Good day, and welcome to today's FEMSA's Third Quarter 2025 Results Conference Call. My name is Serge, and I will be your coordinator for today's event. [Operator Instructions] And now I'd like to hand the call over to Juan Fonseca. Please go ahead, sir.

Good morning, everyone, and welcome to FEMSA's Third Quarter 2025 Results Conference Call. Today, we are joined by our CEO and Chairman, Jose Antonio Fernandez Carbajal, Jose Antonio Fernández Garza-Lagüera our current CEO of our Proximity and Health division and future CEO of FEMSA; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team. The plan for today is a little different than usual. We will begin with our CEO and Chairman, who is traveling today and is therefore joining us remotely. Jose Antonio will share with us some thoughts on the past couple of years, where he sees our company today, and how he sees FEMSA position for the future as he gets ready to step down from the CEO role at the end of this week. He will not be able to stay for the remainder of today's call. Next, we will hear from Antonio Hernandez Velez Leija, still in his capacity as CEO of our Proximity and Health division. As you know, he will assume the role of CEO of FEMSA in a few days. But most of his comments today will focus on the performance and trends in our key retail operations during the third quarter, as well as some thoughts on the short- and long-term initiatives we are taking to address an evolving consumer. Next, Martin Arias, we'll discuss FEMSA's consolidated and operational results for the quarter in further detail. And finally, we will open the call for your questions. For the Q&A, please keep in mind that as of today, Jose Antonio is still the CEO of Proximity and Health, and there is a lot to discuss regarding those operations. If you would rather ask him about his views on the broader FEMSA platform, I'm sure he'll be happy to provide some high-level directional comments today, but these are early days as he onboards to his new role. Obviously, we'll be happy to dedicate ample time to this topic during our February call and beyond. And with that, let me turn it over to our Chairman, Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. As you all know, in June of 2023, I returned to the role of CEO at a challenging moment because of our good friend, Daniel Rodriguez have fallen gravely ill, and we were in the thick of executing on our ambitious FEMSA Forward strategy. I committed at the time to where the 2 hats of CEO and Executive Chairman for a certain time with a clear plan to fill the CEO position and return to the separation of these key roles within that time frame. With the help of our Board, we've been able to deliver on that plan. And while I'm happy to hand over the keys to the incoming CEO next week, I appreciated the opportunity in these past 2 years to get close to the operations again, particularly through such a key process as FEMSA Forward. Today, I would like to share some thoughts on our recent past and on our future. FEMSA Forward was all about maximizing long-term value creation by focusing on our core verticals, retail and beverages, enabled by digital, and setting out very clear capital allocation target. In the past 32 months, we've been hard at work executing that plan, divesting nearly $11 billion of assets while in our core at the same time. In addition, the capital allocation framework we put in place in February of last year is guiding our actions and allowing us to move steadily toward our leverage objective by distributing between March of 2024 and March of 2027, and expected a total of approximately $7.8 billion of capital through [ ordinary ] and extraordinary dividends, and also through some share buyback. As I briefly recap these last 2 years, there are 2 message -- 2 messages I want to highlight. First, that…

Hello Jose Antonio? Excuse us while we try to reconnect to connect with Antonio. [Audio Gap]

Ladies and gentlemen, we experienced a momentary interruption in today's conference. Please continue to stand by. [Audio Gap] And we've got -- we've back Jose Antonio. Please go ahead.

Thank you. I'm very sorry. I don't know what happened and I kept talking, and I didn't notice when I left. Can you tell me where I...

The paragraph of Spin Jose Antonio.

Okay. So I will repeat that paragraph. Thank you. At Spin, we continue to grow our user base and engagement as we make steady progress in developing a digital ecosystem that will better enable our millions of users to navigate and improve their financial lives in a world that is increasingly digital. Although this is one of the longest term bets in our core verticals, we have a firm belief that the digital capabilities we are building are indispensable to OXXO Mexico, and will prove to be a source of value creation, creation for decades to come. Jose will certainly bring a fresh perspective to this business. I have been at FEMSA for nearly 40 years. During that time, I have lived through several reinventions of FEMSA. And today, I am as excited about our long-term growth opportunities as I have ever been, and I hope you are too. I will continue to work to capitalize on those opportunities in my role as Executive Chairman, but I will have fewer chances to speak with you. So I want to take this moment to thank every one of you for your interest in our company and for your full support through all these years. And with that, let me turn it over to our new CEO.

