Good day, ladies and gentlemen, and welcome to FEMSA's Second Quarter 2025 Results Conference Call. Please note that this event is being recorded. [Operator Instructions]. I will now turn the call over to your host for today, Juan Fonseca, Investor Relations. You may begin, sir.

Thank you. Good morning, everyone. Welcome to FEMSA's Second Quarter 2025 Results Conference Call. Today, we are joined by Juan Carlos Guillermety, CEO of Spin, formerly Digital@FEMSA; Martin Arias, our CFO; and Jorge Collazo who heads Coca-Cola FEMSA's Investor Relations team. This is the first time Juan Carlos joins us for a quarterly conference call as part of our ongoing efforts to provide more market access to our leadership team. The plan for today is for Juan Carlos to open the conversation with some background on Spin followed by a strategic discussion on where we are today in our digital endeavor. And just as importantly, where he sees Spin going in the future. After his remarks, Martin will provide some detail on FEMSA's quarterly results. And finally, we will open the call for questions. Juan Carlos, please go ahead.

Thank you, Juan. Good morning, everyone. It's a pleasure to be here today discussing and sharing with you some of the exciting progress that Spin has been making and what we're trying to build. Thank you for your interest and for joining us this morning. Let me begin by providing some brief context into why and how Spin came to be, not to make a trip down memory lane, but because so much of what's Spin does today, and will do in the future, leverages and enables OXXO and FEMSA digital physical assets more broadly. As most of you know, OXXO began developing a platform for basic cash payments and services many years ago. Selling prepaid long distance telephone cards and evolving over time by enabling its customers to solve an ever-growing number of needs from utility bill payments to correspondent banking to e-commerce payment functionality broadening the scope of its service offering along with the needs of its customers. More recently, as digital platforms in the market launched and evolved, it became increasingly clear that FEMSA had an opportunity as well as the strategic need to develop its own digital platform, not only to complement its physical cash-based functionalities, but to evolve OXXO's broader value proposition and strengthen its role as the most convenient way to meet every day needs. Looking into the future, convenience retail cannot be imagined without a seamless, integrated digital experience. Spending is one of the most important aspects of how we ensure that OXXO continues to deliver convenience across both physical and digital ecosystems while accessing new profit pools. Since our foundation in 2021, we have envisioned an omnichannel ecosystem centered on payments and rewards. While we always saw it as an integrated experience, we launched Spin by OXXO, our digital wallet and Spin…

Thank you, Juan Carlos. Good morning, everyone. Let me begin by discussing our consolidated results for the second quarter of 2025. During the quarter, we delivered total revenue growth of 6.3% despite a challenging environment in Mexico, impacting both Proximity and Coca-Cola FEMSA, which was offset by solid top line trends outside Mexico, currency tailwinds and the consolidation of the OXXO USA operation. Operating income increased by only 1.2% year-over-year as the more challenging consumer environment in Mexico did not allow us to absorb the inflationary effects on our cost and expenses as effectively. In addition, our operations were geared to a stronger consumer environment than the one that materialized, plus our cost and expenses ran a bit ahead of actual volume and traffic. While this impacted profitability, we remained confident in our ability to navigate short-term headwinds by maintaining strong operational discipline and leveraging the solid fundamentals of our business. Net consolidated income decreased by 64.3% to MXN 5.6 billion, driven mainly by: one, a noncash foreign exchange loss of MXN 4.1 billion compared to a gain of MXN 6.1 billion last year, a swing of more than MXN 10 billion related to FEMSA's U.S. dollar-denominated cash position, which was negatively impacted by the sequential appreciation of the Mexican peso during the period, and #2, a lower interest income of MXN 2.1 billion compared to MXN 4.1 billion the previous year, reflecting lower interest rates. Turning to our operating results and beginning with the Proximity Americas division, overall, the division delivered mixed results this quarter, improving sequentially at the top line level, but still reflecting a challenging consumer environment in Mexico that was partially mitigated by a robust performance in our other markets in Latam. Same-store sales declined modestly by 0.4%, once again reflecting a combination of a solid…

[Operator Instructions] The first question comes from the line of Ben Theurer calling from Barclays.

I wanted to take the opportunity to dig a little bit more into some of the comments you made in the opening and talking a little bit about Spin and the opportunities here and particularly how you think to bring this back into Proximity Americas and to like hopefully trying to see some sort of a recovery. As you've seen the business evolving over the last couple of years from the early stages to now and obviously, you're showing progress here on still acquiring new customers with them actually using as well the platform. What would you say are the missing pieces in order to really make the most out of Spin and Spin Premia as it relates to really boosting again maybe some of that traffic or some of that recovery of the Proximity stores, particularly in Mexico? That would be my question.

