps.0.7250 per share.
Under Mexican income tax law, dividends, either in cash or in kind, paid to individuals that are Mexican residents, and to individuals and companies that are non-Mexican residents, on the Company´s shares, including the Series L shares and the Series B shares underlying our units, including units represented by ADSs, are subject to a 10.0% Mexican withholding tax, or a lower rate if covered by a tax treaty. Profits that were earned and subject to income tax before January 1, 2014 are exempt from this withholding tax. For 2022 and onwards most of the dividends will correspond to income tax earned after January 1, 2014 therefore will be subject to withholding tax. There were no withholding taxes associated with the payment of dividends in 2021 and 2020 by the Company to its shareholders.
22.2 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 balances in order 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 2023 and 2022.
The Company is not subject to any externally imposed capital requirements, other than the legal reserve (see Note 22.1).
The Company's Finance and Planning Committee reviews 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 nationally and internationally, currently rated AAA and A/A3/A- respectively, which requires us to comply, among others, with the financial metrics that each rating agency considers. As a result, prior to entering new business ventures, acquisitions or divestitures, management evaluates the impact that these transactions can have on its credit rating.
Note 23. 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 equity holders of the parent by the weighted average number of shares outstanding during the period plus the weighted average number of shares for the effects of dilutive potential shares.
Earnings amounts per share type are as follows:

| 2023 |
| Per series | Per series | Per series | Per series |
| "A" shares | "D" shares | "B" shares | "L" shares | Total
Consolidated net Income | 9,551 | 5,618 | 1,896 | 3,161 | 20,226
Consolidated net income attributable to equity holders of the parent | 9,225 | 5,426 | 1,831 | 3,054 | 19,536
Weighted average number of shares for basic earnings per share (millions of shares) | 7,937 | 4,668 | 1,576 | 2,626 | 16,807
Earnings per share |  |  |  |  | 1.16
| 2022 |
| Per series | Per series | Per series | Per series |
| "A" shares | "D" shares | "B" shares | "L" shares | Total
Consolidated net Income | Ps. 9,268 | Ps. 5,451 | Ps. 1,840 | Ps. 3,067 | Ps. 19,626
Consolidated net income attributable to equity holders of the parent | 8,989 | 5,287 | 1,784 | 2,974 | 19,034
Weighted average number of shares for basic earnings per share (millions of shares) | 7,937 | 4,668 | 1,576 | 2,626 | 16,807
Earnings per share |  |  |  |  | 1.13
| 2021 |
| Per series | Per series | Per series | Per series |
| "A" shares | "D" shares | "B" shares | "L" shares | Total
Consolidated net Income | Ps. 7,712 | Ps. 4,536 | Ps. 1,531 | Ps. 2,552 | Ps. 16,331
Consolidated net income attributable to equity holders of the parent | 7,418 | 4,363 | 1,473 | 2,454 | 15,708
Weighted average number of shares for basic earnings per share (millions of shares) | 7,937 | 4,668 | 1,576 | 2,626 | 16,807
Earnings per share |  |  |  |  | 0.93

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Note 24. Income Taxes
24.1 Income Tax
The breakdown of the income tax expense by Mexico and Foreign countries for the years ended December 31, 2023, 2022 and 2021, is as follows:

| 2023 | 2022 | 2021
Current tax expense: |  |  |
Current year | Ps. 7,604 | Ps. 5,658 | Ps. 4,259
Deferred tax expense: |  |  |
Origination and reversal of temporary differences | (44) | 860 | 2,795
(Benefit) utilization of tax losses recognized | 1,221 | 29 | (445)
Total deferred tax income expense | 1,177 | 889 | 2,350
Total income tax expense in consolidated net income | Ps. 8,781 | Ps. 6,547 | Ps. 6,609
2023 | Mexico | Foreign | Total
Current tax expense: |  |  |
Current year | Ps. 5,474 | Ps. 2,130 | Ps. 7,604
Deferred tax expense: |  |  |
Origination and reversal of temporary differences | (322) | 278 | (44)
Utilization (benefit) of tax losses recognized | 238 | 983 | 1,221
Total deferred tax | (84) | 1,261 | 1,177
Total income tax expense in consolidated net income | Ps. 5,390 | Ps. 3,391 | Ps. 8,781
2022 | Mexico | Foreign | Total
Current tax expense: |  |  |
Current year | Ps. 3,522 | Ps. 2,136 | Ps. 5,658
Deferred tax expense: |  |  |
Origination and reversal of temporary differences | 197 | 663 | 860
Utilization (benefit) of tax losses recognized | (4) | 33 | 29
Total deferred tax | 193 | 696 | 889
Total income tax expense in consolidated net income | Ps. 3,715 | Ps. 2,832 | Ps. 6,547
2021 | Mexico | Foreign | Total
Current tax expense: |  |  |
Current year | Ps. 3,356 | Ps. 903 | Ps. 4,259
Deferred tax expense: |  |  |
Origination and reversal of temporary differences | 1,659 | 1,136 | 2,795
Utilization (benefit) of tax losses recognized | 356 | (801) | (445)
Total deferred tax | 2,015 | 335 | 2,350
Total income tax expense in consolidated net income | Ps. 5,371 | Ps. 1,238 | Ps. 6,609

