As filed with the Securities and Exchange Commission on April 21, 201624, 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM20-F

ANNUAL REPORT PURSUANT TO SECTION 13

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20152017

Commission file number001-35934

Fomento Económico Mexicano, S.A.B. de C.V.

(Exact name of registrant as specified in its charter)

Mexican Economic Development, Inc.

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

General Anaya No. 601 Pte.

Colonia Bella Vista

Monterrey, NL 64410 Mexico

(Address of principal executive offices)

Juan F. Fonseca

General Anaya No. 601 Pte.

Colonia Bella Vista

Monterrey, NL 64410 Mexico

(52-818)328-6167

investor@femsa.com.mx

(Name, telephone,e-mail and/or facsimile number and

address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be file by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a non-accelerated filer.an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

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INTRODUCTION

This annual report contains information materially consistent with the information presented in the audited consolidated financial statements and is free of material misstatements of fact that are notwould result in material inconsistencies with the information in the audited consolidated financial statements.

References

The terms “FEMSA,” “our company,” “we,” “us” and “our,” are used in this annual report to refer to Fomento Económico Mexicano, S.A.B. de C.V. and, except where the context otherwise requires, its subsidiaries on a consolidated basis. We refer to our former subsidiary Cuauhtémoc Moctezuma Holding, S.A. de C.V. (formerly FEMSA Cerveza, S.A. de C.V.) as “Cuauhtémoc Moctezuma” or “FEMSA Cerveza”, to our subsidiaryCoca-Cola FEMSA, S.A.B. de C.V., as “Coca-Cola“Coca-Cola FEMSA”, to our subsidiary FEMSA Comercio, S.A. de C.V., as “FEMSA Comercio” comprising. Our equity investment in Heineken, through subsidiaries of FEMSA, including CB Equity LLP, “CB Equity”, is referred to as the “Heineken Investment”. FEMSA Comercio comprises a Retail Division, and a Fuel Division and Health Division, which we refer to our subsidiary CB Equity LLP, as “CB Equity.”the “Retail Division”, “Fuel Division” and “Health Division”, respectively.

The term “S.A.B.” stands forsociedad anónima bursátil, which is the term used in the United Mexican States, or Mexico,“Mexico”, to denominate a publicly traded company under the Mexican Securities Market Law (Ley del Mercado de Valores), which we refer to as the Mexican“Mexican Securities Law.Law”.

References to “U.S. dollars,” “US$,” “dollars” or “$” are to the lawful currency of the United States of America (which we refer to as the United States)“United States”). References to “Mexican pesos,” “pesos” or “Ps.” are to the lawful currency of Mexico. References to “euros” or “€” are to the lawful currency of the European Economic and Monetary Union (which we refer to as the Euro Zone).

As used in this annual report, “sparkling beverages” refers tonon-alcoholic carbonated beverages. “Still beverages” refers to non-alcoholic non-carbonatednon-alcoholicnon-carbonated beverages.Non-flavored waters, whether or not carbonated, are referred to as “waters.”

Currency Translations and Estimates

This annual report contains translations of certain Mexican peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Mexican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, such U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 17.195019.6395 to US$ 1.00, the noon buying rate for Mexican pesos on December 31, 2015,29, 2017, as published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates. On April 15, 2016,20, 2018, this exchange rate was Ps. 17.558018.6145 to US$ 1.00.See “Item 3. Key Information—Exchange Rate Information”for information regarding exchange rates since 2011.2013.

To the extent estimates are contained in this annual report, we believe that such estimates, which are based on internal data, are reliable. Amounts in this annual report are rounded, and the totals may therefore not precisely equal the sum of the numbers presented.

Per capita growth rates, consumer price indices and population data have been computed based upon statistics prepared by theInstituto Nacional de Estadística, Geografía e Informáticaof Mexico (National Institute of Statistics, Geography and Information, which we refer to as INEGI)“INEGI”), the U.S. Federal Reserve Board andBanco de México (Bank of Mexico), local entities in each country and upon our estimates.

Forward-Looking Information

This annual report contains words such as “believe,” “expect” and“expect,” “anticipate” and similar expressions that identifyforward-looking statements. Use of these words reflects our views about future events and financial performance. Actual results could differ materially from those projected in theseforward-looking statements as a result of various factors that may be beyond our control, including, but not limited to, effects on our company from changes in our relationship with or among our affiliated companies, movements in the prices of raw materials,

competition, significant developments in Mexico and the other countries where we operate, our ability to successfully integrate mergers and acquisitions we have completed in recent years, international economic or political conditions or changes in our regulatory environment. Accordingly, we caution readers not to place undue reliance on theseforward-looking statements. In any event, these statements speak only as of their respective dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

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ITEMS1-2. NOT APPLICABLE

ITEM 3.       KEY INFORMATION

Selected Consolidated Financial Data

This annual report includes (under Item 18) our audited consolidated statements of financial position as of December 31, 20152017 and 2014,2016, and the related consolidated income statements, consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2015, 20142017, 2016, and 2013.2015. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Our date of transition to IFRS was January 1, 2011.

Pursuant to IFRS, the information presented in this annual report presents financial information for 2017, 2016, 2015, 2014 2013, 2012 and 20112013 in nominal terms in Mexican pesos, taking into account local inflation of any hyperinflationary economic environment and converting fromthe inflation adjusted local currency to Mexican pesos using the official exchange rate at the end of the period published by the local central bank of each country categorized as a hyperinflationary economic environment (for this annual report, only Venezuela).

Furthermore, pursuant to IFRS, determined as a result of Venezuela’s hyperinflationary economic environment and currency exchange regime, Coca-Cola FEMSA reported the results of its Venezuelan subsidiary, Coca-Cola FEMSA de Venezuela, S.A., or KOF Venezuela, as a separate consolidated reporting segment. Since its Venezuelan subsidiary will continue doing operations in Venezuela, Coca-Cola FEMSA changed the method of accounting for our Venezuelan entities we were ableits investment in Venezuela from consolidation to convert local currencyfair value measured using onea Level 3 concept as of December 31, 2017. Prior to December 31, 2017, Coca-Cola FEMSA’s recognition of the three legaloperations of KOF Venezuela involved athree-step accounting process to (1) translate all transactions based in foreign currencies into bolivars, (2) restate all nonmonetary accounts to current bolivar by applying the general price index and (3) then translate the bolivar amounts to Mexican Pesos. We translated the Venezuela subsidiary figures at an exchange ratesrate of 22,793 bolivars per U.S. dollar at December 31, 2017, which better represents the economic conditions in Venezuela that country.are not otherwise reflected in the market exchange rate (the exchange rate was not published by the local central bank). For further information, see Notes 3.3, and 3.4 to our audited consolidated financial statements. For eachnon-hyperinflationary economic environment, local currency is converted to Mexican pesos using theyear-end exchange rate for assets and liabilities, the historical exchange rate for equity and the average exchange rate for the income statement. See Note 3.3 to our audited consolidated financial statements.

Ournon-Mexican subsidiaries maintain their accounting records in the currency and in accordance with accounting principles generally accepted in the country where they are located. For presentation in our consolidated financial statements, we adjust these accounting records into IFRS and report in Mexican pesos under these standards.

Commencing on February 1, 2017 Coca-Cola FEMSA started consolidating the financial results of Coca-Cola FEMSA Philippines, Inc., or KOF Philippines, in Coca-Cola FEMSA’s financial statements.

Except when specifically indicated, information in this annual report on Form20-F is presented as of December 31, 20152017 and does not give effect to any transaction, financial or otherwise, subsequent to that date.

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The following table presents selected financial information of our company. This information should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto. The selected financial information contained herein is presented on a consolidated basis, and is not necessarily indicative of our financial position or results at or for any future date or period; seeperiod. See Note 3 to our audited consolidated financial statements for our significant accounting policies.

(3)

Includes results of Coca-Cola FEMSA Philippines (“CCFPI” or “KOF Philippines”) (formerlyCoca-Cola Bottlers Philippines, Inc.), from February 2017 starting of consolidation accounting method.See “Item 4. Information on the Company—The Company—Corporate Background”and Note 4 to our audited consolidated financial statements.

(4)	Includes results of Vonpar, S.A. (“Vonpar” or “Group Vonpar”), from December 2016, and other business acquisitions.See “Item 4. Information on the Company—The Company—Corporate Background”and Note 4 to our audited consolidated financial statements.

(5)

Includes results of Socofar, S.A. (“Socofar” or “Grupo“Group Socofar”), from October 2015, FEMSA Comercio –the Fuel Division from March 2015 and other business acquisitions.See “Item 4. Information on the Company–Company—The Company–Company—Corporate Background.”Background” and Note 4 of our audited consolidated financial statements.

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Dividends

We have historically paid dividends per BD Unit (including in the form of American Depositary Shares, or ADSs)“ADSs”) approximately equal to or greater than 1% of the market price on the date of declaration, subject to changes in our results and financial position, including due to extraordinary economic events and to the factors described in“Item 3. Key Information—Risk Factors” that affect our financial condition and liquidity. These factors may affect whether or not dividends are declared and the amount of such dividends. We do not expect to be subject to any contractual restrictions on our ability to pay dividends, although our subsidiaries may be subject to such restrictions. Because we are a holding company with no significant operations of our own, we will have distributable profits and cash to pay dividends only to the extent that we receive dividends from our subsidiaries. Accordingly, we cannot assure you that we will pay dividends or as to the amount of any dividends.

The following table sets forth for each year the nominal amount of dividends per share that we declared in Mexican peso and U.S. dollar amounts and their respective payment dates for the 20112013 to 20152017 fiscal years:

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At the annual ordinary general shareholders meeting, or AGM,“AGM”, the board of directors submits the audited consolidated financial statements of our company for the previous fiscal year, together with a report thereon by the board of directors. Once the holders of Series B Shares have approved the audited consolidated financial statements, they determine the allocation of our net profits for the preceding year. Mexican law requires the allocation of at least 5% of net profits to a legal reserve, which is not subsequently available for distribution, until the amount of the legal reserve equals 20% of our paid in capital stock. As of the date of this report, the legal reserve of our company is fully constituted. Thereafter, the holders of Series B Shares may determine and allocate a certain percentage of net profits to any general or special reserve, including a reserve foropen-market purchases of our shares. The remainder of net profits is available for distribution in the form of dividends to our shareholders. Dividends may only be paid if net profits are sufficient to offset losses from prior fiscal years.

