Coke Femsa Posts Solid Growth in 3rd Quarter

We think narrow-moat

Despite weak unit case volumes, which fell 1.6% over last year, we were pleased to see consolidated gross margin remain flat, which we attribute partly to lower PET and sweetener prices in many of the firm’s regions. Still, we remain focused on some of the near-term challenges the firm faces in its core Mexico and Central America geography (which contributes nearly half of sales), including a softer consumer environment following natural disasters in the region and higher concentrate costs. As evidence, volumes for the segment contracted 3.2% and gross margin fell 70 basis points over last year. Looking ahead, we think the firm will be able to continue its pricing initiatives to help offset lower volumes (the average price per case in the region grew 6.3%).

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