Q4 2019 Earnings Call
[music].
Welcome to the Anheuser Busch Inbev full year 2019 earnings conference call and webcast.
Hosting the call today from a bands that are Mr., Carlos Brito, Chief Executive Officer, Mr. for week, I did <unk>, chief financial and solutions Officer.
To access the slides accompanying today's call. Please visit the investor website at Www Dot Haby dash Embeds dot com and click on investors tab and the reports a result center page.
Today's webcast will be available for on demand play back later today.
At this time, all participants have been placed Oh listen only mode and the full will be opened for your questions. Following the presentation.
If you looked like to ask a question at that time. Please press star one on your Touchtone phone.
If at any point. Your question has been answered you may remember yourself from the Q by pressing the pounds key.
If you should require operator assistance, please press star zero.
Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements.
These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.
It is possible that 80 in this actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated and these forward looking statements.
For a discussion of some of the risks and important factors that could affect a being beds future results see risk factors in the company's latest annual report on form 20-F filed with the Securities and Exchange Commission on the 22nd March.
2019.
Hey, beans, as assumes no obligation to update or revise any forward looking state information provided during the conference call I shall not be liable for any action taken a reliance upon such information.
It's now my pleasure to turn the floor over to Mr. Carlos Brito, Sir you may begin.
Hi, Good Maria and good morning, good afternoon, everyone.
Welcome to <unk> fourth quarter 2019 earnings call.
So they will be taking you through the results of before year end fourth quarter, including high watch more to markets.
Well, that's been a few minutes and or no no direct to consumer businesses and provide you with an update on or better growth agenda before it can be addresses our financials.
I'd be happy to take your questions.
Oh performances were 19 was below our expectations and we're not satisfied with his results.
There were many successes, but we also face many challenges.
This year, we took steps for mobile revenue growth to be more balanced between Waterman revenue, Brad group, which is critical to long term sustainable top and bottom line growth.
We grew volumes by more than one person.
Our third consecutive year one gross.
<unk> rules accelerating each year.
This contributed to strong and balanced top line growth.
Broad set of markets, including Brazil, Mexico, Colombia, and South Africa.
Sony performance from the U.S. largest market, which is <unk> revenue and EBITDA growth and improved market share trends.
We made significant progress toward.
The leveraging commitments, resulting in a leverage ratio afford finds its way into the year going for the proceeds expected to be received.
That's one of those Greenville operations.
Excluding the last 12 months you picked up from <unk> operations.
That being said this year was not without its challenges.
We faced significant headwinds in our cost base, driven primarily by the highest annual ingredion commodity and transactional currency cost in the past decade, which held back a bit that grew by approximately 200 basis points.
We also faced challenging macroeconomic environments and anymore markets, including Brazil, Argentina, South African South Korea wouldn't the consumer leading to consumer trade down and consumption contraction.
Additionally, our performance in the second half was impacted by softness in the Mad Love Channel.
I'd Love channel and trying to almost football channel in the country in war or portfolio over indexes.
Let me know take you through the results with for your into court.
Well delivered a more balanced top line growth with revenue up 4.3 person.
Maybe brookwood are up 3.1 person and total bottoms up 1.1 person.
Oh beer volumes grew by 8.8% led by our premium portfolio and supported by improved performance for more core portfolio.
Oh, no beer business had a strong year with bottoms up by 4.8% led by Brazil and Colombia.
Our EBITDA grew by 2.7% with margin contraction of 65 basis points to 40.3 person.
Increasing commodities and transactional currency costs held back EBITDA growth by approximately 200 basis points.
Underlying <unk> decreased by 47 cents to three dogs and 63 cents.
The board has proposed a final dividend of one Europe for sure.
Fiscal year 2019, bringing the total dividends for the your two when you're in a sense.
I mean, I'll tell you about the results of the quarter.
Oh revenue the fourth quarter grew by 25% with threaded Berkeley the growth of 45%.
Good for more proposition initiatives.
I was fortunate upset advances in our smart affordability strategy as well as category mix from the rapid growth of our known beauty business, which has a lower average revenue per hectoliter than our beer business.
Oh beer business delivered 0.8% growth, while our known beer business grew by 8%.
Voting total volume growth of 1.6%.
EBITDA declined by 5.5% with margin contraction of 336 bips to 40.1%.
Our EBITDA performance was impacted by could might introduce actual currency headwinds couple recycling a challenging comparable partially due to phasing sales and marketing investments following the twin seem FIFA World Cup.
Our global brands, Budweiser, Stella Artois and put on it continued to outperform.
Between 19, they grew volume they grew revenue by 5.2% and by 8% outside of their whole markets, where they typically commands a premium price point.
Budweiser grew revenue by 3.3% outside of its home market of the U.S. led by Brazil, India in Europe, where it fits the fastest growing brand in the region, partially offset by China due to the softness in my life channel.
This performance was on top of a challenging comparable given the brands global sponsorship of the twin 18 FIFA World Cup.
We'll continue to leverage Budweiser show in connection with football through your partnerships with the English Premier League in La Liga, which we activated the more than 20 markets.
Hello, blood delivered healthy growth of 6.5% outside of Belgium, led by the U.S. and Brazil.
Corona once again led the way with growth of 21% outside of Mexico. In addition to it varies from performance and its whole market.
Growth was broad based with China, and South African leading the way.
The complementary nature of our global brands enables us to meet consumer needs in a variety of occasions and price points, minimizing cannibalization and driving overall growth of the premium segment.
And I like to go into more detail on some of the commercial highlights across sort of six named markets.
So that feels in each country is full year in fourth quarter 2019 performance can be found no for your results press release from earlier this morning.
Starting with the U.S.
By now you are likely familiar with a five commercial break awards in the U.S., which we put in place two years ago.
This priorities are ranked in order of the potential incremental revenue growth they will contribute to our ambition to lead the future growth of the U.S. beer industry.
First expand core plus.
The core plus segment in the West is only half the size of what it is you know the mature markets.
Therefore, all pretty workers to double the size of the corporate segment.
In the past two years of segment has grown from 6% of U.S. your category, 3%.
Largely due to the strong momentum of Michelob ultra.
Second.
Leading developed Super Britain.
I have to be relevant your if we want to gain share with throats and take advantage of the ongoing criminalization trend.
Our ambition is to double our share of the second.
2019, or shift segment to sweat stellar towards stabilizing volumes in our craft portfolio growing by double digits well ahead of the quest segment, which grew by low single digits.
Third <unk>.
Disrupt the Britons segment.
Currently we're a small player in the segment <unk> mission is to disrupt.
We have doubled or volume into segments since 2017.
Led by the triple digit growth of Michelob Ultra pure gold organic.
Fourth.
Well as our share of mainstream within ambition to reaching flat share a segment.
In 2019 or shift segment decreased by 15 bits.
Well, there's you want to be done there's a significant improvement from the 60 bips decline of two years ago.
And finally, our fits commercial priorities to capture growth view on beer.