We're going to take a couple of seconds. We'll be on mute for little bit. Thank you for the question. I'd like to first highlight that in terms of where we see the future from an OXXO perspective, we're already well underway in leveraging the data that comes from our Premia Rewards program to accelerate our retail media efforts. And the early results are quite promising as we have more data on our customers, and we continue to penetrate further our base, our expectation is that how we can personalize and customize our offers is going to continue to improve, allowing us to drive higher commercial income. On the Spin side of things, we're very early in our monetization journey as we're currently only starting to explore financial services, including savings and credit products. We launched our first personal loans earlier in the year and are very excited about the prospects of how this can evolve in the future but recognize that we're going to be doing so in a very careful manner and taking time to progress our financial services value proposition. Lastly, I would highlight that we have interest in moving all of our Spin products beyond OXXO, beyond Proximity and Health to have a much wider value proposition, and we're also quite early in that journey that will start primarily focused on payments and rewards and evolve into financial services as well.

I think I would also add, Ben, this is Juan. I mean, if you just look at the tender, this figure that we've been reporting of what percentage of OXXO sales are going through the program, through the Premia program. And that's a number that goes up by 1 or 2 percentage points per month, right? I mean we were discussing among ourselves. We gave you a figure today of, I think, 45.8%, almost 46%. But the reality is that June was already at 47%, right? And so I'm sure 3 months from now, we're going to be talking somewhere in the 50s. I think we're still very much in the early stages of people embracing this and to having it impact their habits, right, in terms of going to OXXO more frequently and choosing OXXO versus other alternatives because it gives you those rewards and then how this feeds through the engagement on whether you're using your physical card or your app and then the -- kind of the broader purpose of Spin as an ecosystem. But I still think -- I mean, the growth rates -- this thing has only been around for a couple of years, right, a little bit more than a couple of years. And the slope of that curve is really remarkable. So I do think there's a lot more to come in terms of just people, again, internalizing that if you do this transaction at OXXO versus elsewhere, it gives you these benefits that you didn't have not that long ago.

Can I just quickly follow up on that? So with that tender going up, are you seeing better traffic data with the ones that are signed up for Spin/Spin Premia than traffic data with the customers that aren't signed up? So is there something that potentially can help you recovering the traffic as we move into the coming quarters and then into 2026?

In fact, we do because that 47% of sales is -- tends to favor heavy users. In other words, the percentage of users that represent that 47% is a lower percentage. And so what that indicates to you is it drives loyalty and engagement with people. So people are obviously choosing to go more to the store more frequently to buy more things driven by the access to the points. And that the value proposition of that program is still going to experience significant improvement in terms of customization, in terms of the types of promotions you offer as we refine the data, we improve the data, we learn more how to use the data without obviously overwhelming the consumer.

And I think there's also kind of a double-click you can do on the tender number because that -- the number we give you is percentage of sales, but we're increasingly tracking and incentivizing the number of transactions, which would kind of connect with traffic more directly. And then, of course, there's a second click, which has -- or a third click in this case, that has to do with services transactions, right? Because those give you a lot of information that it's very different what you can glean from a transaction of somebody buying a Coke as opposed to somebody paying their bills. And so there's still a lot of room to keep improving that data acquisition and processing and then implementation within the Spin ecosystem.

The next question comes from the line of Álvaro García calling from BTG. Álvaro García: My question is for Juan Carlos, given he's on the line as much as I'd love to ask about OXXO on culture, sort of other FEMSA subsidiaries very much focused on profitability. You've had the benefit of sort of being isolated from that mentality for some time now at FEMSA Digital. How do you feel about FEMSA Digital fitting within OXXO to really leverage that physical footprint? And this is obviously in the context of potentially leaning into certain -- sort of it's a second question within digital, which is how you feel about not burning cash necessarily, but being a lot more aggressive when it comes to leaning into specific revenue streams like NetPay, like credit, like merchant acquiring, et cetera.

Thanks for the question. Generally, we're excited. I think the environment inside of FEMSA is one where we have the independence and the autonomy to drive a differentiated culture within Spin than the rest of FEMSA. It's a culture that is much more consumer tech focused where we have a strong emphasis in agility and rapid iteration testing based on customer needs and demand. And hence, we've been able to develop our own culture within Spin. Now I recognize that our right to play starts from the assets that we have within FEMSA, more specifically with the capillarity that we have with OXXO and the significant footprint and customer presence across the OXXO platforms, which requires tremendous amount of collaboration between our teams that although it is a challenge given the differences around culture, the reality is that we have strong alignment, both at the Board as well as at the management level that we need to evolve our thinking towards digital. And hence, this is a strategic imperative for the company, and there's a tremendous amount of focus from the OXXO team in working together with Spin as we evolve our value prop. On your question related to cash burn and our ability to be more aggressive on the growth side and not necessarily as focused on profitability, you're absolutely right. Within Spin, we recognize that for us to be a relevant digital platform, we have to have the scale, the massive penetration within Mexico and the frequency of use, and that requires us investing in the business to be able to drive that stickiness that ultimately will enable us to drive two big opportunities, as we mentioned earlier in our remarks. The first one being evolving OXXO's convenience value proposition into digital with a much more digital value prop that leverages both their existing physical footprint, but our Spin digital ecosystem. And then two, driving financial services, both for savings and credit where we see a significant monetization opportunity, and we're very early in that journey of deploying credit.