Recognized in Consolidated Statement of Other Comprehensive Income (OCI)

Income tax related to items charged or recognized directly in OCI during the year: | 2023 | 2022 | 2021
Unrealized loss (gain) on cash flow hedges | Ps. (236) | Ps. (590) | Ps. 787
Remeasurements of the net defined benefit liability | 24 | 173 | (27)
Total income tax recognized in OCI | Ps. (212) | Ps. (417) | Ps. 760

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Balance of income tax included in Accumulated Other Comprehensive Income (AOCI) as of:

Income tax related to items charged or recognized directly in OCI as of year-end: | 2023 | 2022 | 2021
Unrealized loss (gain) on derivative financial instruments | Ps. (241) | Ps. (13) | Ps. 573
Comprehensive income to be reclassified to profit or loss in subsequent periods | (241) | (13) | 573
Re-measurements of the net defined benefit liability | (153) | (205) | (408)
Balance of income tax in AOCI | Ps. (394) | Ps. (218) | Ps. 165

A reconciliation between effective income tax rate and Mexican domestic statutory tax rate for the years ended December 31, 2023, 2022 and 2021 follows:

| 2023 | 2022 | 2021
Mexican statutory income tax rate | 30 | % | 30 | % | 30 | %
Income tax from prior years | (0.37) | % | 0.19 | % | (0.64) | %
Income (loss) on monetary position for subsidiaries in hyperinflationary economies | 2.03 | % | 1.18 | % | (0.21) | %
Annual inflation tax adjustment | 2.08 | % | 5.63 | % | 6.48 | %
Non-deductible expenses | 1.99 | % | 2.17 | % | 1.82 | %
Income taxed at a rate other than the Mexican statutory rate | 1.49 | % | 1.68 | % | 1.14 | %
Effect of restatement of tax values | (3.50) | % | (4.69) | % | (2.54) | %
Effect of change in statutory rate | (0.60) | % | (0.39) | % | (0.09) | %
Income tax credits (1) | — | % | — | % | (2.69) | %
Tax loss (recognition) (2) | (1.40) | % | (8.50) | % | (3.57) | %
Other | (1.22) | % | (1.89) | % | (0.78) | %
| 30.50 | % | 25.38 | % | 28.92 | %

(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 2021 and 2022, the Company recognized an amount of Ps. (761) and (2,194), respectively, corresponding to favorable effects for deferred tax assets of the Company's subsidiaries, taking into account that there was certainty of recoverability of such deferred tax assets. In addition, in 2023 an effect of Ps. (409) of deferred tax assets was recognized, for which the company also has certainty of recoverability.
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Deferred income tax
An analysis of the temporary differences giving rise to deferred income tax liabilities (assets) is as follows:

