Dear Shareholders:

While we were sorting through the challenges of the COVID-19 pandemic for the second year in a row, 2021 was characterized by resiliency and recovery at FEMSA. While restrictions and operational reductions remained in place in some markets, we began to see gradually improving health and mobility trends as consumers began to feel more comfortable in resuming activity levels. With an unwavering focus on the health and safety of our people, FEMSA stood ready to serve our consumers, support our communities, and boldly push forward in advancing our strategy for sustainable growth and innovation.

Leadership Transitions
We completed the year by thanking Eduardo Padilla for his leadership as Chief Executive Officer of FEMSA since 2018, following the announcement of his retirement. Eduardo achieved an exceptional trajectory of almost 25 years at FEMSA, first joining in 1997 as head of strategic planning, and subsequently taking on multiple leadership roles in the following years, including serving as CEO of FEMSA Comercio for 16 years. During his tenure, FEMSA developed compelling new business verticals, consolidated key partnerships, and even navigated the challenges of a global pandemic. Guided by his vision, he strengthened FEMSA’s culture and values while positively impacting the markets and communities where we operate. On behalf of all of us at FEMSA, I would like to thank Eduardo for his tireless service and wish him the best in his retirement.

We also welcome Daniel Rodríguez Cofré as FEMSA’s new Chief Executive Officer as of January 1, 2022. Daniel first joined FEMSA in 2015 as Chief Corporate Officer, before assuming the role of FEMSA Comercio CEO one year later. There, Daniel grew OXXO’s leadership position, including developing compelling growth opportunities in South America; supported the Health Division’s evolution into a powerful regional platform; and helped the Fuel Division consolidate its position in Mexico. Now we look forward to Daniel’s leadership through FEMSA’s next era – driving growth, innovation, and market leadership while advancing our sustainability vision in support of our diverse people and their families, our communities, and our planet.

Sustainable Business
For FEMSA, sustainability is about generating the right social, environmental, and economic conditions to operate and continue growing in harmony with the environment and society. FEMSA is a signatory of the United Nations Global Compact (UNGC), and we support and adhere to the UNGC’s ten principles to protect human rights, uphold ethical labor practices, preserve the environment, and combat corruption.

The leadership of our business units and the important work of the Fundación FEMSA are fully aligned with our ethics and values, focusing on where we can have the greatest impact on the three pillars of our Sustainability Strategy that was updated in 2021: Our People, Our Planet, and Our Community. These priorities relate the important global topics as well as our businesses’ most material issues, that is, the environmental, social and governance (ESG) topics that are most important to both our Company and the concerns of our stakeholders. I am proud to co-lead the new Sustainability, Inclusion & Diversity Committee, which we set up in 2021 as an internal, cross-functional leadership team to further enhance the Company’s ESG strategies. Among other objectives, the Committee has set the goal of increasing the representation of women among managers and directors by 20 percentage points by 2030.

Beyond being the right thing to do, sustainability and ESG management at FEMSA is also good for business.

Our Sustainability Strategy creates social, environmental, and economic value for all our stakeholders and contributes to lower employee turnover rates, increased customer satisfaction, operational continuity, and lower costs, among other advantages. Following Coca-Cola FEMSA’s first green bond issuance in 2020, FEMSA took a next step in our bold sustainable finance vision by announcing in April 2021 the placement of Euro-denominated sustainability linked notes in the international capital markets, representing the largest ever sustainability-linked bond by a Latin American issuer.

Perhaps most importantly, our accompanying Sustainability Linked Bond Framework includes ambitious Sustainability Performance Targets aligned with the goals of our Sustainability Strategy, particularly in the transition to a circular economy and the mitigation of climate change. In February 2022, we were honored to be recognized as having issued the “Corporate High-Grade Bond of the Year” by LatinFinance, as part of their 2021 Deal of the Year Awards.

Value Creation
Through this lens of sustainable finance and business continuity – particularly as we navigated the effects of the pandemic – we upheld our disciplined approach to financial management in 2021 while innovating to drive sales and growth. Total revenues increased 12.8% for the year as compared to 2020 to Ps. 556.2 billion (US$ 27.1 billion), reflecting growth across our business units, partially offset by increased COVID-19 operating restrictions. Income from operations increased 25.3% and consolidated net income increased significantly to Ps. 37.7 billion (US$ 1.8 billion).

Net majority income was Ps. 8.00 per FEMSA unit¹ and US$ 3.9 per FEMSA ADS. Our consolidated net debt position at year-end was Ps. 93.2 billion (US$ 4.5 billion), and our capital expenditures amounted to Ps. 24.1 billion (US$ 1.2 billion), reflecting the reactivation of ongoing investment activities in most of our business units.

