Q3 2020 Anheuser Busch Inbev NV Earnings Call
[music].
Welcome to Anheuser Busch Inbev third quarter, 2020 earnings conference call and webcast host.
Hosting the call today from AB Inbev, and Mr., Carlos Brito, Chief Executive Officer, and Mr., Fernando Tennenbaum, Chief Financial Officer.
To access the slides accompanying today's call. Please visit AB and that's website at www Dot a bomb dot end beds dot com and click.
He called me and investors tab and the ripples reports it results in or page.
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Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements. These.
These expectations are based on management's current views and assumptions and involve known and unknown risk and uncertainties.
It is possible that Avi endeavours actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward looking statements.
For a discussion of some of the risk and information factors that could affect AB inbev future results.
Risk factors in the company's latest annual report on form 20-F.
Filed with the Securities and Exchange Commission on the 20 Threerd of March 2020.
AB Inbev assumes no obligation to update or revise any forward looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information.
It is now my pleasure to turn the floor over to Mr. Carlos Brito, Sir you may begin.
So taking a goal and good morning, or good afternoon, everyone.
Welcome to our third quarter and <unk> or in school.
I hope you and your families or stay safe and well.
First and foremost I'd like to personally Cook, a little more color for their own going upwards to ensure business continuity and a strong recovery.
The volatility of uncertainty over the past several months, but push those old to focus on what we stand for.
I was going to be part of the solution.
So overall as a food being above that means staying true to our purpose of bringing people together for a better world and doing everything we can to ensure the health and wellbeing or people or communities and our customers.
The answer her role.
Blayne all communities, it's become specially relevant this year.
We're finding creative ways to leverage our scripts to make a difference.
Maybe your west we worked with elected officials to producing <unk> 8 billion ounces of hand, sanitizer in 40 States and the district of Columbia in advance of November's general election, and foster a safe environment for voters across the country.
Our efforts have always been successful thanks to the rapid mobilization and creativity or what teams has been encouraging and humbling to see that this programs are truly making a difference and strengthen your reputation across all our stakeholders.
Today I'll first take us through the results of the third quarter and how the stress of our business and the categories in which we operate prepare us for a strong recovery.
Next I will elaborate on the fundamentals of our innovation strategy in wife has been especially critical for success. This year, you like of rapidly evolving consumer trends.
I will then headed over for <unk> to talk about our liability management initiatives and capital allocation priorities will then be happy to answer your questions.
Let's start with the results and keep pick a ways from the third quarter.
Our results this quarter reflect the Beaufort fundamental strengths of the company and the ongoing resilience of the global beer category.
We delivered balanced top line growth with total volume growth of 1.9%.
Your volumes grew by 2.6%, while non beer volumes declined by 2.5%.
Revenue grew by 4% as.
Volume growth was enhanced by revenue per hectoliter growth of 2.3% driven by healthy brand mix from Premiumization is successful revenue management initiatives, which more than offset changes in channel and packaging mix, resulting from COVID-19 restrictions.
But like growth was offset by higher cost of sales as we rapidly adjusted or switching to meet evolving demand, resulting in slightly the public line of 0.8% with margin contraction of 188 bips to 38.2%.
Well normalized bps decrease to 79 cents, while underlying your P.S. decreased to 80 cents.
Well this is demonstrated incredible resilience in momentum this quarter in a fast changing environment.
It seems to begin to eve linked to stable year over year vitamins in September.
We remained focused on growing the beer category in developing the expanding premium segment, where our global brands and leaned away with double digit growth.
He Brazil or their business delivered impressive volume growth of more than 25% meaningfully outperforming the industry by leveraging the strength of our commercial strategy in our commitment to operational excellence.
Oh innovation portfolio contributed in a relevant way led by Brahma do promoted.
We're also encouraged by the strength of our customer demand for beer.
With government subsidies, helping to support consumer disposable income.
While EBITA grew by more than 6%, we faced margin compression due to translational transactional kersey headwinds an adverse packaging mix, resulting from the continued growth of one way packaging this year, particularly kent's.
Additionally, the growth of Ken volumes is exceeded our expectations, resulting in additional costs related to be under hedge them key commodities, primarily FX and aluminum.
In South Africa consumer demand remains strong.
So our results are significantly impacted by one month outright ban on alcohol sales for mid July to mid August.
What's the government lifted the ban we observed robust consumer demand as volumes return to growth in September.
We benefited from a diverse portfolio cross various price points and styles, especially as consumers shifted to more affordable brands and bulk returnable packages benefiting or core brands.
Or bottom line was heavily impacted by operational deleverage from the month lung ultrawideband.
So partially offset by cost savings initiatives.
In China top and bottom line growth was driven by continued criminalization as our premium Super premium brands deliberate strong growth.
We grew the most market Sherman brewer's in the increasingly relevant in home channel and we're also leading and the growing ecommerce channel with our online viewer sales growing double digits this quarter.
In Europe, we delivered a solid performance will help it with a healthy top and bottom line growth and margin expansion with our premium brands, leading the way.
