Earnings Call Transcript - KOF Q1 2022

Operator, Operator

Good morning, and welcome to Coca-Cola FEMSA's First Quarter 2022 conference call. As a reminder, today's conference is being recorded and all participants are in a listen-only mode. At the request of the company, we will open the conference up for question-and-answer after the presentation. During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA's future performance and should be considered as a good faith estimate made by the company. These forward-looking statements reflect management's expectations and are based on current available data. Actual results are subject to future events and uncertainties, which can materially impact the company's actual performance. At this time, I will now turn the conference over to Mr. John Santa Maria, Coca-Cola FEMSA's Chief Executive Officer. Please go ahead, Mr. Santa Maria.

John Santa Maria, CEO

Good morning, everyone. Thank you for joining us today to discuss Coca-Cola FEMSA's first quarter 2022 results. With me on the call today are Constantino Spas, our Chief Financial Officer, and Jorge Collazo, Head of Investor Relations. Against the backdrop of what is still a volatile environment, we are building on last year's positive momentum to deliver a solid start to the year. Our volumes increased across all of our markets while our consolidated revenues and operating cash flow grew double digits. Importantly, we continue delivering accelerated results across all our strategic fronts. We are leveraging the strength of our enhanced cooperation framework with the Coca-Cola company to align and execute ambitious growth plans and investments. While we open new revenue streams and significantly advance our digital strategy. During today's call, I will first review our consolidated results. Then I will expand on our renew strategy, which is based on six strategic corridors, with a special emphasis on our portfolio and omnichannel digital initiatives, providing examples of how we are implementing this strategy across our diverse footprint. Before our Q&A session, Constantino will walk you through our division's performance and our hedging strategies, closing with an update on the use of our green bond proceeds, as we continue progressing towards our sustainability commitments. Before discussing our consolidated results, it is important to remind you that our recent acquisition of CBI in Brazil is included as of February 1, 2022. For this reason, we will refer to certain figures as comparable, which is the year-on-year comparison, excluding the effects of M&A and currency translation. Moving on to the first quarter results. Our consolidated volumes increased 10.1% year-on-year and 9.3% on a comparable basis. This growth was driven mainly by double-digit growth in Brazil, Colombia, Uruguay, and most of our territories in Central America, coupled with solid performance in Mexico, Guatemala, and Argentina. It is important to highlight that all of our categories posted accelerated volume growth as compared with the previous year. Our core sparkling beverage category grew 7.4% driven by 6.7% growth in brand Coca-Cola and 9.9% growth in flavors. Our still and personal water beverage category grew 37% and 33% respectively, with an outstanding rate of growth across our territories. Once again, and despite the effects of Omicron during January, our on-premise trade channels volume accelerated, especially towards the end of the quarter. For example, in Brazil, our on-premise channel grew 25%, while the traditional trade increased 15% year-on-year outperforming a resilient modern trade. Importantly, our single served mix recovery continues across all our territories. Indeed, our single served mix covered an additional two percentage points in Mexico and Brazil as compared with 2021. Our consolidated total revenue growth accelerated, increasing 14.6% year-on-year and 13.4% on a comparable basis. This growth was driven by our solid volume performance, coupled with our pricing initiatives, revenue growth management, positive price mix, and favorable currency translation effects. Notably, we achieved a solid performance despite the decline in beer revenues resulting from the transition of Heineken's beer portfolio in Brazil. Despite the volatility in the supply chain and raw material environment, our gross profit increased 13.5% and our gross margin remained resilient, contracting only 50 basis points. Our pricing initiatives, revenue growth management, and favorable raw material hedging strategies substantially mitigated margin pressures, mostly from higher PET and sweetener costs across most of our territories. Our operating income growth accelerated sequentially with solid 16% growth year-on-year, leading to an operating margin expansion of 20 basis points. On a comparable basis, our operating income increased 13.9%. This performance reflects fixed and variable expense efficiencies across our operations, as well as a reduction in other operating expenses, mostly related to contingencies recognized during the same period of 2021. Our operating cash for the quarter increased 11.6% year-over-year resulting in a resilient operating cash flow margin of 19.2%. As we substantially protected our profitability to deliver solid operating cash flow growth. Finally, our controlling net income declined 8.3% to reach MXN2.9 billion, impacted mainly by non-cash unfavorable effects in our comprehensive financing result such as market value loss on financial instruments related mainly to increased interest rates and a foreign exchange loss that resulted from the appreciation of the Mexican peso and the Brazilian real as applied to our U.S. denominated cash position. I'll now take a moment to provide you with a strategic update. As we have mentioned in previous calls over the past years, we have been adapting and reshaping our company to thrive in the new business environment. In 2019, we began the implementation of our fuel for growth program, which is an efficiency program, allowing us to restructure and functionalize the company, while delivering savings and a necessary agility to navigate the pandemic as a more resilient organization. Building on this transformation during 2021, we announced a fundamental part of our future ambition, our enhanced cooperation framework with the Coca-Cola company. This enhanced cooperation framework enables a model that is aligned for the long term, opening up the opportunity to work with the Coca-Cola company, to leverage the Coca-Cola portfolio, our combined capabilities and our deep customer relationships for accelerated long-term system growth. This framework adds new areas to our business relationship, including the alignment of ambitious growth plans, digital initiatives, and the exploration of potential new revenue streams, such as the distribution of beer, spirits, and other products. Importantly, we have aligned the economics of our business and management incentives as to which investments and profit levels are mutually beneficial for both parties, thus providing