Our bylaws provide that dividends will be allocated among the outstanding and fully paid shares at the time a dividend is declared in such manner that each SeriesD-B Share and SeriesD-L Share receives 125% of the dividend distributed in respect of each Series B Share. Holders of SeriesD-B Shares and SeriesD-L Shares are entitled to this dividend premium in connection with all dividends paid by us other than payments in connection with the liquidation of our company.

Subject to certain exceptions contained in the deposit agreement dated May 11, 2007, among FEMSA, The Bank of New York Mellon (formerly The Bank of New York), as ADS depositary and holders and beneficial owners from time to time of our ADSs, evidenced by American Depositary Receipts, or ADRs, any dividends distributed to holders of our ADSs will be paid to the ADS depositary in Mexican pesos and will be converted by the ADS depositary into U.S. dollars. As a result, restrictions on conversion of Mexican pesos into foreign currencies may affect the ability of holders of our ADSs to receive U.S. dollars, and exchange rate fluctuations may affect the U.S. dollar amount actually received by holders of our ADSs.

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Exchange Rate Information

The following table sets forth, for the periods indicated, the high, low, average andyear-end noon exchange rate, expressed in Mexican pesos per US$ 1.00, as published by the U.S. Federal Reserve Board in its H.10 Weekly ReleaseBank of Foreign Exchange Rates.New York. The rates have not been restated in constant currency units and therefore represent nominal historical figures.

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RISK FACTORSRisk Factors

Risks Related to Our Company

Coca-Cola FEMSA

Coca-Cola FEMSA’s business depends on its relationship with The Coca-Cola Company, and changes in this relationship may adversely affect its business, financial condition, results of operations and prospects.

Substantially all of Coca-Cola FEMSA’s sales are derived from sales ofCoca-Cola trademark beverages. Coca-Cola FEMSA produces, markets, sells and distributesCoca-Cola trademark beverages through standard bottler agreements in the territories where itCoca-Cola FEMSA operates. Coca-Cola FEMSA is required to purchase concentrate for allCoca-Colatrademark beverages from companies designated by The Coca-Cola Company, which price may be unilaterally determined from time to time by The Coca-Cola Company in all such territories. Coca-Cola FEMSA is also required to purchase sweeteners and other raw materials only from companies authorized by The Coca-Cola Company.See “Item 4. Information on the Company—Coca-Cola FEMSA—Coca-Cola FEMSA’s Territories.” Pursuant to Coca-Cola FEMSA’s bottler agreements, and as a shareholder, The Coca-Cola Company has the right to participate in the process for making certain decisions related to Coca-Cola FEMSA’s business.

In addition, under Coca-Cola FEMSA’s bottler agreements, itCoca-Cola FEMSA is prohibited from bottling or distributing any other beverages without The Coca-Cola Company’s authorization or consent, and Coca-Cola FEMSA may not transfer control of the bottler rights of any of its territories without prior consent from The Coca-Cola Company.

The Coca-Cola Company also makes significant contributions to Coca-Cola FEMSA’s marketing expenses, although it is not required to contribute a particular amount. Accordingly, The Coca-Cola Company may discontinue or reduce such contributions at any time.

Coca-Cola FEMSA depends on The Coca-Cola Company to continue with itsCoca-Cola FEMSA’s bottler agreements. Coca-Cola FEMSA’s bottler agreements are automatically renewable forten-year terms, subject to the right of either party to give prior notice that it does not wish to renew the applicable agreement. In addition, these agreements generally may be terminated in the case of material breach.See “Item 10. Additional Information—Material Contracts— Material Contracts Relating to Coca-Cola FEMSA —Bottler Agreements.” Termination of any such bottler agreement would prevent Coca-Cola FEMSA from sellingCoca-Cola trademark beverages in the affected territory. The foregoing and any other adverse changes in theCoca-Cola FEMSA’s relationship with The Coca-Cola Company would have an adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

The Coca-Cola Company has substantial influence on the conduct of Coca-Cola FEMSA’s business, which may result in Coca-Cola FEMSA taking actions contrary to the interests of its shareholders other than The Coca-Cola Company.

The Coca-Cola Company has substantial influence on the conduct of Coca-Cola FEMSA’s business. As of April 8, 2016,13, 2018, The Coca-Cola Company indirectly owned 28.1%27.8% of Coca-Cola FEMSA’s outstanding capital stock, representing 37%37.0% of Coca-Cola FEMSA’s sharescapital stock with full voting rights. The Coca-Cola Company is entitled to appoint five of Coca-Cola FEMSA’s maximum of 21 directors and the vote of at least two of them is required to approve certain actions by Coca-Cola FEMSA’s board of directors. As of April 8, 2016,13, 2018, we indirectly owned 47.9%47.2% of Coca-Cola FEMSA’s outstanding capital stock, representing 63%63.0% of Coca-Cola FEMSA’s capital stock with full voting rights. We are entitled to appoint 13 of Coca-Cola FEMSA’s maximum of 21 directors and all of itsCoca-Cola FEMSA’s executive officers. We and The Coca-Cola Company together, or only weus in certain circumstances, have the power to determine the outcome of all actions requiring the approval ofby Coca-Cola FEMSA’s board of directors, and we and The Coca-Cola Company together, or only weus in certain circumstances, have the power to determine the outcome of all actions requiring the approval of Coca-Cola FEMSA’s shareholders.See “Item 10. Additional Information—Material Contracts— Material Contracts Relating to Coca-Cola FEMSA—The Shareholders Agreement.”The interests of The Coca-Cola Company may be different from the interests of Coca-Cola FEMSA’s other shareholders, or its creditors, which may result in Coca-Cola FEMSA taking actions contrary to the interests of such other shareholders or its creditors.shareholders.

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Changes in consumer preferences and public concern about health related issues could reduce demand for some of Coca-Cola FEMSA’s products.

Thenon-alcoholic beverage industry is evolving mainly as a result of changes in consumer preferences and regulatory actions. There have been different plans and actions adopted in recent years by governmental authorities in some of the countries where Coca-Cola FEMSA operates including an increaseoperates. These include increases in taxestax rates or the imposition of new taxes on the sale of beverages containing certain sweeteners, and other regulatory measures, such as restrictions on advertising for some of Coca-Cola FEMSA’s products. Moreover, researchers, health advocates and dietary guidelines are encouraging consumers to reduce their consumption of certain types of beverages sweetened with sugar and High Fructose Corn Syrup or HFCS.(or “HFCS”). In addition, concerns over the environmental impact of plastic may reduce the consumption of Coca-Cola FEMSA’s products sold in plastic bottles or result in additional taxes that wouldcould adversely affect consumer demand. Increasing public concern about these issues, new or increased taxes, other regulatory measures or anyour failure of Coca-Cola FEMSA to meet consumers’ preferences, could reduce demand for some of Coca-Cola FEMSA’s products, which would adversely affect itsCoca-Cola FEMSA’s business, financial condition, results of operations and prospects.See “Item 4. Information on the Company—Coca-Cola FEMSA—Business Strategy.”

The reputation of Coca-Cola trademarks and trademark infringement could adversely affect Coca-Cola FEMSA’s business.

Substantially all of Coca-Cola FEMSA’s sales are derived from sales ofCoca-Cola trademark beverages owned by The Coca-Cola Company. Maintenance of the reputation and intellectual property rights of these trademarks is essential to Coca-Cola FEMSA’s ability to attract and retain retailers and consumers and is essentiala key driver for itsCoca-Cola FEMSA’s success. Failure to maintain the reputation ofCoca-Cola trademarks and/or to effectively protect these trademarks could have a material adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

If Coca-Cola FEMSA is unable to protect its information systems against service interruption, misappropriation of data or breaches of security, Coca-Cola FEMSA’s operations could be disrupted, which could have a material adverse effect on its business, financial condition, results of operations and prospects.

Coca-Cola FEMSA relies on networks and information systems and other technology, or information system, including the Internet and third-party hosted platforms and services to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, and to store client and employee personal data. Coca-Cola FEMSA uses information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. Because information systems are critical to many of Coca-Cola FEMSA’s operating activities, Coca-Cola FEMSA’s business may be impacted by system shutdowns, service disruptions or security breaches. In addition, such incidents could result in unauthorized disclosure of material confidential information. Coca-Cola FEMSA could be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems. Any severe damage, disruption or shutdown in Coca-Cola FEMSA’s information systems could have a material adverse effect on its business, financial condition, results of operations and prospects.

Negative or inaccurate information on social media could adversely affect Coca-Cola FEMSA’s reputation.

In recent years, there has been a marked increase in the use of social media and similar platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individual access to a broad audience of consumers and other interested persons. Negative or inaccurate information concerning or affecting Coca-Cola FEMSA or theCoca-Cola trademarks may be posted on such platforms at any time. This information may harm Coca-Cola FEMSA’s reputation without affording us an opportunity for redress or correction, which could in turn have a material adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

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Competition could adversely affect Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

The beverage industry in the territories where Coca-Cola FEMSA operates is highly competitive. Coca-Cola FEMSA faces competition from other bottlers of sparkling beverages, such asPepsi trademark products and other bottlers and distributors of local beverage brands, and from producers oflow-cost beverages or “B brands.” Coca-Cola FEMSA also competes in beverage categories other than sparkling beverages, such as water, juice-based beverages, coffee, teas, sportmilk, value-added dairy products, sports drinks, energy drinks and value-added dairy products.plant-based beverages. Coca-Cola FEMSA expects that it will continue to face strong competition in itsCoca-Cola FEMSA’s beverage categories in all of itsCoca-Cola FEMSA’s territories and anticipatesanticipate that existing or new competitors may broaden their product lines and extend their geographic scope.

Although competitive conditions are different in each of itsCoca-Cola FEMSA’s territories, Coca-Cola FEMSA competes principallywe compete mainly in terms of price, packaging, effective promotional activities, access to retail outlets and sufficient shelf space, customer service, product innovation and product alternatives and the ability to identify and satisfy consumer preferences.See “Item 4. Information on the Company—Coca-Cola FEMSA—Competition.” Lower pricing and activities by Coca-Cola FEMSA’s competitors and changes in consumer preferences may have an adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Water shortages or any failure to maintain existing concessions could adversely affect Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Water is an essential component of all of Coca-Cola FEMSA’s products. Coca-Cola FEMSA obtains water from various sources in its territories, including springs, wells, rivers and municipal and state water companies pursuant to either concessions granted by governments in itsCoca-Cola FEMSA’s various territories (including governments at the federal, state or municipal level) or pursuant to contracts.