While encouraged by this momentum we remain cautious as we are now seeing renewed on premise restrictions across Europe.
Our global brands had a strong performance this quarter going ahead of the total business demonstrated the resilience of the global Premeditation trend total global brand revenues grew by six 8% this quarter.
Outside of their respective all markets, where this brands command a premium price point revenues grew by more than 8%.
Budweiser grew by more than 8% outside of the U S with top line growth contributions led by China, Brazil in the U K.
They'll artois deliberate double digit growth inviting consumers across the world to savor the in whole meal occasion.
Chromic continue to perform well with revenue growth of five 3% outside of Mexico with growth across the majority of its markets.
Well delivered strong results in a challenging environment, demonstrating the strength of our business and the deer category are.
A commercial strategy was successfully executed with the best in class brand portfolio.
A relentless commitment to operational excellence, coupled with our scale and agility enable us to stand out and strengthen our relationships with our customers.
This fundamental advantages of our business led to market share gains the most of Archie markets this quarter.
One of our strengths give our business a solid foundation, we're not standing still as our consumers continue to evolve rapidly.
We're seeing an acceleration trends such as online be to be platforms ecommerce and digital marketing.
We have been investing this capabilities for several years as we advance toward being a truly customer and consumer centric organization.
We're digitizing our relationships with our customers through our proprietary would be to be platform. These which provides them with convenience seamless communication and most importantly enhanced business performance.
Extending these across our portfolio has seen rapid in broad based adoption by our customers.
Also leveraging technology to offer convenience store consumers through consistent investments in E commerce, but she was usage of our proprietary platforms in our third party partnerships.
Dramatically accelerated over the past several months.
Elvish R E Commerce leadership in key markets.
That's consumer behavior quickly evolves with finding new ways for our brands to connect with consumers.
It was our in House Agency Draft line, we're delivering consumer first marketing campaigns with more speed and relevance than ever before.
Cause that address changing consumer behaviors. It's also critical that we have a diverse portfolio products that target a variety of consumer needs and locations.
The price of success of innovations like Burma Diploma and.
And Bud light Seltzer. This year is a demonstration of a thoughtful and well designed innovation strategy.
We have been evolving this strategy over time to deliver superior products to consumers with increased speed and agility.
This capability is prudent, especially critical this year as consumers adapt to a rapidly changing environment.
Oh innovation strategy is rooted in four key principles.
The first is superiority, we want to provide superior product store consumers across key attributes.
To ensure superiors added proposition our process evolves rigorous benchmarking and consumer testing prior to introduction into the market.
The second is sustainability, we want our portfolio to be aligned with long term trends. So that we go our consumers are going and maximize our return on investment.
Or goes to ensure our innovations generate year over year, consistent growth and debt with derisking and certainty prior to launch.
That's why seating and learning is critical to our resource location decisions as we aim to prioritize the right projects.
Third scalability.
Our aims to address big consumer pinpoints and scale solutions globally to take advantage of our diverse geographic footprint.
With the chairman minimum thresholds to ensure we're working on impactful projects and were disciplined about stopping projects that do not meet performance metrics after their first year.
And finally, we focus on and <unk>, we're developing our portfolio to engage new consumers and tap into new occasions and segments.
Oh innovation fundamentals have evolved over time and are categorically focused on the consumer.
We continuously engage with our consumers to insure a portfolio addresses the most the structural and stubble trends.
In addition, we Labrador category expansion framework to broaden and different shapes or portfolio, Amy to find opportunities to fuel the light white spaces.
From here, we bring products to life through our dedicated seed and learn approach.
This process has evolved dramatically used to take up to two years and now we're driving toward out 100 date concept to launch timeline across all of our markets.
We start with smaller local pilots, which allow us to gain critical lines quickly by seeing how a product actually performs in market.
This gives us more confidence for when we do decide to scale are winning innovations and approach recall proved and move.
Our strategy has resulted in the portfolio differentiated innovations that address common consumer opportunities and growing mega trends like pre musician health and wellness and purpose driven breads let.
Let me tell you more about three success renovations that address this mega trends.
Starting with Bud light Selsor, we launched this product in the U S. In January it's volume is more than 40% incremental to the deer category and more than 75% incremental to our portfolio but.
Itself as the premium product with 100 calories in less than one random sugar made with natural fruit flavors.
Burma Duple multi is another amazing success story, the delivers of New Bureau, malt experience to consumers by blending bilson molt with the Munich molt.
Which results in a striking flavor profile.
It's off to a strong start and is now the leader of the corporate segment in Brazil after only five months.
In Ecuador, a local crop innovation Nordstrom Shimura was developed in partnership with the government.
It is supporting and developing thousands of farmers in the country, while delivering incremental volume to the category.
We're offering a high quality local product at an acceptable price point to broaden our address book consumer base.
Successive like these are the result of a consumer centric strategy, which is driven an accelerated innovation performance over the last three years.
The contribution of organizations to total revenue is growing meaningfully.
Last year innovations contributed approximately $5 billion for global revenue.