us with long-term certainty and the right incentives to invest and align behind our business growth and market development capabilities towards long system value creation. Aligned with this framework on April 19th, we announced a new distribution agreement with the Campari Group in Brazil, another step to strengthen and consolidate our multi-category platform with high potential leading brands. Now, in conjunction with the release of our 2021 annual integrated report, we have renewed our strategy under our new concept that we call Re-Evolution. This strategy is based on six strategic corridors. First, we are rapidly building and rolling out an omnichannel multi-category commercial platform that encompasses our business-to-business and direct-to-consumer channels. Second, we are developing a consumer-centric winning portfolio with options for every consumer taste and lifestyle. Third, we are fostering an agile digital-savvy, people-centric culture, reshaping our company through talent, enabling key organizational capabilities. Fourth, we have further deepened our company's commitment to sustainable development by placing sustainability at the heart of our organization and every decision. Fifth, we are digitizing our core IT capabilities with an improved architecture to facilitate the scale and integration of our omnichannel strategy. This is critical as we are undergoing a significant digital transformation, not just in the frontline, but enabled by the implementation of a robust backbone and systems. And finally, we plan to actively pursue value-enhancing acquisitions. We are not only exploring traditional opportunities to shape our company's future footprint but also prioritizing adjacent categories for portfolio expansion and capabilities to complement our value proposition. Now, let me share a few highlights of the strategy implementation across our markets. In Mexico, our portfolio initiatives focused mainly on affordability, multi-packs, and innovation, which is enabling us to grow the sparkling beverage category and to accelerate our momentum in still beverage category, including on hydration, energy, and nutrition segments. To give you a sense, we have now reached 85% coverage in our territory with our 2.5-liter universal returnable bottle, up seven percentage points as compared with the end of 2021. Regarding innovation, our new formula of Coca-Cola Zero, Sin Azucar continues to outperform the sparkling category, growing double digits as compared with the previous year. On the omnichannel front, to show you the speed at which we are escalating our platform, in just the first quarter of the year, we have increased the number of active monthly purchases by more than 80% in Mexico to reach approximately 220,000 by the end of the first quarter. This means we added more than 100,000 monthly buyers in just a quarter. In other words, 30% of our total client base in Mexico is now active monthly buyers. We continue to increase the number of routes in households we serve with our direct-to-consumer Coca-Cola model and home delivery routes. During the first quarter, we added more than 120 new routes and implemented strategies to increase the number of monthly buyers while continuing to improve our delivery effectiveness and net promoter scores. In summary, in Mexico, we are progressing across our strategic initiatives, increasing execution, bolstering affordability, and advancing on both of the B2B omnichannel and direct-to-consumer home delivery fronts. Moving on to Brazil, despite a relatively challenging January, we saw sequential improvements in February and an important acceleration in March to deliver an outstanding quarter. All of our categories posted double-digit growth highlighted by solid 15% growth in brand Coca-Cola and 11.4% growth in flavors during the quarter. We also continue to strengthen our competitive position, gaining share in the sparkling, teas, soft drinks, sports drinks, and energy categories. Aligned with our omnichannel platform corridor, we now have more than 160,000 monthly buyers enabling us to increase the percentage of digital orders to 40% by the end of the first quarter, up from 30% at the end of 2021. Looking ahead, we are optimistic that we have the right capabilities to continue growing in Brazil. We expect to continue strengthening our portfolio, bolstering our affordability capacity, and delivering outstanding market execution to provide the right pack at the right place for our Brazilian consumers as we continue expanding our multi-category omnichannel platform. In other markets, such as Columbia, Panama, and Uruguay, we are bolstering the affordability of our portfolio. For example, the rollout of our universal bottle, which allows us to provide affordability not only in brand Coca-Cola, but also in flavors and still beverages is providing positive results. Indeed in Columbia, this initiative is growing more than 50% as compared with the previous year. Similarly in Argentina, Columbia, and Panama, we are capitalizing on the reopening of the on-premise channel and the strength of our multi-pack strategy to recover our single serve mix, which has increased by more than six percentage points in these key markets. Finally, on the omnichannel front, we continue to see positive results in Columbia, Panama, Nicaragua, and Costa Rica. We have increased the number of clients with monthly purchases by more than 30% as we continue enhancing and accelerating our client onboarding and purchase conversion to our digital systems. So summarizing the progress and speed at which we are building our omnichannel platform, on a consolidated level at Coca-Cola FEMSA, we have reached more than 400,000 active monthly buyers. Just to give you a sense of this pace, the number of active monthly buyers increased close to 25% in March, as compared to February. And we achieved more than a million digital transactions just last month. Importantly, our digital revenues in March amounted to $80 million, more than 7% of our total revenues. In other words, digital revenues in one month accounted for more than 20% of the digital revenues we achieved during the entire year of 2021. I want to also emphasize the significant investments we are making to continue bolstering our affordability capacity, especially behind returnable bottles. During the last two years, we have invested more than $500 million in returnable production lines and in bottles and cases, and now for 2022, we expect to install 10 new state-of-the-art production lines, especially focused on returnable capacity in Mexico. Our positive momentum shows that we are executing and delivering against our strategic agenda. Looking forward, we will continue building a consumer-centric multi-category portfolio, accelerate the rollout of our digital B2B and direct-to-consumer omnichannel platforms and continue to place sustainability at the center of everything we do while fostering an agile, people-centric culture across all of our markets and organizations. With that, I'll now hand over the call to Constantino.