| Consolidated Statement of Financial Position as of | Consolidated Income Statement
| 2023 | 2022 | 2023 | 2022 | 2021
Expected credit losses | Ps. (64) | Ps. (95) | Ps. 15 | Ps. (15) | Ps. (34)
Inventories | 53 | 36 | 5 | 18 | (1)
Prepaid expenses | 20 | 24 | (4) | (32) | 29
Property, plant and equipment, net | (1,150) | (1,305) | 314 | (118) | (223)
Other assets | (190) | (257) | 45 | 86 | (28)
Finite useful lived intangible assets | (10) | 1 | 1 | 48 | 69
Indefinite lived intangible assets | 1,509 | 1,311 | 591 | 123 | 165
Post-employment and other non-current employee benefits | (438) | (444) | (2) | 15 | (59)
Derivative financial instruments | 75 | 2 | 73 | (3) | (72)
Contingencies | (921) | (895) | (96) | (23) | 171
Employee profit sharing payable | (533) | (359) | 174 | (85) | (236)
Tax loss carryforwards | (5,726) | (7,205) | 1,221 | 29 | (445)
Tax credits to recover (1) | (726) | (1,067) | 342 | 327 | 1,200
Cumulative other comprehensive income | (394) | (218) | (211) | (417) | 760
Liabilities of amortization of goodwill of business acquisition | 5,574 | 6,117 | (543) | — | 87
Leases Liabilities, net | (43) | (14) | (28) | (37) | (15)
Other | (1,486) | (768) | (720) | 973 | 982
Deferred tax (income) |  |  | Ps. 1,177 | Ps. 889 | Ps. 2,350
Deferred tax, asset | Ps. (7,771) | Ps. (7,975) |  |  |
Deferred tax, liability | 3,321 | 2,839 |  |  |
Deferred income taxes, net | Ps. (4,450) | Ps. (5,136) |  |  |

(1) Corresponds to income tax credits from dividends received from foreign operations to be recovered within the next four years accordingly to the Mexican Income Tax law.
The changes in the balance of the net deferred income tax assets are as follows:

| 2023 | 2022 | 2021
Balance at beginning of the period | Ps. (5,136) | Ps. (5,632) | Ps. (8,669)
Deferred tax provision for the period | 1,177 | 889 | 2,350
Change in the statutory rate | — | (82) | 81
Effects in equity: |  |  |
Unrealized loss (gain) on derivative financial instruments | (236) | (591) | 787
Cumulative translation effect | (320) | 61 | (163)
Remeasurements of the net defined benefit liability | 24 | 173 | (27)
Inflation adjustment | 41 | 46 | 9
Balance at end of the period | Ps. (4,450) | Ps. (5,136) | Ps. (5,632)

The Company has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future. The unrecognized deferred tax liabilities associated with the undistributed profits are as of December 31, 2023: P s.5,792, and December 31, 2022: Ps. 4,149.
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Tax Loss Carryforwards
Some subsidiaries in Mexico, Colombia, 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 loss carryforwards for which a deferred tax asset has been recorded and their corresponding years of expiration are as follows:

| Tax Loss Carryforwards amounts in millions
2029 | 2,702 |
2030 | 3,172 |
2031 | 157 |
2032 | 597 |
2033 and thereafter | 5 |
No expiration (Brazil and Colombia) | 10,924 |
| Ps. 17,557

During 2013, the Company completed certain business acquisitions in Brazil. In connection with these acquisitions the Company recognized certain goodwill balances 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 for which deferred tax assets have recorded, which have no expiration, but their usage is limited to 30% of Brazilian taxable income in any given year. As of December 31, 2023 and 2022 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 | 2021
Balance at beginning of the period | Ps. 22,000 | Ps. 22,129 | Ps. 21,522
Increase (1) | 2,002 | 10,610 | 5,768
Usage of tax losses | (5,685) | (10,706) | (4,558)
Effect of foreign currency exchange rates | (760) | (33) | (603)
Balance at end of the period | Ps. 17,557 | Ps. 22,000 | Ps. 22,129