Thank you, [indiscernible]. Good morning, everyone. Today, I want to structure my comments around three topics. First, the quarter's results with a particular focus on OXXO's Mexico same-store sales and traffic, where despite a still challenging environment, we are seeing some encouraging signs. Next, I want to talk about the actions and initiatives the team has put in place at both the short-term tactical level, but also some ideas about more strategic considerations and projects aimed at strengthening the value proposition and relevance of the OXXO store in the medium and long term. Finally, I will share with you some initial thoughts as I get ready to step into the FEMSA CEO role in a few days. So firstly, let's talk about the third quarter. As you saw in our release, same-store sales for Proximity Americas increased 1.7%, with average ticket rising 4.9%, and average traffic contracting 3.1%. This represents a clear improvement versus the first half, marking an inflection in our trend that seems to be improving further in October. This quarter was the first to show positive same-store sales growth since the middle of last year, and importantly, we believe a significant part of the improvement came not from a meaningful change in macro conditions, the weather or the consumer environment, but rather from adjustments we made to address category and channel-specific challenges. As a result, we improved our competitive position in several key categories like beer, soft drinks and snacks. And in terms of the channel, we believe we also improved our overall competitive position versus the traditional trade, reversing the trend we saw earlier in the year. Which brings me to my second topic regarding the short- and medium-term initiatives we have launched to improve performance. There is a long list of actions and initiatives designed…

Thank you, Jose Antonio. Good morning, everyone. Let me begin by discussing our consolidated results for the third quarter of 2025. During the quarter, we delivered total revenue growth of 9.1% despite a still challenging but improving environment in Mexico, impacting both Proximity and Coca-Cola FEMSA, which was offset by solid top line trends outside Mexico. Some currency tailwinds, particularly in Europe and the consolidation of the OXXO USA operation. Operating income increased by 4.3% year-over-year, reflecting inflationary effects on our costs and expenses, partially offset by expense efficiency efforts across multiple operations, especially at OXXO Mexico, Coca-Cola FEMSA Mexico, Health and Europe. Net consolidated income decreased by 36.8% to MXN 5.8 billion, driven mainly by a noncash foreign exchange loss of MXN 1.3 billion, compared to a gain of MXN 4.3 billion last year, a swing of more than MXN 5.5 billion. Related defense U.S. dollar-denominated cash position, which was negatively impacted by the sequential appreciation of the Mexican peso during the period. Two, higher interest expense of MXN 5.5 billion, compared to MXN 4.8 billion the previous year, reflecting higher debt at Coca-Cola FEMSA and higher lease obligations across our retail network. And three, lower interest income of MXN 1.9 billion compared to MXN 2.6 billion the previous year, reflecting lower interest rates and lower cash balances. Our effective tax rate for the quarter was 29.3%, showing a sequential improvement. We understand that the spike in the first half of the year in our effective tax rate 42.2% in the first quarter, and 40% in second quarter raised certain concerns. In that regard, I want to make several comments. The quarterly movement of our tax rate can be volatile and difficult to project on a quarterly basis, since it can be impacted in any given quarter by any…

[Operator Instructions] The first question is from Ben Theurer from Barclays.

Jose Antonio, congrats on the new job. And I actually have a question for you on the old jobs. So as it comes to retail, just wanted to understand a little bit and dig a little deeper into your commentary on the same-store sales performance. Well, clearly, traffic was down only 3% versus the give or take, 6% we saw in the first half. There was a very easy comp versus last year because of some of the hurricanes. But you did mention there is sequential improvement into October. So I wanted to kind of like understand if you could give us a a couple of more data points as to maybe how the performance was from July through September? And how that carried into October? And what we should expect here as we move throughout the fourth quarter and then maybe into next year, just with the closing remarks being slightly optimistic into next year? So I just want to understand a little bit the traffic dynamics at OXXO.

Sure. This is great. I was expecting this one to be either the first or the second question.

Fantastic. Be prepared for that.

So -- I mean, obviously, I would say, I am glad that I see a reversing of the trends in OXXO Mexico on this quarter. And I do see better performance in traffic compared to last -- the first half of the year. But obviously, I'm not satisfied because we had, as you say, some easy comps. To the defense of my team and also there were some adverse effect in weather, especially obviously in September and especially in the Central of Mexico, but I -- and I mean what gives me some optimism is that the last couple of months, we've seen market share gains in beer, in soft drinks, and even in snacks, and even in tobacco, especially with the introduction of some lower-priced tobacco. I am -- October is still not over, but I am very encouraged by the results. So if that trend continues, I think we should be facing a much better end of the year. What else I can tell you? I can tell you some of the things that we've been putting in place that we think we're going to take effect much more -- or they were going to take longer to take effect. Like promoting coffee and some food items around coffee and breakfast are really beginning to shape up. Coffee is growing at double digits, and that gives me optimistic. And then the ability to be introducing multi returnable packages, affordability stuff in beer in soft drinks are really, really beginning to take place. And I would say in services, we're implementing new increasing services every, every quarter. And so even though, for example, we're growing a lot with the Asian e-commerce retailers, those things have now scaled back given some tariff restrictions. We're beginning to see other increases in traffic in services that are -- give us high expectations for growth. We're still waiting for the permit to get back into Banorte and other banks. But cash withdrawal with the main banks, some of the big fintechs and with Spin are growing double digits as well. So I would say still not satisfied because I wish we were going better in traffic, but very encouraging signs towards the fourth quarter. Does that help you?

