Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Earnings Call Transcript

Hello, and welcome to the Coca-Cola FEMSA Third Quarter 2026 Conference Call. My name is Vinicius, and I will be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Pamela Ortiz, Investor Relations Director at the Coca-Cola FEMSA. Pamela, please go ahead.

Good morning, everyone, and welcome to Coca-Cola FEMSA's Third Quarter 2026 Results Conference Call. Today we are joined by Ian Craig, our CEO; Gerardo Cruz, our CFO; and the rest of the Investor Relations team. Before we begin, let me remind all participants that today's conference call may include forward-looking statements that should be considered as good-faith estimates made by the company. These forward-looking statements reflect management expectations and are based upon currently available data. The actual results are subject to future events and uncertainties that can materially impact the company's performance. For additional details, please refer to the full disclaimer in the earnings release that was published earlier today. After the prepared remarks, we will open the call for questions. To ask a question, please use the raise hand feature in your Zoom toolbar. With that, let me turn the call over to Ian to begin our presentation about the third quarter results. Ian, please go ahead.

Thank you, Pam. Good morning, everyone. Before discussing our third quarter performance, I would like to take a moment to address the earthquake that struck Colombia in August and which impacted the communities of Pereira and Cali. Together with FEMSA and The Coca-Cola Company, we provided more than 180,000 liters of water, 30,000 meals and essential supplies to affected communities. We also committed to supporting more than 1,000 traditional trade stores and helping rebuild approximately 150 stores. We remain in close coordination with our local teams and are committed to supporting our employees, their families and the communities affected. Now let me walk you through our consolidated results. Our third quarter performance demonstrates our focus on sustainable growth. Leveraging our portfolio and capabilities translates into results across markets with distinct consumer dynamics and macroeconomic conditions. Our long-term growth algorithm is based on developing the beverage industry by expanding consumption across categories and serving new consumption opportunities. Indeed our record third quarter consolidated volumes demonstrated the effectiveness of our commercial strategies across all regions. Our competitive advantage combines the strength of our brands, unparalleled distribution reach, consistent above-the-line and below-the-line investments throughout the years, consumer-centric execution, culture and leading-edge digital enablers. Importantly, we continuously tailor our commercial strategies to the specific consumption trends and economic realities of each market, allowing us to capture growth opportunities while strengthening our competitive position. Let me highlight how our strategy is translating into results across our operations. Starting with Mexico. Volumes increased 4.2% year-over-year, off of a low base last year, which was still impacted by the consumer backlash. Our focus on affordability, differentiated price pack architecture and commercial execution supported further share gains, including a 70 basis point increase in sparkling beverage value share as of September versus the prior year. Our approach is anchored in protecting affordability, strengthening commercial execution, accelerating portfolio innovation and leveraging our digital capabilities. Together, these pillars have enabled us to navigate a challenging consumption environment while positioning our business for sustainable long-term growth. Portfolio innovation continues to unlock incremental growth opportunities by expanding our presence in emerging beverage categories and capturing new consumption occasions. During the quarter, we launched Coca-Cola Triple Zero, further strengthening our Zero Sugar portfolio as well as Topo Chico's sparking lemonade and orangeade, which have already achieved 70% traditional trade coverage and a 40% repurchase rate. Meanwhile, Ciel Aguas Frescas flavored water, launched last quarter, continues to gain traction reaching 65% coverage in the traditional trade with a market share gain of 7.6 percentage points since its launch in May. These portfolio innovations in key white spaces bode well in our efforts to continue to drive industry growth, capturing new consumption opportunities. Lastly, digitalization continues to strengthen our customer relationships and enhance our commercial effectiveness. Through Juntos+, we are driving a higher average ticket by 19% versus the prior year and increasing the time and quality of our interactions with clients. Overall, Mexico's performance reinforce our confidence in the direction of our strategy. Our commercial capabilities have enabled us to sustain volume growth, gain market share and develop new beverage categories. Looking ahead, our priority remains to build on our competitive momentum while gradually improving profitability through disciplined revenue growth management and operating efficiencies. Turning to Brazil. Volumes increased 3.9% year-over-year, reflecting the sustained positive momentum of our business and share gains. Brazil remains one of Coca-Cola FEMSA's most compelling structural growth opportunities, supported by significant headroom to lead industry growth and expand our participation across beverage categories. During the quarter, we continued leveraging our differentiated commercial capabilities to capture these opportunities, focusing on expanding our Zero portfolio availability, strengthening execution at the point of sale, and deploying proven route to market and digital capabilities. As a result, Coca-Cola Zero continued delivering strong growth with volumes up 15% versus prior year, while flavors and still beverages grew 8% and 20%, respectively, versus prior year. Within our flavors portfolio, we have won close to 4 percentage points of market share, driven by brand Sprite's outstanding performance. Importantly, we continued gaining share across nearly all beverage categories, with gains of approximately 1.2 percentage points in total