HM 219, we effectively leverage or innovative and operational capabilities to deliver double digit revenue growth.
2020, we're increasing investment to fuel this growth.
Big ambitions for blood cells or to grow our share into fast growing hard Seltzer category English. We're currently under index.
The brand was launched in January 20 to 20 exhaust with very strong start.
In summary, we're making some considerable progress across all five of our commercial priorities and believe we have the right strategy in place to lead future growth.
Moving out to Mexico.
This is our sixth.
Streak your volume revenue and EBITDA growth in Mexico, and we see significant opportunities for future growth.
First.
Well pick up the Consumptions relatively high it's not evenly distributed across regions and demographics.
We see an opportunity to grow forgot to coincide consumption through affordability initiatives addressing new occasions, and appealing to new consumers, including women.
Second we see a massive premiumization opportunity the print segment represents a much smaller portion of the industry. Then it goes in other markets with similar maturity, but it's growing rapidly.
Britain portfolios going by strong double digits, leveraging the dedicated structure of our high end company.
Third we believe it can capture additional sure throat exploring adjacent categories.
Enhance your portfolio through new ventures, including flavored beers and not all coal offerings to serve more consumers on more occasions.
Fourth we expand your presence in new and existing channels.
2019, we announced a partnership with walks through the largest C store chain in Mexico, which allows us to reach new consumers as it continues to expand into new regions across the country.
Additionally, we have a very strong footprint was our own we feel form it's more than one element that enables us to directly interact with consumers.
In short we're extremely proud of our success in Mexico and believe the future about business is bright.
Now, let's talk about Colombia.
Our business in Colombia had a great year, delivering the highest annual volume growth since the assay be combination.
Growth was healthy both for Butte and all of your businesses as we're enhancing the portfolio, so dress new and existing consumers.
We reached the had could record high share of the premium segment this year.
By a global brands, which grew by more than 50%.
We see further growth opportunities. This columbia's prudent segments is two relatively small compared to markets a similar maturity and we are investing behind or portfolio to fuel its growth.
Well I've been significantly stepping up our innovation capabilities in our view and not be or portfolios.
The results I innovations contributed to over 30% of or volume growth.
In 2019.
This includes successful package innovations such as one litter in single serve returnable offerings in product innovations such as solve Oh I knew purpose driven water Brent.
We feel confident that the actions that we're taking will drive further growth of our Colombian business.
Turning now to Brazil.
He Brazil, we've also been scaling up or innovation capabilities.
2019 innovation accounted for 10% of or revenue.
Up from 5% into 18.
We have half the time it takes to launch a product from eight months to four months, how long has to act with speed to respond to emerging consumer trends.
We launched innovations across all segments.
In premium we launched low gluten stellar to lots of dress, drawing health and wellness trends.
We created a new more premium visual brand identity for Beck's or Jim style premium pure more Brent, which deliver very strong growth throughout the year.
We launched a local craft brand called see better lager from Colorado, which uses president ingredient is already the largest craft beer in Brazil.
And of course segment scope your malls was our largest ever ever innovation launch in Brazil, which has been a major success and has brought the scope brand family back to growth in the fourth quarter.
Well if your mall has also meaningfully contributed to our share gains within the growing pure most segment, where we currently under index.
We're working to get to fair share of the segment with scope your remote into core <unk>.
Well he meant in core plus and backs in print.
Oh ready Bohemia is the number one brand into segment in scope. Your malls is the number three.
As as off the fourth quarter.
And the various segments, we have leveraged the best practice for more other markets to launch beers.
And with local crops, we know it three brands not somebody needs can leachman in each is growing rapidly in the state that money home I can ask is already the leading brand in Nevada segment.
Within a year of its launch.
Our innovation supported Brazil's strong top line performance this year, and we'll continue to leverage our capabilities to fuel for growth.
Now, let's turn to South Africa.
In South Africa beer has gained approximately two percentage points of share of total due largely to a consistent execution of the category expansion framework.
We delivered meaningful results across every element of the framework.
And the growing high end segment, where our portfolio currently under index.
We are working directly close the close the gap and delivered on our highest ever market share in the segment this year.
In the core or a bulk offerings returned to growth led by strong performance from carbon black label.
Additionally, we extended our portfolio to new consumers and locations through fast growing brands, such as fly fish group, the fruit and counsel mill stealth.
We also continue to leverage or smart the affordability initiatives such as lying laggard.
Which has brought incremental volume for the beer category by acting as an entry point for price sensitive consumers, especially in light of challenging macroeconomic environment.
We're confident that we have built a strong portfolio in South Africa.
Meet the needs of consumers across styles and price points.
Moving out to trend.
In China with the leaders are both the premium instable premium segments and today I would like to focus on our growing super premium business.
Oh leadership in the Super premium segment has been achieved with the best in class portfolio brands, which span across 2000 occasions.
And I rolled out strategically across the country, depending on the maturity level of a particular region.
Corona leads the way is the number one super premium brand in China complemented by brands, such as Blue Girl, who garden in their local craft brands boxing cap.
Hi company dedicated sales force and route to market focus exclusively on growing or superpremium portfolio was launched success in China in 2014. It was later rolled out.
20 additional markets.
Operational excellence leveraging the I'm comparing allows to deliver best in class results in the segment.
Furthermore, the Super Britons segment contributed meaningfully to our top and bottom line results as the gross margins are approximately 10 times that of core brands.
We're excited about the future potential to segment and believe we have the right before the brands and capabilities to continue winning.
Before I move onto the next topic I'd like to take a few minutes flip date you in the impacts of the cool did 19 outbreak in the operations in China.
First and most importantly, the health and safety of our community or colleagues in our business partners will always be our top priority.
We support government measures and recommendations to contain the spread of the virus.
As for the business in fact, it continues to evolve.
So far we see a significant decline in the men.
I'm friends channels with almost no activity in the night like shell and very limited activity in restaurants.
We've also observed a meaningful decline in in home channels, although somewhat so somewhat lesser extent than in the on premise.
Well the supply side, we have reopened more than half of our borders and other team licenses to reopen the remaining ones with exception of our brewery in Wuhan According to local government godless.
Despite the current hardship.
Did you not to lead this crisis willing back the long term potential of our business given our unparalleled brand portfolio love to market and talent pool.
We remain committed to support our team. There's a sports is then consumers through this difficult time, they're fully engaged to prepare for strong recovery when the situation improves.
Now I'd like to update you on the progress of two of our businesses.
At the beginning of 20 19.2, New Chiefs thought leadership team to reflect increased importance of two businesses a.
But she's not alcohol beverages, how soon then a cheap owned retail officer.
Who leads our direct to consumer businesses.
Oh no no business represents approximately 10% of our total one generating approximately $3 billion of ready.
Our top six markets for this business, our Brazil outdoors, Salvador, Dominican Republic, Argentina, and Colombia.
We had a strong portfolio brands spanning different styles functions price points and occasions.
This portfolio comprises our old brands, such as going on that's good.