It does. And then obviously, into next year, we get the really easy comps, correct?

Well, hopefully, yes. I do think there's a lot of things we need to still do on our part, and I am very encouraged by the obsession towards market share gains that we're following through in OXXO, and I think that's a discipline we will go forward. But we should get better comps. And I do think the World Cup should help as well.

Congrats again on your new role as well.

Thank you.

We'll now take our next question from Alejandro Fuchs from Itau.

Congratulations on their new role to Jose Antonio. I have 2 quick ones, if I may. The first one on OXXO Mexico, another strong performance on gross margins this quarter. I wanted to see if you could maybe elaborate a little bit more into how much of this is the service mix continue to add to the business? How much of this is maybe a little bit of pricing? And where do you see just gross margins in Mexico continue to develop at OXXO in the future? And then the second, on Bara and also in Brazil and another also strong quarter of growth, so congratulations on that. I wanted to maybe Jose Antonio grab your thoughts on where do you see these 2 businesses in the next 10 years? How much of our priority are them to you and to the team? And then maybe if you could elaborate a little bit into what would be the best case scenario, sort of medium to longer term of Brazil and Bara.

Yes. Thank you, Alejandro, for I would say, obviously, I've always said that OXXO Mexico has a lot of momentum and still a lot of gross margin to gain. If you look -- I think always the gross margin it's an incomplete number. And obviously, we don't have the full answer, but you would have to say, look, at the full profit pool all the way from the -- of our supplier partners all the way to the consumer. And I always like to see gross margin gains, and I think there's a lot to gain still. But some of that should be given back to our consumer in affordability. Obviously, some categories are more elastic than others. And so we have the smart data to play with that and give back to our consumers some of the gross margin gains. As to this quarter and the gross margin gain, it has a little bit to do with the commercial income that we continue to grow incredibly well. It has a little bit to do with mix. The affordability things allows us to even gain some gross margin as we implement some very profitable promotions in some of the affordable SKUs that we we are trying to promote. So the mix also helps sometimes with the broad margin. But I would say, mainly, it's -- that we continue to win commercial income. And as we grow what you can expect through the year I do expect that there's more gross margin to make, but some of it will be given back to the consumer in affordable promotion and price pack architecture. Afterwards -- afterwards Bara and OXXO Brazil, as I said in this forum, and I will say it in the future, those are 2 of the most exciting avenues…

And we will now take our next question from Antonio Hernandez from Actinver.

Congrats on the results and this new position. So question regarding an update on the health business, both in Mexico and Chile, some news also...

Antonio can you be closer to the mic? I'm not being able to...

Yes. Can you hear me there?

Yes, better.

Okay. Perfect. Just wanted to get an update on your health business. Both in Mexico and Chile saw some news -- recent news on a new format in Chile. Also, there's a very different trend in Mexico. So I wanted to get an update on that business in both countries.

Yes. So in Chile, we were facing a very tough competitive environment in Chile for the last couple of years, and we are very happy that we continue to Gain market share. We're growing in all of our channels. As you know, Chile is a multichannel business. We are in the pharmacy. We're in the franchise business. We're in the distribution to independent pharmacy. And we continue to gain -- and we just even opened our discount pharmacy chain in Chile. And we are seeing incredible growth in sales and in market share, in all of that. Given that it's a very competitive market, sometimes that does not translate to bottom line growth. But even given the huge competitive environment that we see in Chile, we are happy that we are growing even in the income statement. So -- and we expect Chile, it's a mature market. We have very high market shares. But I do feel there's a lot of room for growth in even newer categories in the health and beauty space, in the premium and in the discount space, and we're beginning to get into other adjacencies in the elderly care, I mean the pet and veterinary care, and so we see new avenues for growth for Chile. Very different outlook for Mexico. In Mexico, we are the #6 player. I could obviously put as an excuse. A big chunk of our stores are in the Sinaloa region, which have been affected by security. But it's not enough to explain the drop. To be honest, we need to fix Mexico. We're working very hard to fix it. We have now the right talent in place. But we had to close many stores in Mexico, and we're still on working on fixing that operation, and we hope to fix it in the next few months. Thankfully, we have a very high-growth business in Colombia. And even in Ecuador, we're seeing market share and revenue and profit gains. So in general, health as a business we're happy except for Mexico.

And we will now take our next question from Alvaro Garcia from BTG Pactual.

All the best in your new role Jose Antonio. Two questions. One, the fit-for-purpose /corporate restructuring comments you mentioned earlier, the reduction in SG&A. In my head, I have this $100 million amount that you've typically guided for on the corporate front. Is that subject to change? And if you could just give us more color on how you're thinking on structuring the corporate expenses there? And then just one really quick one on interest expense. Martin, I don't know if you could expand on -- you saw a pretty big uptick at the FEMSA level, ex-cost. What explain that?