nonalcoholic ready-to-drink beverages and nearly 6 percentage points in energy drinks. These results reinforce our competitive momentum and demonstrate how our portfolio is well positioned to address evolving consumer preferences. We also continued advancing our commercial strategy with a focus on improving profitability by strengthening our single-serve portfolio, increasing its share of our sparkling beverage volume mix by 80 basis points to reach 27.7%. Digitalization remains an important enabler of this strategy. Through Juntos+ and Juntos+ Advisor, we continued enhancing customer engagement, improving order recommendations and optimizing our commercial team's productivity. These tools are helping us strengthen customer coverage and increase the effectiveness of commercial visits. As of September, digital revenues represented close to 42% of traditional trade revenues, with an 18% increase in average ticket size. Turning to profitability, we remain focused on translating volume growth and stronger commercial execution into improved operating leverage through disciplined revenue growth management, portfolio optimization and continued cost efficiencies. At the same time, we are maintaining a disciplined investment approach to support sustainable long-term growth. Looking ahead, while we are mindful of a potential slowdown -- post election slowdown, we remain confident in the Brazilian market's long-term potential. Our scale, commercial capabilities and quality portfolio position us to continue to capture growth opportunities while sustainably improving profitability. Turning now to Guatemala. Volumes grew 8% year-over-year, outperforming the nonalcoholic ready-to-drink industry which expanded approximately 5.5%. The Guatemala operation continues to benefit from favorable consumption dynamics supported by remittances, attractive demographics and urbanization trends. Our strategy remains focused on developing the beverage industry by offering affordable price points, strengthening our core colas category, expanding our single-serve portfolio and enhancing execution in the traditional trade. During the quarter, energy drinks grew 98%, supported by improved product availability. Meanwhile, our 360-degree Powerade strategy delivered a turnaround in sports drinks, resulting in a market share gain of approximately 1 percentage point, supported by increased cold drink availability through cooler investments and enhanced execution capabilities with Juntos+. At the same time, productivity initiatives, including bottle light-weighting and cost to serve optimization help mitigate PET and diesel cost pressures while improving operating efficiency. Moving on to Colombia. Volumes increased 15.9% year-over-year, supported by strong consumer demand, higher household purchasing power and disciplined commercial execution. The consumer environment remains favorable, supported by higher wages, favorable weather conditions and GDP growth of approximately 3.5%. Our portfolio and package strategy continued delivering strong results, with sparkling beverage volumes increasing 15.4% during the quarter, including 13.5% growth in colas, 19.2% in Coca-Cola Zero and 23.9% in flavors, supported by Quatro and Sprite. Non-carbonated beverages grew 12.9% year-to-date, driven by Powerade and Monster, up 48.4% and 55.9%, respectively. Additionally, our recent launch of Fury achieved 30% customer coverage in its first month, reinforcing our ability to develop emerging beverage categories. We also continued strengthening our digital capabilities through Juntos+ by enhancing platform functionalities to drive customer engagement and leveraging loyalty plan initiatives, with nearly 90% of our traditional trade customers now using Premia points. Importantly, we continue to translate volume growth into improved profitability through increased scale and cost absorption. Finally, turning to Argentina, Volumes remained flat year-over-year amid continued pressure on household purchasing power, despite the inflation moderating to 33.4%. Against this backdrop, our disciplined RGM and differentiated price-pack architecture continued balancing affordability with profitability. Our sparkling beverage portfolio grew 3.9%, supported by Coca-Cola Zero and Sprite, while digital orders through Juntos+ increased 21% year-over-year, enhancing customer engagement and commercial productivity. Looking ahead, we remain focused on strengthening our competitive position and maintaining operating discipline as we navigate the challenging consumption environment. Our third quarter performance reinforced Coca-Cola FEMSA's multiple avenues for long-term growth. We are focused on developing the beverage industry by expanding consumption across categories, occasions and markets. Our sustainable competitive advantage is built on 5 key strengths: the power of our brands, our unparalleled distribution reach, consistent investment [ ATL and BT lane ] throughout the years, our customer-centric execution culture and our leading-edge digital capabilities. Together, these strengths provide a differentiated platform to unlock new consumption opportunities, deepen customer relationships and drive sustainable profitable growth. For the remainder of the year and into 2027, we are well positioned to capture the significant growth opportunities and untapped potential across our markets. At the same time, we remain vigilant and well prepared to navigate financial market volatility and any potential resulting cost pressures. Our revenue growth management initiatives, operating efficiencies, scale and digital capabilities will remain key levers to support our performance. Looking ahead, I am particularly excited about the pace and quality of innovation we expect to bring to consumers across the region together with our partners at the Coca-Cola Company. Their focus on innovation, supported by the Latin America innovation hubs, is starting to deliver encouraging results. Recent launches, including Coca-Cola Triple Zero, Topo Chico's sparkling lemonade and orangeade, Ciel Aguas Frescas and the revamp of Sprite Zero reflects this momentum. With an exciting pipeline of innovations ahead for 2027, I am confident that the best is yet to come. With that, I will turn the call over to Gerry to review our third quarter financial results.