And those and those of some of the leading beverage companies in the world such as Coca Cola and pets.
Our non beer business.
Performed very well you play 19 with one growth of 5.3% the resulting in an evolving strategy that was put in place into anything team by or new all cool you know coal leadership team.
We seek to grow and optimize our legacy business.
Standup portfolio and disrupt the space by capitalizing on trends, such as health and wellness.
We're proud of the work then in Swindon 19th to elevate the importance of ore milled all cool business it leverages momentum into 2020.
Our chief owned retail absurd lead so all of our direct to consumer businesses, which reach approximately 250 million consumers consume interactions annually through a network of roughly 13000 stores Pops in ecommerce ventures.
This business generates over $1 billion in revenue and grew by double digits last year.
It also enables us to be closer than ever to our consumers leveraging technology to personalized experiences.
A good example is our omnichannel ecosystem in Brazil that includes our E commerce ecommerce platform that delivery yeah pitch stores.
Which enables us to leverage data to ensure consumers have a seamless experience both online and offline.
Furthermore, the majority of our own retail outlets a franchise, including thousands of almost all around the stores in Mexico, We're proud support local communities and promote a thriving business environment you know markets.
Moving on I'd like to spend a few minutes discussing the advancements we've made in our better world agenda.
In March 18, we launched our 2025 sustainability goals are most ambitious started commitments yet that will help us grow our business for the next 100 years and beyond while reducing our impact and the environment.
Our goal is it closely aligned to the United Nations Sustainable development goes as we believe private sector companies ever responsibility to contribute to solutions for some of the world's most pressing and complex issues.
I like what they too on the progress we have made when each goal in 2019.
In 2019, we continue to support our farmers through agricultural development.
We're working with over 20000 farmers in 13 countries to grow the best barley, we can solve a hops base rice, hence for them.
The stuff in a vicious goal, that's 100% about direct farmers would be skill connected and financially empowered by 20 to 25.
Today, 50% of our direct farmers are skilled.
85% of connected and say, 5%, but financially in power.
When it comes for Waterton stewardship efforts, we leverage our partnership with the nature Conservancy to accelerate the establishment of waterfall.
One Tina Colombia, El Salvador in Mexico, and support and support watershed protection projects in California in Colorado in the U.S.
We also continued to work with the world what funds.
Focusing on conservation and reforestation efforts and addressing local water challenges and believe you're Mozambique, Uganda and Zambia.
We're constantly looking for ways to increase the recycled content in our packaging in advocate for charitable solutions.
We have committed.
That's my 2025, 100% about products would be available packaging that heater returnable or made from majority recycled content.
Currently over 40% of over one is the returnable packaging in we have achieved 42.3% recycled content you know one way glass bottles.
Climate change has a far reaching impacts on our business and the communities in which we live and work.
We have committed to transition to 100% of our fortunes electricity to come from renewable sources by 2025.
Today, 61% of or porches electricity is under contract from renewable sources.
Now I'd like to handed over to Filippi who'll take you through our 2019 earnings cash flow and capital allocation Filippi.
Thank you Brett though.
One and good afternoon, everyone.
That starts with an update on our net finance costs.
Net finance costs in the air water over $4.3 billion compared to over $6.8 billion into thought anything.
The decrease was mainly driven by lower mark to market gains linkage to the hedging of our share based payment program.
Nearly $900 million.
We are to a loss of nearly $1.8 billion into southern 18.
Excluding the impact of the gains and losses related to the hedging of five a share based payment programs.
Our PCR in 2019 was 24.9%.
Likely better than that low end of our guidance.
This was due to significantly lower E T R.
The fourth quarter, driven by accrued benefits from interests on on.
Yeah, so in Brazil.
Our effective tax rate guidance for the full year 2020.
Between 27% 29%.
Excluding any gains and losses related to the hedging a fall by share based payment programs.
Yeah, I expect that increase didn't need PR is threatened by the for we backed up the U.S. tax reform record low interest rates in Brazil, which minimizes the users.
Perhaps they'll benefit and that change in the country mix.
Moving on now to earnings per share.
Our underlying P. S is a year define as our normalized EPS, excluding the impact of mark to market related to the hedging of our share based payment programs and hyper inflation adjustment the in Argentina.
Decreased by 47 cents from $4.10 to $3.63.
The decrease was mainly driven by lower normalized it did.
And that finance costs, excluding the impact of the hedging of our share based payment problems.
We closed fiscal year 2019, with $13.4 billion off cash flow from operations and EBITDA margin of 40.3 and compared to 25.5% of our net revenue into cash well ahead of most of our fears in all three metrics.
Moving to cover working capital another important I mention for cash flow generation.
Our working capital cost is up those elements of working capital.
We can see there for them and so to the operation of our business.
If you exclude certain items, which management has later or no ability to influence for example payroll related payables.
In 2019.
Reaches an average level off guard working capital as a percentage of revenue.
Negative 13.4%.
There's nobody is broadly in line the last two years, despite the significant contract mix headwinds.
We continue to see opportunities to further drive called right after.
What percentage off not forever.
I mean, I've spent some time discussing our debt profile.
I just see on this slide our debt maturity profile is that well distributed across the next several years.
2019, we undertook a significant refinancing effort, which Fedex standards, our weighted average maturity and gives us a comfortable maturity profile.
In addition, we took significant steps to retire adapt.
Closing the expected divestitures of our straight operations not yet reflected in this line.
I was strong cash flow generation provides us with sufficient cushion to repay a refinance.
Standing that without being dependent on capital market transactions that meets our funding needs.
In addition to maintain roughly $16 billion up liquidity comprised of cash and revolving credit facility.
Oh death portfolio remains insulated from interest rate for lithography as 91% of that that holds that fixes right.
But a more.
Fraud is comprised of our diverse mix of currencies. If this 7% of our dad is denominated in us dollars and 29% in you.
We use the euro as a proxy put a basket of emerging markets clearances.
During its correlation with our key emerging market currencies.
In addition, the euro has the advantage of provide the access.
<unk> markets, we've significantly higher liquidity and lower costs when compared to those are emerging market currencies.
Our weighted average maturity is roughly 14 years.
And there is no we are in which the total debt maturing exceeds our liquidity as you have seen under phrases like.
Finally, we have a weighted average coupon rate of approximately 4%.
Accounting for the proceeds expected to be received from the divestment of just straight operations by excluding the last 12 months of it's a bit to.
Our net debt to EBITDA radio was four times board at 12 month theaters ending December 31st just on the nice thing.
The leveraging truck around two times remains our commitment and we will prioritize debt repayments in order to me its objective.
As you can see under its like our capital allocation objectives remain unchanged.
And with that I O and back to Maria to begin to give any sector. Thank you.
Thank you and supports now open for questions any interest. This time, we've all in Pakistan. So one question and one follow up question.
Again, if you have a question or comment please press star one on your Touchtone phone.
If at any point. Your question has been answered you may remember yourself and the Q bypassing the panicky.
We get asked why you pose your question you pick up your handset to provide optimal sound quality.
