Hello, and welcome to the FEMSA's third quarter 2023 results conference call. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. We kindly ask you to limit yourselves to one question only. If you require assistance at any point, press star zero, and you'll be connected to an operator. I will now hand you over to Juan Fonseca to begin today's conference. Thank you. Good morning, everyone. Welcome to FEMSA's third quarter 2023 results conference call. Today, we are joined by Paco Camacho, our Chief Corporate Officer, Eugenio Garza, our CFO, and Jorge Collazo, who heads, Co-heads Coca-Cola FEMSA's Investor Relations team. The plan is for Paco to open the conversation with some high level and strategic comments on trends and results, followed by Eugenio, who will focus more on the detailed numbers, and we will then open the call for your questions. Paco, please go ahead. Thank you, Juan. Good morning, everyone. Let me begin by thanking you once again for all your kind messages of support and sympathy around the passing of Daniel last August. He left a big hole for us, but also a big legacy, and we carry renewed purpose to continue what he started. To that end, José Antonio transitioned seamlessly and is now fully engaged in his dual role as Chairman and CEO, steering the ship as we continue to execute our ambitious strategy. On that note, as an update on where we are on FEMSA Forward, we can inform you that regarding the Envoy Solutions BradyIFS transaction announced at the end of August, the regulatory process has advanced according to schedule, and we expect the transition to close soon. Additionally, we have launched the divestiture process for the next layer of assets, including those related to Solística and Imbera, and we are already making progress on those early efforts. Furthermore, last month, we announced changes to FEMSA senior leadership team, as well as an evolution of the organizational structure of our retail business vertical. Once these changes take effect in November, we will have one leader for each of the three core business verticals in full consistency with FEMSA Forward, enabling our organization to operate with maximum focus and effectiveness. As we have mentioned before, FEMSA Forward is fully aligned with FEMSA's customer centricity and our broader strategic priorities of driving long-term growth, increasing, increasingly enabled by digital capabilities, always within our core business verticals and with a disciplined approach to capital allocation. On this last topic, we have made significant progress in our analysis, and we will share and discuss our findings with our board coming November meeting. We are all aware that this is an item top of mind, and we will keep you posted as appropriate. Moving on to the results, our third quarter numbers continued the very positive trends seen during the first half of the year, fully consistent with our strategic priorities and making progress towards the targets set by each business unit long-range plan. Indeed, 2023 is shaping up to be a banner year for our core business verticals. Beginning with proximity, like we did in our call last quarter, it's helpful to talk for a minute their own long-range plan and the 4 priorities around which it is built. Strengthening the core, developing new growth avenues, developing multiple successful formats, and growing the footprint beyond Mexico. Looking at OXXO's third quarter results through this lens, we see they again made stellar progress in strengthening the core. Same-store sales growth remained above 15% against a demanding comparison base, with average traffic contributing more than half of the growth, which is remarkable. This strong performance continues to be driven by a broad set of tailwinds, including a strong consumer demand for thirst, gathering, and ignitions, solid commercial income dynamics, better segmentation at the store, and the rapid adoption of the Spin Premia loyalty program. Continuing with the positive news of a stronger core, store growth was robust once again, with Mexico and Latam adding 293 net new stores during the quarter, and 1,453 during the past twelve months. Looking only at Mexico, we are on pace to meet or exceed the 1,000 new net store threshold for the first time since before the COVID pandemic, and with more productive stores. Moving on to the long-range priority of growing beyond Mexico, during the quarter, Grupo Nós continued its solid advance, with revenues increasing over 150% year over year, and with OXXO's footprint in Brazil more than doubling during the last twelve... Still in Proximity Americas, but along the priority of developing multiple successful formats, Bara grew revenues by 30.7% - 36.7% and reached a total of 309 stores as of the end of the quarter. For its part, Proximity Europe increased revenues by 8.7%, reflecting traffic recovery and positive pricing initiatives, as well as the growth of Valora Food Service and B2B business. As of the end of the period, Proximity Europe has 2,810 points of sales. Our health operations continued the trend we saw in the first half of the year, reflecting foreign exchange headwinds from a strong Mexican peso relative to local currencies in South America, as well as mixed results with flat, flat numbers in Chile and positive trends in Colombia and Ecuador, offset by pressure in a more competitive Mexico. Importantly, during the quarter, our health business continued to push to consolidate its competitive position across several markets, increasing its footprint by 9% to reach a total of 4,347 locations. In fact, during the last year, our health division added new locations across its territories at a pace of one per day. For its part, our fuel business delivered a stable performance with a strength, with a strength in the corporate wholesale business, continuing to perform relative to retail, outperform relative to retail. Regarding digital, the number of active users for Spin reached 6.4 million during the quarter, and active users for our Premia loyalty program reached 17.7 million, while more than 28% of OXXO Mexico sales are now associated with the program. We continue to privilege the acquisition of higher quality users, while we make progress fine-tuning the use cases, value proposition, unit economics, and monetization strategies for each part of the ecosystem. In terms of financial implications, during the quarter, we deployed close to MXN 1 billion on growing this business, roughly in line with the previous quarter as well as budget. Finally, Coca-Cola FEMSA delivered a remarkable set of results for the third quarter, driven by double-digit volume and revenue growth as they accelerate their pace of investment across markets. With that, let me turn it over to Eugenio. Thank you, Paco, and good morning to everyone online. Before going on to the numbers, also want to give a quick shout-out to all our colleagues in Acapulco and surrounding areas that were affected by Hurricane Otis. They have been true heroes in helping the community get back on their feet over the past couple of days. Thank you for that. Going to the results in more detail, I also want to