I would complement on just two small points. One, as an issue of alignment between the two organizations, we hope to, by the end of this year, so that it applies next year, we come up with a system of joint P&Ls and joint KPIs where key executives that need to cooperate in OXXO and in Spin will be receiving their bonuses, a significant portion of their bonuses tied to the same exact objective. So we hope that will align interests and will align efforts a lot more. And #2, and out of fairness to Spin, we are quite conservative in how we measure the cash burn spend. As Juan Carlos mentioned, if you think about Premia, the percentage increase in sales that you would have to believe to make Premia, just Premia, a breakeven business is very low -- very, very low single digits. In other words, if you just take the incremental sales multiply times the gross margin, thinking that having 47% of your sales tied to Premia has to be driving incremental sales. Then Premia, there is no doubt that Premia today is profitable. The problem is we wanted to avoid measurements such as that because they can then justify any number of things with regards to just spending more and more and more. And so we purposely -- for purposes of the P&L and cash burn at Spin, we said, no, no, no, I just want to know the cost that you're spending and the points that you sell to OXXO. Incremental sales don't get included into your P&L. But we well know that this is driving a significant amount of incremental sales.

The next question comes from the line of Thiago Bortoluci calling from Goldman Sachs.

I would like to explore more the same-store sales dynamics at OXXO Mexico, right? Now it's been roughly the fourth quarter in a row that we are discussing traffic and what is happening there, what are the pressures? And when will it inflect? Obviously, there are a lot of moving parts, weather, macro that comes from the elections. But one thing that caught our attention this quarter was in the beginning of the presentation in Martin's prepared remarks, he said some loss of competitiveness versus other channels and other points of sales, #1. And on the opening remarks on the press release, I see a focus from management to work on assortment [Audio Gap].

It's not like we've been increasing the prices on an SKU like to SKU like basis. But again, I think the best example is, for example, beer. Before you were buying one-way glass presentations, so you were buying cans and now because you have a little bit less money in your pocket because of the economy and when you have some friends over, you're going to buy the 1-liter returnable beer package and share it with a group of friends. If OXXO doesn't have that packaging presentation, then in effect, it's at a competitive disadvantage. But that second part, we believe, is generally addressable, and we're working on that, both in beverages as well in snacking with smaller presentations as well as lower-priced tobacco products. But an example is, we're seeing it with Bara as well. If you sparse out Bara and you strip out convenience categories and you just leave the categories that go head-to-head with other similar discount channels, you can clearly see that we're doing fine on the non- convenience categories, but in the convenience categories, the consumer is simply being more conservative and more cautious in addition to the weather issues, which central -- anybody who's in Mexico City knows that the last quarter was particularly cold for the time of the year and in other parts of Mexico, more rain. But we have to react to that, and there is a laundry list of very, very, very long initiatives that's been triggered by the OXXO team around beer, soft drinks, packaging formats, our coffee value proposition, more promotional activity with our supplier partners that we hope that during the second half of the year will help improve this issue with the traffic.

That makes sense. If I may have a follow-up, now on -- it's more on Health and also Grupo Nós in Brazil. I know in Health; you've been very vocal on rationalizing the portfolio and you've been closing stores over the last few quarters. And this quarter, we also saw some net closures in Brazil, right? Where would you say FEMSA is in terms of optimizing the portfolio? And how should we think about net unit growth across these two divisions going forward?

Let me take a first crack at this and then Martin can complement. I think the two are in very, very, very different situations, right? And on the one hand, in Health, you're talking about Mexico specifically, which is going through a pretty major surgery. And there's different things that are being analyzed by the team in terms of how to move forward. Clearly, the national strategy and entering into some parts of the country where the brand was not well known and trying to compete head-to-head with some of the incumbents has not turned out to be the right strategy. And so the 400-plus closures in Mexico and restructurings that we're going to talk a lot more going forward about how -- and there are some really cool ideas, I think, internally that we're thinking about how we could disrupt this industry or do things differently. But that's one thing. Brazil, we closed a few stores of the earlier cohorts. We continue to kind of learn about what works and what doesn't in Brazil. The growth in Brazil should be at about 20% for the foreseeable future. We are super bullish about Brazil. And so I just want to be clear that the fact that we closed a lot of stores in Mexico Health, a few stores in Grupo Nós have nothing to do with each other in terms of the causality of what's going on there.