Coca-Cola FEMSA obtains the vast majority of the water used in its production from municipal utility companies and pursuant to concessions to use wells, which are generally granted based on studies of the existing and projected groundwater supply. Coca-Cola FEMSA’s existing water concessions or contracts to obtain water may be

terminated by governmental authorities under certain circumstances and their renewal depends on several factors, including having paid all fees in full, having complied with applicable laws and obligations and receiving approval for renewal from local and/or federal water authorities.See “Item 4. Information on the Company—Regulatory Matters—Water Supply.” In some of itsCoca-Cola FEMSA’s other territories, Coca-Cola FEMSA’s existing water supply may not be sufficient to meet its future production needs, and the available water supply may be adversely affected by shortages or changes in governmental regulations and environmental changes.

Water supply in the Sao Paulo region in Brazil has been reduced in recent years by low rainfall, which has affected the main water reservoir that serves the greater Sao Paulo area (Cantareira). Although Coca-Cola FEMSA’s Jundiai plant does not obtain water from this water reservoir, water shortages or changes in governmental regulations aimed at rationalizing water in such region could affect Coca-Cola FEMSA’s water supply in its Jundiai plant. We cannot assure you that water will be available in sufficient quantities to meet Coca-Cola FEMSA’s future production needs or will prove sufficient to meet itsCoca-Cola FEMSA’s water supply needs. Continued water scarcity in the regions where Coca-Cola FEMSA operates may adversely affect its business, financial condition, results of operations and prospects.

Increases in the prices of raw materials would increase Coca-Cola FEMSA’s cost of goods sold and may adversely affect its business, financial condition, results of operations and prospects.

In addition to water, Coca-Cola FEMSA’s most significant raw materials are (i) concentrate, which is acquiredCoca-Cola FEMSA acquires from affiliates of The Coca-Cola Company, (ii) sweeteners and (iii) packaging materials.

Prices forCoca-Cola trademark beverages concentrate are determined by The Coca-Cola Company as a percentage of the weighted average retail price in local currency, net of applicable taxes. The Coca-Cola Company has the right to unilaterally change concentrate prices or change the manner in which such prices are calculated. In the past, The Coca-Cola Company has increased concentrate prices forCoca-Colatrademark beverages in some of the countries where Coca-Cola FEMSA operates. Coca-Cola FEMSA may not be successful in negotiating or implementing measures to mitigate the negative effect this may have in the pricing of itsCoca-Cola FEMSA’s products or its results.

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The prices for other Coca-Cola FEMSA’s other raw materials are driven by market prices and local availability, the imposition of import duties and restrictions and fluctuations in exchange rates. Coca-Cola FEMSA is also required to meet all of itsCoca-Cola FEMSA’s supply needs (including sweeteners and packaging materials) from suppliers approved by The Coca-Cola Company, which may limit the number of suppliers available to it.Coca-Cola FEMSA. Coca-Cola FEMSA’s sales prices are denominated in the local currency in each country where it operates, while the prices of certain materials, including those used in the bottling of itsCoca-Cola FEMSA’s products, mainly polyethylene terephthalate (or “PET”), resin, preforms to make plastic bottles, finished plastic bottles, aluminum cans, HFCS and certain sweeteners, are paid in, or determined with reference to, the U.S. dollar, and therefore may increase if the U.S. dollar appreciates against the applicable local currency. WeCoca-Cola FEMSA cannot anticipate whether the U.S. dollar will appreciate or depreciate with respect to such local currencies in the future.future, and we cannot assure you that Coca-Cola FEMSA will be successful in mitigating any such fluctuations through derivative instruments or otherwise.See “Item 4. Information on the Company—Coca-Cola FEMSA—Raw Materials.”

Coca-Cola FEMSA’s most significant packaging raw material costs arise from the purchase of PET resin, and plastic preforms to make plastic bottles and from the purchase of finished plastic bottles, the pricesprice of which areis related to crude oil prices and global PET resin supply. The averageCrude oil prices that Coca-Cola FEMSA paid for resinhave a cyclical behavior and plastic preforms inare determined with reference to the U.S. dollars in 2015 decreased 24% as compared to 2014 in all Coca-Cola FEMSA’s territories; however, given thatdollar; therefore, high currency volatility has affected and continues tomay affect most of Coca-Cola FEMSA’s territories, the average pricesprice for PET resin and plastic preforms in local currencies were higher in 2015 in Mexico, Colombia, Venezuela and Brazil.currencies. In 2015, average sweetener prices were lower in Guatemala, and were higher in the rest of Coca-Cola FEMSA’s territories, in each case as compared to 2014. Fromaddition, since 2010, through 2015, international sugar prices werehave been volatile due to various factors, including shifting demand, availability and climate issues affecting production and distribution. In all of the countries where Coca-Cola FEMSA operates, other than Brazil, sugar prices are subject to local regulations and other barriers to market entry that cause Coca-Cola FEMSA to purchase for sugar above international market prices.See “Item 4. Information on the Company—Coca-Cola FEMSA —RawFEMSA—Raw Materials.” We cannot assure you that Coca-Cola FEMSA’sits raw material prices will not further increase in the future.future or that Coca-Cola FEMSA will be successful in mitigating any such increase through derivative instruments or otherwise. Increases in the prices of raw materials would increase Coca-Cola FEMSA’sits cost of goods sold and adversely affect its business, financial conditions,condition, results of operations and prospects.

Taxes could adversely affect Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

The countries where Coca-Cola FEMSA operates may adopt new tax laws or modify existing tax laws to increase taxes applicable to Coca-Cola FEMSA’sits business or products. Coca-Cola FEMSA’s products are subject to certain taxes in many of the countries where it operates, which impose taxes on sparkling beverages.operates.See “Item 4. Information on the Company—Regulatory Matters—Taxation of Sparkling Beverages.” The imposition of new taxes, increases in existing taxes, or changes in the interpretation of tax laws and regulation by tax authorities may have a material adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Tax legislation in some of the countries where Coca-Cola FEMSA operates has recently been subject to major changes.See “Item 4. Information on the Company—Regulatory Matters—Mexican Tax Reform” and “Information on the Company—Regulatory Matters—Other Recent Tax Reforms.Reforms.” We cannot assure you that these reforms or other reforms adopted by governments in the countries where Coca-Cola FEMSA operates will not have a material adverse effect on its business, financial condition, results of operations and prospects.

Regulatory developments may adversely affect Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Coca-Cola FEMSA is subject to several laws and regulations in each of the territories where it operates. The principal areas in which Coca-Cola FEMSA is subject to laws and regulations are water, environment, labor, taxation, health and antitrust. Laws and regulations can also affect Coca-Cola FEMSA’s ability to set prices for its products.See “Item 4. Information on the Company—Regulatory Matters.” Changes in existing laws and regulations, the adoption of new laws or regulations, or a stricter interpretation or enforcement thereof in the countries where Coca-Cola FEMSA operates may increase its operating and compliance costs or impose restrictions on itsCoca-Cola FEMSA’s operations which, in turn, may adversely affect Coca-Cola FEMSA’s business,its financial condition, business, results of operations and prospects. In particular, environmental standards are becoming more stringent in several of the countries where Coca-Cola FEMSA operates. There is no assurance that Coca-Cola FEMSA will be able to comply with changes in environmental laws and regulations within the timelines established by the relevant regulatory authorities.See “Item 4. Information on the Company—Regulatory Matters—Environmental Matters.”

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Voluntary price restraints or statutory price controls have been imposed historically in several of the countries where Coca-Cola FEMSA operates. Currently, there are no price controls on Coca-Cola FEMSA’s products in any of the territories where itCoca-Cola FEMSA has operations, except for those voluntary price restraints in Argentina, where authorities directly supervise fivecertain of Coca-Cola FEMSA’s products sold through supermarkets as a measure to control inflation, and Venezuela, wherestatutory price controls have beenin the Philippines, where the government has imposed price controls on certain ofproducts considered as basic necessities, such as Coca-Cola FEMSA’s products, including bottled water, and a limit has been imposed on profits earned on the sale of goods, including Coca-Cola FEMSA’s products, in an effort to seek price stability of, and equal access to, goods and services. If Coca-Cola FEMSA exceeds such limit on profits, it may be forced to reduce the prices of its products in Venezuela, which would in turn adversely affect its business, financial condition, results of operations and prospects. In addition, consumer protection laws in Venezuela are subject to continuing review and changes, and any such changes may have an adverse impact on Coca-Cola FEMSA.water. We cannot assure you that existing or future laws and regulations in the countries where Coca-Cola FEMSA operates relating to goods and services (in particular, laws and regulations imposing statutory price controls) will not affect Coca-Cola FEMSA’s products, or that Coca-Cola FEMSA will not need to implement voluntary price restraints, which could have a negative effect on its business, financial condition, results of operations and prospects.See “Item 4. Information on the Company—Regulatory Matters—Price Controls.”

Unfavorable resultsoutcome of legal proceedings could have an adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Coca-Cola FEMSA’s operations have from time to time been and may continue to be subject to investigations and proceedings by antitrust authorities and litigation relating to alleged anticompetitive practices. Coca-Cola FEMSA also has been subject to investigations and proceedings on tax, consumer protection, environmental, labor and laborcommercial matters. We cannot assure you that these investigations and proceedings will not have an adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.See “Item 8. Financial Information—Legal Proceedings.”

Weather conditions and natural disasters may adversely affect Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Lower temperatures, higher rainfall and other adverse weather conditions such as typhoons and hurricanes, as well as natural disasters such as earthquakes and floods, may negatively impact consumer patterns, which may result in reduced sales of Coca-Cola FEMSA’s beverage offerings. Additionally, such adverse weather conditions and natural disasters may affect plant installed capacity, road infrastructure and points of sale in the territories where Coca-Cola FEMSA operates and limit Coca-Cola FEMSA’sits ability to produce, sell and distribute its products, thus affecting itsCoca-Cola FEMSA’s business, financial condition, results of operations and prospects.