So I would say, I would split the corporate overhead in 2 phases. The first one, the fit-for- purpose component is something that me and the OXXO team have been working on, and we are -- there were opportunities as we prioritize certain projects in OXXO Mexico and prioritize others. There was a good opportunity to reshuffle the overhead in OXXO Mexicos headquarters, and there will be some opportunities for savings, but also to leave some room for executives to dedicate to the big projects around food, around services, around the affordability that we want to invest. I do expect a big hit on savings. You will see the full number probably by the end of the year and as we start next year. As -- eventually, I would -- when I become CEO of FEMSA, I do plan to take a deeper look on -- and as always, with big changes in management, there are opportunities to look at the overhead in the full company, and I will comment more on that probably in February and beyond. Hopefully, that's what I can answer for now.

The comments on -- fit for purpose for OXXO Mexico specifically at the moment?

Yes, for now, yes.

Alvaro, could you repeat your second question? I just want to make sure I got it right.

Sure. On the interest expense, specifically, ex-KOF, we saw a pretty big sequential increase there. I was wondering if maybe there's some derivatives in there that's driving that? Or what drove that sequential uptick there?

Well, looking at the total interest expense, KOF, actually went up from -- looking this correctly from [ $1.59 billion to $1.3 billion ] interest expense net and it was flat on interest expense. And so the interest expense went up by MXN 600 million. I don't -- I'd have to get back to you on the detail exactly in the context of everything, it's not that big a number. Interest income is certainly coming down as our cash balance has come down. As interest rates generally come down, particularly in Mexico, but to some degree in the United States. But specifically, that what appears to be a MXN 600 million increase in interest expense at FEMSA, I'll get back to you.

We'll now take our next question from Thiago Bortoluci from Goldman Sachs.

First of all, best of luck on your expanded challenges. And also congrats to your father on another successful transition. We'll be looking forward to connecting more going forward. I have two questions. One is more conceptual, right? When you think about the one thing that you'd like to do differently in FEMSA going forward. What do you think this is the clear opportunity? This is more conceptual, right? But it still related to your vision for the company, and this is somehow also linked to the capital allocation strategy. How do you think the role that Coca-Cola FEMSA will have in the FEMSA overall portfolio going forward?

Thank you, Thiago. Obviously, great question. I would say -- I will answer you with the second one. I would say, obviously, I am in love and have a huge appreciation for the KOF as a business and the talent. It's an incredible business, and it's an operation that has a lot of things going on for themselves to really keep growing, growing the core. I'm incredibly impressive what the opportunities that are -- we see for the digital transformation of the bottling platform. For growth opportunities, not only in their soft drink category, but in their non-KOF. And I see a lot of potential for organic growth in Brazil, Guatemala, Colombia and even in Mexico, with all the -- even with the taxes. So I'm very excited for Coca-Cola FEMSA. The relationship with the Coca-Cola Company is the best one we've had probably in decades, probably since the JV was formed. It's incredible that what the management team from both sides have been able to construct as a growing and fruitful relationship. I do think Coca-Cola FEMSA should play a part in a consolidation space through eventual M&A. And I am excited for the opportunity. I have huge respect for the bottlers in South America. And obviously, here in Mexico, I have a huge appreciation for all of them. And I do think there are opportunities to keep exploring possibilities with other families and bottlers in the space. I will comment more -- in more detail on what I see cost in the future, but that could give you some color of my excitement for Coca-Cola FEMSA. And from what I would say, I would do different? I think I let it be known in what -- in my earlier comments. I do think we need a bigger sense of urgency and a bigger sense of counting every penny. We have the ambition in FEMSA to be one of the best, or the best proximity retailer in the world. Obviously, with the Coca-Cola FEMSA company as part of it. As to do that, you have to have the best management team. You have to have a very demanding workforce, but also lead to the culture that you want to instill for the long-term growth of the company. So I would say my big, big focus on conceptually bigger demand for excellence in our corporate office, bigger demand for excellence throughout the channels in management, bigger speed in making big decisions on capital allocation. And I think that should give you the color on the sense of urgency that we plan to move versus previous years.

And going back to Alvaro Garcia's question, the increase in interest expense, excluding Coca-Cola FEMSA, was slightly over MXN 600 million. 2/3 of that can be attributed to an increase in the financial expense associated with the lease accounting under IFRS, and likely the consolidation of the U.S. business is a big reason for you seeing the sort of uptick relative to other periods. For other periods, most of it is related -- all of it is related to organic growth of leases.

We'll now take our next question from Bob Ford from Bank of America.

Congratulations on the promotion, Jose. Martin mentioned some reclassifications. Were there any reclassifications or onetime items that contributed to the gross margin improvement at OXXO Mexico? And Jose, where do you see opportunities to make further improvements in the value propositions at OXXO Mexico? And then one other question, if I could. Could you discuss the charge in discontinued operations, it was a little bit bigger than what we were looking for. We're just wondering how you're thinking about Solistica and the LTL business.