bring your attention before that, that, as of the third quarter, we are now booking Envoy Solutions as discontinued operations. Therefore, for comparability purposes, we are adjusting our third quarter 2022 consolidated financials to reflect this change. Moving on to FEMSA, FEMSA's consolidated quarterly results, total revenues during the third quarter increased 19.3%, while income from operations increased 12.7% compared to the third quarter of 2022. Net consolidated income was MXN 12.8 billion, reflecting higher income from operations, a non-cash foreign exchange gain of MXN 5.4 billion related to FEMSA's US dollar-denominated cash position, as impacted by the depreciation of the Mexican peso during the quarter, and a decrease in net interest expenses during the quarter. This was offset by a decrease in our net income from discontinued operations, which mainly reflects the results of our investment in Heineken during the third quarter of 2022. Moving on to discuss our operations and beginning with Proximity Americas. We added 293 units during the quarter to reach 1,453 net new stores for the last 12 months. This puts us ahead of target and underscores not just the momentum we have achieved in Mexico, but also the strong pace we now have in Latin America, particularly in Colombia, where we recently began opening stores in our fourth city, Cali. OXXO same-store sales were up 15.1% for the third quarter. This was driven by an increase of 6.6% in average customer ticket and a very strong 8% growth in traffic. As Paco mentioned at the outset, this performance reflects a broad set of tailwinds related to core categories performing well, healthy commercial income dynamics, better segmentation efforts, and the growing impact of the Premia loyalty program. All of this against the backdrop of a robust consumer environment. Gross margin expanded by a full percentage point to reach 41.2%, reflecting strong commercial activity and promotional programs from key suppliers, as well as an undemanding comparison base from last year. Income from operations increased 14.7%, while operating margin decreased 50 basis points compared to the same period of 2022 to reach 8.9%, reflecting an increase in labor expenses stemming from the labor reforms in Mexico. At Proximity Europe, revenues increased 8.7% in local currency to reach MXN 11.2 billion, reflecting a recovery in traffic and ticket, driven mostly by improved customer mobility. Gross margin was 41.8%, reflecting a mixed effect driven by the positive performance of Valora's food service and B2B businesses. Operating margin was 3.1%, reflecting better operating leverage, partially offset by an increase in expenses driven by inflationary pressures. Moving on to FEMSA's health operations. During the quarter, we expanded our drugstore count by 80 net new additions to reach a total of 4,347 units across all of our territories at the end of September, and 365 total net new stores for the last twelve months. Revenues increased slightly, while same-store sales decreased an average of 3.6%. However, as was the case last quarter, it is important to note that on a currency-neutral basis- ... revenues would have grown 13.6% and same-store sales would have increased 4.7%, partially offset by a demanding comparison base in our operations in Chile and a very challenging competitive environment in Mexico. Gross margin contracted 30 basis points in the quarter, reflecting a negative mix effect driven by the increasing contribution of our operations in Colombia, which have a structurally lower margin. Operating margin increased 60 basis points, reflecting an increase in labor expenses in most of our markets. At OXXO Gas, revenues increased 14.2%, and same-station sales grew 8.1%. Retail volumes were again complemented by a robust pickup in corporate and wholesale activity. During the quarter, gross margin was 12.4%, while operating margin was 4.5%, reflecting tight expense control, offset by increased labor expenses. Moving on, Coca-Cola FEMSA, as you saw a couple of days ago, delivered a stellar set of results in the third quarter. Total volume grew 11.6%, driven by growth across all of its territories. Total revenues increased 10.1%, and operating income grew 15.3% as operating margin expanded by 70 basis points to reach 13.5%. You can listen to the replay of their conference call held last Wednesday on their investor relations website. And with that, let us open the line up for questions. Operator, please? Thank you. As a reminder, if you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. You are kindly asked to limit yourself to one question only. If you change your mind and want to withdraw your question, please press star two. Please ensure your lines are unmuted locally as you'll be prompted when to ask your question. Our first question comes from the line of Ben Theurer from Barclays. Please, go ahead. Ben Theurer from Barclays, please go ahead. Please. Our next question comes from the line of Ricardo Alves from Morgan Stanley. Please go ahead. Hi, everyone. Thanks so much for the call. Thanks for the quick update on capital allocation as well. I'll leave follow-ups on that to another colleague. I wanted to take advantage of such strong top line at OXXO, as well as the new leadership with José Antonio in the retail vertical. Wanted to take advantage of that and try and ask a more strategic question. I mean, FEMSA opened nearly 300 stores this quarter, right? We're running at 1,500 last twelve months. So in the context of the FEMSA Forward announcement, the prominence that OXXO is gaining, the senior management changes, is there a revised medium- to long-term growth plan for OXXO? Wanted to see if you can break it down again into what are the latest thoughts for Mexico, South America, ex-Brazil, and even Brazil, if you will, but mostly Proximity Americas. Basically, after these numbers, quarter-over-quarter of beats, on the top line front, we feel that there's upside to the numbers that we've discussed over and over again over the past couple of quarters. So just curious to hear the latest strategic thoughts ahead for OXXO, coming from José Antonio and the Proximity team overall. And then I'll go back in the queue. Thank you. Thank you. Thank you, Ricardo, for the question. I'm not sure what it means to go back in the queue, but, thank you. I'll just start with the first part of the question- Because I wanna limit myself to one question. I know. Thanks for the discipline. Listen, let me start with the first part of the question, and I will let then... Can you provide a bit more color? But look, on the strategic side, clearly, the good news here is that, on top of the good news of the organizational alignment with FEMSA Forward, which is taking place as we said in November, the fact is that, as we have also shared with you, we have very robust long-range plans on each of the businesses, including, of course, Proximity. So as of today, what is happening is that all the plans that were developed behind that long-range plan strategy are being deployed, and every single one of them are providing results, and some of those results are, of