Thank you, Ian, and good morning. I will begin with an overview of our consolidated third quarter results, followed by our divisional performance. I will then provide an update on our financing results, commodity hedging strategy and sustainability achievements. Consolidated volumes increased 5.3% year-over-year to 1.1 billion unit cases, marking a record third quarter volume for Coca-Cola FEMSA. This milestone was achieved by volume growth across all regions, reinforcing the strength of our diversified geographic footprint and our ability to adapt our commercial strategies to the distinct consumer dynamics and operating environments of each market. Total revenues increased 10.9% to MXN 79.7 billion, driven primarily by volume growth and our revenue growth management initiatives. These positive effects were partially offset by unfavorable mix and currency translation effects. On a currency-neutral basis, revenues increased 11.3%. Gross profit increased 14.5% to MXN 37 billion, resulting in a gross margin expansion of 140 basis points to 46.5%. This improvement was supported primarily by lower sweetener and PET costs compared with the previous year, reflecting the benefits of our hedging strategy, together with the appreciation of most of our operating currencies against the U.S. dollar, which reduced the cost of dollar-denominated raw materials. These benefits were partially offset by higher aluminum costs and unfavorable mix effects. On a currency-neutral basis, gross profit increased 14.8%. Operating income increased 15.4% to MXN 11.9 billion, while operating margin expanded 60 basis points to 14.9%, reflecting MXN 1.1 billion related to recovered insurance claims in Brazil. Excluding this nonrecurring benefit, operating income would have increased 7.4%, with an operating margin of 13.6%, representing a contraction of 40 basis points. These positive effects were partially offset by higher marketing, freight, maintenance and labor expenses as well as a recognition of an operating foreign exchange loss as compared with a gain in the previous year. Adjusted EBITDA increased 16.2% to MXN 16.8 billion, with a margin of 21.1%, representing an expansion of 100 basis points. Excluding the insurance recovery in Brazil, adjusted EBITDA increased 10.6%, with a margin of 19.7%. Overall, these results reflect the strength of our operating performance and our continued focus on balancing sustainable growth with cost management. Finally, majority net income increased by 5.5% to MXN 6.2 billion, primarily reflecting the higher operating income. This benefit was partially offset by higher income taxes and higher net financing expenses, which I will address in more detail shortly. Turning now to our business unit performance. Let me begin with Mexico and Central America. Volumes increased 4.8% year-over-year, supported by positive performance across all territories in the business unit. Total revenues grew 8.3% to MXN 46 billion as volume growth was offset by unfavorable portfolio mix and currency translation effects. On a currency-neutral basis, revenues increased 9.3%. Gross profit increased 11.6% to MXN 23 billion, resulting in a gross margin expansion of 150 basis points to 49%. This improvement was driven primarily by lower raw material costs, particularly sweeteners and PET, supported by our hedging strategy and the appreciation of our operating currencies against the U.S. dollar. Operating income declined 3.1% to MXN 6.5 billion, while operating margin contracted 170 basis points to 14.3%. Despite the year-over-year contraction, profitability improved sequentially compared with the first 2 quarters of the year, reflecting progress in our efforts to gradually recover margins. However, marketing, labor and freight expenses together with an operating foreign exchange loss, as compared with a gain in the previous year, impacted profitability. These pressures were partially mitigated by our hedging strategy. As Ian discussed, our commercial strategy in Mexico continues to prioritize affordability, market share gains and innovation to better serve new consumption occasions. While this approach has supported our competitive momentum, the increase in the mix of multi-serve presentations has resulted in an unfavorable impact on the price/mix, putting additional pressure on margins. Looking ahead, we remain focused on progressively strengthening performance through revenue growth management initiatives to improve package mix and profitability, supported by the continued