Constantino Spas, CFO

Thank you, John, and good morning, everyone. I will now expand on our division's first quarter results. In Mexico, our volumes increased 3.7%, while our total revenues increased 10.6%, driven by a very solid performance in most of our channels, pricing initiatives, revenue growth management, and a favorable price mix. Moving into Central America, in that region our operations continue to deliver a strong performance, with 11.8% volume growth and 15.8% revenue growth as compared to the first quarter of 2021. Remarkably, our volumes in Guatemala continue to show significant volume growth even when considering a high comparable baseline. As a result of this, our quarterly revenues increased 11.4% in the Mexico and Central America division. On the profitability front, our gross profit increased 7.1%, which resulted in a gross profit margin of 48.4%, representing a margin decrease of 190 basis points as compared to the first quarter of 2021. This contraction was driven mainly by increases in commodity prices, which were partially mitigated by our revenue management and raw material hedging strategies. As we have previously mentioned, although we continued to see the normalization of certain operating expenses during the quarter, we were able to double down on savings and efficiencies. As a result, and despite a tough comparable baseline, we were able to increase our operating income by 13.4% and to expand our operating margin by 30 basis points in the Mexican and Central American region. As we continue to see a dynamic raw material and supply chain environment, we expect to continue to protect profitability through very disciplined raw material hedging strategies and focus on driving expense efficiencies. Our operating cash margin for the quarter was 23.2%, which represents a flat contraction of 50 basis points. If we move on to South America, this division delivered solid 17.7% volume growth as compared to 2021. This increase was driven mainly by the strong volume growth of 20.2% in Brazil, which includes the consolidation of CVI, an 18.8% in Colombia, while Argentina and Uruguay also delivered strong volume performance. Despite facing tough weather conditions and new COVID-related constraints at the beginning of the year in Brazil, we were able to deliver a very solid quarter, punctuated by an outstanding performance and strong consumer demand during March, that also was helped by very good weather, particularly in March. On a comparable basis, excluding volumes of CVI in Brazil, volume in the division would have increased a solid 15.7%. Revenues for the division grew 19% as our revenue management initiatives, pricing, and volume growth were partially offset by the transition of a beer portfolio in Brazil. If we exclude the currency translation and M&A, our top line would have increased a solid 16.1% during the quarter. On the profitability front, our gross profit in South America increased 25.5%, expanding our margins by 200 basis points. This increase was driven mainly by the operating leverage resulting from volume growth, favorable price, mix effects, and raw material hedging strategies, coupled with a resumption of tax credits on concentrate purchases from the Manaus Free Trade Zone in Brazil. These effects are partially offset by increases in raw material costs. Our operating income for the division increased 23.2%, while our operating income margin expanded 30 basis points as compared to the first quarter of 2021, driven mainly by higher gross profit and an increase in operating leverage resulting from volume growth and expense efficiencies. These effects were partially offset by the transition of the beer portfolio in Brazil and higher freight and labor costs. Finally, our operating cash in South America increased by 17.4%, resulting in an operating cash margin contraction of 20 basis points. Now moving on to a comprehensive financing result, which recorded an expense of MXN2.2 billion. This is an increase of 93.9% as compared to the previous year, driven mainly by the following non-cash effects. First of all, a loss of MXN936 million in the market value of financial instruments, a foreign exchange loss of MXN165 million, and a lower gain on a monetary position on inflationary subsidiaries related to Argentina. These effects were partially offset by a decline in our interest expense net driven by an increase in interest income. Notably, underscoring the strength of our balance sheet and cash generation, we were able to finish the quarter with a cash position of more than MXN49 