Coca-Cola FEMSA may not be able to successfully integrate its acquisitions and achieve the expected operational efficiencies and/or synergies.

Coca-Cola FEMSA has and it may continue to acquire bottling operations and other businesses. Key elements to achieving the benefits and expected synergies of Coca-Cola FEMSA’s acquisitions and/orand mergers are the integration of acquired or merged businesses’ operations into itsCoca-Cola FEMSA’s own in a timely and effective manner and the retention of qualified and experienced key personnel. Coca-Cola FEMSA may incur unforeseen liabilities in connection with acquiring, taking control of, or managing bottling operations and other businesses and may encounter difficulties and unforeseen or additional costs in restructuring and integrating them into itsCoca-Cola FEMSA’s operating structure. We cannot assure you that these efforts will be successful or completed as expected by Coca-Cola FEMSA, and Coca-Cola FEMSA’s business, financial condition, results of operations and prospects could be adversely affected if it is unable to do so.

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FEMSA Comercio

Political and social eventsCompetition from other retailers in the countriesmarkets where Coca-Cola FEMSA Comercio operates and changes in governmental policies may have an adverse effect on Coca-Cola FEMSA’scould adversely affect its business, financial condition, results of operations and prospects.

In recent years, some of the governments in the countries where Coca-Cola FEMSA operates have implemented and may continue to implement significant changes in laws, public policy and/or regulations that could affect the political and social conditions in these countries. Any such changes may have an adverse effect on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects. We cannot assure you that political or social developments in any of the countries where Coca-Cola FEMSA operates, such as the election of new administrations, political disagreements, civil disturbances and the rise in violence and perception of violence, over which Coca-Cola FEMSA has no control, will not have a corresponding adverse effect on the local or global markets or on Coca-Cola FEMSA’s business, financial condition, results of operations and prospects.

FEMSA Comercio

Competition from other retailers in Mexico could adversely affect FEMSA Comercio – Retail Division’s business, financial condition, results of operations and prospects.

The Mexican retail sector is highly competitive.competitive in the markets where FEMSA Comercio operates. The Retail Division participates in the retail sector primarily through FEMSA Comercio – Retail Division. Itsits OXXO stores, which face competition fromsmall-format stores like such as7-Eleven, Extra, Super City, Círculo Circle K, stores and other numerous chains of grocery retailers across Mexico fromand other regionalsmall-format retailers toand small informal neighborhood stores. In particular, small informal neighborhood stores can sometimes avoid regulatory oversight and taxation, enabling them to sell certain products at prices below average market prices. In addition, these small informal neighborhood stores could improve their technological capabilities so as to enable credit card transactions and electronic payment of utility bills, which would diminish one of FEMSA Comercio –Retailthe Retail Division’s competitive advantages.

In the pharmacy sector, FEMSA Comercio –participates through the Health Division in Mexico, Chile and Colombia. In Mexico, it faces competition from other drugstore chains such as Farmacias Guadalajara, Farmacias del Ahorro and Farmacias Benavides, as well as regional and independent pharmacies, supermarkets and other informal neighborhood drugstores. In Chile, relevant competitors are chain drugstores such as Farmacias Ahumada and Salcobrand, while in Colombia, the most relevant competitors are Farmatodo, Olimpica, Farmacenter, La Rebaja and Colsubsidio.

For the Fuel Division, the opening of the Mexican fuel distribution market is expected to alter the competitive dynamics of the industry. The consolidation process, expected to take place as large companies and international competitors enter the market, may occur rapidly and materially alter the market dynamics in Mexico. Currently, the Fuel Division faces competition from small independently owned and operated service stations, regional chains such as Corpogas, Hidrosina,Petro-7, Orsan and international players such as British Petroleum and Shell.

Additionally, we expect the competitive landscape to continue to evolve as new technologies are developed based on changing consumer behavior. The continuing migration and evolution of retailing toon-line and mobile-based platforms for consumers may present competition in the retail space in the future that could adversely affect the Retail DivisionDivision.

FEMSA Comercio may face additional competition from new market participants. IncreasedThe increase in competition may limit the number of new store locations available and could require FEMSA Comercio –Retail Division to modify its product offering or pricing structure.scheme. As a consequence, FEMSA Comercio – Retail Division’s business,future competition may affect the financial condition,situation, operation results of operations and prospects may be adversely affected by competition in the future.of FEMSA Comercio.

SalesFEMSA Comercio’s points of OXXO small-format storessale performance may be adversely affected by changes in economic conditions in Mexico.the markets where it operates.

Small-format stores often sell certain products at a premium. The small-format store market is thusmarkets in which FEMSA Comercio operates are highly sensitive to economic conditions, since an economic slowdown is often accompanied bybecause a decline in consumer purchasing power is often a consequence of an economic slowdown which, in turn, results in a decline in the overall consumption of FEMSA Comercio – Retail Division’s main product categories. During periods of economic slowdown, OXXO storesFEMSA Comercio’s points of sale may experience a decline insame-store traffic per store and average ticket per customer, which may result in a decline in overall performance. See “Item 5. Operating and Financial Review and Prospects—Overview of Events, Trends and Uncertainties.”

FEMSA Comercio’s business expansion strategy and entry into new markets and retail formats may lead to decreased profit margins.

FEMSA Comercio –has recently entered into new markets through the acquisition of othersmall-format retail businesses such asquick-service restaurants. In recent years, the Retail Division’s overall performance.Division and the Health Division have continued with this strategy. These new businesses are currently less profitable than OXXO and might therefore marginally dilute FEMSA Comercio’s margins in the short to medium term.

Regulatory changes in the countries where we operate may adversely affect FEMSA Comercio –Retail Division’sComercio’s business.

In Mexico,the markets where it operates, FEMSA Comercio – Retail Division is subject to regulation in areas such as labor, taxation, zoning, operations and related local permits and health and safety regulations. Changes in existing laws and regulations, the adoption of new laws or regulations, or a stricter interpretation or enforcement thereof in the countries where FEMSA Comercio – Retail Division operates may increase its operating and compliance costs or impose restrictions on its operations which, in turn, may adversely affect the financial situation, operation results and prospects of FEMSA Comercio – Retail Division’s business, financial condition, results of operations and prospects.Comercio’s business. In addition, changes in current laws and regulations may negatively impact customer traffic, revenues, operational costs and commercial practices, which may have an adverse effect on the financial situation, operation results and prospects of FEMSA Comercio.

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FEMSA Comercio’s business depends heavily on information technology and a failure, interruption or breach of its IT systems could adversely affect it.

FEMSA Comercio’s businesses rely heavily on advanced information technology (“IT”) systems to effectively manage its data, communications, connectivity and other business processes. FEMSA Comercio – Retail Division’s business,invests aggressively in IT to maximize its value generation potential. The development of IT systems, hardware and software needs to keep pace with the businesses’ growth due to the high speed at which the division adds new services and products to its commercial offerings. If these systems become obsolete or if the planning for future IT investments is inadequate, FEMSA Comercio businesses could be adversely affected.

Although FEMSA Comercio constantly improves and protects its IT systems with advanced security measures, they still may be subject to defects, interruptions or security breaches such as viruses or data theft. Such a defect, interruption or breach could adversely affect the financial condition,situation, operation results and prospects of operations and prospects.FEMSA Comercio.

FEMSA Comercio –Comercio’s business may be adversely affected by an increase in the price of electricity in the markets where it operates.

The performance of FEMSA Comercio’s points of sale would be adversely affected by increases in the price of utilities on which the stores and stations depend, such as electricity. As an example, given the relevance of the Mexican market, the price of electricity in Mexico generally remained stable or decreased in recent years, with an exception for the second half of 2016 and 2017, when the price increased significantly. Electricity prices could potentially increase further as a result of inflation, shortages, interruptions in supply or other reasons, and such an increase could adversely affect the financial situation, operation results and prospects of FEMSA Comercio’s business.

Tax changes in the countries where we operate could adversely affect FEMSA Comercio’s business.

The imposition of new taxes, increases in existing taxes or changes in the interpretation of tax laws and regulations by tax authorities, may have a material adverse effect on the financial situation, operation results and prospects of FEMSA Comercio’s business.

The Retail Division may not be able to maintain its historic growth rate.

FEMSA Comercio –The Retail Division increased the number of OXXO stores at a compound annual growth rate of 10.1%9.0% from 20112013 to 2015.2017. The growth in the number of OXXO stores has driven growth in total revenue and results at FEMSA Comercio –the Retail Division over the same period. As the overall number of stores increases, percentage growth in the number of OXXO stores is likely to slow. In addition, assmall-format store penetration in Mexico grows, the number of viable new store locations may decrease, and new store locations may be less favorable in terms ofsame-store sales, average ticket and store traffic. As a result, FEMSA Comercio – Retail Division’sThus, our future results and financial conditionsituation may not be consistent with prior periods and may be characterized by lower growth rates in terms of total revenue and results of operations. In Chile and Colombia, OXXO stores may not be able to achieve or maintain historic growth rates similar tolike those in Mexico. We cannot assure you that FEMSA Comercio –the revenues and cash flows of the Retail Division’sDivision that come from future retail stores will generate revenues and cash flowbe comparable with those generated by its existing retail stores.See “Item 4. Information on the Company—FEMSA Comercio—Retail Division—Store Locations.”

FEMSA Comercio – RetailThe Health Division’s business depends heavily on information technology andsales may be affected by a failure, interruption, or breachmaterial change in institutional sale trends in some of its IT systems could adversely affect it.the markets where it operates.

FEMSA Comercio – Retail Division’s business relies heavily on advanced information technology (which we refer to as IT) systems to effectively manage its data, communications, connectivity, and other business processes. FEMSA Comercio – Retail Division invests aggressively in IT to maximize its value generation potential. Given the rapid speed at which such division adds new services and products to its commercial offerings, the development of IT systems, hardware and software needs to keep pace with the growthIn some of the business. If these systems become obsolete or if planning for future IT investments is inadequate, FEMSA Comercio – Retail Division’s businessmarkets where we operate, our sales are highly dependent on institutional sales, as well as traditional, open-market sales. The institutional market involves public and private health care providers, and the performance of the Health Division could be adversely affected.