In addition, our share of innovation has also been gaining momentum in any of our key markets validating our global approach.
In summary, or innovation strategy, rooting, consumer centricity, and agility physicians as well to drive future growth.
It was one of the key drivers of our performance this quarter and will continue to leverage this capability to successfully navigate the volatile environment as consumers adapt to the new reality.
So to wrap off before I hand over to one of our.
Or third quarter results reflect our fundamental strengths is the world's leading brewer and the resilience of the global gear category while.
While we expect our performance in the second half of this year will be better than the first the environment remains volatile and uncertain, especially with some governments are with new restrictions.
Little leverage them rivaled assets of our company are diverse geographic footprint with access to high growth regions are clear commercial strategy. The world's most valuable portfolio via brands industry, leading profitability and most importantly are talented team of true owners to continue our momentum and this fast change.
Environment.
Now I'd like to hand, it over to federal General.
Thank you Britain. Good morning, good afternoon, everyone, I hope, you're all safe and well.
Before I take you through a recent liability management initiatives and kept on location priorities I would like to highlight our company's partnership with the United Nations.
I am proud to represent a bean Bev is a founding member of the United Nations Global compact CFO taskforce.
Whose <unk> corporate investments and finance should United Nations sustainable development goals are refugees.
The task force was launch it alongside the United Nations General Assembly in September I.
I had to put 20 to speak about <unk> being bad is approach to sustainable development highlight.
Highlighting the challenges that are most material towards business and delivering impact at the local level.
Our participation in the task force in our brother engagement booting, the United Nations General Assembly reflects our company's commitment to the Stg's.
And more broadly our commitment to building a better word for our consumers our customers and our colleagues.
The pillars of our sustainability strategy of sensitive around water.
Quota energy and packaging.
All of which are fundamental two hours a day to day operations.
And that's why we always see that sustainability is not just part of our business Ud's our business.
Now let me update you on the recent liability management initiatives, we have undertaken.
As for disclose it at the end of the second question. Our total liquidity position as of June 30th amounted to more than $34 billion, consisting of the $90 billion and wrong revolving credit facility, what ICF and.
And more than $25 billion of cash.
This equated amount was Hyatt then we required to manage our business evening times affiliated relocate it then.
Therefore.
<unk> 30.
Successfully redeem at approximately $11.4 billion of near term that through a combination of tender and make whole exercises in line with forward the leveraging commitments.
As you see on is like 20.
Our <unk>, our well distributed across the next several years and recently undertaken redemptions considerably boosted our obligations for the next five years.
Risking the front end of our debt profile.
As a reminder, we do not have any financial covenants on our tired of that portfolio, including our our CF.
Our bond portfolio remains largely insulated from interest rate volatility as approximately 96% holds a fix it right.
Furthermore, the portfolio comprised of a diverse mix of currencies with 56% denominated in U S dollars and 35% in your room.
We've recent redemptions, we have further expanded our waited I've had asthma too rich by more than one year, two roughly 16 years.
Finally, we continue to have a very manageable waited a rash coupon rate of approximately 4%.
I will now take you to our capital location priorities.
The first priority for the use of cash is to invest behind our brands and to take full advantage of the organic growth opportunities in our business.
Second deleveraging to around the two times and that that would be the ratio remains our commitment and we were pyrrhotite debt repayment in order to meet these objectives.
Good.
Who's spectrum, any we always be ready to look at to put points when and if they are rice.
Object Charter Street financial discipline and deleveraging commitments.
Our priority is returning access guests for shareholders in the form of dividends in order to share buybacks.
In line with these longstanding capital location of priorities, our board determined that it would be prudent and in the best interest of the company to forego the 2000 and planning entering dividend payments.
Why are businesses delivering proofing results, we continue to face uncertainty and we'll activity in light of the COVID-19 pandemic.
This decision is consistent reformer financial discipline, and pure Thises, our deleveraging commitments, which has been impacted by the COVID-19 pandemic.
The box proposal with respect to a full year 2020 dividend will be announced that we follow a full year 2020 results on February 25th 2021.
The organic growth for forward business, our teams have shown incredible rajiv easier significantly reducing discretion that expenses during the elevated volatility of the first half of the year, but then people too quickly to invest as being vitamin began to improve.
We will continue to manage our capital with a long term mindset.
Managing our resources effective to drive future growth.
And with that I'll hand back to any call to begin to Q&A session. Thank you.
The floor is now thanks for question and answer time limit.
One question and one follow up question.
Again, if you have a question or comment please press star one on your Touchtone phone.
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Thank you our first question will come from the light of Edward Monday with Jeffries.
Morning afternoon, everyone I've got one question will follow up.
Just on the innovation Retyping under.
Yeah, I'm, a pretty talks about room for the introduction of another call plus brand can you talk about the health of your innovation Plotline Glibly and how do you balance complexity of innovation around and also margins.
And then the second question that on the news.
Capabilities on slide 10.
Recently, given to deal 10 principles with.
With a new principal around serving in partnering with customers can you provide a few concrete examples of what customers liked about any bees platform.