billion, representing a 5% increase as compared with the end of 2021. Now, let me provide you with an update on our raw material hedging position for the remainder of 2022. In Mexico, we have hedged approximately 75% of our PET needs for 2022 and more than 90% of our high fructose corn syrup needs. Notably, we have also hedged more than 35% of our aluminum needs in the country. While in Brazil, we have hedged more than 75% of our sugar needs for the year. We're confident that with these hedges, coupled with our ability to segment our consumers and revenue growth management capabilities, we'll continue to enable our sustainable growth in mitigating margin pressures and protect our profitability during 2022. Highlighting the strength of our cash generation and our commitment to total shareholders return, at our annual shareholders meeting on March 28th, our shareholders approved the proposed ordinary dividend of MXN5.43 per unit with its first installment to be paid on May 3, 2022. As John previously mentioned, one of our strategic corridors displacing sustainability at the heart of our organization. And consistent with this, I want to touch on our approach to sustainable financing and provide an update on our progress towards key sustainability targets. First of all, an update on our allocation of green bond proceeds. As you know, we issued our first-ever green bond in September 2020 valued at US$705 million, at the time, the largest for a Latin American corporation and a first for the Coca-Cola system. We're pleased to report that as of December 31, 2021, we had already allocated US$350 million of green bond net proceeds to eligible green projects. The total investment so far represents 49.7% of the net proceeds and includes investments in all of the three main categories: climate action, water stewardship, and circular economy. Now let me provide you with an update on progress on key sustainability targets. First, regarding the circular economy, we have a target of achieving 50% of recycled resin in our PET bottles by 2030. During 2021, we achieved 31% recycled resin as compared to 29% in 2020. Second, we are well underway to achieve our water efficiency commitments, which are 1.36 liters of water per liter of beverage produced by 2024 and 1.26 by 2026. By the end of this year, we have achieved an industry-leading 1.47 liters in water use ratio, improving from 1.49 in 2020. As part of our commitment with the science-based target initiatives, we committed to reduce 50% of our scope 1 and 2 absolute greenhouse gas emissions from our operations by 2030 as compared with our 2015 baseline. Notably, we have already reduced these emissions by 28%. Additionally, we have increased the use of clean energy in our operations to 85%. You can find more information on this in a recently published annual integrated report, which is available on our website. Finally, I want to mention that we continue making significant progress with regards to our pilot test for distribution of other products and categories from leading companies and brands. For example, in Mexico, we're expanding the pilot test we have for personal care products with Procter & Gamble and for spirits with Campari to more territories in the country. Additionally, last month we began a pilot program with Kellogg in the Toluca region. In the case of PNG, we already began tests in the city of San Luis Potosi, while with Campari, we began in another area. In both cases, we're now expanding these pilot tests to more territories as we continue increasing our value proposition for our customers and partners gathering valuable learnings and insights. With that, I will hand the call back to John for his final remarks. And thank you very much for attending the call today.

John Santa Maria, CEO

Thanks, Constantino. Although the beginning of 2022 has enjoyed its fair share of volatility, we remain ambitious about our ability to continue delivering accelerated results across all of our strategic fronts. We're convinced that we have the right capabilities to continue growing our top line, while substantially mitigating margin pressures for the remainder of the year. I'm encouraged by our renewed strategy and by the speed at which we are implementing Coca-Cola FEMSA's transformation. We remain committed to continue accelerating our digital edge while building a customer-centric multi-category portfolio together with our partner, the Coca-Cola company. Thank you for your continued trust and support and for joining us today. Operator, I'd like to call for questions.