You know what, I'd like to go back to your first question. I specifically asked the OXXO team before this call to run an analysis for stores that were near hard discount channels and to give me a sensitivity whether there was a decline in sales, same-store sales in those stores. And the difference is really very small. It's very, very small. I would characterize it as 1%. So when you look at the categories, I also asked them to help me map all the categories of a hard discount, which I know is the subject of a lot of comments that we get. If you ask somebody to map out the categories that are in a hard discount store versus in an OXXO, the overlap is probably a little in the 20% range. In other words, the consumer occasion of going to buy a coffee, going to pay financial services, buying Coca-Cola product or buying a Heineken [indiscernible] product as you walk down the street of buying a quick snack because you're hungry or accessing to buy some bread for a quick snack. Those occasions are significantly different than the one that's being offered in the hard discount models. We think it competes head-to-head with Bara without a doubt. But with regards to OXXO, we do believe that the format will continue to exist -- coexist with relatively contained overlap. I wanted to address that because that's the subject of a lot of questions, particularly Juan gets and commentary that we see in the analysis that's published.

The next question comes from the line of Rodrigo Alcantara calling from UBS.

I want to take the discussion, Proximity Americas just, but on the OpEx side, right? On one hand, selling expenses, I mean, it was really, really impressive, the achievements that we saw, right, on you guys decelerating the pace of OpEx growth. I mean you mentioned there about the initiatives to have a more efficient labor usage, right? So my question on the OpEx side related to labor is, is it fair to assume this run rate that we saw this quarter to project this going forward, which again, was quite impressive, the efficiencies that you achieved on the labor front. And how would you say in relation to the 40-hour working week, how compliant would you say you are currently right now to comply with that new regulation as a result of these changes that you have implemented? And my question on the -- and the other question for the OpEx side would be on the G&A, the administrative expenses, where we continue to see this line growing considerably. You give some explanation in the press release, right? But just curious on -- I mean, really what's driving here? I mean, are you hiring more people? Or what is driving the G&A? And when can we expect some sort of leverage or stabilization in this line? That will be my question.

Sure. A couple of quick things. Let me start with your compliance question. Look, we're always trying to get a little bit ahead of the curve because, as you know, OXXO is a very big ship. And so it's not a ship that moves on a dime and it's not moved from one quarter to another, and changes require changes in the operations, systems, culture and so on. So today, we are not compliant with the 40 hours because it's not the law. And so -- but we have been running experiments in certain plazas, certain areas at 45 hours and at 40 hours to see how we would change our operations. And those plans are producing very valuable insights of how you want to use dynamic shifts. So in other words, not everybody in a store has to be at the store the same amount of time. So you can start the day with less people if it's a slow breakfast store and then bring in more people during lunch when you have a lot of activity, if it's a store in a downtown business district. And then in the evening, also you can move down. You can move people so that they work a total of 40 hours or 45 hours or 43 hours wherever the labor reform ends up, but you can ask them to work a little bit more certain days and a little bit less other days or give them more days off so that you use them. There are a lot of learnings that are being developed as we speak. So when the law is passed and we have greater clarity, we will be in a position to roll out that as quickly as possible. With regards to the issue of administrative expenses, this…

The next question comes from the line of Ricardo Alves calling from Morgan Stanley.

First question on net income. Considering your operations were relatively in line with what we expected at least. But as it pertains to the bottom line, we saw a big miss relative to what we expected. We saw higher taxes and significantly lower equity income, I believe, from MXN 90 million in the first quarter to almost MXN 800 million in the second quarter. Probably, I would assume that most of that could be related to OXXO, Brazil. So can you just share more details on what's driving this volatility below the line just so that we have a better basis to model the second half of the year as it relates mainly to equity income -- the equity income line and then also taxes because effective taxes were also higher than expected. So that's my first question on EPS. The second question is actually a follow-up on OXXO, Mexico. We shared the view that the second half could be better in terms of traffic and same-store sales, but we are lacking evidence of that yet. And I think that some of the discussions that we had with you guys, with senior management as it relates to all the initiatives that you are taking to improve traffic, I think that, that discussion is very timely. It's very important and it's very helpful. But it's not very clear to us where -- what do you think is going to move the needle most into the second half? Can you go into the qualitative examples of the biggest initiatives that you're taking? Is it the new proposition with the tobacco companies? Is it the soft drinks initiatives that you're taking, retail media? What do you think is going to really move the needle for us to see a second half that is better for us to see a rebound? So also that we can have better visibility into the key drivers to see the light at the end of the tunnel, if you will. I don't know, maybe July was better, maybe that could be evidence. Those are my questions.