course, part of what is being reported. Now, as we work on... right now, in the budget for 2024, as we close 2023, you can imagine that part of the exercise is to also revise or revisit the projection that was done for the next several years as part of the long-range plan. The team is working on that, and I'm I assure you that when with José coming in, he's actively participating in reviewing those numbers, in checking whether they need to adjust some of the strategies, how they will start working together. So I mean, clearly, he's part of the very robust process that we have in FEMSA related to the long-range plan, to the budget, to the business management. And José is jumping in at the right moment to make sure that any adjustment is taken care of as part of that process. As for the second part of the question, I don't know, Juan? Yeah. Yeah. Hey, Ricardo, it's Juan. Yeah, I think in terms of the number of openings, as you correctly framed the question, this is, ... pretty strategic in the following sense. You know, the last couple of years, certainly through the COVID years, there was this big deceleration in the opening of stores in Mexico, right? We closed a bunch of stores, and then we were opening 800 per year. And obviously, there was this concern of, you know, does this mean that structurally we can't go back to kind of the four-digit number of openings in Mexico? And of course, what we've seen the last, you know, 18-24 months is, you know, once we built our pipeline with the new standards that are allowing us to open better, more productive stores, we are already back to the 1,000 stores per year in Mexico. I think at this point, that is the number that I would plug into a model. I don't know necessarily that we would go back to the, you know, 1,200, 1,300, 1,400, that we did at some point in Mexico. I think I would use the 1,000 number for Mexico. But the other part of the equation, which is Latam, has definitely come of age over that time frame as well. We mentioned a few minutes ago, we are now in 4 markets in Colombia, so it's Bogotá, Bucaramanga, Pereira, and now Cali. And things are going well, and, you know, we integrated OK Market in Chile. There's gonna be some further growth there as well. And of course, Peru is also kind of coming into a stage where we could probably accelerate the opening. So if you look at it in an aggregate number, so the 1,400 and change, that number will probably continue to increase, but it will be more driven by ex-Mexico than by Mexico. I would leave Mexico at 1,000 until further notice. But again, remembering that those 1,000 stores are going to be more productive than the 1,000 stores that we opened 2, 3, 4, 5 years ago. I would leave it there. The only thing I would add, just to get on to move on here, but I think it's important, is that, as we continue to execute on the long-range plan, we are having success across all initiatives, I mean, top-line initiatives, bottom-line initiatives, and that is making, I think the unit economics, especially in Mexico, better than we thought they would be when we originally executed. So if anything, I see a longer runway, in terms of how long we can grow, at this pace. And I think José's challenge going forward would be more of a bandwidth issue as to how we allocate, I mean, human power, and just, I mean, bandwidth to prioritize, across all the regions that are now encompass what he is managing. So it's more a prioritization issue than anything else. I'm comfortable that we would be able to grow at this pace, probably for longer than we otherwise would have with the old unit economics. This, none of this really includes Brazil, right? I mean, Brazil is its own thing, and there I would also envision an acceleration of the pace. Very clear. Thanks for the comprehensive answer, everybody. Thank you. Our next question comes from the line of Ben Theurer from Barclays. Please go ahead. Okay, we try this again. Can you hear me? Yes, perfect, Ben. Thank you. Ah! Fantastic. So first of all, congratulations on the results. And I'd like to ask my question on, just capital allocation in general. We talked right now about store openings, OXXO. You've talked about the health piece, one per day, nice number, 365 in the last 12 months. So if we think about these CapEx plans, right? And obviously, the cash you need for being that base, new stores, be it OXXO, be it health in the different regions. How should we think about just your cash flow allocation and just the general allocation of the excess capital that you have right now, post M&A? Any update you can give us on that, that will be much appreciated. Sure. Let me take that then, and then you guys can complement me if you want. I mean, the true beauty of the proximity health model from a capital allocation perspective is that they're true compounders. I mean, they generate a lot of cash, and we are at a store base right now in all geographies that pretty much self-funds this growth at very high marginal voids. So it is a fantastic business model at the stage we're in. So we could be, I mean, over the next five years, be spending, I mean, from $4 billion-$5 billion of growth CapEx, not just in new store openings, but also distribution centers and all the infrastructure that will be self-funding by the business unit and still have enough cash left over for distributions to shareholders. So that basically leaves at least the cash we have on hand in the balance sheet right now available, and again, cash is fungible. But in that amount of the cash that we have right now for inorganic expansion and for capital returns to shareholders. So we're faced, I think, with a very high-class problem of having, I mean, two very cash-generative assets at very attractive reinvestment opportunities in cash flow generation. We have one, a burgeoning business, not burgeoning, but, I mean, we're incubating business, which is digital, which we are investing in, but it only consumes a fraction of the cash that the other two businesses are spitting off. And that provides us, again, optionality to look for value-creating acquisitions, and potentially, I mean, substantial returns to shareholders as well. Thank you. The next question comes from a line of Bob Ford from Bank of America. Please go ahead. Thank you. Good morning, everybody, and thanks for taking my question. You seem to be generating not only scale, but engagement with Premia. Could you talk a little bit in terms of where you are, in terms of driving frequency and average ticket, and where you are in that progression of transitioning Premia from a cost to a profit center, please? Hey, Bob. Yeah, this is Juan. I think you're, you know, you focus on something that I find very exciting myself, which is the, you know, the speed at which Premia has grown, the massive number of users. And when we look internally at, you know, the impact on average tickets, so how this is spilling over to the OXXO business, but also very early stages where we are working with partners, right? So you talk about Volaris, so you talk about the, yeah, the streaming service from Televisa and potentially others that may come down the road, as