Operator, Operator

Thank you. Our first question comes from Alan Alanis at Santander. Your line is open. Please go ahead.

Alan Alanis, Analyst

Thank you very much and good morning. Congratulations on the results. It seems you saved the most interesting news for the end. Now, I’m eager to hear about your pilot program with Campari in Mexico along with Kellogg and Procter & Gamble. Congratulations on that. Please keep us updated. I have many questions regarding the potential of those agreements, John. If you could share your thoughts on that, it would be appreciated. What’s the vision for that? That will be my first question. After that, I have a few financial questions for Constantino.

John Santa Maria, CEO

Thank you, Alan. We are currently engaged in pilot tests with three partners: Campari, Kellogg, and Procter. The outcomes of these tests will guide the type of future arrangements we might establish. As it stands, this is indeed a pilot program, and we are looking to expand our understanding from it. Thus far, the results have been very promising for both parties. We have observed an increase in sales at each point of sale across our total portfolio, as well as a rise in the number of items sold per store within the Coca-Cola portfolio. The synergies we are experiencing are very positive. Thank you. Do you have any more questions for Constantino?

Alan Alanis, Analyst

Yes. The other one really quickly. I mean, they're much more financial questions regarding - we're seeing a big discrepancy in the move of the operating income and the EBITDA this quarter. What were the changes that you were doing during the depreciation? And if you can just expand more, a little bit more on the financial losses below the operating line just to confirm that these are like non-recurrent and if they have anything to do with your hedges? Congratulations also for having all the hedges, especially in the remaining of the year it seems 20% of sugars in Mexico, 34% in Brazil and so forth. But just to understand a little bit more there, the moves of the depreciation and the extraordinary financial charging for the operating line? Thank you.

Constantino Spas, CFO

Yes. Thank you, Alan. I'm going to ask Jorge to answer this one. Are you eager to answer?

John Santa Maria, CEO

I'm going to give this question to Jorge and then I can add some more color if necessary. Jorge, can you jump in please.

Jorge Collazo, Head of Investor Relations

Sure. Hi, Alan. Yes, Alan. So basically, the main effect is related to exchange rates actually. And as you know, we are having these virtual effects because of foreign exchange related to specific zones. So it's not really changes on the depreciation, that's what I mean, coming mainly from a benefit from the appreciation of our currencies that we saw during the quarter, so they don't actually impact the EBITDA on the operating income line.

Constantino Spas, CFO

Alan, and actually, on your question on the pilot program, I would want it to add some more color in context of the initial remarks. This is evidently not only focused on Mexico. We're running different pilot programs in different regions, in Brazil, in Colombia, and in Panama, as of today, on top of Mexico, with different partners. And particularly in Brazil, I think that we announced recently an agreement with Campari. And this is very exciting, too, because, as John mentioned, the synergies that we're getting with some of these key partners that are fantastic brands by the way. And I think that's commonality that we're picking up in this approach to partnership, in the case of Campari, we believe it's an ideal partner. It's got excellent brands. It's got great potential to grow by leveraging the brands and our distribution network. And we're taking them to many more points of sale than what they reach today. That is something that is key. I mean, particularly the partners that don't have a strong DSD model as part of their core route to market are getting enormous benefits when we look at the pilots, not only in distribution but also in execution. So in the case of Campari, particularly, it's a distribution contract that brings additional brands and products in the case of spirits to a portfolio in Brazil. And in general terms, this agreement just represents one more step further with the goal to continue offering, as John mentioned, a winning portfolio, and proves that our capabilities are working successfully. So approaches like the one with Campari in this case, which is a multi-year long-term agreement for five years, will allow us to work for strategies in different channels and regions and with different emphases. And that is something that will become, I think, overtime, a commonality on the type of approach that we would take while we scale up these pilots into larger agreements throughout the different markets where we're operating. We wanted to make sure that we make the point across that it's great in Mexico as of today with these partners, but we're also scaling up other agreements with different FMCG in this case, spirit players in all over different markets. I hope that helps and provides enough information for the question.

John Santa Maria, CEO

And Alan, I know you asked as well around the comprehensive financing result. And that is mostly related to the mark-to-market of derivatives that we have related to interest rates. And so when the U.S. Treasury moved up that created these non-cash effects close to a MXN1 billion that we have this quarter.

Jorge Collazo, Head of Investor Relations

Yes. So they're all non-cash effects.

Operator, Operator

We'll move to our next question with Ben Theurer with Barclays. Your line is open. Please go ahead.