Although FEMSA Comercio – Retail Division constantly improvesaffected by its IT systemsability to maintain and protects them with advanced security measures, they may still be subject to defects, interruptions, or security breaches such as viruses or data theft. Such a defect, interruption, or breach could adversely affect FEMSA Comercio – Retail Division’s business, financial condition, results of operations and prospects.grow its client base.

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FEMSA Comercio – RetailThe Health Division’s businessperformance may be adversely affected by an increase in the price of electricity.contractual conditions with its suppliers.

The performance of FEMSA Comercio – Retail Division’s stores would be adversely affected by increases in the price of utilities on which the stores depend, such as electricity. In recent years the price of electricityHealth Division, especially in Mexico, has remained stable,acquires the majority of its inventories and particularly thehealthcare products from a limited number of suppliers. Its ability to maintain favorable conditions in its current price was reduced last year, although itand service agreements could potentially increase as a result of inflation, shortages, interruptions in supply, or other reasons,affect the Health Division’s operating and such an increase could adversely affect FEMSA Comercio – Retail Division’s business, financial condition, results of operations and prospects.

FEMSA Comercio – Retail Division’s expansion strategy and entry into new markets and retail formats may lead to decreased profit margins.

FEMSA Comercio – Retail Division has recently entered into new markets through the acquisition of other small-format retail businesses such as drugstores and quick-service restaurants. FEMSA Comercio – Retail Division continued with this strategy in 2015 and may continue with it in the future. These new businesses are currently less profitable than OXXO, and might therefore marginally dilute FEMSA Comercio – Retail Division’s margins in the short to medium term.

Taxes could adversely affect FEMSA Comercio’s business.

The imposition of new taxes or increases in existing taxes, or changes in the interpretation of tax laws and regulations by tax authorities, may have a material adverse effect on FEMSA Comercio’s business, financial condition, results of operations and prospects.performance.

Energy regulatory changes may impact fuel prices and therefore adversely affect FEMSA Comercio –the Fuel Division’s business.

FEMSA Comercio –The Fuel Division mainly sells mainly gasoline and diesel through owned or leased retail service stations. Currently,Previously, the prices of these products arewere regulated in Mexico by the government agency namedComisión Reguladora de Energía (Energy(“CRE” or Energy Regulatory Commission), a government agency. Changes in how these prices may be determined or controlled may adversely affect FEMSA Comercio – Fuel Division’s business, financial condition, results of operations and prospects. In the future and in accordance with what is envisioned by the current regulations in Mexico,. During 2017, fuel prices willgradually began to follow the dynamics of the international fuel market, and in 2018 we expect them to continue to do so in accordance with the regulatory framework, which may also adversely affect FEMSA Comercio –the financial situation, operation results and prospects of the Fuel Division’s business, financial condition, results of operations and prospects.business.

Uncertainty in Mexican legislation and regulation of the energy sector could affect FEMSA Comercio –The Fuel Division’s business.performance may be affected by changes in commercial terms with suppliers, or disruptions to the industry supply chain

Mexican legislationThe Fuel Division mainly purchases gasoline and regulationdiesel for its operations in Mexico. The fuel market in Mexico is currently undergoing structural changes that should gradually increase the number of suppliers. As the energy sector in general, and of fuel distribution in particular, is in transition or has not been fully implemented (through secondary legislation and rules) givenindustry evolves, commercial terms for the recent passing of energy reforms. The authorities have certain discretion to implement the energy reform and,Fuel Division could deteriorate in the future, new rules, additional requirements or steps or interpretationsand potential disruptions to the order of the supply chain to our gas stations could adversely affect FEMSA Comercio –impact the financial performance and prospects of the Fuel Division’s business, financial condition, results of operations and prospects.Division.

FEMSA Comercio –The Fuel Division’s business could be affected by new safety and environmental regulations enforced by the government, global environmental regulations and new energy technologies.

Federal, state and municipal laws and regulations for the installation and operation of new service stations are becoming or may become more stringent. Compliance with these laws and regulations is often difficult and costly. Global trends to reduce the consumption of fossil fuels through incentives and taxes could push sales of these fuels at service stations to slow or decrease in the future and automotive technologies, including efficiency gains in traditional fuel vehicles and increased popularity of alternative fuel vehicles, such as electric and liquefied petroleum gas (LPG)(“LPG”) vehicles, have caused a significant reduction in fuel consumption.consumption globally. Other new technologies could further reduce the sale of traditional fuels, all of which could adversely affect FEMSA Comercio – Fuel Division’soperation results orand financial position.

Competition from new players in Mexico could adversely affect FEMSA Comercio – Fuel Division’s business.

The openingsituation of the Mexican fuel distribution market is expected to alterFuel Division.See “Item 4. Information on the competitive dynamics of the industry. The Mexican fuel distribution and retail market is expected to enter into a consolidation process as large companies and international competitors enter the market or gain market share at the expense of small, independently owned and operated service stations. Consolidation may occur rapidly and materially alter the market dynamics in Mexico which may affect our ability to take advantage of existing opportunities. Such changes could adversely affect FEMSA Comercio – Fuel Division’s business, financial condition, and results of operations and prospects. We cannot assure you that any further market consolidation will not be detrimental to FEMSA Comercio – Fuel Division’s market position or competitiveness or will not materially and adversely affect its business, financial condition, results of operations and prospects.Company—Regulatory Matters—Environmental Matters.”

Risks Related to Mexico and the Other Countries Where We Operate

Adverse economic conditions in Mexico may adversely affect our financial position and results.

We are a Mexican corporation and our Mexican operations are our single most important geographic territory. For the year ended December 31, 2015, 70%2017, 63% of our consolidated total revenues were attributable to Mexico. During 2012, 20132015 and 20142016 the Mexican gross domestic product, or GDP, increased by approximately 4%, 1.4%2.6% and 2.1%,2.3% respectively, and in 20152017 it increased by approximately 2.5%2.3% on an annualized basis compared to 2014,2016, due to stronger performance in the services and primary sectors, which were partially offset by lower volumes and cheaperhigher prices in the oil and gas industries. We cannot assure you that such conditions will not slow down in the future or will not have a material adverse effect on our business, financial condition, results of operations and prospects going forward. The Mexican economy continues to be heavily influenced by the U.S. economy, and therefore, deterioration in economic conditions in, or delays in the recovery of, the U.S. economy may hinder any recovery in Mexico.recovery. In the past, Mexico has experienced both prolonged periods of weak economic conditions and deteriorations in economic conditions that have had a negative impact on our results.

Our business may be significantly affected by the general condition of the Mexican economy, or by the rate of inflation in Mexico, interest rates in Mexico and exchange rates for, or exchange controls affecting, the Mexican peso. Decreases in the growth rate of the Mexican economy, periods of negative growth and/or increases in inflation or interest rates may result in lower demand for our products, lower real pricing of our products or a shift to lower margin products. Because a large percentage of our costs and expenses are fixed, we may not be able to reduce costs and expenses upon the occurrence of any of these events and our profit margins may suffer as a result.

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In addition, an increase in interest rates in Mexico would increase the cost of our debt and would cause an adverse effect on our financial position and results. Mexicanpeso-denominated debt (including currency hedges) constituted 39%39.6% of our total debt as of December 31, 2015.2017.

Depreciation of the Mexican peso and of our other local currencies relative to the U.S. dollar could adversely affect our financial position and results.

Depreciation of the Mexican peso and of our other local currencies relative to the U.S. dollar increases the cost of a portion of the raw materials we acquire, the price of which is paid in or determined with reference to U.S. dollars, and of our debt obligations denominated in U.S. dollars, and thereby negatively affects our financial position and results. A severe devaluation or depreciation of the Mexican peso, which is our main operating currency, may result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert Mexican pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our U.S.dollar-denominated debt or obligations in other currencies. The Mexican peso is afree-floating currency and, as such, it experiences exchange rate fluctuations relative to the U.S. dollar over time. During 2014, 20132017, the Mexican peso appreciated relative to the U.S. dollar by approximately 4.8% compared to 2016. During 2016 and 2012,2015, the Mexican peso experienced fluctuations relative to the U.S. dollar consisting of 7.1% of recovery, 1%19.9% of depreciation and 12.6%16.6% of depreciation respectively, compared to the years of 2013, 2012 and 2011. During 2015, the Mexican peso depreciated relative to the U.S. dollar by approximately 16.6% compared to 2014. Through April 15, 2016,20, 2018, the Mexican peso has depreciated 2.1%appreciated 5.2% since December 31, 2015.29, 2017.

While the Mexican government does not currently restrict, and since 1982 has not restricted, the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer other currencies out of Mexico, the Mexican government could impose restrictive exchange rate policies in the future, as it has done in the past. Currency fluctuations may have an adverse effect on our financial position, results and cash flows in future periods.

When the financial markets are volatile, as they have been in recent periods, our results may be substantially affected by variations in exchange rates and commodity prices and, to a lesser degree, interest rates. These effects include foreign exchange gain and loss on assets and liabilities denominated in U.S. dollars, fair value gain and loss on derivative financial instruments, commodities prices and changes in interest income and interest expense. These effects can be much more volatile than our operating performance and our operating cash flows.See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk.”

Political events in Mexico could adversely affect our operations.

Mexican political events may significantly affect our operations. Presidential elections in Mexico occur every six years, with theThe most recent one occurringpresidential and congressional elections took place in July 2012.2012 and 2015, respectively. Enrique Peña Nieto, a member of the Institutional Revolutionary Party (Partido Revolucionario Institucional or “PRI”), was elected as the presidentPresident of Mexico and took office on December 1, 2012. In addition,Mexico’s next presidential election will be in July 2018. We cannot predict whether potential changes in Mexican governmental and economic policy could adversely affect economic conditions in Mexico or the sector in which we operate. The Mexican Congress has approved a number of structural reforms intended to modernize certain sectors ofpresident strongly influences new policies and foster growth ingovernmental actions regarding the Mexican economy, and is continuingthe new administration could implement substantial changes in law, policy and regulations in Mexico, which could negatively affect our business, financial condition, results of operations and prospects. In response to approve further reforms. President Peña Nieto continues to face significant challenges asthese actions, opponents of the structural reforms approved by the Mexican Congressadministration could have an effect on the Mexican economy. react with, among other things, riots, protests and looting that could negatively affect our operations.