Our first question, it's coming from the line of Robert Ottenstein Evercore ISI.
Great. Thank you very much.
Two questions one the revenue per hectoliter was disappointing.
And its you know you gave some good explanations for that in terms of consumer mix affordability initiatives. The non beer and it's so all of that makes sense, but it is a metric that you know is important. It's one that you know in the past, we followed to get a sense of how you're doing in revenue management someone.
During <unk>, if you can give us a sense of what the revenue per hectoliter looked like for just beer or any kind of you know comparable measure on that metrics that that would be number one.
And then second I was just wondering brito in particular, if you could give us your assessment of the hard seltzer.
Outlook in the U.S. based on our numbers it looks like you're getting about 18% market share I know, it's early days does that sound about right and do you see hard seltzer skiing margin accretive to the U.S. business. Thank you.
[noise] [noise] Robert's so your first question I'm in a.
The net revenue per hectoliter in the fourth quarter.
So before I go Dale and just remind us that the net revenue for the full year was 3.1% in the fourth quarter came down.
Reasons why came down.
First I mean in Europe.
Well, we're expanding our portfolio into new.
Customer occasions, and priced years within premium. So for example by the launch of but.
But wasn't in Netherlands in France.
Yeah. That's you know 30 days, but doing very well because of course as a dilute is.
In fact on our net revenue per hectoliter, but it's incremental to our portfolio because it addresses price segments, where we were.
In which we're we're totally ops.
Then in Brazil, so the impact of category mix deterred rapid growth.
<unk>.
Known beer versus feared so for example of beer grew 3%.
Yes the.
Carbonated soft drinks water everything else, that's known Alco grew 11%.
So that of course.
Then all of your business has a lower revenue back loaded, but again, it's incremental business.
Oh no.
Another thing in Brazil.
Is that we'll have implemented some tactical revenue management initiatives you remember that in Q3, we had a price increase that had some issues in terms of its implementation.
Given the competitive you know reaction or no competitive reaction that took price down at same time.
And then as the things came to more of a normality, but it's the only king halfway through the fourth quarter. There's do you have some impact seem that in the fourth quarter.
Yeah in China, We also had some tough comps if you remember.
Q4 last year in China, I read in Frac water grew over 10% so recycling that in China.
Well I think those are.
Some reasons why the net revenue for next winter in the fourth quarter.
Was below the yearly average.
But again.
It's one quarter only.
In terms of your question about.
About there's still the on the net revenue.
I think what to what we we have to say about price in general you know step back Robert.
Is that in many of our emerging markets in which we operate.
You know consumer disposable income as that grows has lagged legal shouldn't be lagged inflation over the past several years.
This has impacted the relative affordability of beer in many cases, a negative impact on forgot the concentrator feared.
So in order to sustain and accelerate the long term growth prospects of the company.
We're taking any factors into consideration so we run a big study.
In terms of you know priceless to see in those markets.
With many factors being taken into consideration.
Local at the local level.
Told the health of consumer environment.
Relative to your affordability inflation taxes competitive environment.
And we found.
Hi market.
But there is a better place to two places healthy top line balance.
Several of those markets, resulting very strong topline growth in markets, such as Mexico, South African Colombia.
The study those markets and we believed that the disciplined execution that strategy will enable us to accelerate topline growth.
Remember.
This this is all connected to the category expansion framework, so there's not a new framework.
It's just that.
In the category expansion framework that as many components within very busy in the last three four years since we learned about the model in the core.
Labored.
Styles Freeman five of the categories thinks the framework and last on the smart affordability.
And this year after all this let's just see studies.
But that we learn more about each market as opposed to big averages and because it will assist this change over time because of income.
Disposable income inflation taxes, and everything and employment. So many things we decided to review some of that.
<unk> the parameters that we used to have can we saw that there were opportunities for us too.
ER tap into that volume to in profit pool. So that's one thing that also relates to the whole thing about smart affordability, so long answer, but just touch on different points on our.
Pricing in revenues tragic.
In terms of the second question about how hard sell story for sure it's a huge opportunity.
Well I wasn't supposed to be industry in general in the U.S., it's bringing new consumers to the category.
From wind from spirits, so much so that the category with back to growth in the fourth quarter last year.
We started in this category with a 10% share.
Were number three today, but as you said, we Oh, we have a portfolio approach. So we have borne indeed, we have met his cell Sir and now since superbowl since January this year, we have been myself.
And you're right I mean, we're getting a very quickly to close to 20 share of segment and we intend to get to number two position with this portfolio approach that again, its catering to different price points, a different consumer needs in occasions, and that's the way, we do a global brands as well.
It's interesting to think way to think about sell certain when you think what's happened with Ah craft.
In the U. S class was also the emerging trend helped to be a category brought new consumers so not unlike still sort of.
We were behind because when we got to be was a portfolio like a support for the we had had no crops quickly in a few years, we've built the portfolio craft brands that today grows that many many times.
Over what the crap industry grows you grow strong double digits versus the low single digits for the craft industry and that's what was done through some years and today where were the biggest players in the U.S. and going way ahead of the industry. So and the good news about stelzer compared to craft is that sell says a gain of national brand.
Yes, which of course caters much more to the way we go to market. So I think its oh good years very profitable.
It's incremental brings new people to the category. It addresses a lot of trends that out there in terms of health and wellness more cool ads and with flavors. There are many things that can be accomplished.
Is it margin accretive would you expect hard sensors to be margin accretive for you in the U.S. this year or do you need more scale.
It is once production streamlined because today is not yet there as you can imagine absolutely that's and today, we're still depends on a couple of beer is a couple of breweries to cover the whole country, but does it's often the case as it grows then we go breweries and then of course and that's what.
The U.S. business guys and now.
You're now, saying that's number $100 million in our beyond your big bets in terms of Opex and Capex and some of that Capex is not only for capacity, but also for localization of capacity. So we can cover the whole U.S. from a more streamlined perspective.
Thank you very much.
Thank you.
Our next question comes from one that's kinda Stirling with Bernstein.
Sure I think your line is doesn't make sure you're not on mute.
[laughter].
And we'll move onto our next question comes from the one of the Edward Mundy with Jefferies.
Celebrates versus the full 0.6% you did in fiscal 13 to some animal great people forget.
And that's all I didn't get the <unk>, we didn't get the first part of a question for some reason can you start again please.
So it's not that up.
Yes.
Good Okay. So I'm just talking my question is the thing about bucking the from most of it in a.
In South Africa in 2018, you didn't provide guidance, but I think you indicated that you expect to greet grace to accelerate.
The last five years in fiscal 15 to 17, a full 0.6%.
Because of the more Gracie portfolio that you're getting from SMB Miller as one of the enhanced revenue management tool kit from the kinds of expansion modal framework.
I appreciate in the very near term external environment has been incredibly tough, but has anything changed how you look at the opportunity I'm today.
For your business. So it's a great and my follow up question is you know around.