You're better off.
Chemo as well as provide an update on the rolled up they fall.
What does the Plotline looked like with regards to the Lola was water market.
Sure Ed just so I make sure I understand your first question was about any specific market in terms of innovation or just in general.
General innovative plotline lately.
Okay, well so in terms of innovation this quarter, we decided to.
To make it a bit more transparent the the way we would have been evolving in the way of innovation prices is rooted on a couple of key principles like superiority sustainability scalability grim mentality gives you a global footprint.
Scalability Z key because we wanted to focus on things and put our resources behind things that can be big and can be scalable and can travel to different markets of course, the number one.
On on.
On innovation will always be to be consumer centric. So we strive to have very getting sites better than others. So we can root organizations on pinpoints that are out there for consumers and customers as opposed to.
Solutions in search of a problem. So we try first to see if there's a problem. We've tried to see if there is something that has a good market fit and that's why we do pilots and then we kill things that don't work and invest behind those that have the potential and it also aligned with long term trends.
Try to avoid things that are there just for one season, we're trying to to invest in things that are there for the long term and they're also incremental to the category into our business, but those are the.
In terms of complexity with.
With technology. It is true that today there are two things first consumers expect more assortment of Richard assortment from companies and that's why the category expansion framework helps us identify occasions needs and pier our portfolio.
Today in future put forward it to those needs.
But also with technology, we can manage a more complex supply chain, because we have more information data points and it's clear for us to see what's working what's not working and we have a discipline of also killing things that are not working to also avoid that complexity would try to stay with good complexity complex liquids value.
So in terms of your second question Chimps obese, we've been invest enough for five years.
[noise] digitizing the relationship we have with customers and also consumers customers being are the first one was started and.
And what's good for for customers and these is that they're not relying on the sales rep visit because sometimes the sales rep will come and they are not present during the bank or solving something or buying something for their business in the supermarket. So they missed that visit.
Also they don't want to be dependent on the phone call from our tellers sales representatives, they like to be independent and today everybody have apps for everything they do their lives. So.
Go with the bees app they have access not only to ordering assistant that they can order products independently whenever it fits better they're scheduled but they also have a single place I one stop shop for all our new products promotions availability of products.
The time of delivery and much more things that will continue to add to the platform. So what we used to be a pipeline, where our products. We'd go and cash would come back now it's beginning to be more and more platform. What we can offer not only our products other products in the marketplace format, but also the digital wallet.
And other services. So it's something that's very promising and adoption during cold it escalated or.
Big time.
So.
So we're very happy to be to be and again the number of users increased nearly by 40% just in this last quarter.
Thank you.
And which which market then so far and what how do you see that sort of progressing across the wider business.
Yeah, we're expanding first throughout the Americas.
That's that's R.
First let's say.
Southern countries, but it's a global project and we have dates in the next year or two for all markets pretty much.
Okay. Thank you.
Thank you.
The next question will come from the line of temperature Stirling with Francine.
[noise] hybrid Fernando at two questions from my son to please.
Brazil had spectacular performance in the cool shortly 25% volume go. Some beer is remarkable could you just took us a little bit about the factors that lay behind that and in particular, then how many of those that you think.
Two four and beyond.
The second question is in the U S. Again, I'm just trying to scratch my head to remember the last time, you gaming chair in the U S and I think it was eight years ago and four to 12 so.
So can you just again talk a little bit about what lies behind that slogans any improvement share train and is that something you're expecting to continue into the next cool cause as well.
Travers searches of Brazil.
We had does it said an amazing born in performance ahead of 24, 25% volume growth this quarter.
So meaningfully outperforming the industry and for sure gaining Shea what's behind that couple of things first acceleration of our innovations so going back to the question right before this one about the innovation prices soon Brazil things that used to take two years to go to market note takes 100 days now.
Case with parameter promoted and sculpture molt. So those are two things that were really key get things the resilience of our core brands drink covid as it happened all over the world consumers went back to trusted brands the brands. They know they like they used to in our core had a very good performance.
In the second towards the end of the second quarter, but also the third quarter.
Also the premium portfolio continue to grow double digits and that has been also in our global global brands are leading the way and I think trouble the the whole thing about our operational excellence that we always pride ourselves on was very much in Vogue. This this quarter because of all the lockdowns and everything the way we were.
Nimble and agile to adapt to a new way of working with our you know.
Retailer's.
And the needs of our consumers for example said delivery.
Courier platform to deliver it being 40 minutes call to your doorstep grew a lot because of the conditions in which consumers who are subjected to it with the stay at home.
<unk> and now the service is now present enroll 27 presents states and the number of orders are escalating JFS month after month after month, but I think all this is something that played in our in our.
Favorite here to support this 25% more growth that had also a share component to it.
So I think our strategy walk you well operational efficiency the scale, we have in the country. The brands we have.
Most of all the people we have people in Brazil used to.
To the kind of situations that a pandemic or situation like have been NAMIC could.
Face.
