Fomento Economico Mexicano SAB de CV (FMX), also known as FEMSA, is one of Latin America's largest beverage companies exporting to the U.S., Canada, Europe and Asia. Headquartered in Monterrey, Mexico, Fomento operates through Coca-Cola FEMSA (KOF), FEMSA Cerveza, and FEMSA Comercio. Coca-Cola FEMSA (around 48% of total revenue) produces and distributes carbonated beverages in Latin America. Indeed, it is the largest Coca-Cola bottler in Latin America and the second largest Coca-Cola bottler globally, in terms of sales volume.

We are reiterating our Buy recommendation on Fomento. The company posted positive results for the second quarter of 2008, including encouraging results for Coca-Cola FEMSA and FEMSA Comercio. Top-line growth in the FEMSA Cerveza segment was due to the positive pricing in the key Mexican markets for the quarter.

The company was able to compensate for higher raw material costs by reducing administrative expenses. We are also positive on the acquisition of the Colombian bottled water brand, Agua Brisa. Moreover, being a producer of a low-cost, daily use product, focused on domestic markets, FEMSA is less exposed to the recent international crisis.