.
(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 year s
24.2 Recoverable taxes
Recoverable taxes result mainly from higher advanced payments made during the year of income tax during 2023 in México in comparison to current year income tax, and other indirect tax, which will be compensated or recovered in future years.
24.2.1 Exclusion of the State Value added Tax (“ICMS”) on the federal sale taxes (“PIS / COFINS”)
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 formaliti es concluded.
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.
24.3 Tax Reforms
In October 2021, the Organization Economic Cooperation and Development (“OECD”) and the G20 agreed to a Statement related to the “Base erosion and profit shifting” plan based on two Pillars to attend tax challenges that arise from the digital era in the global economy. The Second Pillar, through the “Global Anti-Base Erosion” rules (“GloBe rules”) attempts to establish a taxation system
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that guarantees that Multinational Groups reaching the threshold of 750 million euros of income, pay a minimum tax of 15% in each jurisdiction where they maintain their operations. An additional income tax should be calculated and paid by the “Ultimate Parent Entity (“UPE”) of the group to reach such 15% by entity and by jurisdiction.
According to the analysis of the standard GloBe rules performed together with FEMSA, considering it is the Company´s controlling shareholder and consolidates for financial purposes the total Company´s results, it is concluded that FEMSA is the UPE and is the entity obligated to determine any complementary tax corresponding to its hold businesses including the Company.
As of December 31, 2023, the tax authorities of the countries where the Company operates have not published the proper regulations to attend this Second Pillar. The Company is monitoring the publication of such regulations.
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. The Company´s Brazilian subsidiaries commenced legal proceedings to ascertain their ability to calculate federal sales tax without using the value-added tax as a basis, in accordance with the Brazilian Federal 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. Pursuant to our final favorable resolution of 2019, the federal production and sales taxes together resulted in an average of 14.6% tax over net sales in 2023.
In recent years, the excise tax rate on concentrate in Brazil has undergone recurrent temporary fluctuations. The excise tax rate was increased from 4.0% to 8.0% from February 1, 2021 to February 24, 2022, was reduced 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 purchases of concentrate in the Manaus Free Trade Zone has been affected accordingly.
In December 2022, the Brazilian government published the new transfer pricing rules that will be effective as of 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 Cooperation and Development (“OECD”). During 2023, the Brazilian government issued regulations to establish the guidelines required to comply with the transfer pricing rules. In 2024, further regulation 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%. The state of Minas Gerais started to apply as of January 1, 2024 an additional charge of 2.0% on sales as a contribution to a poverty eradication fund.
In December 2023, the Brazilian government published a provisional measure, to establish the amount of tax credits determined by a final and unappealable court decision subject to be offset, that says any credit exceeding the value of 10 million Reais (approximately Ps. 34.9 million as of December 31, 2023) must observe the monthly limitation to be offset by 1/60 of the total value of the tax credit. Even though taxpayers must observe and comply with this regulation as of January 1, 2024, this provisional measure needs to be converted into law by May 31, 2024; or it will be revoked.
In December 2023, the Brazilian government published a new law to become effective on January 1, 2024, that establishes that subsidies granted by municipalities or the states will be taxed by the income tax and social contribution at the combined tax rate of 34.0% and will be subject to other contributions at a combined tax rate of 9.25%. In addition, the federal Brazilian government will grant an income tax credit of 25.0% on the municipality or state subsidy, limited to the lowest between the amount of 25.0% of the tax benefit itself and 25% of the depreciation of such assets applied on development or expansion approved projects which caused such subsidy, provided that certain conditions and limitations are met.
Furthermore, in December 2023, the Brazilian government published a constitutional amendment enacting a broad tax reform in Brazil that will replace the current indirect tax system for a new one, to be implemented progressively from January 1, 2026 until its full adoption in 2033. The municipal (ISSQN), state (ICMS) and federal taxes (PIS and COFINS) will be replaced by a dual value-added tax ("VAT") (CBS and IBS). The dual VAT will apply on all tangible and intangible goods, rights and services, and it will be calculated based on the amount charged on the location where the goods are consumed or the rights and services are provided. The dual VAT will not be used as a basis for its own calculation (no tax gross-up), and it will give the right to register the tax credit of the previous transaction. This new tax system is a non-cumulative system. There will be a standard rate for all goods and services, with exceptions for certain sectors such as education, health, public transportation, food for human consumption, agricultural products and some others, that will be entitled to a tax reduction of 100.0%, 70.0% or 40.0% of the tax rate. In the following years, the Brazilian government will issue the specific regulations to implement these constitutional amendments and the percentages of such dual VAT.
In addition, the constitutional amendment will impose as of 2027 an excise tax (IS) on production, extraction, commercialization or import of services or goods harmful to health and the environment. Such tax will apply only once, will not generate a subsequent tax credit (as it is subject to the so-called monophasic system) and will be used as part of the tax basis of other taxes applied on sales
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of services and goods. The current excise tax (IPI) will be reduced to zero, except for those products produced at the Manaus Free Trade Zone in order to maintain the competitiveness and development of such incentivized zone. Same as above, it is expected that the Brazilian government issues further regulation in connection with these amendments and the corresponding percentages for such tax.
Argentina
In June 2021 (with retroactive effects as of January 2021), the Argentine government increased the income tax rate to 35.0% for 2021 onwards and imposed a tax rate of 7.0% on dividends paid to non-resident stockholders and resident individuals.