Furthermore, no single party has a majority in the Senate or theCámara de Diputados (House of Representatives), and. Mexican congressional elections held in June 2015 in the lower house resulted in a relative majority (29.18%) for the PRI, but the PRI still lacks an absolute majority. The absence of a clear majority by a single party could result in government gridlock and political uncertainty.uncertainty on further reforms and secondary legislation to modernize key sectors of the Mexican economy. Mexico’s next federal legislative election will be in July 2018 for both the Senate and House of Representatives. We cannot provide any assurances that political developments in Mexico, over which we have no control, will not have an adverse effect on our business, financial condition, results of operations and prospects.

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Economic, political and social conditions in Mexico and other countries may adversely affect our results.

Many countries worldwide, including Mexico, have suffered significant economic, political and social volatility in recent years, and this may occur again in the future. Global instability has been caused by many different factors, including substantial fluctuations in economic growth, high levels of inflation, changes in currency values, changes in governmental economic or tax policies and regulations and overall political, social and economic instability. We cannot assure you that such conditions will not return or that such conditions will not have a material adverse effect on our financial situation and results.

The Mexican economy and the market value of securities issued by Mexican issuers may be, to varying degrees, affected by economic and market conditions in other emerging market countries and in the United States. Furthermore, economic conditions in Mexico are highly correlated with economic conditions in the United States as a result of the North American Free Trade Agreement (“NAFTA”), and increased economic activity between the two countries. In November 2016, presidential elections took place in the United States that resulted in a change of the nation’s leadership. President Donald Trump has made public his intention to terminate orre-negotiate the terms of NAFTA, but the content of any potential revisions has not been specified. Furthermore, President Donald Trump has stated that if Canada and Mexico do not agree to the United States’ terms tore-negotiate the pact, the United States may withdraw from NAFTA. However, there can be no assurance as to what the U.S. administration will do, and the impact of these measures or any others adopted by the new U.S. administration cannot be predicted.

Adverse economic conditions in the United States, the termination orre-negotiation of NAFTA in North America or other related events could have an adverse effect on the Mexican economy. Although economic conditions in other emerging market countries and in the United States may differ significantly from economic conditions in Mexico, investors’ reactions to developments in other countries may have an adverse effect on the market value of securities of Mexican issuers or of Mexican assets. There can be no assurance that future developments in other emerging market countries and in the United States, over which we have no control, will not have a material adverse effect on our financial situation and results.

Natural disasters could adversely affect our business.

From time to time, different regions of Mexico and certain areas of the other countries in which we operate experience torrential rains and hurricanes, as well as earthquakes. FEMSA Comercio’s points of sales and some operating facilities have been affected by hurricanes and other weather events in the past, which have resulted in temporary closures and losses. Natural disasters may impede operations, damage facilities necessary to our operations and adversely affect the purchasing power of our clients. Also, any of these events could force us to increase our capital expenditures to put our stores back in operation. Accordingly, the occurrence of natural disasters in the locations where we have operations could adversely affect our business, results of operations and financial condition.See “Item 4. Information on the Company—Insurance.”

Technology andcyber-security risks.

We use information systems to operate our business, to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. Because information systems are critical to many of our operating activities, our business may be impacted by system shutdowns, service disruptions or security breaches, such as failures during routine operations, network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors,cyber-attacks by common hackers, criminal groups ornation-state organizations orsocial-activist (hacktivist) organizations, natural disasters, failures or impairments of telecommunication networks or other catastrophic events. Such incidents could result in unauthorized disclosure of material confidential information, and we could experience delays in reporting our financial results. In addition, misuse, leakage or falsification of information could result in violations of data privacy laws and regulations, damage our reputation and credibility and, therefore, could have a material adverse effect on our financial situation and results, or may require us to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems.

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Security risks in Mexico could increase, and this could adversely affect our results.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to organized crime. The presence of violence among drug cartels, and between these and the Mexican law enforcement and armed forces, pose a risk to our business. Organized criminal activity and related violentHistorically, these incidents have decreased in 2015 compared to 2014 and 2013, but remain prevalent in some parts of Mexico. These incidents arebeen relatively concentrated along the northern Mexican border, as well asand during 2017 in certain other Mexican states such as Sinaloa,Tabasco, Baja California, Estado de Mexico, Morelos Michoacan and Guerrero.Colima. The north of Mexico is an important region for some of our retailFEMSA Comercio operations, and an increase in crime rates could negatively affect our sales and customer traffic, increase our security expenses, and result in higher turnover of personnel or damage to the perception of our brands. This situation could worsen and adversely impact our business and financial results because consumer habits and patterns adjust to the increased perceived and real security risks, as people refrain from going out as much and gradually shift someon-premise consumption tooff-premise consumption of food and beverages on certain social occasions.

Depreciation of local currencies in other Latin American countries where we operate may adversely affect our financial position.

The devaluation of the local currencies against the U.S. dollar in ournon-Mexican territories can increase our operating costs in these countries, and depreciation of the local currencies against the Mexican peso can negatively affect the translation of our results for these countries. In recent years, the value of theVenezuelan currency in the countries where we operate has been relatively stable relative tovolatile against the Mexican peso, except in Venezuela.peso. During 2015,2017, in addition to the Venezuelan currency, the currenciescurrency of Brazil and Argentina also depreciated against the Mexican peso. Future currency devaluation or the imposition of exchange controls in any of these countries, or in Mexico, would have an adverse effect on our financial position and results.

We have operated under exchange controls in Venezuela since 2003, which limitslimit our ability to remit dividends abroad or make payments other than in local currency and that may increase the real price paid for raw materials and services purchased in local currency. Prior to 2014, we had historically used the official exchange rate to translatein our Venezuelan operations. However, since the beginning ofCommencing in 2014, the Venezuelan government has announced a series of changes to the Venezuelan exchange control regime.

In January 2014, the Venezuelan government announced an exchange rate determined by the state-run system known as theSistema Complementario de Administración de Divisas, or SICAD. In March 2014, the Venezuelan government announced a new law that authorized an alternative method of exchanging Venezuelan bolivars to U.S. dollars known as SICAD II. In February 2015, the Venezuelan government announced that it was replacing SICAD II with a new market-based exchange rate determined by the system known as theSistema Marginal de Divisas, or SIMADI. In February 2016, the Venezuelan government announced a 37% devaluation of the official exchange rate and changed the existingthree-tier exchange rate system into a dual system. Thesystem by combining the official exchange rate (6.30 bolivars per US$ 1.00 as of December 31, 2015) and the SICAD exchange rate (13.50 bolivars per US$ 1.00 as of December 31, 2015) were merged into a single official exchange rate of 10.00 bolivars per U.S. dollar. The decision was part of a package of economic policies intended to mitigate the economic crisis of the member countries of the Organization of the Petroleum Exporting Countries (OPEC).

In March 2016, the Venezuelan government announced that it was replacingand maintaining the SIMADI exchange rate with a new market-based exchange rate known asDivisas Complementarias, or DICOM, and the official exchange rate with a preferential exchange rate denominatedDivisa Protegida, or DIPRO. The DIPRO exchange rate is determined by the Venezuelan government and may be used to settle imports of a list of goods and raw materials, which has not been published as of the date of this annual report. The DICOM exchange rate is determined based on supply and demand of U.S. dollars. As of April 15, 2016, the DIPRO and DICOM exchange rates were 10 bolivars and 339.45 bolivars per US$ 1.00, respectively.rate.

WeCoca-Cola FEMSA translated ourits results of operations in Venezuela for the full year ended December 31, 20152017 into our reporting currency, the Mexican peso,pesos using the SIMADIan exchange rate of 198.7022,793 bolivars per U.S. dollar. As explained in Note 3.3 to US$ 1.00, which wasour audited consolidated financial statements, as of December 31, 2017, the exchange rate in effect as of such date. As a result, in 2015, we recognized a reduction in equity of Ps. 2,687 million. Coca-Cola FEMSA will closely monitor any further developments that may affect the exchange ratesused to translate the financial statements of itsour Venezuelan subsidiary for reporting purposes into the consolidated financial statements was 22,793 bolivars per U.S. dollar which reflects management’s judgment about the effects of the economic environment in Venezuela on the variability in the future.exchange rate.

Based upon our specific facts and circumstances, we anticipate using the DICOM exchange rate to translate our future results of operations in Venezuela into our reporting currency, the Mexican peso. This will further adversely affect our comprehensive income and financial position. The Venezuelan government may announce further changes to the exchange rate system in the future. To the extent a higher exchange rate is applied to our investment in Venezuela in future periods as a result of changes to existing regulations, subsequently adopted regulations or otherwise, our comprehensive income in Venezuela and financial condition could be further adversely affected. More generally, future currency devaluations or the imposition of exchange controls in any of the countries where we operate may potentially increase our operating costs, which could have an adverse effect on our financial position and results of operationsoperations.See “Item 11. Quantitative and comprehensive income.Qualitative Disclosures about Market Risk— Foreign Currency Exchange Rate Risk.”

Risks Related to Our Holding ofthe Heineken N.V. and Heineken Holding N.V. SharesInvestment

FEMSA does not control Heineken N.V.’s and Heineken Holding N.V.’s decisions.

On April 30, 2010, FEMSA announced the closing of the transaction pursuant to which FEMSA agreed to exchange 100% of its beer operations for a 20% economic interest in Heineken N.V. and Heineken Holding N.V. (which, together with their respective subsidiaries, we refer to as Heineken“Heineken” or the Heineken Group)“Heineken Group”). As a consequence of this transaction, which we refer to as the Heineken transaction, FEMSA now participates in the Heineken Holding N.V. Board of Directors, which we refer to as the Heineken Holding Board, and in the Heineken N.V. Supervisory Board, which we refer to as the Heineken Supervisory Board. However, FEMSA is not a majority or controlling shareholder of Heineken N.V. or Heineken Holding N.V., nor does it control the decisions of the Heineken Holding Board or the Heineken Supervisory Board. Therefore, the decisions made by the majority or controlling shareholders of Heineken N.V. or Heineken Holding N.V. or the Heineken Holding Board or the Heineken Supervisory Board may not be consistent with or may not consider the interests of FEMSA’s shareholders or may be adverse to the interests of FEMSA’s shareholders. Additionally, FEMSA has agreed not to disclosenon-public information and decisions taken by Heineken. On September 21, 2017, FEMSA completed the sale of a 5.24% of combined shareholding in the Heineken Group, reducing our economic interest from 20% to 14.76%. FEMSA’s aforementioned governance rights did not change as a result of the sale.