well as the internal ones, you know, OXXO Gas in particular. You notice the power of this in a demographic that historically has not really had a lot of access to loyalty programs. So there is, you know, the average ticket that goes to Premia is meaningfully higher than the regular average ticket. You start really looking at things like retail media, yeah, you know, digital media, where you begin to monetize when you get on your app to check your points balance or whatever, and you begin to get ads by some of our big suppliers. So you're transferring the real estate, where obviously, for a long time, we've been monetizing the physical real estate on the Commercial Income front, but we're beginning to monetize the digital real estate for similar purposes, which, of course, is, you know, endless. Very early stages, Bob, but moving in the right direction and probably a little bit faster than I expected. Yeah, and, Bob, if I may, just to add a couple of points to that. The most exciting part of the OXXO Premia is the fact that we are being able to identify the different journeys from different consumer segments. And the fact is that there is one way in which a consumer that goes into an OXXO Gas station and accumulates points there uses the overall OXXO Premia platform, versus someone that goes and uses daily to buy a coffee in an OXXO store. And the reality is that the team is digging into every single journey possibility so that they maximize the personalization for consumers in the midterm. That's really the end game here, on top of everything else that Juan said. So today, when you look at the tender, which is very high already, that already reflects the fact that consumers are themselves learning how to use their points, how to use the ecosystem. And it has to do with a bunch of things related to the consumer. It has to do with the age group they belong to, the socioeconomic level they belong to, the type of life they have, and whether they are a student or they are a young professional, or they are a professional driving an Uber or a truck. And all those journeys are what are allowing us, understanding them, is what is allowing the team to actually tailor-make some of the activities that are conducted. Promotions with OXXO store, promotions with OXXO Gas, promotions with the partners. And really, that is the exciting part of all this, beyond the number of active users that we have, which is really big, too. So, honestly, moving forward, there is a lot of possibilities that are being that the team is tapping into, that are part of what is included in, once again, as I said before, in the long range planning. And I'm sure that we'll be able to share more, on what is happening in digital more in detail in the months to come. Yeah, and I think the other thing that obviously is beginning to accumulate, Bob, is the amount of data, right? I mean, to Paco's point, we are being able to gather, and obviously for the first time, have the data, you know, assigned to a person for whom we know, you know, who they are, what their email account is, what their phone number is, and then begin to customize some of this promotional activity and incentivize behaviors with the rewards themselves. So early stages for all of this, but off to a faster start than expected. Just as a follow-up, are you guys making money or losing money? And, you know, I mean, I'm all in. I kind of get the TAM. How should we think about the evolution, though? I think at this point, we are, given the elasticity from the point usage, we are better than breakeven on the Premia, and we're still at early stages, so it's promising. Great for you. Thank you so much, and congratulations. The next question comes from the line of Thiago Bortoluci from Goldman Sachs. Please go ahead. Yes, good morning, gentlemen, congrats on the results, and thanks for taking my question. I would like to explore and dig a little bit more into growth, right? Starting with Mexico, and we've been hearing you guys cautioning down on the strong comps for same-store sales, but the thing is, quarter after quarter, you have been beating expectations, right? Not only surpassing your own marks, but also performing by far your peers, right? With your competitors mentioning incrementally higher growth within the hard discounter, and even on our end, seeing Bara growing and meeting, how should we think about same-store sales for OXXO going forward? How sustainable do you think this above inflation ticket growth might be? How much hard discounters could impact traffic? This is the first question. And the second one, still on the expansion, team, do you have any color on how your build-up in Brazil is performing in terms of profitability? And what are the learnings from Brazil that eventually you might take into the U.S.? Those are the questions. Thank you very much. Yeah. Thank you, Tiago. Let me take the first part of the question, and then I'll let Eugenio and Juan add color to that and tackle the second part. But when it comes to OXXO, I think that Eugenio made reference to that, the reality is that, as we said, they are executing the long range plan that they put together. Those action plans are paying dividends, are working, and are delivering results. I think that it's safe to say that they are ahead of the long range plan projection, and they are in the process of reshaping those and working as a team to refresh those projections. The runway, as Eugenio said, we are confident that the runway for performance is longer than we originally thought. Having said that, the reality is that as you know well, in any business, we have to be realistic about what can be a tailwind and what type of headwinds come ahead of us. The operational excellence of the teams are creating a bunch of those tailwinds. And we see a lot of opportunities moving forward in growing the core, in new formats, and the rest of it as part of their strategic plan. Nevertheless, we also know that evidently there are things that happen beyond our control that have to do with the context, with the categories, with the activities and activations from our suppliers, our commercial partners, et cetera. And that we are always prepared to do that. And all that is put into the melting pot, and the teams come up with a revised projection. So for the time being, we remain very positive about the possibilities in our OXXO model. They continue to polish the diamond, to call it that way, in terms of the operational excellence, the operational efficiency, learning how to activate the categories better. The segmentation is working fantastic. So again, positive, but we remain conscious of all the external factors that are around us, and that we have to juggle, at the same time. I would add that, I mean, if you look at what's happening over the past few quarters, Thiago, I think it is a reversal of the trend we saw during the pandemic of consumption patterns shifting from the small box to the larger box. And now that's coming back with a vengeance, and that is coming back higher than we anticipated, frankly. So we're seeing traffic trends pick up, and also tickets, and pricing stick to what