Coca Cola Femsa (NYSE:KOF) executives emphasized resilience and sequential improvement in 2025 performance during the company’s fourth-quarter and full-year results call, pointing to stronger trends late in the year, continued investment in digital tools, and a focus on affordability—especially in Mexico—as key themes heading into 2026.
Fourth-quarter results showed volume growth and margin support from insurance recoveries
For the fourth quarter, Coca-Cola FEMSA reported consolidated volume growth of 1.3% to 1.09 billion unit cases, supported by “gradual sequential improvements” in Mexico and “solid volume growth” in the rest of its territories. Management highlighted that December marked the strongest month in the company’s history for volume performance.
Gross profit increased 1.8% to MXN 36.3 billion, with gross margin contracting 60 basis points to 46.7%. Executives attributed the margin pressure mainly to unfavorable mix, hedging positions, and fixed costs such as labor and depreciation, partially offset by better sweetener and PET costs.
Operating income increased 13.3% to MXN 13.7 billion, and operating margin expanded 160 basis points to 17.6%. Management noted the increase reflected the recognition of MXN 1.1 billion in insurance claims recovered in Brazil and Mexico, net of related expenses. Excluding insurance recovery and related expenses in both the fourth quarter of 2024 and 2025, management said operating income would have declined 2.1%, with normalized operating margin contracting 90 basis points to 16.1%.
Adjusted EBITDA rose 12.8% to MXN 18.2 billion, with margin expanding 210 basis points to 23.4%. Excluding insurance effects, normalized Adjusted EBITDA increased 4.4% with margin up 30 basis points to 21.9%. Majority net income increased 3% to MXN 7.5 billion, as operating income growth was partially offset by higher comprehensive financial results and a higher effective tax rate.
Mexico: sequential recovery, affordability actions, and IEPS excise tax pressure
In Mexico, volumes declined 0.9% year over year in the quarter, but management stressed the trend improved throughout 2025. CEO Ian Craig described the company’s actions early in the year—including adjusting its “promotional grid” and strengthening affordability initiatives—as a response to a weaker-than-expected consumer environment and “temporary unfavorable brand sentiment” in the first half.
Management highlighted several category datapoints:
- Coke Zero volume rose 14% year over year in Mexico.
- The stills portfolio grew 7.4%, led by Monster (+41%), Fuze Tea (+33%), and Santa Clara (+28%).
Craig said the company had “fully” recovered its competitive position and entered 2026 with “positive share momentum” in both colas and sparkling flavors. The company also cited execution investments, including installing more than 100,000 new cooler doors by year-end.
Looking ahead, executives repeatedly pointed to the impact of the IEPS excise tax increase in Mexico. In Q&A, Craig said the company maintained its 2026 expectation of a low- to mid-single-digit volume decline in Mexico because it needed to pass through the IEPS increase and was already seeing impacts in the first quarter “as expected.” On pricing, he said it was “still too early to tell” whether additional increases to cover cost inflation would be prudent, noting the consumer remains sluggish and that elasticity is behaving as anticipated.
CFO Gerardo Cruz added that Mexico gross margins were seeing “a bit of pressure,” despite a generally benign raw material environment in sweeteners and plastics, with aluminum cited as an exception. He said the company aimed to offset pressure through fixed-cost and expense actions in an effort to deliver “as close to flat EBIT margins as possible” for the year.
South America: broad-based volume growth, Brazil strength, and digital scaling
In South America, management described a more favorable consumer backdrop in 2025, aided by execution, capacity investments, and the reopening of the plant in Porto Alegre. For the fourth quarter, the South America division posted 3% volume growth to 504.1 million unit cases, with growth across all territories.
Division revenues increased 4.6% to MXN 35.4 billion (or 9.5% currency neutral). Gross margin in the division contracted 170 basis points to 43.7%, which management linked to unfavorable mix and higher fixed costs. Operating income rose 32.8% to MXN 6.8 billion, and operating margin expanded to 19.2%, aided by approximately MXN 1 billion of insurance recovery in Brazil. Excluding insurance effects, management said normalized operating income increased 6%, with operating margin up 20 basis points to 16.3%.