Ben Theurer, Analyst

Perfect. Thank you very much and congrats again, just along the lines of what we've been talking about these pilot projects and thanks for clarifying that you're also doing that in other regions. So, can you help us understand what ultimately - how you think about the mix going forward? And what's like a kind of a preferred product, because obviously, you're running tests with the spirits companies like Campari, your current partner. But you also mentioned PNG, Kellogg. So what's like the perfect target for you? And is there any conflict of interest that you may have to manage at some point when it comes down to deciding what you want to put on the truck or not, just to understand a little bit the drivers of these different potential partnerships?

John Santa Maria, CEO

Sure. Thank you for the question. Let me answer it this way. Let me see if I can give you more color. What we're looking for is a portfolio of products that gives us a much better approach to our customer base depending on the channels and occasions that we serve. So ultimately what we would like to do is focus on not so much a single brand, but have the partnerships in place that allow us to have a significant share of wallet of each one of our clients. So, if you think about this in terms of what we can deliver through the Coca-Cola system, Coca-Cola FEMSA towards each one of our either small shops or bars in Brazil, et cetera, we're looking to go from a starting point of about 20% share of wallet being a what that bar or store basically consumes to about 40% share of wallet, okay, to be able to become a very, very customer-centric and preferred supplier. And with that, we can build other types of products and services on top of that platform as we go forward. Does that help?

Jorge Collazo, Head of Investor Relations

Yes. And in addition, there's also some consideration that we take into the analysis that are more related to our internal processes, right? How synergistic or how much complexity does this add to our logistical supply chain network? I mean, is it congruent with the type of processes that we have internally, so that we don't affect our execution? So there's other considerations. I mean, definitely this is very focused on a consumer and customer-centric portfolio definition, but we also take into account the fact that we are a very efficient operation and we tend to look at it from an angle also of the disruption possible in our supply chain. So that's also something that we need to take into consideration. And obviously, as you can pick up from the type of partners that we're targeting, there's also interest in companies and brands that are great brands. And at the same time companies that are very focused on investing behind these brands on consumer insights that can provide us with the tools, so that we can transform those insights into executional capabilities that end up driving more growth, not only for the partners and for the customer, but also as John mentioned for the Coca-Cola portfolio, those are interesting analyses that we're learning actually, and we're incorporating as we learn and progress in this journey.

Operator, Operator

We'll move next to Isabella Simonato with Bank of America. Your line is open. Please go ahead.

Isabella Simonato, Analyst

Thank you. Good morning, everyone. So following up on this partnership, right. It's interesting that you mentioned this dimension of share of wallet that you have and then potentially want to. How do you think when you think about the categories, right, that you plan to partnership with brands? How do you think about weighting value and bonds, right, during the portfolio that a bar events who carries and price to sales in general? How strategically do you think about that equation? That will be the first question. And just switching gears a little bit to consumption and volume performance, especially in Brazil, I think was a very strong quarter. And two questions, if you could share with us. First, give us the color of how you're seeing the consumption environment post-March, right, and this evolution throughout the quarter. And second, specifically on the still beverage. If there was a specific driver there for that 70-plus percent growth year-over-year, or that was just the comparative. Just a little bit more color on that. Thank you.

John Santa Maria, CEO

Yes, hi, Isabella. Thank you very much for the question. Let me see. There's a lot of questions there. The first one is we have in terms of where we're going, we have a clear roadmap about what are the categories that we want to embrace to put on our omnichannel multi-category platform. And those would give us a preferential. It would be preferred in terms of both customer and at the same time value, as what Constantino was saying. And it would fit pretty well in terms of our supply chain. And those, as we started going forward, are being executed. We're trying to look at pilots with them in each one of the countries. So it's not only a volume issue, it's more about how do we go out there and get the right categories and the right margins into our business to make sure that they become route accretive. And therefore, as we move forward, that is the focus of that roadmap that we're putting into place. Again, we think the share of wallet that we're talking about is something that would allow us to become very sticky in terms of a platform for the trade, but obviously, in a very synergistic way with the customer, consumer, and the Coca-Cola portfolio. Going forward in Brazil, I think, we had a very good quarter, as you said. But the underlying growth trends that we're seeing in our business are very strong. Even as we go forward in April, April is continuing to have very strong volume performance, not as much as in March. But we have the right strategies in place of affordability, multipack, and multi packing, single serve multipacking, dual packing, ensuring that we have new category enhancements with growing categories such as energy. And underlying, we see continued consumer activity, good macroeconomic trends throughout the year, and we think we're going to have a very solid growth year in Brazil. It's not something that we're just seeing as a first quarter event, but it's gaining momentum also in terms of execution, in terms of refrigeration penetration. And overall, we're seeing our business in Brazil improve quarter by quarter. I don’t know if Constantino would like to add anything.