we have. So, I don't know if this is a secular trend, or if this is a temporary trend, but, but it is what's causing the short-term results. Having said that, with the value prop that we have, and with the unit economics we're getting, we're comfortable that we can continue on that path going forward. With... I think you mentioned Bara and the other multi-formats. I think, I mean, we're growing there as well, and we see a lot of promise. Having said that, they're still too small to make any kind of cannibalization threat to the expansion path we see in OXXO. Again, there are more than 1 million mom-and-pops in Mexico. I mean, tens of thousands of larger formats, I mean, stores across Mexico. So I think there's room for all of the formats to continue to grow in this way. And the second part of your question was with regards to Brazil. And again, what I can say is from a four-wall perspective, the stores are performing much better than we expected when we originally entered into the partnership with Raízen. It's still an issue of scale. As you know, our model is distribution driven, and distribution investments are, I mean, are front loaded. You have to put the distribution center first and then fill it up. So there's still, I mean, a big runway of stores before we can get to the economics we expect for the region. But the fact that the four-wall model is working well, I mean, gives us a high sense of confidence that we will get to these numbers, and that we will be able to replicate these units of distribution center slash stores in the region of São Paulo and hopefully in more regions in the future. And to what extent we can export that to the U.S., I think the U.S. is a different market, and we'll get to that. But it's, I mean, that's the learning so far in Brazil. Yeah. I, I would just add, Thiago, this is Juan. I mean, going back, I'm kind of, you know, guilty as charged because I remember six months ago, sitting in this same conference room, on, on the call and telling all of you to not put into your model, kind of a teens number. And then I've been wrong for the following two quarters because we've delivered 15. ... You know, I think to Eugenio's point, the jury is still out in terms of how much of this is sustainable. But it increasingly looks like there's a lot of structural reasons why things are as positive as they are, as opposed to just the bounce back from COVID. As we begin to look at 2024, again, you know, I would—I think the numbers are gonna continue to trend down. So in my mind, it would probably—we're probably thinking more about a very high single-digit same-store sales growth, and we'll revise that in February. But I don't think, you know, double digits are out of the question, at least for the early stages of 2024. We'll see. But it... The deceleration has certainly been a lot less rapid than we expected six months ago. So that's all very good news. That's super clear. Thank you very much, everyone. Thank you. Before we proceed to the following questions, a final reminder: if you'd like to ask a question, please press star one. We kindly ask you to limit yourself to one question only. The next question comes from Álvaro García from BTG. Please go ahead. Please go ahead. Hi, guys. Thanks for this question. My question, we haven't focused on margins at OXXO. Profitability came down a bit, SG&A accelerated sequentially, and you mentioned the release sort of increased labor expenses in connection with labor reform. But I was wondering if there was any other dynamic going on there, maybe sort of quicker growth outside of Mexico. I know it's still very, very small, but I'm not sure if that's starting to maybe move the needle a bit, or is this really solely a people thing in Mexico? Thank you very much. I would say, Álvaro, thank you for the question. First, primarily, it is labor, as we said. Having said that, a lot of these initiatives in the strategic plan, including we are looking at better methods for recycling cash, for cashing cash out in the stores. We are, I mean, rejiggering the operational model with regards to how many people, I mean, operate the store, how many are fixed, how many are variable, in terms of shifts, et cetera. And all that is, is experimentation. It's things as we look to build, I mean, more resiliency from a cost perspective going forward. And all those experiences, all these experiments are flowing through P&L as OpEx. So, that is a little bit of the factor that you also see there. There is, as you said, also just the mix effect with regards to South America, which is less profitable than Mexico at the margin. But I would say, I mean, 80/20, it's labor, 20%, the rest of the stuff I just talked about. I would add one more thing, Álvaro, this is Juan. You know, growth margin historically has been the main source of margin expansion at OXXO, and usually we do very well at the growth level, and then we lose some of it in the SG&A, and we end up with a smaller expansion at the operating level. I was personally very, very happy to see this quarter, us going back to an expansion at the growth level. You know, we've talked about services having been volatile, some of our correspondent banks coming and going. We now have Banorte back. We talked for a number of quarters about Premia, the impact of how we were booking the points. This is prior to us moving the whole loyalty program outside of OXXO and into the digital P&L. But, you know, to have kind of exited those two kind of noisy situations, you know, at least right now, it looks like we're back to a place where commercial income begins to be strong enough that it helps expand the margin at the gross level. And if we are able to continue that, then that bodes well to our ability to then offset labor pressures, which, as you know, going into 2024, there are outstanding questions in terms of, you know, Congress and what's gonna be passed around labor legislation. So we'll see. But we're much better going into that situation with an expanding gross margin coming from commercial income, which is where we are right now. Great. Thank you very much for the color. Thanks, Álvaro. The next question comes from the line of Alan Alanis from Santander. Please go ahead. Yep. Thank you so much. Good morning, and congratulations for the results. My question has to do with the Bara and the fact that it's growing more than 50% faster than the rest of the supermarket. I mean, I understand what Eugenio said, that the revenge spending and so forth, because you see it there on the traffic, but clearly you now have a winning model on Bara, on the supermarket. So what are the ambitions with this chain? How fast can you grow it, and how much does it changes your strategic thinking with regarding moving to different formats? That would be my question. If you could also just quickly comment on the trends on spirits demand in Mexico in the last quarter, in OXXO or in Bara, that would be highly appreciated. Thank you so much. Yeah. Alan, let me take the first part of the question about Bara. First, I mean, Bara is, we don't consider Bara to be a supermarket. I mean, we—Bara is a completely different