We could face and that triggers lots of changes, but again, let's let's be realistic here, we're not out of the woods yet regarding the pandemic. So will continue to be very vigilant and alert because things I just see in Europe now continues to go back and forth.
In terms of the U S. I think what's more important than gaining share. This quarter. Trevor is the trend of the last few quarters. I think we have another strategy for three years that is inconsistent that's firing in all cylinders and as we get more and more of our volume you said.
<unk> set of growing.
That's the reason why we see our share that was negative became less negative to flat last quarter and now to a positive. So I think the trend is more reassuring than one quarter. There's one quarter that doesn't tell the whole story, but I think this trend is rooted.
On a strategy that's working.
Have michelob Ultra you have.
The fastest share gainer.
In the beer space without Fnb's in the U S. Yeah, but like Selsor the normal one innovation in the market, including F&B as as well once in January and we also have improved trends in our mainstream brands.
So I think and we also live growth in a category.
Chemezov, including Fnb's E. B was the one that had the highest share of innovation. This quarter again, so I think all those things are contributing let's remember, but when we got your 10 years ago. All our brands, we're seeing segments that in the first few years, where all the client segments like light beer.
And so many other segments value brands and all that now we have a lot of our actions segments that are growing like craft specialties like the.
The Selzer's segment.
Like the the Michelob Ultra segment. So I think we're beginning to see that a lot of our portfolios Moore.
Pointed towards segregated growing and that's what you see in the in the overall mix.
So thanks, thanks very much.
Our next question will come from the line of all of their Nicholi with Goldman Sachs.
Hi, Good morning, brighter Fernando just one question if anyone follow up just on the on the first question is on the hop says well, so you're getting Shenzen U S feet.
Hey, why don't you both for your for projects about your lunch on lean in January I'm, referring to Tibet Lighthart says that for instance, now we've seen your competitors in both be and also soft drinks launching brands outside of the U S.
What are your views on the potential for that category outside of the U S. I'm thinking Australia about bringing in Mexico, or even Europe and can we talk about your strategy on this and then just to follow up on the slide I think 21.
You waited that very age maturity is now 16 years has increased by about the circumstances of 12 years on the a couple of years ago going forward would you seek to expand with maturity silver or kinda, we can see them about the main objective could be to reduce your advanced coupon rate, which is 4% today. Thank you very.
Much.
So for the for the second one Santa will take this one a month to maturity kept your first questions just to make sure I got it right. The developed selsor expanding outside of the U S. Rep, yes exactly.
How ya yeah. So yeah. So what we see is that trends that are set in the U S. They tend to travel well and that's no different with Selsor, we believe.
So now sell certain Canada is already a reality, but we have very strong brands and self in Canada.
For example in Canada two of the top three fastest growing families of brands himself in Canada hours neutral being the biggest one will successful. We're also quality additional hard sources in other markets like the UK, where were launched Mike's hard seltzer.
Of course still early days, but it's it's one of the leading brands and a nascent segment. We also went to China with myself. So the first hard sell some China was zero sugar lowly busier.
Low calories. So we're beginning to see that yes, there is a nascent ah.
Consumer need an occasion that seltzer.
Is set too and that we're using our global footprint to expend things were learned cross markets, while the market, so you're a social being a different.
Thank you.
Thank you and what is it on your on your second question on our deck to Mcdonald's profile.
Even before all the initiatives we have been this year, we have on and off any health for that matter for firewood for very long wait to divert asthma students are given all of the more like television and a certain that rising from cosby's hour stretch issue as much amount of the risk in the front end.
So we.
This will eliminate any meaningful my thoughts on the next five years.
And that Cup, where it's really creatives and shows that we have a very very health risk profile. So that was the main object rather than gaining one extra year of operated avalanche from activities.
And now going forward given that it would have a fix it racing pretty much 90, 596% of all of that I don't feel that the average per point is going to change in a meaningful way, but the fossils which is one a hostile audience. When we lay our car number two is to reduce leverage and go to answer two times on that.
So the focus is going forward should continue to reduce the current off debts more than any liability management too.
And Mark duty talk to a tactical Paul.
Thanks, Ma'am, thank you very much.
<unk>.
Alright next question will come from the line of can get as a lot with credit. Please.
Hey, Brita Fernando a couple of questions for me please.
You you talked to note about the resilience of the B category can you just just elaborate on how you sent the categories performing this is wine and spirits, particularly in your major markets.
And then my second question is one thing been noticing gives us as the on trade reopens. The trade is not really slowing.
Are you nursing that a unit sink permanent changes in consumer behavior people, just drinking or more occasions any thoughts run that would be insightful. Thank you.
Well I think I I would go for the second question first I think it's too early to talk about.
Don't tradeoff trades, and how it's going to play back and forth because you're afraid yes. It has reopening the markets, but now in Europe will see it going back.
Also when bill unfree reopen there were still restrictions.
In terms of capacity in hours of operation.
So I think it's too early to say how window and traders fully back to 100% operation what consumers will do in terms of how they splits or occasionally between home and auto home, which will have an impact on on trade it off trade volumes.