Constantino Spas, CFO

Yes. And in the case of still, Isabella, it's a combination of, definitely of comparables, but at the same time, when you look at categories like tea, energy drinks with the Monster brand, and sports drinks, they're growing phenomenally. I mean, they have gained great traction with consumers or execution is fantastic. And actually, we have achieved record market share for those categories in this quarter. So it's a combination of the comparative, but also consumer trends, and macro environments, and executional capabilities overall. But particularly in these three categories, there's also a specific trend that's accelerating in terms of performance in the market. So the combination of all those effects has delivered an excellent result for the still category in Brazil this year.

Operator, Operator

Okay. So our next question with Lucas Ferreira at JP Morgan. Your line is open. Please go ahead.

Lucas Ferreira, Analyst

Thank you. Good morning, John, Constantino, and Jorge. I have also two questions. One is regarding multi-category. If you can give us a sense of how big you think this sort of total addressable market could be for you in Mexico and Brazil, when you identify the categories that are synergistic to your business. So how big could this addressable market be in each of the countries, if you have an ideal sort of fair share of this market you could have in say mid-term? And the second question is regarding the consumption environment in Mexico, especially, talking about price elasticity, how comfortable you are to kind of continue to face cost pressures going forward? There are talks, the government tried to sort of eliminate inflation, I don't think you're directly back to if you can discuss this or how the government initiatives to potentially curbing price hikes and some categories if this could be directly or indirectly impacting you at some point? Thank you.

John Santa Maria, CEO

Constantino, do you want to take the first one? I'll take the second.

Constantino Spas, CFO

It's still very early in the multi-category approach, and we're currently in an experimentation phase. Most of these initiatives are at the pilot level, and we're analyzing the potential size we can realistically achieve. We have some hypotheses but are not ready to disclose those just yet, as we need more information. As John mentioned, we have some initial thoughts about the share of wallet and certain channels. Based on the market and channel, our hypothesis is that we could achieve 30% to 40% of the share of wallet in fragmented trade stores, which differs between on-trade and off-trade scenarios. We believe we can establish a platform that can deliver a solid business in collaboration with our fragmented trade retailers, targeting that 30% to 40% share of wallet. We must validate our ability to achieve this, which is why we're focusing on these pilot projects. I hope this clarifies things, and we expect to have more information in the coming months to share about our multi-category goals.

John Santa Maria, CEO

Yes. Turning back to the Mexico consumer environment, there have been some preliminary discussions between the Mexican government to create a program aimed at reducing inflationary impacts across various sectors, in which we are not involved at this time and do not expect to be. Regarding the inflation outlook in Mexico, we can expect a slight increase in inflation from current levels. However, our revenue growth management strategies are set up to address this and continue to achieve positive volume growth. We have successfully grown in a high-inflation environment, with increasing and accelerating volumes in Mexico over recent quarters, and we believe we can sustain this momentum. Our portfolio and initiatives are designed to support this, and we offer a range of consumer price points and packaging options that allow us to adjust to consumers' varying needs. In summary, regarding your question about a formal program in Mexico, the government is beginning to collaborate with various sectors for what they refer to as efforts to minimize inflation impacts on certain products. However, we do not see this evolving into widespread price controls as may be seen in other contexts.

Operator, Operator

We’ll go next to Sergio Matsumoto with Citi. Your line is open. Please go ahead.

Sergio Matsumoto, Analyst

Yes. Hi. Good morning, John and Constantino. Thank you for taking my question. I wanted to kind of delve deeper into this pricing and inflation question. The pricing in Mexico appears to be at least for this quarter, sort of like in line with inflation like that high single-digit number. Now historically, your category has grown more robust pricing, often above inflation. So I'm wondering if you could give us some color on what you have in mind in terms of how you're seeing this revenue growth management that you just mentioned. There might be some mix effect of perhaps more returnables or maybe you have some of these hedges that Constantino mentioned. So perhaps you don't have to do a step-up pricing right now, but maybe there's more coming later in the year, perhaps in the summer. So if you could kind of give us some color that would be great? Thanks.

Jorge Collazo, Head of Investor Relations

Sure, Sergio. Sorry, Constantino. Go ahead.

Constantino Spas, CFO

No, go ahead, Jorge, go ahead. Go ahead, please.