Couple of 19 and I. Appreciate you don't have a crystal ball on well cover not seen ultimately ends up but I was wondering whether you can elaborate a little bit more on somebody assumptions around the scale the magnitude on most of ours as to how it relates to your guidance of two to five cents EBITDA growth.
No I mean, given what we said in terms of or the lease that we can grow top line faster. If that was your question is.
South African August that year.
We continue to believe the same thing this year or topline was below that average or it was 4.3 as opposed to 4.6 because of a couple of things first China.
In the second half decelerated.
Right because of them I'd like channel.
That can presume Korea, we had Korea, we had macro issues industry was down.
By high single digits.
We also had a price increases that we implemented and when looking back the execution that price increase was not optimum.
The same came to set about Brazil.
In that consumers remain under pressure things are getting better but the price increase was done at a moment when the competitors were doing something very different that took a while for us to streamline.
And because of that we lost one.
And also because we are running backs and some fast growing segments like seltzer and fuel malls. So I mean as we fix.
Real Multisite doing Brazil think about that's pure molten Brazil, we had no presence today in less than a year. So we have the number one and three position as off the fourth quarter already.
And if you're most section.
In Brazil, and we would like to have.
The first three positions there.
Oh, sure where <unk> cap, you know, where we came from to hide from a 10% share.
But we are going very fast and we think the portfolio approach will get us to number two position that segment.
In premium in South Africa. For example, we had an amazing performance this quarter again record high share, but still divorce issue. So in that segment is growing so there's some segment mix shift.
That is not in this three I mentioned, so secure more freedom South Africa for example, we need to accelerate or.
Alright participation those segments. So we can also benefit from that growth.
But in terms of the overall business, we had some important.
Countries for us like China, Brazil.
Oh, we of course less important but trying in Brazil, where one because of a channel that we over index nightlife, yeah. The one for a price increase and its execution in Korea, both macro and price increase so ambitions on changed we're going to continue to grow with a more balanced top line.
And that is between volume and that revenue and we think as a company we can do better than the average the 4.6.
This year, we did 4.3.
Because of all of the headwinds we mentioned its first.
But we see opportunities in segments, where we own under index and that would taking measures to grow and catch up faster in those segments.
In terms of covert 19 Cook your 19, what we would put in our release.
Is that a first of all you're talking about cooking lunch in China, because that's where.
We have information about it and that's where it's relevant at this point.
So for the first two months of 2020.
We estimate that this outbreak 'cause it resulted in lost revenue of approximately $285 million.
[noise] or in terms of <unk>.
And lost EBITDA over approximately 170 170 billion U.S. dollars.
At the EBITDA level.
So to finish in fact, when our business in China is difficult to estimate given its it's dependent on the containment of the very virus and especially the speed, but the speed by which our customers and consumers resumed their normal operations advice.
Which can be different by channel problems in China, you have more than 30 promises and each province is adopting a slightly different way.
I'm going back to normal life, some problems for were hardly hit or harder hit so they're taking more time, some others are going back to business a bit faster.
Anyway, anticipating our customers to resume their operations in the course off Q2 second quarter.
This year.
So.
And the impact of our current view.
Yes.
Reflecting on our estimates.
For Q1, and full year that we gave and the outlook session.
And but of course this is based on what we know today.
Right. So this is a where we are today.
And the good news I mean, it's super lighting.
It is all thing is that.
Chinese consumers were surveyed my kuntar.
The market research company regarding the impact to cozadd, but their consumption patterns and what they tend to do once their release, when they're confinement inquiry and team.
Not that can stop things they want to do six.
Perhaps six I told me.
Within our business room.
Want to go back to restaurants, they were to go back to the trends to dine out.
Entertain to both doors into entertainment to do everything that they would normally do so that's the squarely within our dream of bringing people together so that.
That's why I had seen in China the crisis wrong.
Let's now working on of course, and the databases, we have weekly calls with a global guys as well.
And now we're monitoring private SMIC Robbins channel by channel, because we're going to come back very fast because we think when it comes back to be very fast. If you look at Sars. That's the way it came back and as a company given the portfolio we have the channels.
At a were strong and the channels that but getting stronger like you cormorants, because people are changing habits, and we have a very good sheer higher than the average market share of the market in those channels, we want to do you even stronger company in China.
To this crisis is old, but right now of course first priority to save dog people community consumers, but once the government guidelines allows us to go back to business, we're prepared and we had thing.
[noise] as the recovery takes place so it's very prepared and we feel good about it.
In terms of that looks great. Thank you.
Thank you Ed.
Your next question comes from the one that's kinda Sterling Thats something.
Hi, Richard can you hear me this time.
Yes.
Great [laughter] <unk> eight in your prepared remarks, and then press release, you talk a little bit didn't don't sensors site on you talked about some of the headwinds that emerged we were 29 team that weren't there. When you started the year, but if you look at the elements of presume instead, we're actually inside your own can show, which elements of your own.
Say within controlled facilities are you not satisfied reason and would you aim to results next year.
Well I think as you said some elements some elements we could we anticipate it to the market just to be in the name of completeness I'll start from their travel.
I always said that the second half second half the year, we'd be tougher because of Ah the timing of our commodity and FX hedges. We also said it would be tougher because of the sales I'm liking saizen coming from a World Cup here you before.
We also said that there was some inventory.
In China that was advanced in Q2 for summer activities ever use a bit different this year was Q2.
And that would take away a little bit since Q3. So all that was sad was public and all that on top of that things are Didnt expect was first.
The price increase with it gives me in Brazil.
End of first a week of July.
In terms of execution was not very successful.
Not because we executed the poorly but because we didn't anticipate.
Market participants reactions and some participants stick that price down I was there taking our price up.
So that took a while some months including into the fourth quarter.
With volume impacts.
To to gets fixed let's put it this way to find its new balance.
So we lost volume in Q3 and part of Q4.
You know market, that's very important for us in a period where.
Quarter is important to love Sporting for Brazil was there any court but.
But that was not a plant in Korea, the same thing happened.
We implemented a price increase in April.
Every three years implement the price increase in Korea, we plan to win in April.
Same thing happened competition took a different view.
And then we had to roll back prices in October. So again, we lost a lot of this summer.
And in South Korea.
So I think those two things are things that looking back we could have them down.
Laughing channel it was hard to predict because it was something that was mandated.
By it was an extra now let's see maybe we could have shifted resources faster as we're doing now through other channels and as said before we under indexing some fast growing channels like Seltzer Pure Mall and example, South African Queen we're growing oldest channels, but maybe you could have started.
Six months to your before a then which over time started.
I think those are things that are within our control.
Hi, there we learn from it.
We intend to do a better job going forward.
But you're right. Some things were externalities, we had no control and the normally focus on the things we control, we're very acid with ourselves as you know.
And don't take it we don't think there's likely so we're learning and trying to see how it can be better next time around.
I just like solar question basically due to in Brazil at the start to other.