<unk> that you are paid was able to pick up volume from the on trade.
In in all markets.
And what we saw is that what was really.
Worse for our business wasn't a stay home restrictions.
Because if it was about two and trade being shut down a restricted consumers could find a way. If it was about you cannot leave that you're home then that's the restriction that really affected us most.
In terms of the first one.
In beer has proven once again to be very resilient.
It's also choose abuse move into new occasions. For example, we see that feels at home since people are not go into restaurants, they're having more meals with family and maybe a small group of friends that whole gives begins to penetrate into location that was more wino occasion.
And it's also we can see that is rising in terms of frequency and penetration. So people are drinking in a more moderate way, but more frequently.
And there is also shifts of course, clearly to a new home channel with the rise of e-commerce and we've asked them behind our brands and we tend to lead ecommerce in most countries that are relevant.
In China for example will have more than doubled his share of the second brewer in the ecommerce channel I mention China, because the most developed E Commerce channel in general for beer as well and we're very agile to ship for sources, where consumers are going.
<unk> here in the company for many years has been we go where consumers go because that's where growth is in with the dislocations that took place with Covid, we had to be very agile first stopping some.
Expenses and investments that will discretionary and as you saw consumers going here and there we relocate those investments to support growth of channels and brands that we're going.
Were growing.
So and again, just one last point effective or global company and the fact that dependent to hit China, and South Korea first it for US. It was a very good line because you saw what consumers retailer's governments, we're doing and channels and how they were shifting and we're more prepared when he came to you.
Americans and African disorder.
Great. Thank you.
Thank you.
That's all come from the line of chest and mainstream [laughter] today.
Today.
So I just wanted to follow up on Travers questions Muslim, Brazil, and the U S.
Brazil, we've got normally carnival is a very big moment for you.
Like it's gonna be canceled this year decided just how should we think about that in the coming months and what are you doing to mitigate that likely events not happening.
And then second on the U S. Obviously very strong commercial strategy put in place a few years ago, but I guess from the outside it also looks like it's made quite a bit of a managerial changes in the way you manage that business much more regional empowerment, a distributor that as much happier than they used to be so maybe you can maybe talk.
About those changes and also when you look at the success that you're having in the U S. What can you apply more globally from from what you've learned in the in that market.
Well, Firstly I think both Brazil in the U S.
Ah.
<unk>.
Very strong leaders so that has been very important.
And and that's a lot of the growth in Brazil has been that we were very agile and responding to new consumer environment. The same in the U S. I think those those leadership decisions make a big difference in terms of carnival.
You know I think like and we thank you and Covid.
It happened that.
With consumer trends come in what's happening with.
With Covid.
Is that there was an increase any home consumption. So that's clear it's pretty much everywhere, but.
There were more occasions like relaxing at home smaller groups watching television livestream of music art.
Sports people couldn't go to Vegas, but they could be at home as sports came back.
Consumers are also buy more locally.
And from small upgrade the mom and pop stores so that also.
Horses to change a little bit the way we service to market.
Corn core plus brands also showing more resilience, which concern is going back to more blends that they that they trust no.
I used to and big box that was very important for core brands in most markets and core plus and everything is going digital everything's going digital orders Entertainment look ahead, delivering Brazil, now covering the whole country and cancer.
Has become at this June Covid, most markets that convenient back of choice.
What we've seen on the other hand also is that consumers have adapted.
Very quickly so when sports were not available consumers found ways to entertain themselves.
And will continue to navigate this clinton uncertainty and we'll see what happens in Brazil Carnival, Yes, it's true the carnival is a very important.
Moment of consumption, but let's not forget the carnival is also part of a brother consumption moment, which is summer.
And holidays.
Schools are out so I mean carnival adds to this whole thing, but if you start adding the layers. It's about summer it's about vacation so.
Schools are out so families travel take time off and have carnival on top.
But I mean carnival is not the only thing that is important for the location in the U S. I agree with you.
I think we have the strategy, but we also have more regional <unk>.
Strategies.
Regional colors too overdue so.
So sometimes we have some other dimensions would have a general direction, that's national but then we adapt a little bit on the edges to regional.
Particularities and the wholesalers are very involved in the planning process.
So they owned the plan that skin in the game and.
That's why it's take the system's working as one as opposed to hasn't done. So that's again merit of the leadership of both you as in Brazil.
We were having such amazing performances.
Thank you <unk>.
Our next question will come from the line of Simon House with city.
Ah. Thank you and good afternoon particular from the from the a couple for me as well please but so I appreciate you could see with centric strategy in the other category management framework Scratchy is really starting to deliver consistent sure improvement to the market like Brazil, and we've seen that come through this quarter.
Wonder whether you could help us maybe understand now what's happening in the total will be a market you reference the corona about your payment from the government support we've seen in that market I know, it's difficult to get a handle on how much of a benefit that's perhaps given all that supported pay it off of take but I wonder whether you could say, whether you've seen a slowdown perhaps an overall brasilia.