In December 2023, the Argentine government issued an executive decree (Decree 29/2023) that increase the PAIS (Programa para una Argentina Inclusiva y Solidaria) tax rate to 17.5%, applicable to the import of goods (excluding goods from the market basket goods, fuels, lubricants and other goods related to energy generation). This tax is applicable to foreign currency operations carried out as of December 13, 2023 and represents an additional cost for our Argentine operations. This rate is also applicable to freight services and other transportation services of imported or exported goods, or when such services are acquired in Argentina and provided by non-residents.
Mexico
In April 2021, the Mexican government amended the Federal Labor Law, the Mexican Federal Tax Code and other laws that regulate labor benefits to prohibit the outsourcing of personnel except in certain circumstances such as specialized works or services that are not part of the core business of a company and that are provided by services providers registered with the Ministry of Labor and Social Welfare. As a result of this tax reform, the deduction of expenses related to outsourcing is prohibited as well as the ability to credit the value-added tax generated by the expenses related to the outsourcing and in extreme cases, the outsourcing of personnel may qualify as tax fraud. This reform became effective on September 1, 2021.
In accordance with amendments to Mexican tax laws in effect from January 1, 2022, Mexican issuers are joint and severally liable for taxes payable on gains derived from the sale or disposition of its shares or securities representing its shares, such as ADSs, by major shareholders who are non-Mexican residents with no permanent establishment in Mexico for tax purposes, to other non-Mexican residents with no permanent establishment in Mexico for tax purposes, to the extent that such Mexican issuer fails to provide certain information with respect to such sale or disposition to the Mexican tax authorities. For purposes of these regulations, “major shareholders” are shareholders that are identified in reports submitted by the Mexican issuer to the CNBV on an annual basis as a result of being (i) directors or officers who directly or indirectly own 1.0% or more of the Mexican issuer’s capital stock, (ii) shareholders who directly or indirectly own 5.0% or more of the Mexican issuer’s capital stock or (iii) within the ten largest shareholders of the Mexican issuer based on direct ownership of shares of capital stock. Although in some instances 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 to that effect issued by the Mexican tax authorities. There is currently no obligation by non-Mexican residents to inform Mexican issuers about their sales or dispositions of shares or securities representing shares, which limits our ability to comply with our reporting obligations to the Mexican tax authorities. Therefore, the amount of a potential tax liability is uncertain and difficult to determine given inherent mechanics and procedures, including the application of any tax treaties available, applicable to the trading of publicly-traded securities.
Colombia
In August 2021, a new tax reform became effective in Colombia. This reform increased the income tax rate from 30.0% to 35.0% for 2022 onwards and limited to 50.0% the ability to deduct the municipality sales taxes against income taxes or as a discount to income taxes.
In December 2022, a new tax reform was approved in Colombia, which became effective during 2023. The main changes are the following:
Introduction of an excise tax for beverages with added sugar based on the following schedule:
•From November 1, 2023 to December 30, 2023 a tax of $18 Colombian pesos (approximately Ps. 0.08 as of December 31, 2023) to beverages that contain 6 grams and 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 those with more than 10 grams of added sugar per 100 ml;
•From January 1, 2024 to December 30, 2024, $28 Colombian pesos (approximately Ps. 0.12 as of December 31, 2023) for beverages that contain between 6 grams and 10 grams of sugar per 100 ml and a tax of $55 Colombian pesos (approximately Ps. 0.24 as of December 31, 2023) for those with more than 10 grams of added sugar per 100 ml; and
•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 that contain between 5 grams and 9 grams of sugar added per 100ml and a tax of $65 Colombian pesos (approximately Ps. 0.29 as of December 31, 2023)for those with more than 9 grams of added sugar per 100 ml.
Introduction of a new tax on single-use plastics, with a rate of 0,00005 of Tax Value Unit (“UVT”) per gram of plastic. One UVT is equivalent to $42,412 Colombian pesos. Products from the family basket are excluded from this new tax, which can also be avoided
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with a circular economy certification to be issued in case recycled resin is incorporated into the packaging. In 2023, a legal resolution was issued by Colombian Supreme Court (Resolution C-526/23) requiring that the person responsible for the payment of such tax is the producer of single-use plastics.
Increase of the income tax rate of January 1, 2023, from 20.0% to 35.0% over taxable income obtained within Colombia by free trade zones. This change can be effective on January 1, 2025 if a free trade zone company can demonstrate a 60% income increase in 2022 in comparison with the 2019 fiscal year. However, the Colombian Supreme Court ruled that this law shall not be applicable to the entities that have obtained its approval to be considered as a free trade zone company prior to December 13, 2022. The free trade zone Colombian subsidiary obtained its approval prior to such date.
Elimination of the possibility of taking as a tax discount the municipality sales taxes against income taxes.
Increase of the occasional income tax rate from 10% to 15% applicable on sales of fixed assets; and introduction of a stamp tax rate between 0% and 3%, over the sales price of real estate and other assets.
Introduction of a minimum income tax rate of 15.0%, which must be calculated considering an adjusted financial profit or “adjusted income”. The qualified entities are required to calculate such minimum income tax and if such calculation results in a tax rate higher than 15%, such entity shall pay only the regular income tax rate and if the result is lower than 15%, such entity shall pay an additional tax to reach the 15% rate.
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 became effective to reintroduce the standard debt and credit system for producers, wholesalers, and retailers with a tax rate of 13.0%, therefore our Costa Rican subsidiary is no longer responsible for collecting such tax throughout the entire supply chain.
Uruguay
On December 31, 2021, the Uruguayan government issued an executive decree that increased the excise tax for energy drinks from 19.0% to 22.0%. This increase was effective on January 1, 2022.
Note 25. Other Liabilities, Provisions and Commitments
25.1 Other current liabilities