Part of the problem was the beer grew 3% and on the 11% if I look at via Brazil from the Ambev Akorns price makes it was down 20 bips in the quarter was that due to re basing your price increases to shine regained some volume in Q soon.
Uh huh.
Well that was just too many things, including the one I just mentioned.
But.
So you should we had with execution price increase in the third quarters Lee.
Brad into the fourth quarter.
Got it of course affected the you in your comparison.
Also this quarter the positive brand mix from premium growth was more than offset.
By this technical revenue management initiatives that offset.
And the negative geographic mix right from expanding more in the north in the northeast that's pure mall.
Started going in accelerating.
Your malls is more.
Prevalent these days in the north in the northeast So that has a geographic mix and you know that's in the festival margin those margins because its social economic classes, the lower socioeconomic glasses or more.
Prevalent there.
As well as some smart affordability initiatives like the gross or local craft beers on top of all that you also had.
No no cool I, just said going way ahead of beer with a lower net revenue back weighted but incremental margins I mean, you put all those into next.
That was why.
We we didn't grow much in terms of net revenue per hectoliter.
Other had if you look at.
I've got to hand, if you look at a four year.
In Brazil.
That's ever Brexit or grew by 1.9%.
So I.
I mean.
Oh of course impacted by the fourth quarter I.
I mean, we had through a good growth net revenue per hectoliter net revenue in Brazil for your grew 7% total volume in Brazil grew 5%.
Well I'm very happy to see brings you back to growth.
This is great because it hasn't grown one.
Or for some years, that's great to see net revenue more balanced with volume growth in both beer and on beer.
It's great to see premium growing double digits.
Even in the face of a cost of sales that went up by 15.5% during the year.
So that's something that was really brutal.
It doesn't happen all the time.
And that cost of sales took.
Sure.
Hmm check your two or 300 basis points from our.
EBITDA.
So they between Brazil declined by 4.4%.
Three percentage points, so that's 4%.
It was the commodity that socs that was higher than any time, we cant remember.
So I mean, that's also something that should be mentioned.
Thank you very much better.
You're welcome.
Great.
Our next question comes from Onest, Celine Pannuti, Okay Piedmont.
Yes, thanks, very much good morning, everyone.
My question is on that side of that's on the price [laughter] I wanted to understand assisted when if you could ask pes hobbies small well Debbie yes. It doesn't take offense in 19, and which would be the time for Twentytwenty income sounds right now [laughter] and just to let you anything in terms of pricing [noise].
Do you think that Dan farm and easily King that's a intensified pricing increase all twentytwenty and I'm not so I see that because you guiding so when I tell you want.
[noise] costs and transaction to be around mid single digits Twentytwenty [laughter] index, we got it would be helpful. If you could tell us.
Oh, you know why it's that you have to mid single digits African transaction, if it'd be impact and seen which countries. We should expect us to begin with excellent. Thank you.
Hi, slated in terms of smart affordability and let me just make sure. We all thought the same language on that.
So again this belongs to the.
Category expansion framework, so it's not a new idea. It's just that we've been active in all dimensions of more activity more all that matches up the category extension framework.
And less active on smart affordability. So now that we have more studies more insights more learnings because we try different things in different places it would build tool kits to be with clickable. We now can be more active and especially market African Latin America, there's a lot to be done there because people need a lot of people don't consume video.
Because they can afford it.
Right and if this is incremental volumes than the right way this can be dilutive.
Due to net revenue, but it's incremental dollars in terms of margins.
So.
We have been expanding your portfolio walk for more accessible price points.
It isn't new packaging formats and also you beers grew this local crops. So smart affordability is a big umbrella that includes all this.
There's always drive incremental profit.
But generally have a diluted aside from that that netcredit correctly. Thanks.
And what they're contributing meaningfully to go in many of our market.
Including Brazil, Argentina, Colombia, Ecuador, South Africa.
So well that was your first question, we don't have any guidance that we're getting at this point, there's no big deal how impactful this will be.
But make sure that this is part of the category expansion framework category expansion framework is about enlarging the category.
So we can create more value in the category, it's not about getting that revenues down.
In the category expansion framework you have.
Five dimensions Yep core.
Subdivisions.
Oh classic and easy drinking you have flavors you have styles you have freeman.
And you have smart affordability smart affordability is the only one of the five.
That could dilutes.
Net revenue per hectoliter, but you can bring new consumers to the category you have to remember that in this geography is there any people that you think huson cheap called <unk>.
That has no quality.
Well be brands or illegal.
But that's what we're trying to do try to get this consumers into our category.
Hey for for them as well because of branded products more high quality products, so but again.
This doesn't live by itself is lives in the context of the category expansion framework that has filed five dimensions, there's one of them and the only one that goes from cord, though.
That's the first thing.
Your second question was about.
Price.
And can you just remind us exactly you asked whether the environments is better for price right.
Oh, Yeah. I mean, you mentioned earlier studies have been just because you like fictional pricing has been completed and since you all mentioned not seen a high.
Let me tell conversation will you be able just here to get to that's a pricing.
Yeah, No no no I mentioned two markets I mentioned, Brazil, and South Korea, I didn't see I didn't say the price was being tough I said the twice the execution looking back maybe could have done could have been better plant.
Right. So that's what we learn from it that's at the end the market moved somewhat.
But in a different time it we would normally do pricing in a different time, we tried to do in a different time from normal and it didn't work so well. So it was more on the execution fees then believing that there was no pricing possibilities because again remember as we grow premium as it grows.
Styles as again within the within the category, especially framework. There are many things that can create net revenue opportunities for include or not because of price, but because of mix.
That's the story in China, we don't do a lot of price increases, but the Knicks gets net revenue to grow every year by 6% 7%.
They seem to pass.
And again when you got all Thats all factors in bad it's.
We given an EBITDA guidance for next year, given what we know today about co. Good.
19 of EBITDA growing organically.
Between two and 5%.
So I think there's encompasses everything.
And we're also gave guidance.
Including for the first quarter.
<unk> said that the growth organically.
EBITDA for George maybe I should be around minus 10% because all the things just said tough comparable in Brazil.
Right, let's remember that Brazil has an amazing quarter last year.
And that's what we're comping that.
And that's a calls it 19 that is impacting to China business [noise].
Thank you.
Our next question comes from the line Carlos Laboy of HSBC.
Yes, good morning, everyone.
Brito, we we see considerable discounting in some of our emerging market tours.
From local premium brands, whether it's maybe moynihan, Brazil, Castleline in South Africa, or even of global brands.
And some of these markets when is that helpful and strategically important.
It's a discount and and when it's destructive how does this get into your broader strategy for building these premium brands.
Well.
Good thing a price ladder.
Boy as you know is very dynamic.
But for example, give an example.
Sure I'm off in Brazil was a segment that five years was nonexistent.
Also do create the segments cultural malt.
We didn't grades but also you know somebody created others jumped into that bandwagon, including us.
Oh Boy Im is the number one in there.
So when it wasn't as in a place which was premium segment, but pretty much segment was more and more populated by international brands. Some William it was losing a little bit well that edge.