Let me start with the below-the-line question. The single most important reason for the decline in net income is one thing, which is an MXN 10 billion swing caused by foreign exchange losses on our U.S. dollar excess cash balances. And that just happened to be -- it was a very good year last quarter, the second quarter of 2024. And here, it was worse because the peso decline. And in that way, it's a little -- not tricky, particularly difficult to understand, but the balance sheet items are impacted quarter-on-quarter with FX moves quarter-on-quarter, while P&L are moving really with year-to-year FX movements. And so if you back that MXN 10 billion out, that explains most of it. So without a doubt, if you believe that the exchange rate is going to remain stable, that number should be towards 0. If you believe the peso will devalue, you will see again periods where we have very good profits. So I would tell you, below the line, that is the thing that's moving. The second thing is the issue of taxes. I'm sure somebody will ask about this. And we explained it in quite a bit of detail in the press release. The taxes in a period where our pretax income has been impacted by this loss, it tends to magnify two things in a relative marginal tax rate perspective, which is, one, the non-deductible expenses part of labor. As you know, in Mexico, you cannot deduct 100% of labor expenses because a portion of labor expense doesn't pay income tax. So the government has taken the position, well, if employees are not paying income tax on this part of their compensation, they only allow you to deduct, and I'm going to say, approximately 50% of that portion of your…

Give us more evidence to be optimistic about second half to talk a little bit about July.

I would like to talk a little bit about July. Martin always gives me a little bit of a hard time because I look for the green shoots. I mean if the month of July ended today, same-store sales are positive in the low single digits. That's for whatever that's worth. Certainly, I think on the other part of that question in terms of some of the stuff that's being done, that rotation in and out of larger presentations, returnables, kind of changes to the price package. Those have happened over time several times, right? I mean in my tenure, I've seen it happen probably two, three times, where the consumer begins to ask for those multi-serve presentations in both beer and soft drinks, where returnable mix goes up and then eventually things get better and people don't want to deal with the hassle of returnables and you go back to the single-serve one ways. I think we're kind of in the middle of that. And obviously, we're in this process where more of the SKUs at OXXO are going to resemble some of those SKUs at the mom- and-pop where you can kind of do the sharing that Martin was talking about on the multi-serves and the returnables. But there are also these two big external factors, right? The weather and again, if you look at [indiscernible] numbers and other people that have reported, they all seem to converge on how beverages and convenience categories suffered during the quarter. And then just the overall health of the Mexican consumer and whether construction activity picks up a little bit in the second half, which is something we all hope and expect will happen, and it has a lot to do with permitting and kind of government policy. So I mean -- I don't know, Martin, if you have more on that.

Yes. Again, some of these things are outside our control, the economy and weather. And I would suspect you guys have a view on this, particularly on the economy, I assume not on the weather. And implementing many of these commercial activities, you don't just flip a switch when you want to introduce returnable packaging into the OXXO system. You have to develop the systems for recollecting the bottles and cases and the [indiscernible] account for them. As a boss of mine used to say, the most expensive packaging in the world is a returnable package that doesn't return. So that has to be accounted for, and we need to adjust. And then we need to negotiate with our suppliers. And as you can imagine, some suppliers want to save certain packaging presentations for certain channels, and then that's where it's important that OXXO uses its commercial muscle to demand sort of equal treatment in terms of packaging, and till now, positive. There are also some commercial negotiations with some very, very, very important suppliers that are being finished as we speak. which should give us an uplift. I prefer not to identify them. But there are some important categories where we've made some very important negotiations in terms of promotions, commercial income, the margin as a retailer, we're going to be able to keep on them that should flow through towards the second half that you don't see today in the first half. Also, we have been planning for the labor reform to occur this year. We're pretty confident it's not going to happen this year. I think the government has been very sensitive to the fact that in the current economic environment, reducing work hours is likely to be somewhat recessionary. And so I think that's going to give us some breathing room with regards to things that we had otherwise planned for this year.

Next question comes from the line of Bob Ford calling from Bank of America.

Juan Carlos, how do you think about the sustainability of Spin's consumer fee-based revenue? And how do you see that evolving over time, if at all? And can you talk a little bit about your deal with Mercado Pago? How should we think about the fee income and traffic generation with Mercado Pago versus other correspondent banking agreements? And is the deal limited to cash in and out? Or does it encompass pickup returns or other services?