Some of the reclassifications -- all the reclassifications that happen in Proximity Americas had to do with OXXO LaTam. None of them had to do with OXXO Mexico. And OXXO Mexico, even on a standalone basis did have an expansion of its gross margin.

In fact, I think Bob, expansion in Mexico was something like 130. Yes.

Thank you, Bob. I would say if you look into also Mexico, we are, by far -- or we have a very important market share in what we call impulse gathering the beer, the soft drinks, the services category. But we still have a long ways to go in a couple of categories that OXXO right for winning. One is around food. We are the biggest sellers of coffee. And if you look at our LatAm operations, all of our coffee occasions go paired with very good tasty food. And I think we have a lot of opportunity to win in food around coffee. And obviously, that leads you to breakfast. And if you look at it, there's not really an affordable winning food opportunity. And that's a segment on that we have lower traffic than average. So we are very excited with increasing the opportunity for that. We still are very excited about the opportunities we see on segmentation. And I think we're going to go bigger and tougher on segmentation. We know all of the stores that are close to a discount store, or discount supermarket. And we have very clear actionable steps that we can put in place in the affordability space, not only in the categories that compete in the grocery space, but in the impulse and gathering. So we're beginning to do some of that and it's beginning to react incredibly. And there are things that will take longer to mature. But I am very excited about them. Some of them around the beyond trade and other services. And that requires working with team towards creating payment options that you can pay at Spin, but you can also send people money that they can withdraw at OXXO, and you can reward them for withdrawing at OXXO in a way. We're beginning to see some interesting things. We are still very excited about our growth in OXXO Nichos. They continue to outperform in terms of ROIC and we are continuing to accelerate that. This year, 25%, a little bit lower than what we planned, but still much bigger than previous year. 25% of our stores would be on the niche space, and that should just continue to gain momentum. I would leave it on that. Those are the things that we see are beginning to help us gain share beyond the inputs and gathering categories and towards food and groceries and others. Does that respond your question, Bob?

It certainly does. I just had that one follow-up with respect to the discontinued operations in Solistica.

Martin, you'll take that one?

Yes. So Solistica was -- the transaction was completed in early July. So you will see an impact from Solistica being removed from discontinued operations for that quarter. And it should not return. We've had so many transactions going -- going forward. We really have no major transactions to complete or close that should impact other than this quarter, we reconsolidated the only part of Solistica that we kept, which was less than truckload in Brazil, a very small business. But that's the only one that also got removed from discontinued operations and is now consolidated at the holding company level.

We'll now take our next question from Rodrigo Alcantara from UBS.

Jose, I would like to focus here a bit on food, right, which is a topic we also discussed back in those days. I mean, food is not a new thing, right? I mean, has been there for a while, remember Doña Tota, right? A couple of years ago, was part of the speech, right? Still ever since food as a percentage of sales in OXXO remains relatively low, right? I mean, kind of like it's on this front over the last decade has been relatively slow. So my question here for you is what makes you feel so excited about food again? Why this time could be different? Or could we expect faster adoption on this front presumably with Sbarro, what you're doing with Andatti, right? That would be my question. I mean, can we expect something faster on this front as opposed to previous years? And my second question would be as presumably, you will consolidate this operation, right, once the transaction is approved. Any indications on how the consolidation of OXXO Brazil may impact your consolidated or your proximity Americas margins once you consolidate these operations? That would be my -- those would be my two questions.

I'll answer you first with the second one. Hopefully, by next year, we will give you more clarity, or a distinction between South American and our Mexico proximity business. So hopefully, that will not bring a lot of noise. Obviously, it's still our operation there. It's 600 stores. So even if we still combine it on the proximity of Americas, it shouldn't move the needle significantly. But our plan is to propose to you guys a different outlook when we show the proximity numbers. We're still working on that with Juan and Martin. On food, obviously, food is a very challenging topic, and we always get the question and what is different? What are you going to do that's really going to change? I would say one of the things that encourages me is that all of our South American operations are incredibly well -- really grew the operations since probably they didn't have the services business to rely on. They were very focused on being customer-centric in food first. And since we had a lot of Mexican executive there, they were very humble in asking really the consumer what you guys need and want? And Brazil, we sell a lot of powre [indiscernible]. We sell a lot of bread, our SKU bread is our #1 SKU. And it's twice in numbers than our second even in sales than our second SKUs. So it tells you a little bit of how big food can be for the on-the-go consumer. It's no different to Mexico. And obviously, you would say, well, but Mexico is still eat on the street. That happens in Colombia, that happens in Peru. That happens in Chile. And so I think that's no excuse. What we're doing different is we are really starting with the coffee offering…

We'll now take our next question from Ricardo Alves from Morgan Stanley.