pursuit of procurement, supply chain and operating efficiencies. Finally, adjusted EBITDA increased 3.1% to MXN 9.6 billion, with a margin of 20.8%. Moving on to South America, volumes increased 6% to 448 million unit cases, supported by volume growth across all countries. Total revenues increased 14.7% to MXN 33.7 billion, driven by higher volumes, revenue growth management initiatives and a favorable currency translation effect from Colombia. On a currency-neutral basis, revenues increased 14.1%. Gross profit grew 19.2% to MXN 14.6 billion, with gross margin expanding 160 basis points to 43.2%. This strong performance was supported by top line growth, lower raw material costs, hedging strategy and the appreciation of most operating currencies against the U.S. dollar. These benefits were partially offset by higher aluminum prices. On a currency-neutral basis, gross profit increased 18.4%. Operating income increased 51.2% to MXN 5.3 billion, while operating margin expanded 380 basis points to 15.7%. As I previously mentioned, our reported results included MXN 1.1 billion related to insurance recoveries in Brazil. Excluding this nonrecurring benefit, South America delivered strong underlying profitability, supported by operating leverage, favorable mix and continued operating expense efficiencies. These improvements were partially offset by higher marketing, freight depreciation and labor expenses. Finally, adjusted EBITDA increased 39.7% to MXN 7.2 billion, with a margin expansion of 380 basis points to 21.4%. This performance highlights our ability to translate volume growth and improve commercial execution into stronger profitability as our South American operations continues to scale. Moving on to our comprehensive financing result. We recorded a net expense of MXN 2 billion, compared with an expense of MXN 1.3 billion in the same period of last year. This increase was primarily driven by 2 factors. First, higher net interest expenses, mainly reflecting the additional debt issued during the first quarter of 2026. Second, a loss on financial instruments of MXN 377 million, compared with MXN 39 million in the previous year, primarily reflecting higher interest rates in Brazil. Additionally, we recognized a lower gain in monetary positions and inflationary subsidiaries for MXN 64 million, as compared to a gain of MXN 136 million recorded in the same period of the previous year. Turning to our commodity outlook. The global raw material environment remains volatile, reinforcing the importance of our disciplined hedging strategy and established risk management framework. Throughout 2026, our hedging positions have helped mitigate fluctuations in key commodity prices, providing cost visibility and supporting our profitability. For the year, we have hedged approximately 65% of our PET requirements, 88% of sugar, 98% of HFCS and 74% of aluminum. Importantly, we also continued building our hedging positions for 2027 in line with our established policies. To date, we have secured approximately 16% of our PET requirements, 85% of sugar, 94% of HFCS and 54% of aluminum. Despite the challenging commodity environment, we have been able to capitalize on selected market opportunities to secure part of our 2027 requirements at prices broadly in line with those of 2026. These positions are particularly relevant as we plan for next year, providing greater visibility into our expected cost structure and allowing us to mitigate potential pressures through our revenue growth management strategy. Before concluding, I would like to highlight an important milestone in our sustainability journey. Coca-Cola FEMSA achieved a new record score of 82 points in S&P Global's Corporate Sustainability Assessment, reflecting our continued progress in integrating sustainability into our business strategy and operating model. This achievement reinforces our commitment to strong governance and the continuous improvement of our [ environment and sustainability performance ] [indiscernible] diversified operations with record third quarter consolidated volumes and continued progress in profitability. While we face different challenges and [indiscernible] our priorities are consistent: driving our commercial momentum, improving operating efficiency and maintaining a disciplined approach to capital allocation, aiming to achieve sustainable long-term growth. With that, we can open the call for questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from Lucas Ferreira with JPMorgan.