format. It is a small box. It has a limited assortment. It meets very specific consumer needs related to their shopping. ...routine. I would say that there is no comparison versus what we know as a regular supermarket. It's a different segment, different form. As for the opportunities, I mean, obviously, the fact that we are accelerating the store opening, the fact that the performance is good, we feel confident at this stage that we have a value proposition that is relevant, that is tested and approved by consumers, liked by consumers, and that's why our intention is to accelerate that. At the same time, we are also aware that we have to do this in a disciplined manner, and that's why our discipline takes, for example, focalizing geographically so only certain areas of Mexico. We'll continue to expand in the regions where we are, make sure that we capture all the growth that is there, we applying the model that we have. We are confident also this stage that, given that it's a different format and a different value proposition for consumers, that there is no or very limited cannibalization with our OXXO stores. So that's what I can say about the format itself. Eugenio, you want to add something? Yep. No, just with regards to your second question on spirits, I mean, clearly the pandemic kind of brought that category to the forefront of the OXXO value prop, and that continues to be strong. Beer sales are now, I mean, back to where they were, if not higher than prior to the pandemic. But the consumption pattern- Okay ... of people trying higher graduation drinks is still there and still strong. And the other thing, just to add one bit of color, additional color, and I guess that we spoke about it in another meeting we had, but remember that in Bara, for example, just to talk about the format and the value proposition, there is a big component of private label. So private label is, it's an important part of the equation. It is more important in certain categories. It keeps growing in general, so that speaks to the type of format and value proposition that we have in Bara. Got it. That's, that's critical. Thank you. The private label. Thank you so much. Appreciate it. Congratulations. Gracias, Alan. Gracias. Thank you, Alan. Yes. The next question comes from the line of Rodrigo Alcántara from UBS. Please go ahead. Hi, good morning, good afternoon. Thanks, Paco, Eugenio, Juan, for taking my question. So, a couple of months ago, our Banorte friends came back to OXXO, right? So, I mean, this clearly demonstrated the relevance of your proximity format. So my question would be on the opportunities you see to know or you are working on to take advantage of the retail media opportunities at the store level, or perhaps partnering with e-commerce guys. Some other strategies or benefits you see to take the most from the proximity format that you have in Mexico with OXXO. Thank you. Yeah, I mean, Rodrigo, those are all, I mean, very relevant points, and that's kind of part of the agenda for the long-range plan. More and more, the digital business obviously is a business in and of itself, but the digital opportunities associated with the, with the store model and the phygital, elements of, combination of physical and digital is, is something that is, is part of the, strategic plan- Mm-hmm ... and something that also slowly rolling out. I mean, there are very significant efforts going on with regards to building out a retail media network within the stores and, and, using the inside of the stores also as specific advertising platforms to generate traffic. We will have eventually the ability to determine which customers are coming into the store, if they have the Spin app or not, and tailor the advertisements to the actual demographics of the store customers that are at any given point in time. So all of that is creating, I mean, tremendous opportunities on that side as well. And again, the more that the digital platform is growing, the more we know that there are opportunities well above just the basic products that we offer right now, which is a wallet, basically, with a loyalty program attached to it. I mean, there are significant opportunities there on the credit side, on different financial products, and in the future, with a broader SKU mix than just the OXXO stores to deliver to those customers through other channels and other means. So, those are all very exciting initiatives that I think are being slowly opened up, and we're just at the tip of the iceberg at this point. Rodrigo, I think that you have a... Your question, it reflects that basically the number of opportunities that pop up every time we talk about the digital and the connection with the store. And the way we are reading that is that, I mean, clearly for our digital proposition, the link with the store is an enormous competitive advantage. And that phygital ecosystem, as Eugenio made reference to, is of tremendous value for the consumer. And the priority of the team is to make sure that we not only tap into that to create value, but also importantly, to help consumers' lives and to help them in their day-to-day, and to open new possibilities for... on their financial side, but also importantly, on their journey as consumers. I see that. That's very clear. Thanks for that, Paco. Yeah, I'm asking on, on the retail media per se, right? Because, you know, we have seen how the retailer, let's say, Walmex, for instance, already at MXN 2 billion pesos business, right? Highly margin accretive. So just curiously for you guys, do you think that, I mean, we're still in an early stage about that, and how, how, how far do you think we could get on, on the retail media? Yeah, Rodrigo, it's Juan. I mean, I think retail media is... I mean, basically, we've thrown two or three pitches in the top of the first inning to talk about something that's kind of involved these days with the World Series starting. No, this is just tip of the iceberg, as Eugenio said. If you, I mean, at the end of the day, a lot of this goes back to, you know, the 13 million times today somebody is going to interact with our stores. That number will continue to grow. And so the potential is really important. You know, we haven't really spoken a lot lately about a couple other things that are, you know, happening on the fulfillment side. You'd mentioned, you know, partnering on the e-commerce side, obviously the 21,000-22,000 stores, whether it's directly, as we've been doing it with Amazon for a number of years, or exploring the use of lockers or other ways that we can participate on the last mile component. Which again, we've done a lot of work on that, and we've identified that it's for a certain subset of our average transactions that are really big enough to kind of sustain the cost of delivery. But there are other things that are happening kind of in the, you know, behind the curtain, all of which are part of the long range plan and along all of which we are making progress. I see. Exciting. Thank you, thank you, Juan, Paco. Congrats on the results. Thank you. Thank you. Our next question comes from the line of Héctor Maya from Scotiabank. Please go