Thank you, Jose Antonio, for all the support and all the interactions with the investor community over the past few years. We really appreciate that and wishing all the best to the new CEOs going forward. A couple of questions, guys. Actually, follow-ups. On the gross margin, when we exclude the U.S. in proximity, I think that we're getting to something like 46%. And my question initially was if we were close to a ceiling, but I think that from the commentary that was already made, you made it clear that the answer to that question is no. That you see more opportunity to continue to expand gross margin here. My question is, how is that possible when you compare your business to other convenience store business outside of Mexico globally in Asia. What do you think is going to be this next lag up driver for your gross margin to continue to expand? That's my first follow-up question. And the second one, I think that as Juan suggested, I will leave more strategic questions at the FEMSA level to next year, but taking advantage of the transition that is happening right now for the new CEO. I think that we can still talk about longer-term strategic issues at proximity. There's a lot of things going on there. You have full control of Brazil, now. Mexico, you're focusing on recovering traffic, all these efforts that we discussed here today. Colombia is growing, then you have the U.S. So there's a lot of things moving on going on, on the proximity alone. What do you think should be your focus and our focus to see what is really going to move the needle under your leadership as you think about the different regions for the next 2 or 3 years?

Thank you very helpful. I would say -- on traffic, I mean, on margin, we are I always say the gross margin is a very incomplete number, and I know I said it before, but I think it's important to emphasize. You need to look at the CPG's gross margin, or margins, and the consumer let's say, relative or end price and the relative value. And in that respect, I do think Mexico is an outlier. And you see it in all the major CPG players that come to Mexico. Mexico is one of the most profitable markets for all of the guys that you guys know well, obviously, for the soft drink guys, for the snacks guys, for the beer guys. It's incredible the margins that they make here. And Mexico is an outlier because they do have a big love for brands. And I think the traditional trade still plays an incredibly large amount of -- which creates a moat for the CPG players. We have the added benefit of the commercial income. And as the discount players continue to gain -- grow and they will continue to grow off and others will continue to grow, the CPGs rely more on obviously, the traditional trade, but also on convenience, and they love to use us as a defensible place to promote -- and to promote their brands. And they do see a great benefit in return on promotional income from OXXO. And that's why we still see a lot of potential for growth. Going forward, as we try to gain share in categories where we're not huge, we're obviously beyond impulse, beyond gathering and beyond food, we will go into categories in groceries where we see an opportunity to gain share against the traditional trade and even against the supermarket. And some of that margin will be given back to the consumers. I don't know yet the amount, you will have to do -- a lot to do with elasticity. So I still -- it's very hard for me to say where the end game is. But when I see the margins of my CPG partners, which I love, and I love for them to do business with us, I do still see room for growth, both in promotional income and in gross margin fully in Mexico. So I would give it at that, and I will give -- you will see clearly how we evolve as we begin to get into other categories in groceries in OXXO where I see a big opportunity.

I would also complement what Jose is saying with a couple of things. Comparisons with other players outside of Mexico, I think, is also difficult because there are very few players that have the weight of financial services. And the income that we earn on financial services is very high margin. Because the -- there are no COGs really associated with the commissions that we charge for our financial services. It's really more as G&A related to the transportation of cash, and technology that we need to have in place. Number two, the issue of our -- when you strip out financial services, the reality is the margin is different and more comparable to things that you may be looking at. Number two, there are very few players outside of Mexico that have such a scale and breadth as opposed to OXXO in meeting proximity needs, really, our competitors are the traditional mom-and-pop. And I think our value proposition is very, very specific and very distinct which allows us in certain categories, given the imports that we have, that Jose mentioned, to partner up with suppliers for any number of initiatives and work that we do with them. And then finally, it's an evolving thing. The waves of value at OXXO will also impact the margin as we go forward. Food, for example, is properly executed, should be an attractive margin business at the gross margin if you manage to control an issue of waste. So I will tell you, it's very hard. We don't look at the business sort of targeting a gross margin. We look at the entire ecosystem. There are things that can produce enormous gross margin, but that would destroy the economics of the store because of the complexity it would bring to distribution, or the complexity it would bring to the execution in the stores, so we pass on them. And then there are things that are lower margin but drive traffic are very simple to execute, and it may be very attractive. So each one of our categories is really judged on the merits of competitive dynamics, issues in the store, growth going forward, and so we spend a lot less time sort of trying to project what the total amount of gross margin is going to be as opposed to looking at each category, maximizing the value in that category, and let the chips fall where they may.