Pretty much.
So I went to the prudent segments supremely within Britain's within pure malls and that's the number one category. So it's no called core plus so yes, reposition boy EMEA.
From premium to core plus because we asked boy and it's simply a different role because now we have.
A big portfolio of.
Local core brands, I mean, local craft brands and premium brands into premium segment and boy I'm yet.
No you can find position for everybody, but independent segment when they had an amazing role to play so much so that has grown by triple digits in the last two years he became only three years.
The leader and the people more segment had a core plus price as opposed to be walking sideways or backwards in the print segment.
I think you have to be you have to understand that some brands will play different rules, because sometimes segments you had to get redefine what did you segment comes in.
Hi, its appeal multiples you read the fine.
The segment. So it's a portfolio strategy, that's why it's good to have rents.
Sometimes just like a soccer player see on the bench.
[music] called one bench to play.
Because there was a new role for that then the for that brand to play and the brand goes in play that Brent. So I agree kudos for guys in Brazil, because they recognize that boy cambia that that was being cluttered into premium segment as all these international brands some up from wasn't competition and craft brands data.
Bigger role to play in core plus it was at that they took the risk and in.
In a few years he became the number one brand into premium segments core plus brilliant brand I mean.
Sure Mall core plus segment in Brazil.
Oh I think that's what we're always trying to do in Africa. For example, not Capsulize, we're calling black label, we saw that there was an opportunity because of the growth.
The Breanna segment.
It's going way ahead of Anybodys expectation that core was being pressured.
By she powerful not being as Sallie, but wining Tetra Pak and all that and we know beer at feeling to some core consumers.
So those of rules to be played by calling Black label. One ran down at some point went to 50 ran.
And growing as it's going out as opposed to be at 16 17 and be decline.
But because it if calling black label was what was our own brand you could say well it took a your own Brian and took down in price yes.
But because it's part of a portfolio that when came down in price is doing very well, but other brands went up in price.
Right. So we didn't have enough capacity for our Fabs in South Africa now we do so now we're playing that role that before we were not planned because of lack of capacity. So now we can it again appeal to some consumers that as you know South Africa is going through a tough economic times, you a bunch of consumers those consumers exists.
Well I'd like to be the the beer that brings people together all people not just the ones that can buy core pleasant Freeman Superpremium. There's also the category expansion framework smart affordability import and that's what we need to continue to look at this is a dynamic and that's why it's good to have portfolio.
Thank you.
You're welcome.
Our next question comes from line of Southern Hills at Citi.
Thank you after normalizing for children Philippe a couple of at least for me I Wonder just following on bridge I feel comments around the category and sort of management framework and the increased implementation. The affordability strategy what is what the what does the stress you sort of mean and how do you think about perhaps medium term.
Gross margins margin development from here do you think you can still expand margins over the medium term, but the application if they if that's that's a strategic approach as it stands and secondly, somebody you Oh sorry.
So everything I think so I think saw because if you're thinking of the category expansion framework is like corn the middle East.
Do you have styles going to one side flavor is going to the other side and you have Freeman going up and you have smart affordability going from core down.
We've been active in all five but not at the same testy that was done core.
And then we started doing premium boost your lots is doing flavor and styles.
And those are very accretive tomorrow.
So smart affordability is the only one that dilutes margin, but brings new consumers into the category.
And it's incremental to margin dollars.
So I mean, if you look at all five they mentioned.
The only one dilute is all the other for a new to true incremental and we're not yet at full you know seen in all four.
Got it.
And then just secondly, just going back to the U.S. business, obviously, a lot of innovation.
Coming into the portfolio again in Twentytwenty, giving you talked about the you'll see the whole itself says how do we think about sort of you know the investment that's going in behind that Hey, what you say on the Capex side, what about marketing investments for 20 years when should we expect a step change in the business. It was it just a reallocation of spend within the U.S. portfolio, that's disposal that anybody.
[music].
Well, let me tell you Sam if you don't mind I'll step back and talk about the five commercial Brett, whereas in the U.S. with numbers, okay. Because again those are metrics.
So the first priority is to grow core plus we went from 6% of total market.
To 8% in two years driven by new global.
The second one is to grow Super premium.
Were flat. So here, we can do better job, but with flat that 20% of the segment in premium.
I wanted to double we went to multiply by 10 times, our volume in two years would double its from we doubled from two years ago.
Mainstream that's corn value, we want to stabilize two years ago, we're losing Sip 60, Bips, that's corn right now, we're losing 13 bips.
In the on beer.
That's what we were declined 6% two years ago, we're now double digit revenue growth and that is what's causing our net revenue in the U.S. to grow this year was 5% it that 1.1% margin expansion of 28, that's going to 40.8% EBITDA margin.
He is very competitive market.
So.
That is.
What we're doing and to support the growth of young beer, especially closer.
We are going to commit to 20% increasing investments in the U.S.
And that's mostly capex, but also some opex.
Hi, Michelob ultra pure gold.
Behinds, new global from what mother brand.
And behind.
Ulcers in terms of capacity.
And also in terms of Kenwyne can and can't cocktails I mean, all those things are mostly capex in terms of Opex, there's a lot of resource reallocation, because that's where growth is.
Great that's really helpful. Thank you.
Thanks.
Our next question comes from one of ONTAP, especially I thought your bank.
Yes, hi, Thank you I just had a question phillipe element on the tax rate and then a quick follow up so what one of the T. The reason for the higher tax rate guidance age. The U.S. fiscal reform you said on the I think the Nondeductibility of your interest charge.
Sarah Apollo over the medium term to reduce the tax rate.
Yes, you did lever the balance sheets.
And then burrito I'm going to slightly deeper on 'em beyond the in the U.S. you talked about selling says you just referred in the previous question two calmed wine they the and Cotwo itself. So we're ready to make cocktails can you just talk a little little bit more about leave how that's performing the size of the east now and.
All we close to the point, where these two brands in particular can start to make a more meaningful contribution to the total.
Hi, Brad is phillippi, Oh, the effective tax rate the point on U.S. tax reform is the full week limitation of that.
I would say the most rather than thinking back.
It's it's also coming from the country mix as there has yeah that's significant shift.
And just inc. is less sensitive.
Two.
The leverage level.
And.
You know.
And what happens if you recollect.
At the very beginning part of the.
C B funding was not deductible.
There is room for steel for the leveraging yeah.
Yeah, and that should should help but.
I think for 2020, it should stick to that.
They're kind of guy that's up 27% to 29%.
And on that young beer.
Indra.
Let me just recap the beyond beer.
So the growth driver for the industry. So that's something we have to take advantage profitable brings a lot of consumers back incremental.
So first the seltzer, whereas spoke about it.
Second canned wine and spirits.
When we started ZX five years ago, one of the missions of the X. was to look at the alcohol.
Jason sees or local other alco segments or their work profit pools and volumes that we're not using your poking.
And gold there with some innovative approaches and that was the canned wine.