| 2023 | 2022
Short-term employee benefits | Ps. 6,567 | Ps. 5,890
Accrued expenses | 6,288 | 5,627
Other | 734 | 333
Total | Ps. 13,589 | Ps. 11,850

25.2 Other current financial liabilities

| 2023 | 2022
Sundry creditors | Ps. 1,150 | Ps. 754
Derivative financial instruments (See Note 20) | 680 | 459
Dividends payable | 209 | 223
Total | Ps. 2,039 | Ps. 1,436

25.3 Other non-current liabilities

| 2023 | 2022
Taxes payable | Ps. 38 | Ps. 38
Debt with former shareholders | 1,578 | 1,575
Other | 825 | 440
Total | Ps. 2,441 | Ps. 2,053

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25.4 Other non-current financial liabilities

| 2023 | 2022
Derivative financial instruments (See Note 20) | Ps. 4,668 | Ps. 3,168
Success fee to pay | 460 | 435
Security deposits | 184 | 185
Other | 152 | 75
Total | Ps. 5,464 | Ps. 3,863

25.5 Provisions
The Company has various loss contingencies and has recognized provisions for legal proceedings it believes an unfavorable resolution is probable and the amount can be reasonably estimated. The following table presents the nature and amount of the provisions as of December 31, 2023 and 2022:

| 2023 | 2022
Taxes | Ps. 1,348 | Ps. 1,823
Labor | 1,308 | 1,385 |
Legal | 614 | 679 |
Total (1) | Ps. 3,270 | Ps. 3,887

(1) In Brazil, the Company is required to guarantee tax, legal and labor contingencies with guarantee deposits. See Note 13.
25.6 Changes in the balance of provisions
25.6.1 Taxes

| 2023 | 2022 | 2021
Balance at beginning of the period | Ps. 1,823 | Ps. 2,066 | Ps. 2,540
Penalties and other charges (See Note 19) | 228 | 109 | 30
New contingencies (See Note 19) | 4 | 306 | 148
Cancellation and adjustments (See Note 19) | (447) | (177) | (59)
Payments | (155) | (473) | (236)
Other effects | — | — | (263)
Effect of foreign currency exchange rates | (105) | (8) | (94)
Balance at end of the period | Ps. 1,348 | Ps. 1,823 | Ps. 2,066

25.6.2 Labor

| 2023 | 2022 | 2021
Balance at beginning of the period | Ps. 1,385 | Ps. 1,472 | Ps. 1,681
Penalties and other charges (See Note 19) | 64 | 80 | 303
New contingencies (See Note 19) | 843 | 516 | 363
Cancellation and expiration (See Note 19) | (523) | (385) | (445)
Contingencies added in business combinations | — | 65 | —
Payments | (308) | (301) | (358)
Effects of foreign currency exchange rates | (153) | (62) | (72)
Balance at end of the period | Ps. 1,308 | Ps. 1,385 | Ps. 1,472

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25.6.3 Legal

| 2023 | 2022 | 2021
Balance at beginning of the period | Ps. 679 | Ps. 612 | Ps. 879
Penalties and other charges (See Note 19) | 50 | 57 | 68
New contingencies (See Note 19) | 117 | 75 | 26
Cancellation and expiration (See Note 19) | (109) | (79) | (241)
Contingencies added in business combinations | — | 149 | —
Payments | (68) | (110) | (97)
Effect of foreign currency exchange rates | (55) | (25) | (23)
Balance at end of the period | Ps. 614 | Ps. 679 | Ps. 612