My question is on the Mexico business environment. You guys had a very good volume performance in the third quarter, the volumes are back to the levels we were seeing in '23, '24 for a third quarter, and also circling that weak comp of the previous year, of 2025. So my question is what to expect from here? So how do you see the consumer and how you guys adjusted your strategy from the second quarter to the third quarter? Because second quarter, we still saw sort of a turbulent market. How you guys adjusted the strategy to keep expanding the market share and how you see, like I mentioned, the consumer as we go into next year?

Lucas, this is Ian. So a couple of points. Just if we take a step back, the first half of the year was pretty challenging because of the price pass-through of the excise tax, which was very large. So that really impacted us. And then in July, things started gradually looking up. But it's fair to say that we still, all the way up to the end of the third quarter, had a low base to compare because we still had the consumer backlash last year. So you have to keep that in mind. So for the fourth quarter, the differences are we started taking RGM initiatives in August. We're probably going to do further RGM initiatives in mid-November to make sure we're covering any impacts that we have from both the FX or any raw materials and be able to continue to improve on our profitability. So that's the difference there. And what I would address is within still a tight consumption environment in Mexico, our daily sales are either flattish or in the trend versus [ prior months ] or continuing to improve gradually. So you see that small, small improvement. And what we think is very exciting is we were not participating in several white spaces, Lucas. So for example, just modeling [indiscernible] I mean, the 3 recent launches in Mexico are way above what we expected, to the point where we're having supply shortages to delivering. So Coke, Coke Zero, it's never too late, is the idea behind the campaign. And it's amazing because there were a lot of people that are Coke lovers that couldn't -- or did not want the caffeine after certain hours in the afternoon. And we're untapping that potential with the brand that they love, and it's an incredible formula brand ID, and it's just getting started. Then we have Ciel Aguas Frescas, the flavored waters with tremendous share gains. We haven't even finished rolling out a new flavor or getting enough share of visual inventory, and it's just the traction that this innovation is doing is very, very encouraging. And finally, the largest white space that I think we had was sparkling lemonades and orangeades, where we weren't participating, and that's a segment that has been growing very healthily. And the acceptance by the Mexican consumer of Topo Chico sparkling orangeade and sparkling lemonade has been 180% above what we expected, to the point where we are again with supply shortages. So I would say, wrapping it up because it's a very pertinent question, that daily trend continues to very gladly improve or be flat versus prior months. But now we don't have the benefit of the base with a lower consumer backlash. That being said, we have stronger RGM initiatives since August and now, in November. We're getting ready for that. And we have very good innovations passing through the pipeline. So that's what fixes our growth algorithm for Mexico, Lucas.

The next question comes from Henrique Brustolin with Bradesco BBI.

Mine will also be to Mexico and Central America, but regarding margins. The question is especially how we should think about the SG&A that we see pressure in margins going forward, right? Because we see this very strong gross margin performance in the region. But throughout the year, SG&A has been a source of pressure. So if you could help us understand how much of that is a deliberate investment in marketing and commercial activities that you are doing versus cost inflation that we may think as being more recurring, just to think about the pace of margins and that line going forward? I think that would be very helpful.

Henrique, I'll kick it off. Starting with the pressure that we're seeing, which is, I think, a good problem to have. The pace of volume performance has been significantly better than what we had planned for, for Mexico specifically. This has been driven by a significant increase in volumes in multi-serve presentations, specifically our 3-liter Coke presentation. We didn't have this in consideration in our budget. That has helped in terms of the scale of our business, but also has put a lot of pressure in terms of profitability and in margins. That, on the revenues side of it, has been something that we've been dealing with and trying to see how we can mitigate it. Going further down the P&L, the other, I think, a relevant factor that specifically affected the third quarter is operative -- the volatility in currency. The peso had a significant impact, the depreciation impact, in the last part of September, which resulted in our accounts payable denominated in dollars having a significant impact in our P&L for the quarter. This is something that we expect, given that we've seen weakness in the peso and expect weakness in the peso to continue for the remainder of the year, this is something that we are expecting to continue and are looking to take action to mitigate as we move forward. Those, I think, are the 2 main components.