And for opportunities for proximity, I would say, first and foremost, Mexico. And I would say even also Mexico, in terms of absolute value, an incredibly optimistic about the future. Even I know there's a lot of volatility and there's some of our categories where we have been having lower declines like tobacco and alcohol and others. But some categories go and some categories come. So I'm very optimistic. We just finished an analysis of how many stores fit and even if you put account a drop in services, a drop in tobacco, we still see thousands of stores. The number is so high that I'm scared to give it to you guys, but it's still at least a decade of growth at this rate. And obviously, beyond -- I mean, within Mexico, Sbarro is increasingly getting its act better and getting better and better with every cohort. And so we do see a few thousand Sbarro's in the foreseeable future. And obviously, that market is huge. It's very, very competitive, and the competitors are getting better by the year, but I think there's room for a few of us. So I'm very happy with our results and the expansion. And I would say Brazil is very top of my mind. We still need a lot of work to getting it better and better. But we are impressive by -- I mean, we've been growing same-store sales at double digits for the whole year and the business keeps accelerating. So I'm very optimistic on Brazil, Colombia. And I would say U.S.A hopefully, eventually, we will grow more confident and confident to keep growing it. But it's still on a very early stage there. But I would put my focus on that order. I would finally say, I'm incredibly impressed by the progress we've made in Europe. We have a superb management team. I've said it before. Our biggest challenge is to grow it, and we're beginning to see opportunities for growing -- especially organically. But we are very happy with the progress in Europe, and we are happy with the economic development of Europe in certain markets where we see opportunities. So we're happy there as well.

We'll now take our next question from Renata Cabral from Citigroup.

Jose Antonio, congratulations on the new role, exciting times ahead and I wish you every success. My question is a follow-up on OXXO digital ecosystem or financial services. The markets in Mexico is quickly evolving on this front and recognizing that OXXO success on this digital front. My question is regarding -- looking ahead, what is Spin's ambition? And where do you see OXXO as distinctive in right-to-mean versus wallet, telco, fintech solutions. And what would be the top capabilities that the company are targeting to invest on those fronts? So that's my question.

That's a very good question, Renata. Thank you. I would say for me Spin is a digital extension of OXXO's value proposition. That's how I see it. We see it as a lever to really enhance the lifetime value of our users. The Premia user average, or Premia users, which are our power users who have the loyalty program, do 3x the average consumption in OXXO in a month than the rest. But if you have a Spin, or your wallet, and the Premia the loyalty program, that's 42% above the Premia user. So I do think there is a lot of value in embedding the whole Spin ecosystem throughout our core missions. We can offer rewards, we can offer personalized promotions. We can offer frictionless experiences that really incentivize you to go more often to the store. So for me, we're in the very early stages on creating an ecosystem with Spin that strengthened the OXXO relevance in our customer lives. Obviously, that includes -- so what some people see as an apocalyptic scenario where everything will go digital like in Brazil with [ PIX ], which could happen. But for us, the potential value shift from in-store to digital, we don't see it as a value migration. We do see it as an opportunity for increasing dramatically the way people interact, and use OXXO almost as a place to cash in your rewards, your points. So we're still very focused on that. I do think at the end, it's about convenience and Spin is much more convenient than cash, but a lot of people need cash, and will need cash for the foreseeable future. Even if we go to a peak level ecosystem cash will still be important for a big sector of the economy. I am incredibly…

We'll now move to our next question from Froylan Mendez from JPMorgan.

Congrats on the new position, Jose. You spoke about that the pace of growth can be maintained for at least 10 more years. Can you go deeper into how the breakdown of this growth should be in terms of store expansion, same-store sales, incremental revenue from commercial income? And your thoughts on what is the adequate level of cannibalization that you can see at any point in time? And how do you feel on the ROICs of the new stores versus the more vintage space today?

That's a very -- if I had a -- a crystal ball to be able to predict exactly that. I wouldn't be here. But I would say, obviously, I mean, if you look at the acceptance level of cannibalization that we take when every time we open a store, and we -- and you extrapolate that for the next 10 years at our expansion. We do think we have at least 10,000 stores to -- and about 60% of that should be normal stores and about 40% of that should be OXXO Nichos. Our numbers say that's even bigger. I would say -- but it's too early to say. So you cannot estimate the stores. How much of that growth would come from same-store sales? I don't know, but we are expecting same-store sales at least to be flat, or even growing slightly with inflation adjustment. So I think there's that. If we win on breakfast, we win on grocery and we win -- we continue to gain share on gathering. Obviously, that number could get higher. But hard for me to give you a precise number at this time.

I think, Froy, this is Juan. In terms of -- normally, we separate in terms of new stores. If you model 1,100 per year. Today, that's 4% and change. And over the years, that will probably get smaller into the 3. But then same-store sales, it's a separate part of the growth algorithm. And there, as you know, our kind of our long-term guidance has been to mid-single digits. If you assume an inflation of 4%, which is the upper band of the Central Bank for inflation and add a point from mix and pricing. It gets you to the mid-single digits. So that's usually what we use for kind of long-term broader expectation management, right? So what I'm talking about is, right now, we're almost at 10%. If you add the two together over the years, probably gets you to the very high singles. Geographically, as you know, there are also differences. It's very different for us. when we look at white space in Guadalajara or in the Bajío or even in Mexico City compared to Tijuana or Juárez, right? So a lot of the openings happening in Central Mexico. But yes, that's how I would -- if I were building a model, those are the numbers I would put in.