While provision for these 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.
25.7 Unsettled lawsuits
The Company has entered into several proceedings with its labor unions, tax authorities and other parties. 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 of these lawsuits is Ps. 134,254, 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.
The Company 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 the Tax authorities; (iv) Ps. 9,949 relating to questions about the amortization of goodwill generated in acquisitions 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. The Company is defending its position in these matters and final decision is pending in court.
After conducting a thorough analysis, during 2021 the Company 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 the Company 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.
25.8 Collateralized contingencies
As is customary in Brazil, the Company 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 8.2 there is some restricted cash in Brazil that relates to short term deposits in order to fulfill the collateral requirements for accounts payable.
25.9 Commitments
The Company has signed commitments for the purchase of property, plant and equipment of Ps. 3,394 and Ps. 2,588 as December 31, 2023 and 2022, respectively.
Note 26. Information by segment
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who periodically reviews financial information at the country level. Thus, each of the separate countries in which the Company operates is considered an operating segment.
The Company has aggregated operating segments into the following reporting segments for the purposes of its consolidated financial statements: (i) Mexico and Central America division (comprising the following countries: Mexico (including corporate operations),
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Guatemala, Nicaragua, Costa Rica and Panama), and (ii) the South America division (comprising the following countries: Brazil, Argentina, Colombia, and Uruguay).
The Company determined that the quantitative and qualitative aspects of the aggregated operating segments are similar in nature for all periods presented. In evaluating the appropriateness of aggregating operating segments, the key indicators considered included but were not limited to:(i) similarities of customer base, products, production processes and distribution processes and (ii) historical and projected financial and operating statistics, historically and according to the Company´s estimates the financial trends of the countries aggregated into an operating segment have behaved in similar ways and are expected to continue to do so.
Inter-segment revenues are not material and are eliminated upon consolidation. Each operating segment reported reflects figures net of intersegment revenues.
Segment disclosure for the Company’s consolidated operations is as follows:

2023 | Mexico and Central America (1) | South America (2) | Consolidated
Total revenues | Ps. 149,362 | Ps. 95,726 | Ps. 245,088
Intercompany revenue | 8,427 |  | 26 |  | 8,453 |
External Revenues | Ps. 140,935 | Ps. 95,700 | Ps. 236,635
Gross profit | 71,665 |  | 39,195 |  | 110,860 |
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method | 18,152 |  | 10,640 |  | 28,792 |
Depreciation and amortization | 6,788 |  | 3,743 |  | 10,531 |
Non-cash items other than depreciation and amortization | 864 |  | 843 |  | 1,707 |
Equity in earnings (loss) of associated companies and joint ventures | 206 |  | 9 |  | 215 |
Total assets | 168,011 |  | 105,509 |  | 273,520 |
Investments in associate companies and joint ventures | 7,963 |  | 1,283 |  | 9,246 |
Total liabilities | 104,898 |  | 34,917 |  | 139,815 |
Capital expenditures, net (3) | 13,415 |  | 7,981 |  | 21,396 |

2022 | Mexico and Central America (1) | South America (2) | Consolidated
Total revenues | Ps. 131,002 | Ps. 95,738 | Ps. 226,740
Intercompany revenue | 6,487 |  | 2 |  | 6,489 |
External Revenues | Ps. 124,515 | Ps. 95,736 | Ps. 220,251
Gross profit | 62,035 |  | 38,265 |  | 100,300 |
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method | 15,797 |  | 9,990 |  | 25,787 |
Depreciation and amortization | 6,424 |  | 4,001 |  | 10,425 |
Non-cash items other than depreciation and amortization | 957 |  | 781 |  | 1,738 |
Equity in earnings (loss) of associated companies and joint ventures | 417 |  | (31) |  | 386 |
Total assets | 172,711 |  | 105,284 |  | 277,995 |
Investments in associate companies and joint ventures | 6,925 |  | 1,527 |  | 8,452 |
Total liabilities | 113,554 |  | 32,565 |  | 146,119 |
Capital expenditures, net (3) | 11,759 |  | 7,906 |  | 19,665 |