Volume since we've come through September and those governments support payments would actually halt so anything to help us with the underlying runway. Please and secondly, I suppose since we'd love to go to speak on one of these calls with you you know it's been reported that you might be planning to step down at some point next year I'll, just wonder whether you could come into Latin confirm if that is the case.
Place.
Well Simon on the first one in terms of consumer interest to you right. That's something that again as I was saying dementia as we go where consumers grow because that's where growth is.
And.
So that has been at the core.
Of everything we do and that starts with having good insights and placing bets on on winning horses.
Think in terms of the Brazil, Brazil in September yes, the government Dade was half, but we haven't seen any any decrease in our in demand because of that so again I I agree that government AIDS.
Is an important component on consumer purchasing power.
Places like Brazil U S, but again.
But people are locked down and sometimes it can not even go to work in the hospitality is totally effected. So I think post covid when does government AIDS are going to be gone, but when people can go back to the awards, we'll see what happens but we'll.
We will see what can that will be but what we can say thus far as best as AIDS have been of course part of the demand creation.
But I think there's more than that I think innovation has also been a key driver in both Brazil in the U S. As we're just talking to Tristan about it.
So in terms of me.
There's rumors that have been out there.
No we don't comment on rumours as you know we've always taken this.
Stan.
Rumors a day every day, what I can tell you salmon is that I'm gonna be doing this kind of calls with you and our colleagues ear for many quarters to come so not to worry.
Thank you for your question.
So thank you.
Our next question will come from the line up not.
Gone with Morgan Stanley.
Hi, Good morning, Brita Fernando. Thank you for the questions I have a follow up to Simon's question, but it brought everyone. How much of the group Q3 performance comes from factors that are unlikely to repeat to the same extent in the coming quarters and a quick follow on would you expect to be able to fully mitigate the headwinds from.
Transactional effects and the rising U S Frank costs and the coming quarters. Thank you.
Okay. So the second one cell number we'll we'll talk about it I was talking about the first one.
Are.
Q3.
Was based on a couple of things first we had a commercial strategy.
Was executed.
And it was nimble enough to adapt to where consumers are great, but I think some innovations are key for our performance. If you look at again.
Couple of questions about Brazil U S. Innovation played a key role like Brown with a promotion Bud light seltzer. So both of them. The number one envision in those respective markets and that came from visiting invaded or this innovation process that we're just displayed in more detail depicted in more detail this quarter because it became.
Very central to how we operate.
So I think it's it's a big thing and this will continue because as consumers that chairman or defined with the new normal will be our prices and be very fast market. Once we have an inside will continue to deliver on a new things.
And track to resolve consumer pinpoints of new occasions. So I think there's some tickets here to stay.
I think all our commitment to operational excellence and agility.
That drove market share gains in many of our key markets.
So part of our DNA.
So the only thing that's changed here is that we're using more technology to be more to be closer to consumers and retailers. So spot things that are happening with them early on in the process and replays to the big unstoppable trends of convenience health and wellness.
Purpose driven brands.
And and.
And premeditation. So I think those are trends that were very much in tune with and.
Local crops for example that are now more and more present in many markets.
Throughout Latin American Africa is something that talk about purpose driven brands.
At an accessible price.
Very important.
And the other one.
Is the confidence in the resilience of our business in the global via category.
If you look at the year to date tomorrow, which suffering as a category as an industry and then we had a very tough first quarter second quarter. So we're not winters and just pandemic.
The only hand, what we see is that when consumers.
And you.
You have more of a normal life in the category It comes back.
So you know when consumers are locked out when we have a very tough time.
Again, so resilient category and we are we had a scale and more importantly, we have the global footprint. So when we learned about the pandemic and what was happening in China that was instrumental for us to be ahead of the curve in Europe America's in Africa, and maybe that's one of the reasons I would perform better sure wise, because we knew what.
To expect in terms of consumers channels and dislocations that would happen in the overall business.
On the other hand.
While we expect that the second half of this year will be better than the first the environment remains very volatile and uncertain.
She is we see now increased on premise restrictions several markets like Europe. So I think those are things that are.
That.
Some things are here to stay but those restrictions that poor relax during the third quarter. They can come back at any minute likely see now in Europe.
Lower continues to focus on the things that we have under our control like efficiency and be very effectively resource location.
Thank you.
And I cannot.
Fernando here on your second question.
It's correct next year, you're going to face some pressures effects pressure, especially Brazil and to a lesser extent Mexican Columbia.
Our view is that we have on hedging polis, which gives us time to react and work on initiatives to mitigate or to try to offset this effect of course.
Given the magnitude you are not going to be able to offset all of that so we're gonna have some margin pressures next year.
But.
You should take a step back and take.
Brother Luke.
With the sort of an industry, leading magazines that we have we have enough flexibility to add this short term productivity without having to make short term decisions that may be negative to the business or maybe negative George of course, our consumers and customers.
So we never looks lose sight of the long term growth of the business. So as brittle mention we are going to continue to focus on.
Efficiently and effectively investment resources behind the opportunities for organic growth.