Although you should expect that the type of stores -- this is Martin speaking, the type of stores will also shift over time. Nichos are becoming are about 15%, 20% of the stores that we're opening. Also Nichos our stores that are open within institutional contacts the factory, hospitals, universities. They tend to have significantly lower staffing. They have slightly different assortment because obviously, you're not going to be selling beer in a workplace. Over time, you could also see us -- we've been testing, although we're not ready to roll it out because we don't think there's yet an opportunity what are called OXXO Smart stores, which are unmanned stores. you can one day see OXXO smart stores and apartment buildings, or smaller offices that we meet needs. So the composition of the type of stores will probably shift over time creating new white spaces and new opportunities in the consumption occasions.

And one data point that we provided in the past, having to do with cannibalization is that it probably represents something like 30 basis points of growth in the overall number. So I would also use that for my own modeling.

We'll now take our next question from Hector Maya from Scotiabank. Héctor Maya López: Would love if you could give us your view, please, on how you are progressing on the banking license ambitions in Mexico and the role of Spin and Spin Premia for OXXO to have an edge with that? Also, if we think about innovation at Spin and Spin Premia, what do you think could move the needle in the next 2 years? And how could this help being to compete versus strong alternatives in Mexico that are accelerating the Nubank, Mercado Pago and potentially Cashi from Walmart?

So I will let Martin answer you the first one, and I will defer to February to give you a more detailed outlook as I'm still on the re-onboarding faith on Spin, and I would love to give you more clarity but on February. But for now, Martin will give you some answers.

I think we will not be presenting our banking license for a year now -- for a year. We've decided to start with a bigger focus on our credit part of it. That does not mean we're going to be increasing our credit. The pace of our credit business much quicker than we had. As I told you, and I promise we'll keep you informed and up to speed. We don't expect that to be more than a $20 million or $30 million deployment next year in terms of trying out new things. But we came to the conclusion that we want to have greater visibility and a sense of our ability to use our data to be successful in credit before we went for the full banking license. So I'd say we're about a year from making that decision of actually filing the banking license. It's already and prepared -- and we've done a lot of work on it, but we decided to just wait 1 year.

We promise better details on February, Hector. Sorry.

We'll now take our next question from Carlos Laboy from HSBC.

Congratulations Jose. And also thank you to Jose Antonio for really turning over the leadership of FEMSA at a moment in history when the business are really at their most dominant, their most focused, maybe the most talent-rich and fiscally sound position that we've seen, right? So it's a gift that we can get Jose Antonio to put his full focus on and growth and value creation here. So Jose, can you please give us more insights on affordability? Beyond, obviously, the savings aspect. Can you speak to what else is driving consumer sampling, repeat consumption and adoption, or maybe some of the more successful discount brands that you're running into in Mexico. And are there any specific categories where this is most evident? Kind of related to that also, is this pressure improving the differentiated proposition that OXXO is getting from its big branded suppliers to drilling foot traffic?

I didn't hear the last part.

Yes. Is all this pressure, Jose, from discount brands, improving the differentiated proposition that OXXO is receiving from your larger branded suppliers to help you draw in foot traffic.

Yes. It's still semi hypothesis. Obviously, it's an educated, not guess, because we've been talking to our CPG partners. And as they see the growth of the discount channel, they reinforce their partnership with OXXO with strength. I would say, first, if you look at the national level, how many stores are next through a discount of our stores are between 600 meters of a discount store, and it's still below 10% of our stores. So that tells you it's still not really moving the needle so much. But they will continue to grow, ours and others. So we -- where we are next to them, something interesting happens. Some -- we lose sales in some categories, and we even win traffic in some categories because people -- it's very easy to walk into one of our stores and to the other ones. And so you see people may be buying the ice with us or buying or buying the beer with us and then going to do their top-ups and their weekly grocery bill in the other one. So it's an interesting dynamic. But that said, it's an increasingly competitive dynamic. Affordability is here to stay in OXXO because the Mexico consumer is very -- is becoming much more price conscious. And we see the opportunity to really gain a much more relevance in what we call the replenishment occasions. And obviously, that has a role to play in beer where you are beginning to see more returnable glass, or the famous Caguamón, we're beginning to increase our coverage in Mexico, but also multipacks. And we're beginning to see that a lot in soft drinks. I think we were a little late in the game and getting into mini multipacks, or the mini cans, 6 pack or 12 pack,…

That's all the time we had for today's question. With this, I'd like to hand the call back over to our host for closing remarks.

Thanks, everyone. Obviously, we're always available for follow-ups and incremental questions. But other than that, have a great rest of the week.

Thank you, everyone, and we will be seeing each other here in every conference call. So looking forward to more interactions.

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.