ahead. Hi, thank you for taking my question. So it's definitely very encouraging seeing the robust result in OXXO, so congratulations on that. It was also very interesting to see the growth with Spin. I mean, it seems you are well on track to reach the 10 million user target that you had mentioned a year ago. So seeing this, I just wanted to know if this, I mean, if at this stage you have more clarity in how much more you could accelerate this? And what could be the potential economics in your plan to leverage this very critical mass to integrate KOF to supply Mom and Pop stores in the traditional channel in Mexico? Thank you. Hey, Héctor. Yeah, I think regarding Spin, you know, one of the things we have learned is, and we had kind of the thesis that the store would be helpful in the acquisition of customers. But to be honest, it's exceeded our expectations, and this has translated into the cost of acquisition, right? Because some of the incentives and some of the strategies that we had in the beginning have turned out to not really be necessary. You know, it looks like we can continue to add subs at the pace that you're seeing without incurring on a very high cost. You know, to Eugenio's comment on phygital, the actual network of physical stores and these, you know, 13 million times somebody's getting asked today if you already have a Spin account, that has turned out to be very, very powerful. Yeah, we are, you know, we are, we are, continue to grow. I mean, on the Spin side, I think we added—we're adding something like 400,000 subs per month. On the premium side, it's significantly faster than that. Going back to an earlier question a few minutes ago, I think the bigger challenge is on engagement, on generating engagement, on having more things for people to do while they're on the app, spending more time. And then, of course, this is gonna translate into better, digital media numbers as well, because people are gonna be there for longer. So that's, that's really the number one item on the agenda, is increasing engagement and, and monetization, as opposed to just sheer, number of subs, because that's happening more or less on its own. In fact, Héctor, this is Paco. But just to add to Juan's point, the fact is that as a metric, for example, today, we focus significantly more on active users rather than total users for Spin. Because what is important is those that are making at least one transaction a month. And then once you have those transacting at least once a month, then you focus on the size of the transaction and the number of transactions that they make. And that's where the team is focalizing at this stage, which is understanding what is the journey of the consumer, how a consumer in one location and of a certain socio-demographic uses the card. Do they use a physical card? Do they use a digital card? Do they use it to transfer money? Do they use it to pay? Do they use it to receive payments from other people? And depending on how they are using that card, then is the type of offerings and the type of journey that we put that consumer into. So when you look at the transactions, the reality is the transactions grew almost 16% during the month. And what the team has learned is that those users that have a higher frequency are obviously the ones that have in each interaction a higher ticket too. So. But again, as I said, clearly, it is different if you are a student in Veracruz, how you use the card, versus if you are someone that is working in Tijuana and you are sending money to Oaxaca. So, I mean, clearly, all those different ways of using the, using a Spin will play a role in terms of how we activate it in the store and what type of offers we do to each of these consumer segments and cohorts. So again, lots of possibilities, but once again, the focus shouldn't be on so much on the recruiting, but it's significantly more on the frequency and how active those consumers are using the platform and ecosystem. I think the other part of your question, Héctor, had to do with the B2B, and as you know, that's the second element. All we've talked about right now, and the success we've seen so far has been on the consumer, to kind of close the loop in the ecosystem, that's the other big part of the strategy. As you know, we acquired Netpay, which basically gives us the infrastructure, so the rails on which to build this trade and the good relationships that Coca-Cola FEMSA has obviously with all the mom-and-pops in the southern part of Mexico, and with the ability to distribute non-Coke non-KOF products through OXXO distribution centers and OXXO commercial relationships. Trying to bring a digital solution so that mom-and-pop through the Spin ecosystem, with obviously a differentiated product, more tailored to their B2B needs, with different, I mean, ability to provide services, potentially credit, et cetera, and have access through the digital framework to accept payments, to order from Cof or to order from other products, that would be, again, using the railways that we built with Netpay, that would be kind of the other side of the prong, sorry, that could bring both sides together and close the loop and try to provide an ecosystem, both on the consumer side as well as on the mom-and-pop/little restaurant side. That's a little bit of what we're trying to do there. For that part, is there a timeline on when it is that we could possibly be seeing that, or more details on that? We're still in the early stages. Again, we have pilots running in some of the Coca-Cola FEMSA regions, and we're still tinkering with the value proposition on how to do it. So it's still early days to have a full timing. That initiative obviously has different implications from an acquisition cost perspective, which was the easy part with the B2C side on OXXO. So we're still working our way around that. Having said that, we do believe that the potential value creation in a win-win situation with the mom-and-pops and small formats or restaurants in the Coca-Cola FEMSA network is large enough for us to be able to devise a business model that works for all of us. Thank you. Thank you very much. Thanks, Héctor. The next question comes from the line of Ulises Argote from JP Morgan. Please go ahead. Hi, guys. Good morning. Thanks so much for the space for questions. So just one quick one here from my side. On the release there, you're mentioning on the proximity formats, the decrease in the contribution on financial services. So just to understand there, if there's any change in competitive landscape or dynamics, or if there's any kind of specific situation there impacting that part of the business? I mean, Juan, you spoke already about kind of Banorte going back and forth, but it would be great if we could get just some extra color there. Thank you. I mean, on that front, yeah, Banorte literally just came back, like, a few days or weeks ago, so it would not be in the numbers. And of course, we had lost Citi and we. There's been some volatility there. So I think looking backwards, certainly there's been. It's been one of the reasons where we've had some noise. But, yeah, going forward, we are expecting, I