I'll start with the second part of your question, which is the deal with Mercado Pago. There, I would highlight that we're committed to continuing to open our infrastructure to all players in Mexico. We see an opportunity to continue to grow our ecosystem. And hence, we view the deal with Mercado Pago similar to many of the other fintechs that are now part of our network as an enabler of consumer choice and ensuring that we have a robust offering as customers access the store. It's primarily related to both cash in and cash out. There are currently some pilots around PUDO, pick up and drop off that we are doing with Mercado Libre, where we are excited about the prospects of how that can evolve into a digital solution over time enabling our customers to be able to purchase on Mercado Libre and hence, pick up and drop off depending on their needs directly in the store. Those are still very early stage. However, we do think that that's going to be something that could be relevant down the line, especially as we continue to evolve our own digital ecosystem. As it relates to your first question on fees and how we see an increased electronification of cash. The reality is that, that is an ongoing trend. Having said that, our correspondent banking fees continue to be quite strong. And hence, through Spin, we see an opportunity to parlay our position in physical cash into the digital ecosystem. And there, monetization is going to come from the opportunities that we see in financial services, primarily around credit, which we're early in our build-out.

Yes. The only thing I would add, one of the things that has surprised me and proves the power of the platform of OXXO is every time a new fintech player gains access to OXXO, they put out press releases sort of almost describing it as new strategic partnerships that we're developing. And the reality, they're being managed like all the other people who access our payment platform. There's nothing special or unique about what Mercado Libre is doing within our OXXO stores as compared to any other traditional financial institution or other e-commerce businesses. So for us, it's sort of business as usual to bring in and give access to more players that gives more optionality to our customers.

You guys are special and unique, and I think that's why they're excited about the distribution.

You can say that I won't. But thank you.

The next question comes from the line of Antonio Hernandez calling from Actinver.

Two quick ones actually. First one, do you have seen an improvement -- actually from a weather perspective, you mentioned this, and it was -- just as you commented, it was already quite expected. But if you could exclude the weather impact on traffic and same-store sales, how was the quarterly performance? And then I have another follow-up.

Traffic ex weather is the question, Antonio. We're having a little difficulty hearing you. It sounds very muffled. The line sounds very muffled. We apologize, but we had a little bit trouble understanding the question.

The question is on traffic, excluding weather, if possible.

Again, with a massive caveat that trying to exclude any individual cause when OXXO runs this analysis and if you were to ask me all the details of how they've run this and analyze this, it would be hard for me to give you all the details. They have attributed a number of approximately 39% to weather of the impact on traffic. But again, myself, I'm a bit skeptical of the science behind sort of pulling on that little string of the myriad of causes for the issue of -- and it's outside of our control. I mean the weather will be what the weather is. Really on the other issues of traffic, I think it's improving our value proposition, improving our mix, adding new categories into -- that's where we need to focus all our efforts and our work because it will rain when it rains and it will be hot when it's hot.

Yes. I think -- I mean, obviously, there's a lot of regional data and weather wasn't -- it's not never constant, right? So you -- also guys got pretty scientific about how they measure this. But I think the main takeaway here is that it was significant, right? I mean whether you believe it's 39% or 40% or a little bit more, a little bit less, you're talking about a significant component. It's a little bit like talking about comps, right? I mean we are heading into a period where the comp base is a lot easier, but that's not really what you're focused on. You're focused on what is within our control, what things -- this thing with the SKUs and the multi-serves and the price architecture, and that's what the team is focused on.

And further evidence that this is weather-driven is the fact that Coca-Cola FEMSA also had a very complicated Mexico. So when you look back at April and May of last year and how hot it was during those months relative to these years, in addition to the issues of the election and the economy and so on. But again, Coca-Cola FEMSA's market share numbers are rock solid. They're doing well. There's no indication that there's a competitiveness issue at Coca-Cola FEMSA. And they also had a very, very complicated second quarter in terms of volume. Again, weather impacts the consumption of beverages more than people realize, not only the temperature, but the rain. So the more rains, the less people go out and so the less they buy single one way servings.

And the margin, it impacts, for example, somebody was telling me about other companies that are more in the coffee business and why their same-store sales were better than ours. They say, well, when it's cold, people drink coffee more than they will drink a cold beer. And so again, it kind of sounds anecdotal. But it actually does happen in the real world.

Okay. I appreciate the color. And just a quick follow-up. Having said that, how does that play out with your opening's expectations for both OXXO and Bara? How does that play out? Are you maybe decelerating a little bit your opening space or just business as usual on that side?