Gerry, I think we need to add labor. We are going to -- what's been happening in Mexico is with the increase in the minimum wage going on a compounded rate that's double digits, the first years of these policies were very, very [ accretive ] because even though they pressured labor -- our labor expense, the consumption that it brought had a much higher multiplier effect. So it was a net positive. Now more and more the -- with the current level of the minimum wage, when there is a large impact, it translates into impact into other categories or levels of collaborators that are not at a minimum wage. We don't have any one really at the minimum wage, but that go further up the chain. So it has a larger compounding impact on labor cost. So that's why I was telling Lucas, Henrique, on the prior question that we are -- we need to be and are very fine-tuned, and that's where Gerry and his team come in, to any potential impacts from FX, from labor, and have ready the RGM initiatives that we need to cover that quarter whenever we have any of those impacts. So I think we're very fine-tuned. Any of those impacts come across to all of the industry. So we're very comfortable with RGM initiatives that are done to undertake offsets to those type of impacts, because they might have a 1 quarter lag, that's about it. Because when they're industry-wide like this, we feel pretty confident that we can navigate them. But we need to be very, very fine-tuned to adjust the timing, and that's where Gerry and the purchasing team and the [ heading ] team come in.

One last factor, Henrique, that is also related to the volume outperformance that we've had, and especially the mix, is our freight expenses have increased significantly versus last year. We've had to ship mainly to the southeast of Mexico, a lot of products from our Toluca plant, that has resulted in an increase in freight expenses. This is something that, obviously, we're looking to address, taking care of efficiencies in our existing plants in the Southeast and a longer-term project of a new plant in that region.

I'll just add that despite these pressures, we have seen sequential improvement in profitability compared to the first 2 quarters given the strong volumes and the gradual recovery of operating leverage as well.

Our next question comes from Benjamin Theurer from Barclays.

This is Rahi on for Ben. Just looking at Brazil, what should we expect to your strategy given potential fiscal changes, specifically if you see some excise taxes or taxes on CSDs? Just looking for more color on how you might mitigate the impact of volume, what the price increase would have?

Rahi, so in the case of Brazil, I think there is a selective tax that's due to come in with [indiscernible] of the tax. We are in close conversations with the government relating to that tax, looking for it to not have an impact, i.e., meaning that the new tax be the same as what we have. But we can't really manifest ourselves on what the government is finally to put through. So I prefer to defer yet on this answer because until we -- the government actually comes out and sends the measure, we don't know exactly the amount that it will be. What we can tell you is, again, anything that comes through, if it's not a neutral movement, we would need to be very agile and move safely with our RGM initiatives to cover 100% of that impact. So in that deal, I mean, we've built a formidable share cushion. So the level of share that we've been able to capture in the last 3 years has just been very large. So I do not foresee any scenario where if, for whatever reason, it's not neutral, we wouldn't do a full RGM pass-through of this, okay? Then there's also the impact -- you didn't ask about it, but it's in Brazil, of the reduction in the work schedule. That will also have an industry-wide impact. So the working week is due to change from 6 by 1, 6 working days to 1 rest, to 5 by 2. That will have an impact across the industry, and that's another impact that we need to pass through via the RGM. So for both, I can't tell you the amount of the tax because we're hoping it's neutral, but we don't know. But when we know, if it's not neutral, we'll need to adjust it. And in the case of the workweek, we are going to -- besides the productivity initiatives, there's a gap that we can't cover on that, and we would be adjusting that via RGM.

Our next question comes from Alvaro Garcia with BTG Pactual.

Ian and Gerry, I hope you're doing well. My questions are on Juntos+ and Premia points incentive structures. It's been a couple of years now of really leaning into what I think has been very productive incentive structures for you. And I was wondering, when you think of [indiscernible] when you think of what you've got in your key clients to do, like what's next on that front? What do you think you can take that to going forward?