Ken spirits, and now ready to drink works as well door.
Well report Bayes machine for court pills, and beer, which has been around in the U.S. no ready commercial in many states.
Which allow us to get incremental volume outside the beer category, well leveraging our existing capabilities in assets.
The other one.
Lets to feel the category white space.
Focusing on brands like Cold Brew ship.
Which is I couldn't boucher with alcohol.
That have higher pertaining to the to growing Microtrends southwest is big on that.
But we continue to ban on bad because that could be something that connects with health and wellness very low a busy something that a health in rentals on one was consumes a little bit freedom for.
And then leveraging the improved performance or existing brands like readers.
We've seen group brand health important trend performs at Reed this and the idea really.
Hi, guys to salvage business the business units and that's what we did in November last year, what establishing new beyond your business unit.
Each allow us to focus on developing this portfolio to meet consumer needs and there's different categories. In occasion. So we're very committed to be on beer.
That's why we announced this investment.
Many and sell Ciber not only but also for Ken wine spirits, and we think there was a lot of.
Interesting.
Volume and margins to be capture here.
Okay funds.
Ladies and gentlemen, we have time for one more question. Our last question comes from the last SNG Arsenal.
Credit C.
Hey, Brita sleeping so you've been talking about category expansion for a couple of years now it seems like the pace of innovation has stepped up but it doesn't seem like it's been enough. You said were rescued trying to do too much at once and perhaps putting yourself too thinly and I'm, losing focus on the co brands.
No I don't think so synergies because I'm in the teams are doing as a separate teams. That's why what are the reasons why is he acts as put in place.
So.
Core is more than 70% of our business, we want to continue to hero the core within a company, but we know that these days is not only about focus in one thing you have to do and again the category expansion framework gives a good roadway to to do that so we have.
Proven ways of work in core.
There was to work to be done of course, because cores being challenged mine by you know many insights from the low from above.
But it means asking core trying to understand a bit more whole brands can be position packaging.
Promotion activities, a new channels.
Cormorants, so lots of things that so core is very important so cores also about the liver. The current the transformed the business continued transform shouldn't be it can seems to me relevant in a lot of this organizational I'd be doing are being done by different size of the business for example.
The Premiumization is being done by the high end company.
So the highest company separate.
From the core organization.
Right.
The flavor and styles are being done by VX.
Right and.
The smart affordability.
Is being done by the core because they're more connected in terms of packaging occasion parks.
The idea.
As to design company I'm into high and company grew double digits, you know both top and bottom line JAKKS has already 50% of or revenue growth. So I mean.
So to your question you're right not everybody's doing the same thing so poor sport to get it was what was might affordability.
Okay. Then you have I am taking care of Premiumization and then he has JAKKS taking care of thousands flavors. So that's pretty much how we are.
Divided to conquer.
Hi, just a quick follow up <unk> it seems like the competitive intensity across the industry has stepped up a of the last couple of years is that offsetting some of the gains that you, making with category expansion and on.
What's embedded in your outlook for the for the competitive environment do you expect it to remain just as intense.
No no I'm in beers ought to think of that is what you see different today is because.
Two or three companies in the beer business are developing more and more global brands.
They start face each others, just like Coke and Pepsi right Coke and Pepsi They are exactly in older. My kids facing each other you used to be very low cool trends of brands, that's going to international then going to global brands and this is this continues to grow.
Competitors are going to face each other you mean markets at the same time, but because.
The growth so in other markets has been done via global brands.
That is also very healthy.
Compared to what a food and beverage categories, where the new entrant comes as a private label.
You know a business at least the new entrant comps at the very top either as a craft, whereas a global brand and that give consumers to trade up and that's beneficial for the category beneficial for players, especially for the.
Leading player in that market.
So when somebody comes to a market and starts developing or <unk>.
He's asking as well and the print segment, if we don't sleep on the wheel well gonna be the biggest Matt no beneficiary.
Oh.
Oh, that's segment going faster right, so and that's what we want to do as more people investing seltzer, we want to have a close to fair share and at some point fish here. So as a segment gross we take our fair share of that growth today, we're not there yet.
Got it thanks.
[laughter] and this was my final question. If your question has not been answered please feel free to contact Investor Relations team I'll now turn the floor back over to Carlos Brito for closing remarks.
Well, thank you Maria and I'd like to do two things into schools. The I'd like to close a the business sports and then I'd like to close and talk about though I'd say your colleague PDP.
His last conference call, So bear with me a little bit.
In terms of the business in closing throughout the year, we achieved a more balanced top line growth between volume and revenue per hectoliter gross and made considerable progress toward our optimal capital structure. However, overall performance was below expectations were company of owners that are never fully satisfied with our results as I said during the call we'll learn from.
From some implementations and executions on prices for example, where some categories that way on the index and we tried and we're going to fix is very quickly were strong diversified company with when and why and rival geographic footprint portfolio brands and talent pool would use this learnings from this year to better position ourselves to the liver.
Long term growth, although some short term challenges I had we're confident in our strategies and plans to grow our business by delivering balance sustainable top and bottom line growth in 2020 and beyond.
So before I conclude no I want to take a couple of minutes to think Philipp you go through.
My friend, my partner or Chief Financial Technology Officer.
Well be stepping down after a long been distinguished career with our company to pursue new projects.
As we announced earlier this year Phillips his departure will be effective after a annual shareholders meeting on April 29.
Since he joined our company 1989.
Repealing body the spirits, there's room night Canadian that.
He has invited the spirit of two ownership as being the company for 30 years has been the architect of our company's best in class Best in class financial strategy and his contributions value creation or numbers.
The Phillips direction, our financial discipline has freed up resources to me that's behind the growth of our business.
Like why is he played a key role integrations of M. bad in bad as well as in a landmark combinations with Anheuser Busch Grupo Modelo and actually beat.
Over the years fit if there was developed with strong batch of talent, that's now spread across different zones and functions of our company.
Another tenant ball or E comm, Chief financial and Technology Officer.
As a great example of this bench than others, a 15 year that some of the company I'm pleasantly serves as vice president of finest for the company's South American zone as well as the Chief Financial Officer for our Brazilian subsidiary about that say.
He has a deep understanding of our business international experience developed through several positions in the finest function, including strategic M&A and Investor Relations you will be part of our senior leadership team Im a member of our Executive Committee.
Phillip Philipp you have been ordered glad you as our partner over 30 years and speaking for myself. It has been invaluable having your advice and your friendship it's been an amazing journey.
We choose the best of luck your new endeavors and success in the next chapter of your life. Thank you very much [noise].
[noise]. That's another welcome we're excited to have you a point is our CFO I look forward to partner with children, Sri will lead growth through consumer spend Christie operational excellence and innovation supported by strong financial discipline. So welcome for another right [noise].
[noise] well, thank you and I'll see you next quarter. Thank you very much.
Thanks for that.
Thank you. This does conclude todays earnings conference call I'm webcast. Please disconnect your lines at this time I don't want.
Wonderful day.
[noise].