If I understood correctly the question, it has to do whether this performance is impacting our plans for opening stores in OXXO and Bara. With regards to Bara, I would say it doesn't. The reality is we're on a long journey here to expand that value proposition. And so there are very few of any changes on that. On OXXO, at least for the time being, again, no major changes. I do think -- and this is more of a trend that we've been seeing over the last year, 1.5 years, not particularly pushed by the recent performance, which is we're seeing a larger percentage of the stores we're opening being OXXO Nichos, which is, again, it's stores that are enclosed "secure environment" so inside universities, hospitals, plants, office buildings, et cetera. We're seeing the percentage of that increasing as a percentage of the stores that we're opening because we see a very unique opportunity to position ourselves in that market, and we want to try to capture as much of that market as we can because we think it's very strategic and very valuable. And there's a lot of demand for it in some of our -- Nichos stores. The feedback we get from the HR of some of the factories in which we've opened this is that it actually reduces -- there's a correlation between opening the OXXO Nichos and the rotation and absenteeism that people see within the factory because people were missing work to be able to execute financial services. And they're being able to execute them inside their workplaces now in a very safe environment. But for the time being, we may revisit that in the second half of the year to slow down maybe some of the expansion if it makes sense. But for the time being, it's -- we're going to continue to open at the pace that we've been guiding to in Mexico, which is 1,000 to 1,100 stores net additions.

The next question is from Ulises Argote calling from Santander.

I had one, maybe it's a bit of a follow-up there related to Bara. So on the release, you cited some weakness there on the convenience categories, right? Could you share some additional color around how much is convenience there from the mix in Bara? You put some numbers there on the release and thanks for that, but any additional color is obviously appreciated. And then kind of a segue into the second part of the question would be how do you see this into the future, right? Is the focus there to further expand non-discount categories in Bara? Or are you kind of fairly comfortable with the current mix?

Ulises, it's Juan. So the mix of convenience within Bara is around 30%. So it's not insignificant. We continue to see value in the Bara customers being able to buy the national brands for beverages, certainly Coke and the big beer brands. However, having said that, if you ask me kind of read the tea leaves sort of looking into the future, certainly, the focus internally is put on the private label part of things and on at least doubling the mix of private label and really continue to move the value prop towards more of a harder discount, which then would mean that convenience component would weigh less. right? So as we go from somewhere in the 20s where the private label is right now into hopefully the 30s and the 40s and beyond, I would expect the relevance of convenience to come down. But that's just directional. I don't really have -- I don't think we have visibility into what the number will look like 5 years from now.

The next question comes from the line of Carlos Laboy calling from HSBC.

Juan Carlos, I was hoping that you could speak to your interactions with the Board of Directors with their level of support and how their skill and their understanding of the firm's changing digital needs, how it's evolving.

Thank you for the question. Interaction with the Board has been great. I'm very excited about the commitment that they have behind the Spin efforts. If anything, they're looking for us to be much faster in our deployment and execution and really looking for the synergies that come from providing a value prop that has the mix of the physical assets on the OXXO side with Spin's digital value prop. In terms of the expertise on the Board, there's been significant changes, and I'll let maybe Martin and Juan talk to them over the course of the last couple of years. We do have a number of Board members that are quite well versed in the digital arena, having gone through transformations on their own, both by -- within big tech companies in the U.S. and driving those value props across different markets as well as through traditional retail and moving towards a more digital offering that have been quite helpful and vocal in the needs and the strategic imperative for us to move quickly in terms of the two big opportunities that we've highlighted, which is enhancing the value prop of OXXO, driving a better convenience value prop through digital as well as the opportunity that we have in financial services and involving our current cash-based correspondent banking into a broader set of offerings that moves us beyond payments and rewards into savings and credit.

Yes. There are two people in particular who have been now on the board for 1.5 years, 2 years. would be Gibu Thomas and Daniel Alegre, both of them in previous jobs have had involvement in digital businesses. And in one case, Juan is now very involved in media business. The areas of focus of the questions and the challenges that they do on the Board are around the cooperation of OXXO and Spin and how do we make sure that those two organizations cooperate better. That has been -- I mentioned already previously that we're looking to have joint P&Ls going forward between executives who share responsibilities. #2, I think they and other members of the Board who are less in the digital world have urged caution with regards to the credit part of the business. And that's why, as you can see in all our calls, we try to transmit the cautiousness with which we will be approaching the credit part of the monetization strategy around this and the continued promise of no surprises. We will keep everybody abreast of what we're doing in this regard and the bets are very contained and small now as we build up capabilities. And we continue to explore, if possible, trying to find partners for some or all of the financial services part of the offering that we're trying to develop. So I would add those two comments to what Juan Carlos just mentioned.

Yes. And I would just -- to finalize, THE Board is not static, right? And just as FEMSA, we've gone through the whole FEMSA Forward process and our mix of core businesses obviously has changed over the past decade, so too has changed the composition of the Board, right? And I think that it connects with the efforts of Jose Antonio in reducing the size of the Board, but also in getting new blood and new talent and new experience into it that is fully consistent with the challenges that the company is looking at and really the DNA of the company today as opposed to what it was 10, 20, 30, 50 years ago.