Alvaro, I mean, I think with Juntos+, it's pretty much where we needed to be. Right now, the team is working on basically fine-tuning the algorithms to help increase the ticket. I think on the app, it's pretty much just smooth sailing. And the new features that are coming on are all looking to improve the customer experience and increase the average ticket. We're not going to get very large gains from widening the base because it's already pretty much available everywhere, and it's just a natural trend of digitalization, which has different paces in the different countries. But we do see that when we keep refining our tools, the average ticket continues to provide a premium, and the indicators regarding improved coverages help us improve that ticket and improve share. What is going to be making a lot of difference to us is the Advisor, so our Juntos+ Advisor sales force tool. There, we only have it in Brazil with order entry. We have it in Mexico without order entry. So we'll be rolling out in Mexico the order entry this year. And we'll be rolling it out in the rest of LatAm without order entry. And there are a lot of benefits from the Advisor tool for the sales force. So there, like I said, there's improved visitation, improved combined coverages. That time and quality of the visits improve and we see that translating directly into improving execution and market share. So for this year, we're seeing a lot of improvement coming up from the Advisor sales force tool rollout, which that's finalizing -- sorry, going along for this year. And then we're going to be coming out in Brazil with a sales supervisor tool, which is fantastic. So think of it this way. The first thing that we did was hand the app to our clients so they have the best technology. Then we handed it to our sales force in Brazil with order entry, in Mexico without order entry. And it's going to -- we're going to be rolling out the order entry and the different modules for the sales force. And now we're rolling out the sales force supervisor tool. So it's incredible. So we're piloting now, it's amazing. So the supervisor sees where are the gaps, what exactly he needs to coach, which sales personnel on, where he needs to reinforce the positives of the sales team. And all of this is done in real time. So it's not waiting until the end of the month to see, or the end of the week, how things are going. So I think that's going to be the second part of the uplift. We're pretty excited. I think that the digital piece, like I mentioned, is one of our key strengths, and it's only going to keep growing. But it's going to be coming now from the sales adviser tool and from the supervisor tool more than from the app, in our opinion, Alvaro. I don't know if you want to complement it.

No, that was great. That was very comprehensive. It will be interesting to see how it works in a tougher macro environment.

Our next question comes from Emiliano Hernandez from GBM.

Ian and Gerry, congrats on the results. Going back to Mexico, following the recent pricing, how has the initial consumer response been? And also looking ahead to 2027, do you see room to implement inflation-linked price increases at the beginning of the year? Or would you prefer to maintain a more conservative pricing strategy to support volume growth and further market share gains?

Emiliano, so the August adjustment where we finalized closing the gap between the tax and inflation was well digested. We have to be cognizant that the consumption environment remains tough. But anything that we see now is going to be pretty much across the industry. So different to the tax where we were very conservative and moved gradually on the tax and inflation impact because it was so large, and we're very confident we did the right NPV strategy. Like we mentioned, we've seen other territories of, for example, other bottlers within our territory performing much different. So we're confident that that was the right strategy. We're also pretty clear that going forward, from what is coming, which is relating to labor or FX and the trickle down to raw materials, we need to be very vigilant and pass through immediately via the best RGM strategy that we can do any type of impact. So it's not going to -- we have enough of a share cushion. We are also, with positive momentum, the innovations give us a lot of support for this. I mean they are amazing. I can't overstate enough how well they are being received by the market. And the pipeline that is coming is very strong. So I think we're in a good position to be able to be vigilant with RGM so that we don't see any impact or we make sure to adjust for any impact and we'll still be able to deliver share gains. I'm pretty confident of that.

Right now, Emiliano, thinking of 2027, I think -- this would be the first of the last 3 years where we have, I would say, a fairly normal operating year, at least this is our expectation. And as Ian mentioned, with the innovation pipeline that we have that is supporting growth and on the back of share performance that we've had, given the strategy that we pursued of maintaining our presence with the consumer this year, I think we're moderately optimistic on the outlook for next year, that we can start taking the just the benefits of this NPV multiyear strategy that we started out this year. So that's a little bit of where we are.

Our next question comes from Henrique Morello with Morgan Stanley.

Ian, Gerardo. Pamela, congratulations on the results. I have just a quick one question on capital allocation. So in the past few quarters and conference calls, you have been talking about possibility on addressing the balance sheet, the low leverage and possibilities around that. And so my question is, if anything changed in your mind right now in terms of priorities in capital allocation, even this quarter's results? And how are -- how is your mind on the possibilities around potential extraordinary dividends or buybacks in the next 12 months or so as well?