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2021 | Mexico and Central America (1) | South America (2) | Consolidated
Total revenues | Ps. 115,794 | Ps. 79,010 | Ps. 194,804
Intercompany revenue | 5,415 |  | 13 |  | 5,428 |
External Revenues | Ps. 110,379 | Ps. 78,997 | Ps. 189,376
Gross profit | 57,366 |  | 31,232 |  | 88,598 |
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method | 15,792 |  | 7,060 |  | 22,852 |
Depreciation and amortization | 5,988 |  | 3,846 |  | 9,834 |
Non-cash items other than depreciation and amortization | 1,052 |  | 561 |  | 1,613 |
Equity in earnings (loss) of associated companies and joint ventures | 141 |  | (53) |  | 88 |
Total assets | 170,543 |  | 101,024 |  | 271,567 |
Investments in associate companies and joint ventures | 5,991 |  | 1,503 |  | 7,494 |
Total liabilities | 115,738 |  | 28,257 |  | 143,995 |
Capital expenditures, net (3) | 9,800 |  | 4,064 |  | 13,865 |

(1) Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 122,615, Ps. 106,911 and Ps. 94,762 during the years ended December 31, 2023, 2022 and 2021, respectively. Domestic (Mexico only) total assets were Ps. 146,253, Ps. 152,236 and Ps. 149,421 as of December 31, 2023, 2022 and 2021, respectively. Domestic (Mexico only) total liabilities were Ps. 98,652, Ps. 108,073 and Ps. 109,945 as of December 31, 2023, 2022 and 2021, respectively.
(2) South America includes Brazil, Argentina, Colombia and Uruguay. South America revenues include Brazilian revenues of Ps. 66,963, Ps. 63,944 and Ps. 53,051 during the years ended December 31, 2023, 2022 and 2021, respectively. Brazilian total assets were Ps. 77,513, Ps. 77,026 and Ps. 74,163 as of December 31, 2023, 2022 and 2021, respectively. Brazilian total liabilities were Ps. 26,571, Ps. 24,003 and Ps. 20,440 as of December 31, 2023, 2022 and 2021, respectively. South America revenues also include Colombian revenues of Ps. 17,680 Ps. 16,799 and Ps. 14,180 during the years ended December 31, 2023, 2022 and 2021, respectively. Colombian total assets were Ps. 17,753, Ps. 14,607 and Ps. 15,132 as of December 31, 2023, 2022 and 2021, respectively. Colombian total liabilities were Ps. 5,337, Ps. 3,902 and Ps. 3,395 as of December 31, 2023, 2022 and 2021, respectively. South America revenues also include Argentine revenues of Ps. 6,668, Ps. 10,917 and Ps. 8,408 during the years ended December 31, 2023, 2022 and 2021, respectively. Argentine total assets were Ps. 4,304, Ps. 7,344 and Ps. 6,087 as of December 31, 2023, 2022 and 2021, respectively. Argentine total liabilities were Ps. 1,456, Ps. 2,378 and Ps. 2,013 as of December 31, 2023, 2022 and 2021, respectively. South America revenues also include Uruguay revenues of Ps. 4,415, Ps. 4,078 and Ps. 3,371 during the years ended on December 31, 2023, 2022 and 2021, respectively. Uruguay total assets were Ps. 5,939, Ps. 6,307 and Ps. 5,642 as of December 31, 2023, 2022 and 2021, respectively. Uruguay total liabilities were Ps. 1,553, Ps. 2,282 and Ps. 2,409, as of December 31, 2023, 2022 and 2021, respectively.
(3) Includes disposals of property, plant and equipment, intangible assets and other long-lived assets of 2023 is Ps. 93, 2022 Ps. 250 and 2021 Ps. 57
Note 27. 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. 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.
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The amendments are not expected to have a material impact on the Company.
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
On September 22, 2022 the IASB issued amendments to IFRS 16 “Lease Liability in a Sale and Leaseback”. The amendments specifies 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 adoption is permitted.
Since the Company has not entered into any sale and leaseback transactions in which it acts as lessee, as of the date of issuance of the consolidated financial statements, no impacts are expected to arise from the entry into force of these amendments.
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements. The disclosure requirements in the amendments are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.
The amendments will be effective for annual reporting periods beginning on or after January 1, 2024. Early adoption is permitted, but will need to be disclosed.
The amendments are not expected to have a material impact on the Company’s consolidated financial statements.
Note 28. Subsequent Events
The Company has evaluated the existence of subsequent events and determined that there have not been events that requires a disclosure in this consolidated financial statements.
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