In Brazil, quarterly volumes increased 2.6%, supported by what management called a historic December, strong execution tied to digital enablers, and weather conditions (higher average temperatures and lower precipitation). Craig said the company continued gaining share in all relevant non-alcoholic ready-to-drink categories and had recovered most of the share lost in Rio Grande do Sul during the plant closure.
Executives also highlighted growth in low- and no-calorie offerings and other categories in Brazil, including Coca-Cola Zero (+44% in 2025) and Sprite Zero (+93% in 2025), and said Sprite Zero represented more than 20% of total Sprite volume. The company also cited growth in juices (+9%), mid-single-digit growth in Powerade, and more than 50% growth in alcoholic ready-to-drink offerings driven by Jack and Coke and Absolut & Sprite.
On digital, the company said Brazil’s Juntos+ monthly active user base surpassed 303,000, Premia Juntos+ loyalty customers rose 73% year over year, and Juntos+ Advisor improved geo efficiency by 9.2 percentage points to 95.6%. Supply chain investments increased manufacturing capacity 8.2% year over year with five new production lines, and warehouse capacity rose by more than 25,000 pallet positions (a 6% increase), including an automated vertical warehouse next to the Itabirito plant.
Financing, working capital, and sustainability updates
Cruz said comprehensive financial results were an expense of MXN 1.4 billion compared with MXN 980 million a year earlier, driven by lower interest income (lower cash balances and lower rates in Mexico) and higher interest expense tied to a US dollar bond due 2035 and related derivatives, partially offset by gains in financial instruments, higher foreign exchange gains, and higher gains in monetary positions from inflationary subsidiaries.
He also detailed a MXN 10 billion bond issuance priced on Feb. 12, 2026 in the Mexican market, including:
- MXN 7 billion 10-year tranche at a fixed 9.12% rate (Mbono + 43 bps)
- MXN 3 billion 3-year tranche at a floating rate (Funding TIIE + 38 bps)
On cash flow and working capital, Cruz said the working capital swing investors observed was largely due to accounts payable and a base-period effect tied to delays in the SAP S/4HANA ERP rollout that drove an unusually large increase in payables in the fourth quarter of 2024. He said 2025 was normalized and the company did not expect further disruptions from payables or receivables in 2026.
On sustainability, the company said its S&P Global Corporate Sustainability Assessment score increased by 11 points year over year to an all-time high of 81, leading to inclusion in the 2026 Sustainability Yearbook as the highest-scoring company in its sector in the Americas. Management also cited a record 4.1 out of 5 score in the FTSE for Good assessment and improvements across MSCI, ISS, ESG, Bloomberg ESG, and CDP.
Early 2026 outlook: Mexico decline, Brazil growth, and flattish consolidated volumes
During Q&A, management reiterated several early outlook points for 2026. Executives said Mexico’s volume decline expectations reflected the IEPS tax pass-through and remained low- to mid-single digits. For Brazil, management described early-year momentum in January and February and said volumes were expected to grow, with a low- to mid-single-digit range offered as an “early take” rather than formal guidance.
Asked about consolidated volume expectations, executives said that combining Mexico and Brazil with performance in other markets suggested a flattish to slightly positive consolidated volume year for 2026, noting several moving pieces and that the company would update investors as the year progresses.
About Coca Cola Femsa (NYSE:KOF)
Coca‑Cola FEMSA (NYSE: KOF) is a large multinational beverage bottler and distributor operating primarily in Mexico and across multiple markets in Latin America. As a principal franchise bottler for The Coca‑Cola Company, the firm is responsible for producing, packaging, marketing and distributing Coca‑Cola branded beverages and a wide range of nonalcoholic drinks to retail and foodservice customers throughout its territories.
The company’s product portfolio includes carbonated soft drinks, bottled water, juices, ready‑to‑drink teas and coffees, sports and energy drinks, and other noncarbonated beverages.