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Heineken operates in a large number of countries.

Heineken is a global brewer and distributor of beer in a large number of countries. Because of FEMSA’s investment inthe Heineken Investment, FEMSA shareholders are indirectly exposed to the political, economic and social circumstances affecting the markets in which Heineken is present, which may have an adverse effect on the value of FEMSA’s interest in Heineken, and, consequently, the value of FEMSA shares.

The Mexican peso may strengthen compared to the Euro.

In the event of a depreciation of the euro against the Mexican peso, the fair value of FEMSA’s investment in Heineken’s sharesthe Heineken Investment will be adversely affected. Furthermore, the cash flow that is expected to be received in the form of dividends from Heineken will be in euros, and therefore, in the event of a depreciation of the euro against the Mexican peso, the amount of expected cash flow will be adversely affected.“Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rate Risk.”

Heineken N.V. and Heineken Holding N.V. are publicly listed companies.

Heineken N.V. and Heineken Holding N.V. are listed companies whose stock tradesstocks trade publicly and isare subject to market fluctuation. A reduction in the price of Heineken N.V. or Heineken Holding N.V. shares would result in a reduction in the economic value of FEMSA’s participation in Heineken.the Heineken Investment.

Risks Related to Our Principal Shareholders and Capital Structure

A majority of our voting shares are held by a voting trust, which effectively controls the management of our company, and the interests of which may differ from those of other shareholders.

As of March 8, 2016, a16, 2018, the voting trust of which the participants are members of seven families, owned 38.69% of our capital stock and 74.86% of our capital stock with full voting rights, consisting of Series B Shares. Consequently, the voting trust has the power to elect a majority of the members of our board of directors and to play a significant or controlling role in the outcome of substantially all matters to be decided by our board of directors or our shareholders. The interests of the voting trust may differ from those of our other shareholders.See “Item 7. Major Shareholders and Related-PartyRelated-Party Transactions” and “Item 10. Additional Information—Bylaws—Voting Rights and Certain Minority Rights.”

Holders of SeriesD-B andD-L Shares have limited voting rights.

Holders of SeriesD-B andD-L Shares have limited voting rights and are only entitled to vote on specific matters, such as certain changes in the form of our corporate organization, dissolution or liquidation, a merger with a company with a distinct corporate purpose, a merger in which we are not the surviving entity, a change of our jurisdiction of incorporation, the cancellation of the registration of the SeriesD-B andD-L Shares and any other matters that expressly require approval from such holders under the Mexican Securities Law. As a result of these limited voting rights, SeriesD-B andD-L holders will not be able to influence our business or operations.See “Item 7. Major Shareholders and Related-PartyRelated-Party Transactions—Major Shareholders” and “Item 10. Additional Information—Bylaws—Voting Rights and Certain Minority Rights.”

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Holders of ADSs may not be able to vote at our shareholder meetings.

Our shares are traded on the New York Stock Exchange, or NYSE, in the form of ADSs. We cannot assure you that holders of our shares in the form of ADSs will receive notice of shareholders’ meetings from our ADS depositary in sufficient time to enable such holders to return voting instructions to the ADS depositary in a timely manner. In the event that instructions are not received with respect to any shares underlying ADSs, the ADS depositary will, subject to certain limitations, grant a proxy to a person designated by us in respect of these shares. In the event that this proxy is not granted, the ADS depositary will vote these shares in the same manner as the majority of the shares of each class for which voting instructions are received.

Holders of BD Units in the United States and holders of ADSs may not be able to participate in any future preemptive rights offering and as a result may be subject to dilution of their equity interests.

Under applicable Mexican law, if we issue new shares for cash as a part of a capital increase, other than in connection with a public offering of newly issued shares or treasury stock, we are generally required to grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage. Rights to purchase shares in these circumstances are known as preemptive rights. By law, we may not allow holders of our shares or ADSs who are located in the United States to exercise any preemptive rights in any future capital increases unless (1) we file a registration statement with the U.S. Securities and Exchange Commission, which we refer to as the SEC,“SEC”, with respect to that future issuance of shares or (2) the offering qualifies for an exemption from the registration requirements of the U.S. Securities Act of 1933. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC, as well as the benefits of preemptive rights to holders of our shares in the form of ADSs in the United States and any other factors that we consider important in determining whether to file a registration statement.

We may decide not to file a registration statement with the SEC to allow holders of our shares or ADSs who are located in the United States to participate in a preemptive rights offering. In addition, under current Mexican law, the sale by the ADS depositary of preemptive rights and the distribution of the proceeds from such sales to the holders of our shares in the form of ADSs is not possible. As a result, the equity interest of holders of our shares in the form of ADSs would be diluted proportionately.See “Item 10. Additional Information—Bylaws—Preemptive Rights.”

The protections afforded to minority shareholders in Mexico are different from those afforded to minority shareholders in the United States.

Under Mexican law, the protections afforded to minority shareholders are different from, and may be less than, those afforded to minority shareholders in the United States. Mexican laws do not provide a remedy to shareholders relating to violations of fiduciary duties. There is no procedure for class actions as such actions are conducted in the United States and there are different procedural requirements for bringing shareholder lawsuits against directors for the benefit of companies. Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors or our controlling shareholders than it would be for minority shareholders of a United States company.

Investors may experience difficulties in enforcing civil liabilities against us or our directors, officers and controlling persons.

FEMSA is organized under the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. In addition, nearly all or a substantial portion of our assets and the assets of our subsidiaries are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States on such persons or to enforce judgments against them, including any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.

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Developments in other countries may adversely affect the market for our securities.

The market value of securities of Mexican companies is, to varying degrees, influenced by economic and securities market conditions in other emerging market countries. Although economic conditions are different in each country, investors’ reactionreactions to developments in one country can have effects on the securities of issuers in other countries, including Mexico. We cannot assure you that events elsewhere, especially in emerging markets, will not adversely affect the market value of our securities.

The failure or inability of our subsidiaries to pay dividends or other distributions to us may adversely affect us and our ability to pay dividends to holders of ADSs.

We are a holding company. Accordingly, our cash flows are principally derived from dividends, interest and other distributions made to us by our subsidiaries. Currently, our subsidiaries do not have contractual obligations that require them to pay dividends to us. In addition, debt and other contractual obligations of our subsidiaries may in the future impose restrictions on our subsidiaries’ ability to make dividend or other payments to us, which in turn may adversely affect our ability to pay dividends to shareholders and meet our debt and other obligations. As of March 31, 2016,2018, we had no restrictions on our ability to pay dividends. Further, ournon-controlling shareholder position in Heineken means that we will be unable to require payment of dividends with respect to the Heineken shares.Investment.

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The Company

Overview

We are a Mexican company, headquartered in Monterrey, Mexico, and our origin dates back to 1890. Our company was incorporated on May 30, 1936 and has a duration of 99 years. The duration can be extended indefinitely by resolution of our shareholders. Our legal name is Fomento Económico Mexicano, S.A.B. de C.V., and in commercial and business contexts we frequently refer to ourselves as FEMSA.“FEMSA”. Our principal headquarters are located at General Anaya No. 601 Pte., Colonia Bella Vista, Monterrey, Nuevo León 64410, Mexico. Our telephone number at this location is(+52-81)8328-6000. Our website is www.femsa.com. We are organized as asociedad anónima bursátil de capital variable under the laws of Mexico.

We conduct our operations throughare a leading company that participates in the following principal holding companies:businesses:

Corporate Background

FEMSA traces its origins to the establishment of Mexico’s first brewery, Cervecería Cuauhtémoc, S.A., which was established in 1890. It was founded in 1890 by fourfive Monterrey businessmen: Francisco G. Sada Gómez, José A. Muguerza Crespo, Isaac Garza Garza, José Calderón Penilla and JoséJoseph M. Schneider. Descendants of certain of the founders of Cervecería Cuauhtémoc, S.A. are participants of the voting trust that controls the management of our company.

The strategic integration of the company dates back to 1936 when its packaging operations were established to supply crown caps to the brewery. During this period, these operations were part of what was known as the Monterrey Group, which also included interests in banking and steel businesses and other packaging operations.

In 1974, the Monterrey Group was split between two branches of the descendants of the founding families of Cervecería Cuauhtémoc, S.A. The steel and other packaging operations formed the basis for the creation of Corporación Siderúrgica, S.A. (now Alfa, S.A.B. de C.V.), controlled by the Garza Sada family, and the beverage and banking operations were consolidated under the Valores Industriales, S.A. de C.V. (the corporate predecessor of FEMSA) corporate umbrella controlled by the Garza Lagüera family. FEMSA’s shares were first listed on what is now the Bolsa Mexicana de Valores, S.A.B. de C.V. (which we refer to as the Mexican Stock Exchange) on September 19, 1978. Between the decades of 1970 and 1980, FEMSA diversified its operations through acquisitions in the soft drinks and mineral water industries, the establishment of the first stores under the trade name OXXO and other investments in the hotel, construction, auto parts, food and fishing industries, which were considered non-core businesses andthat were subsequently divested.

In the 1990s, we began a series of strategic transactions to strengthen the competitive positions of our operating subsidiaries. These transactions included the sale of a 30% strategic interest inCoca-Cola FEMSA to awholly-owned subsidiary of TheCoca-Cola Company and a subsequent public offering ofCoca-Cola FEMSA shares, both of which occurred in 1993.Coca-Cola FEMSA listed its L shares on the Mexican Stock Exchange and, in the form of American Depositary Shares, or ADSs,“ADSs”, on the New York Stock Exchange, or NYSE.“NYSE”.

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In 1998, we completed a reorganization that changed our capital structure by converting our outstanding capital stock at the time of the reorganization into BD Units and B Units, and united the shareholders of FEMSA and the former shareholders of Grupo Industrial Emprex, S.A. de C.V. (which we refer to as Emprex)“Emprex”) at the same corporate level through an exchange offer that was consummated on May 11, 1998. As part of the reorganization, FEMSA listed ADSs on the NYSE representing BD Units and listed the BD Units and its B Units on the Mexican Stock Exchange.