1 FEMSA Units consist of FEMSA BD Units and FEMSA B Units. Each FEMSA BD Unit is comprised of one Series B Share, two Series D-B Shares and two Series D-L Shares. Each FEMSA B Unit is comprised of five Series B Shares. The number of FEMSA Units outstanding as of December 31, 2021 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

These financial results reflect the agility and resiliency of our business units across the organization during a challenging year and our year-end cash position was more than Ps. 97.4 billion (US$ 4.7 billion). Although overall we were significantly impacted by COVID-19 and related changes in consumer behavior across markets, today we are in a much better position than we were one year ago, and perhaps than ever before. Our business units delivered solid performance during 2021 and have considerable avenues for growth in the future.

FEMSA Comercio was impacted by reduced consumer and vehicle mobility during the year, resulting in, among other impacts, our decision to slow planned expansion operations. Nevertheless, we finished the year strongly with 865 net new OXXO stores; 284 net new drugstores; and 9 new OXXO GAS stations, and we took the opportunity to expand our businesses in other important ways.

In the Proximity Division, we built on our longstanding history in correspondent banking and financial services to expand financial inclusion in Mexico through digital innovations, including the launch of Spin by OXXO, a brand operating under a conditional authorization. This program facilitates safe and convenient financial transactions and transfers at any OXXO store. We also launched OXXO’s first loyalty program, OXXO PREMIA, which will reward our customers for their loyalty while strengthening our relationship with them.

In the Health Division, to support the healthcare needs of our customers during another pandemic year, we leveraged our size, scale, and network to secure important medicines and healthcare products and make them efficiently and safely accessible to those in need.

In the Fuel Division, we celebrated 25 years of operations and launched new customer engagement campaigns to strengthen our brand in a competitive environment and at the same time continually improve the customer experience.

Coca-Cola FEMSA: In a year of operational and strategic milestones, Coca-Cola FEMSA was able to deliver strong performance and volume recovery ahead of pre-pandemic levels – and expand digital capabilities that drove increased sales in 2021. Despite supply chain disruption and higher raw material costs, Coca-Cola FEMSA delivered another year of resilency and profitability. On multiple strategic fronts, 2021 was also a year of achievements, including the enhanced Cooperation Framework with The Coca-Cola Company; the redesigned beer distribution agreement with HEINEKEN; a new distribution partnership with Estrella Galicia; and the acquisitions of Therezópolis and CVI, a beer brand and a Coca-Cola bottler in Brazil, respectively.

In line with FEMSA’s sustainable finance strategy and following the issuance of Coca-Cola FEMSA’s green bond in the international capital markets in 2020, Coca-Cola FEMSA also placed the first sustainability-linked bonds in the Mexican market for Ps. 9.4 billion (US$ 470 million) during 2021, thereby publicly committing to lowering our water use ratio from 1.47 liters in 2021 to 1.36 by 2024 and to 1.26 by 2026.

FEMSA Negocios Estratégicos: Our Logistics and Distribution business grew its top-line sequentially during the year and took several important steps to reach new customers through strategic expansions. Solistica began operations in Guatemala, bringing with it an advanced fleet of vehicles that optimize safety and efficiency. And, in alignment with our vision to build a leading national distribution platform in the United States, Envoy Solutions successfully completed several acquisitions that enhanced and solidified our existing footprint, while increasing and consolidating our reach in adjacent regions. Our Food Service Solutions business was impacted by mobility and regulatory changes in 2021 but also continues to find new growth avenues and innovation opportunities.

Looking Ahead
As we begin a new chapter at FEMSA with Daniel Rodríguez Cofré as our CEO, we have also announced a new organizational structure at FEMSA as of January 1, 2022. In accordance with our focus on maximizing our value generation, the reorganization of FEMSA Comercio within FEMSA will be made up of the following three divisions, in addition to the already well-known Coca-Cola FEMSA and FEMSA Strategic Businesses:

• Proximity Division (comprising OXXO México, OXXO International, OXXO GAS, Bara, and Doña Tota)
• Health Division (comprising our pharmacies, laboratories, and beauty stores)
• Digital Division (comprising our coalition loyalty program and financial business initiatives)

We are confident that these strategic changes will allow our businesses to continue in the line of growth and expansion we have achieved to date, thanks to the invaluable dedication of our talented people. With this vision for our collective future, I know we have every reason to be excited and optimistic.

But first, I encourage you to read our 2021 integrated Annual Report and learn more about the highlights of our most important work over this past year that have contributed to where we are today.

Thank you for your continued partnership and wishing you a healthy, safe, and sustainable 2022.

 

José Antonio Fernández Carbajal
Executive Chairman of the Board