And maybe one final point on my end, which getting perhaps to read between the lines of the question of do we have the right expertise in the digital arena around our Board and our management team, I would like to highlight that also the recent changes in administration in OXXO, Mexico have been quite positive. Carlos Arroyo's addition to the team, having led the digital efforts at [indiscernible] and then also having been intimately involved with the transformation of Walmart in Central America has created a different type of discourse for us at Spin as we think about our collaboration efforts between OXXO Mexico and Spin in a very positive manner that is allowing us to gain momentum across our teams and have a much better alignment behind the strategic vision that we're trying to deploy.

There is a follow-up question coming from Ricardo Alves calling from Morgan Stanley.

My line was cut, so I'm sorry if this was asked. But a quick question for Martin on capital allocation. We did see the conclusion of the ASR program. And based on what's been announced, I think that you made reference to that in your preliminary remarks, that would imply perhaps another ASR. So just wanted to see if you have any expectations around that. I'm not sure, for instance, what was your perception with the execution of the last ASR relative to your preliminary expectations? And as it pertains to local buybacks, we've been following how active the company is on that front this year. I think that that's appreciated, that needs to be acknowledged. But just wanted to have your latest thoughts on if we could expect a resumption of that now that the second quarter is behind us.

No problem. Just real quick. Again, our commitment is we're targeting $900 million of buybacks from March '25 to March '26. We're about 40% there. We're like $375 million, I think, is the number between the local market purchases and the ASR. #2, again, this is what people should expect. They should expect during windows where we can trade, executing in the local markets and buying and launching ASRs, we can't do this outside the windows. That's #1. #2, sometimes we have to close windows because we have material non-public information about deals or things that are happening. And I can't communicate when a window has been opened or closed. It's just simply, I am unable to announce that. So don't expect us to be operating in every single window. Don't expect us to announce everything that we're doing simply because it's impossible for me, but you should be focused on the $900 million March to March as our target. And obviously, it will always depend on market conditions. But that really should be what people are focusing on March to March and $900 million more than anything that happens or doesn't happen from one quarter to another.

And I would just add, Ricardo, I mean, at the end of the day, we're kind of halfway the 3-year time frame that we provided to get to the 2x. And we're at 0.93. So I think that number changed more in the last 3 months than it had before. So we're almost at the halfway mark if we think about kind of that North Star of 2x. And I think, again, that's what the market should be. Assume that we are going to move towards that target as much as we can with all the caveats that Martin just mentioned.

And the last question comes from the line of Emiliano Hernandez calling from GBM. Emiliano Hernández Marvan: Most of my questions have already been asked, but maybe [Audio Gap] can you hear me there?

You cut off a little bit, but can you restate the question? Emiliano Hernández Marvan: Yes. I was wondering if maybe you can share [indiscernible] in Europe. Sales look very resilient in the quarter. I wonder if you can comment on how you're seeing the consumer dynamics there. And anything you could share on the strategy you have mentioned in the past to reduce the banners and plan to start with the organic expansion.

I understood the question...

This is Europe, right?

Consumer demand and expansion. One thing -- one message -- thank you, Emiliano. One message that we've certainly shared on the European operation is that obviously, the nature of the organic growth in Europe is a little bit different from what we have in our Latam markets for sure. In terms of -- you're not -- the abundance of corners where it would make sense to set up in the case of Europe, an avec store is not as plentiful. And what we've seen is it's very successful by the Valora team transactions where they will work with an operator of gas stations where Valora --because of their high level of execution and the level of recognition that they have through the avec brand and beyond, they're asked to come and operate the stores for those gas stations. And so that's something that you should expect to continue. There's another route, which involves, for example, the stores in Germany that are the Deutsche Bahn and the train stations, the Deutsche Bank, the DB banner that are going to be converted into avec stores. So that's an upgrade. So the point I'm trying to make is a lot of the new stores that we will have or the converted upgraded stores that we will have will be on existing stores, whether somebody else that was running in the gas stations or groups of stores like the ones that we will convert in the Deutsche Bank stations, more than just greenfield, build a store from scratch. Although there is certainly a thesis that in the outskirts of certain cities, there are white label mom-and-pops that are definitely convertible and upgradable into one of our banners. So that's what I would comment on the organic growth. I don't know, Martin, if you...

Nothing to add.

Yes. I don't know. Hopefully, that's helpful.

Well, there are no further questions. So I will hand it back to your host to conclude today's conference.

Thank you, everyone, for your time and your interest in FEMSA.

And as always, Pam and Alex and myself are always available for follow-ups. So have a great week. Thank you, guys.

Thank you for joining today's conference. You may now disconnect.