Always subject to the financial discipline.
So and on the other hand, who have trained in like the immunization, which growing all four markets and they should continue to support margins even in these in these more challenging environment.
So overall margins. Unfortunately, it's very important but I don't really want to metric by which measures performance at the end of the day, we always being and she'll bring more than anything else more than anything else incremental dollars to the company.
Thank you.
The next question comes from the line of James Edward sounds with our <unk>.
Yes, Hi Christmas Amanda.
I presume you Bruce you guys participated in the boots discussions around policy. The dividend. We'll go see you said nothing about you so full year, but could you give the script more color on on the thought process. The board went through.
Hi, James Fernando here I believe it's fair to say that.
As brittle mention that our business is delivering proofing results and we get a strong third quarter.
But what does this too uncertain and a volatile given the COVID-19, pandemics so with that background, we thought it would be prudent and in the best interests of the company to affordable 2020.
Entering dividend payments.
But but no decision has been taken so far on there for 2020.
Dividend and we will announce.
<unk> what is the final 2020 dividend in February 25th 2021.
And another another important seem to highlight is.
We finished your last year at a four times and that two of data.
We were part of the year on track to finish this year, we found him restarting factory.
Ah, but Ah Portland, some pressure on this planet and property, we took a step back because of Covid. So in this context. We believe is the right decision to forgo the 20 twenties, even in to to ensure that we added to chew on track.
On our nocturnal objective to get through to US two times on that.
Okay. Thank you.
We have reached the a lot of time for Q&A. Our last question will come from the line of Robert.
Thing with Evercore ISI.
Great. Thank you. Thank you very much to to kind of follow up questions.
First you know it it would appear looking at some of the results not just this year, but also last year.
That you're taking is somewhat.
Commercial more commercially assertive strategy.
Not just in terms of innovation, which is very clear and and has been successful, but also perhaps pivoting slightly.
At the margin away from driving and leading price increases to a more a more balanced approach looking at maybe value share and and volume share just as much. So I'm. Just wondering is is that is M. I reading that correctly and do you.
That that or do you see that continuing.
And then the second question kind of going back to you know the the digital initiatives really terrific that you know in this time, the covid period that you're you're able to continue to invest in technology and and the long term kind of infrastructure for success so to speak.
In terms of the benefits that you see from that do you think it's gonna be more in terms of the top line or in terms of operating leverage. Thank you.
Hi, Robert Brito here, so in terms of being more commercial sort of.
I think we've always been because if you look at our.
You look at our value creation trajectory. He was always base pretty much have have one organic and have one inorganic. So we've always been very assertive on the inorganic site.
So service on the organic site in having brands that we invest behind the come in the premium. So we can have the kind of margins we have that are.
Way bigger than our competitors.
So, but you're right.
Continues to two two.
You too.
252.
And evolve.
Nation process and that is you know.
Proving to be the right decision and during cold, but it was very important so we could.
Fast and be nimble.
The Dallas top line growth bounced topline approach is something that is here to stay.
We think that there is a healthy balance between.
Nice mix and volume.
Is the best way to go.
But we learned with us <unk> about the market maturity model, both the category extension framework and that has been embedded in our strategy now for four years and is now more and more visible and anyhow.
Eight of the 10 most of that it would be a brands in the world. So I mean, that's because we've been investing in the in the circus mode behind those commercial initiatives. So I feel good about where we're headed.
And it's never perfect, we always learning, but that's why this time, we decided to update you on where we stand in our evolution in terms of innovation and a quarter organization played a very big role in similar IQ markets in terms of digital Robert.
We started visitor investments in terms of me to be able to see <unk> as you know five years ago and all those things are growing but with covid the growth accelerated in a dramatic way and we're very happy to see that those investments are paying off and that all consumers and our customers see value.
And using those platforms. That's widely adoption has been accelerated in broad based.
And so we're digitizing the relationship with our customers through bees.
We're also getting closer to our consumers in two fashions through draft line by being more.
Might be closer to them in terms of the message and dialogue with them too.
Last line and social media and be very quick to participate in need of dialogue or events, that's happening with our branch, having an opinion and not all events, but the events that have to do is Ah brands.
And also getting physically close to them.
In terms of delivery.
To the consumer to their doorsteps, a cold beer in 40 minutes. So what happens that early investments have now proven to be the right decision and covid accelerated trends that were already there and are very obvious and adoption much faster. Thank you.
This was the final question. If your question has not been answered please feel free to contact the Investor Relations team.
Will now turn the floor it back over to Carlos break out for closing remarks.
Yes, thank you to call and I'd like to close by saying. Thank you. Thank you to everyone on the front lines for their commitment to keeping you safe and thank you towards teams around the world you inspire me everyday and I am so proud to be your colleague in your partner.
Thank you for joining the call today all of you we hope hold your stay safe and well and we hope to celebrate a strong recovery over a beer soon thank you have a great day bye.
Thank you. This does conclude today's earnings conference call and webcast. Please disconnect your lines and have a wonderful day.
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