Jorge Collazo, Head of Investor Relations

Just some initial comments on that and Constantino, please compliment. But I would say, Sergio that what we are leveraging on is on our revenue management capabilities. And so, we are leveraging on a lot of affordability as John mentioned on the prepared remarks. We are investing in returnables, multipack, and execution to drive top line. So far during the year, we have increased prices, basically by the end of the quarter, and during March. And so the effect of that price adjustment is not fully reflected yet on the figures now. But what we're looking at is a combination, Sergio, offering these affordability to our consumers, while at the same time we have these segmentation capabilities to drive top line growth. And of course, that should also be put together with volume growth. And so that's what we are looking at. Yes, we are looking to leverage these revenue management capabilities, which we believe that at the end of the year, we should have a pricing average that could be slightly above inflation. But as I said, it's not cool headline pricing is more of a leveraging on these revenue management and price pack architecture that we have in Mexico.

Constantino Spas, CFO

Yes. That's exactly. That's exactly, Sergio. What I would add is, as Jorge mentioned, we don't focus primarily on headline pricing. But we do it through RGM strategy. And in that regard, I mean, we use a lot, particularly in Mexico, which is a most developed market, we use a lot of big data analytics to try to understand what's the best price pack architecture for the market, and in line with that take particular pricing in a very sequential manner throughout the year. So all-in-all, at the end of the year, just to re-emphasize, I think that as Jorge mentioned, you will see most likely an outcome of pricing ahead, slightly ahead of inflation in Mexico and in Central America. And in line with inflation in South America. That would be my expectation based on all the pricing architecture and RGM strategies that we have put in place for the year. And they're better parts of you know, everyday business and processes within Coca-Cola FEMSA.

Operator, Operator

And due to time constraints, we'll take our final question from Alvaro Garcia at BTG. Your line is open. Please go ahead.

Alvaro Garcia, Analyst

Hey, John and Constantino. I appreciate the call. I have two questions. The first is about the six corridors. Thank you for the update. Regarding the first quarter you mentioned, John, you talked about integrating direct-to-consumer into omnichannel. I’m interested to know if there is more integration happening across your various omnichannel businesses and if there are any organizational changes you'd like to discuss. That’s my first question.

John Santa Maria, CEO

Currently, we are focusing on developing an omnichannel strategy primarily for our traditional trade, specifically in the B2B sector. We are implementing various initiatives to create a seamless order-taking and delivery system. Additionally, in Mexico, we have a well-established direct-to-consumer segment through Coca-Cola delivery. Our efforts are centered on digitizing our traditional operations, transforming the old approach of direct sales into a digitized sales force. We are also working on developing an application that enables customers to place orders from home without requiring the delivery truck to come to their door. This marks a significant shift in our business model. At this time, we do not foresee any organizational changes; instead, we are committed to enhancing our direct-to-consumer platform. We aim to improve our applications and expand our multi-category offerings on our delivery trucks. Our business is growing through additional routes, digitization, and the creation of a digital application that brings everything together.

Alvaro Garcia, Analyst

Great. So same quarter, but still run, still two separate businesses between D2C and B2B?

John Santa Maria, CEO

Right.

Alvaro Garcia, Analyst

Okay, great. And then just one last one a bit of a nerdy question. But I noticed in the filings, when it comes to your cash generating units, sort of how you value your distribution rights and your goodwill, you have these volume growth numbers through 2031. And there were significant increases for places like Colombia and Brazil. And I was wondering if there was anything to that at all or what we should think of those very steep increases? Thank you.

Jorge Collazo, Head of Investor Relations

Hi, Alvaro. Yes, it's actually a combination of a couple of things. One is that we have changed our methodology for projecting going forward. Additionally, as John mentioned, we are setting more ambitious growth plans and expectations. So part of this update reflects those changes. This projection change also involves the timeframe; previously, we projected changes over 10 years, but now we are using a five-year projection method, from which we will derive long-term projections. So it’s mainly a combination of those two factors.

Operator, Operator

And that’ll conclude the question and answer session. I will turn the conference back for any additional or closing comments.

John Santa Maria, CEO

Thank you, operator, and thank you all for attending the call today and for your competence and interest in Coca-Cola FEMSA. I believe we were starting off the year with a very strong performance. We feel that we have the momentum in the business to maintain a very, very solid year for Coca-Cola FEMSA 2022. And as always, our Investor Relations team is available to answer any of your remaining questions. So thank you very much and have a good day and good weekend.

Operator, Operator

Ladies and gentlemen, that will conclude today's conference. We thank you for your participation. You may disconnect at this time.