think, more balanced or stable dynamic. There's no new information regarding a shift in the partners or how we interact with them. One of the reasons you are seeing a little bit of that weakness, Ulises, is that, I mean, we have purposefully also managed pricing to be, I mean, not only competitive, but also provide value for the customer, and pricing has not kept up with inflation for services. So that's why with the high inflation period we've experienced over the past few quarters, as you look through the income statement, that there is a loss in the very high marginal profitability that these services bring. There has been some decay in that profitability because we haven't kept up pricing on purpose. All right. Super clear. Thank you, guys. Thank you. The next question comes from the line of Alejandro Fuchs from Itaú. Please go ahead. Hello, Paco, Eugenio, Juan. Thank you for taking my question. I could follow up maybe to address question on pressures on labor costs, right? We're seeing this across the board in Mexico, and it seems that, you know, in next year, it would only be more pressure, right? We have changes maybe to the working routes. We have maybe changes on the Orlando payment. I wanted to get a sense in how the company is thinking to the budget in next year, if there's any way that OXXO can be even more efficient than it already is, or how are you guys thinking maybe of trying to mitigate some of these potential impacts coming into next year? Thank you. Yeah, Alejandro, thank you for the question. Indeed, I mean, when you look at OXXO's strategies, one of them, one of the strong action plans that they have is the optimization of the store itself, and they have historically been very good at it. So the reality is that regardless of whether or not there are cost pressures, which there will always be some, and then obviously like the labor one, they can be higher in any given year. But the reality is that that is a continuous process. And also it's continuously saving costs out of the operation. And that is something that they have done for many years. They are very good at it, and you can rest assured that moving forward, they will continue to actively pursue that. It's part of the long-range plan action that they have. Go ahead, sorry. Then as for the costs themselves, they are in fact modeling some increases for 2024. That's part of the budget generation for next year. The reality is that, as you know, there are different assumptions that you can have. So at this stage, the team is considering a few of the scenarios and then planning accordingly. But the reality is that today, there's limited visibility in terms of what exactly is going to happen in each of those lines for 2024. So the best you can do as a business is to make sure that you have the different scenarios, that you plan for it, and then you are ready with the specific action plans, either because you already have them or because you will deliver or, sorry, develop specific ones. Eugenio? Oh, I was just gonna add that, I mean, taking my hat off as a FEMSA employee, and just looking at it as a Mexican, I think, I mean, from a macro perspective, the economy will have to adjust, and certain segments of the economy will have to make tougher choices. Fortunately, in retail, it's a little bit easier than in other sectors, but at the end of the day, there will be more money and a better lifestyle for most of the Mexicans. So, I mean, there will be more money to spend and hopefully more top-line growth in the economy as well. So I think it's the right investment. We are just going through the growing pains of adapting to the new reality of relative labor costs to all other costs in the economy. No, yeah, and I think following up on what Eugenio just said, I mean, we should kind of think of separately what, what's minimum wage increases, and then whatever happens with, you know, vacation and the hours in the work week and, and so on and so forth. Obviously, and, and we've seen it for the past five years, you know, the big increases in the minimum wage do have a silver lining as a retailer, obviously, because there's more money circulating in the economy, and, and that will happen again. So, you know, going back to the double-digit growth of the top line, clearly this happens in an environment where people, in real terms, have actually, increased their earnings, by and large. So that's, that's kind of something that needs to be put into the equation, because we do get slack through the top line. Thank you very much. Have a good weekend. The final question comes from the line of Ricardo Alves from Morgan Stanley. Please go ahead. Thanks very much for the follow-up. Eugenio, I got cut off, so I'm sorry if you addressed this already. And I know you're still studying the issue of shareholder returns, but I feel that I need to ask: Is there any even small update, any change, for instance, on the framework and execution? You know, we've been discussing the possibility of extraordinary dividends, buyback, and eventually a new dividend policy as kind of a potential framework. Quick update on that, you know, on your recent thoughts as you're doing your work is progressing on that. And just quickly, I think that in the preliminary remarks, you mentioned a board meeting. I just wanted to confirm the date, if that's possible. Thank you so much. Yeah, on the first topic, really no major update. You didn't miss anything when you were cut off. But having said that, we are getting closer. We are making the, I mean, the more detailed analysis, and there's still, I mean, debates going on internally about how, what the long-term, kind of targets are for the different, businesses, acquisition possibilities, how many of those are really value accretive, how many are not, what the right strategy is for distributing, any excess capital, to shareholders, et cetera. So not a lot of updates. Say that we're getting closer, and the purpose of everyone here in management and the board, we're all aligned that whatever we will do will be in the interest of maximizing the intrinsic per share value of the long-term shareholder for FEMSA. So we're very clear on that, and we will not deviate from that. And as is customary, we usually have the third quarter board meeting after the third quarter results. So that's coming up in the next couple of weeks. We will be discussing this. I won't give you any guarantees that there's gonna be any specific news that will come out of that, but we are making good progress, and we will be, I mean, unveiling what our final thoughts are, as we originally anticipated, in due course, so. Ricardo, thank you very much. Thanks a lot, Eugenio. Thank you very much for the discipline of lining up again like a, like a Harry Potter ride and just riding it again, waiting in line. Thank you. Appreciate that. Thanks, Paco. Thank you. There are no further questions, so I'll hand you back to your host to conclude today's conference. Thanks, everyone, for your interest today. Happy to have you along for the journey, and have a great weekend. Thank you for joining today's call. You may now disconnect your line.