In May 2003, our subsidiaryCoca-Cola FEMSA expanded its operations throughout Latin America by acquiring 100% of Panamerican Beverages, Inc. (which we refer to as Panamco)“Panamco”), then the largest soft drink bottler in Latin America in terms of sales volume in 2002. Through its acquisition of Panamco,Coca-Cola FEMSA began producing and distributingCoca-ColaCoca-Cola trademark beverages in additional territories in Mexico, Central America, Colombia, Venezuela and Brazil, along with bottled water, beer and other beverages in some of these territories.

In April 2008, FEMSAFEMSA’s shareholders approved a proposal to amend our bylaws in order to preserve the unit structure for our shares that has been in place since May 1998 and to maintain our existing share structure beyond May 11, 2008. Our bylaws previously provided that on May 11, 2008 our Series D-B Shares would convert into Series B Shares and our Series D-L Shares would convert into Series L Shares with limited voting rights. In addition, our bylaws provided that, on May 11, 2008, our current unit structure would cease to exist and each of our B Units would be unbundled into five Series B Shares, while each BD Unit would unbundle into three Series B Shares and two newly issued Series L Shares. Following the April 22, 2008 shareholder approvals the automatic conversion of our share and unit structures no longer exist, and,April 2008, absent shareholder action, our share structure will continue to be composed of Series B Shares, which must represent not less than 51% of our outstanding capital stock, and SeriesD-B and SeriesD-L Shares, which together may represent up to 49% of our outstanding capital stock. Our Unit structure, absent shareholder action, will continue to consist of B Units, which bundle five Series B Shares, and BD Units, which bundle one Series B Share, two SeriesD-B Shares and two SeriesD-L Shares. See “Item 9. The Offer and Listing—Description of Securities.”

In January 2010, FEMSA announced that its board of directors unanimously approved a definitiveentered into an agreement under which FEMSA would exchangeexchanged its brewery business of Cuauhtémoc Moctezuma for a 20% economic interest in the Heineken Group, one of the world’s leading brewers. In April 2010, FEMSA announced the closing of the transaction, after Heineken N.V., Heineken Holding N.V. and FEMSA approved the transaction. Under the terms of the agreement,this transaction, which closed in April 2010, FEMSA received 43,018,320 shares of Heineken Holding N.V. and 43,009,699 shares of Heineken N.V., with an additional 29,172,504 shares of Heineken N.V. (which shares we refer to as the Allotted Shares) delivered pursuant to an allotted share delivery instrument, or the ASDI, with the final installment delivered in October 2011. AsOn September 18, 2017, FEMSA completed the sale of December 31, 2015, FEMSA’s interest in Heineken N.V. represented 12.53%shares representing 3.90% of issued share capital of Heineken N.V.’s outstanding capital and 14.94%the sale of Heineken Holding N.V.’s outstanding shares representing 2.67% of the issued share capital resulting inof Heineken Holding N.V., reducing our 20%aggregate economic interest in the Heineken Group. The principal terms of the Heineken transaction documents are summarized below in “Item 10. Additional Information—Material Contracts.”Group from 20% to 14.76%.

In January 2013, as part of Coca-Cola FEMSA’s efforts to expand its geographic reach, it FEMSA acquired a 51% 51.0%non-controlling majority stake in CCFPIKOF Philippines from TheCoca-Cola Company. Since January 2017,Coca-Cola FEMSA has an option to acquire the remaining 49% stake in CCFPI at any time during the seven years following the closing date. Coca-Cola FEMSA also has a put option to sell its ownership in CCFPI to The Coca-Cola Company commencing on the fifth anniversary of the closing date and ending on the sixth anniversary of the closing date. Coca-Cola FEMSA currently manages the day-to-day operations of the business; however, pursuant to its shareholders’ agreement with The Coca-Cola Company (a) during a four-year period ending January 25, 2017controls KOF Philippines, as all decisions must be approved jointly with The Coca-Cola Company, (b) following this four-year period, all decisions relatedrelating to theday-to-day operation and management of KOF Philippines’s business, including its annual normal operations plan, andare approved by a majority of its board of directors without requiring the affirmative vote of any other ordinary matters will be approved onlydirector appointed by TheCoca-Cola FEMSA (c) The Coca-Cola Company has the right to appoint (and may remove) CCFPI’s chief financial officer, and (d) Coca-Cola FEMSA has the right to appoint (and may remove) the chief executive officer and all other officers of CCFPI. Coca-Cola FEMSA currently records its investment in CCFPI using the equity method.

In May 2013, Coca-Cola FEMSA closed its merger with Grupo Yoli, a Mexican bottler operating mainly in the state of Guerrero as well as in parts of the state of Oaxaca. Company.

In May 2013, FEMSA Comercio through one of its subsidiaries, Cadena Comercial de Farmacias, S.A.P.I. de C.V. (which we refer to as CCF)“CCF”), closed the acquisition of Farmacias YZA, a leading drugstore operator in Southeast Mexico, headquartered in Merida, Yucatan.Mexico. The founding shareholders of Farmacias YZA hold a 25%22.7% stake in CCF. In a separate transaction, onalso in May 13, 2013, CCF acquired Farmacias FM Moderna, a leading drugstore operator in the western state of Sinaloa.

In August 2013, Coca-Cola FEMSA closed its acquisitionJune 2015, CCF acquired 100% of Companhia Fluminense,Farmacias Farmacon, a franchise that operatesregional pharmacy chain in parts of the northwestern Mexican states of Sao Paulo, Minas GeraisSinaloa, Sonora, Baja California and Rio de Janeiro in Brazil.

In October 2013, our Board of Directors agreed to separate the roles of chairman of the Board and Chief Executive Officer, ratifying José Antonio Fernández Carbajal as Executive Chairman of the Board and naming Carlos Salazar Lomelín as Chief Executive Officer of FEMSA.Baja California Sur.

In October 2013, Coca-Cola FEMSA closed its acquisitionMarch 2015, following changes to the legal framework resulting from the adoption of Spaipa, a Brazilian bottler with operations in the state of Parana and in parts of the state of Sao Paulo. For more information on Coca-Cola FEMSA’s recent transactions,see “Item 4. Information on the Company—Coca-Cola FEMSA – Corporate History”.

In December 2013,Mexico’s energy reform, FEMSA Comercio through onebegan to acquire service station franchises of its subsidiaries, purchased the operating assetsPetroleos Mexicanos (“PEMEX”) and trademarksobtain permits from PEMEX to operate such service stations as a franchisee. These acquisitions started taking place after two decades(1995-2015) of Doña Tota, a leading quick-service restaurant operator in Mexico. The founding shareholders of Doña Tota hold a 20% stake in the FEMSA Comercio subsidiary that now operates the Doña Tota business.

Since 1995, FEMSA Comercio has providedproviding operation services to retail service stations for fuels, motor oils and other car care products through agreements with third parties that own Petroleos Mexicanos (“PEMEX”)owned PEMEX franchises. In March 2015, following changes to the legal framework and considering the potential expansion and synergies arising from this business as part of Mexico’s energy reform, FEMSA Comercio began to acquire PEMEX’s service station franchises and to obtain permits from PEMEX to operate such service stations as franchisee.

In June 2015, CCF acquired 100% of Farmacias Farmacon, a regional pharmacy chain consisting at that time of more than 200 stores in the northwestern Mexican states of Sinaloa, Sonora, Baja California and Baja California Sur.

In September 2015, FEMSA Comercio acquired 60% of GrupoGroup Socofar, (which we refer to as Socofar), a leading South American drugstore operator based in Santiago, Chile. Socofar operated at that time, directly and through franchises, more than 600 drugstores and 150 beauty stores throughout Chile and over 150 drugstores throughout Colombia. FEMSA Comercio has the right to appoint the majority of the members of Socofar’s board of directors and exercisesday-to-day operating control over Socofar. As part of the shareholders agreement entered into with the former controlling shareholder, such minority shareholder has the right to appoint two members of the board of directors of Socofar.

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In connection with2016, FEMSA Comercio, through its subsidiary Cadena Comercial USA Corporation, LLC. (“Cadena Comercial USA”), completed the acquisition of 60%an 80% economic stake in Specialty’s Café & Bakery, Inc. (“Specialty’s”), which operates café restaurants in the states of Socofar,California, Washington and Illinois. In January 2017, Cadena Comercial USA completed the acquisition of the remaining 20% economic stake in Specialty’s becoming its sole owner.

In June 2016, FEMSA Comercio entered into optionacquired Comercial Big John Limitada (“Big John”), a leading convenience store operator based in Santiago, Chile.

In December 2016,Coca-Cola FEMSA acquired Vonpar, a Brazilian bottler ofCoca-Cola trademark products, with operations in the states of Rio Grande do Sul and Santa Catarina in Brazil. As part of their acquisition, Coca-Cola FEMSA also acquired an additional minority equity interest in Leão Alimentos e Bebidas, Ltda., or Leão Alimentos.

For more information on: (i) the Heineken transaction,see“Item 10. Additional Information—Material Contracts,”(ii) FEMSA Comercio’s recent transactions, regardingsee “Item 4. Information on the remaining 40% non-controlling interest not held by FEMSA Comercio. The former controlling shareholders of Socofar may be able to put some or all of that interest to Company—FEMSA Comercio beginning (i) 42 months after the acquisition, upon the occurrence of certain events– Corporate History,” and (ii) 60 months after the initial acquisition, in any event, FEMSA Comercio can call the remaining 40% non-controlling interest beginning(iii) Coca-Cola FEMSA’s recent transactions,see “Item 4. Information on the seventh anniversary of the initial acquisition date. Both of these options would be exercisable at the then fair value of the interest and shall remain indefinitely.Company—Coca-Cola FEMSA—Corporate History.”

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Ownership Structure

We conduct our business through our principal sub-holdingsubsidiary companies as shown in the following diagram and table:

Principal Sub-holding Companies—Ownership Structure

AsOwnership Structure as of March 31, 20162018

Significant Subsidiaries

The following table sets forth our significant subsidiaries as of December 31, 2017:

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The following table presents an overview of our operations by reportable segment and by geographic area:

Operations by Segment—Overview

Year Ended December 31, 20152017 and % of growth (decrease) vs. previous year

(5)	Reflects sale of 5.24% combined economic interest in the Heineken Group.

Total Revenues Summary by Segment⁽¹⁾