Q3 2021 Anheuser Busch Inbev NV Earnings Call
21 earnings call them, what cats will begin momentarily as a reminder, there will be slides accompanying today's call to access the flights. Please visit avian beds website now at Www Dot E D dash in Bev Dot com and click on the investors tab and the results Center page if for some reason you're unable to view the slides.
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Welcome to and has their bush in the third quarter of 2021 earnings conference call and webcast hosting the call today from a b in Bev or Mister Michelle's Eucharis, Chief Executive Officer, and Mr. Fernando Tenenbaum Chief Financial Officer.
To access the slides accompanying today's call. Please visit a b in depth website at Www Dot E D Dash and Bev Dot com and click on the investors type and the reports and results Center page today's webcast will be available for on demand playback later today.
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Some of the information provided during the conference call may contain statements a future expectations and none of a forward looking statements. These expectations are based on management's current views and assumptions and involved known and unknown risks and uncertainties. It is possible that a b in bev 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 risks and important factors that could affect a b in bev future results C risk factors in the company's latest annual report on form 20-F filed with the Securities and Exchange Commission on 19th March 2021.
A b in Bev assumes no obligation to update and revise any forward looking information provided during the conference call. It should not be liable for any action taken in reliance upon such information.
It is now my pleasure to turn the floor over to Mister Michelle do terrorists, Sir you may begin.
Thank you Jessie and welcome everyone, Florida.
<unk> 2021, or a new school.
It's a pleasure to be speaking with you all today and I Hope you and your family sort of thing well do safe.
As the old we open I'm looking forward to being able to meet with you in person in the near future.
Today, I would like to start with an overview before third water or anything performance and cute commercial bill sustainability highlights.
Then I will hand, it over to put a number cause it goes over financial.
After that we'll be have to face your questions.
So, let's see we forward operating performance for the quarter.
When compared to the third quarter Australian 20th we deliver top one group of 7.9% with the help of $3, 4% volume and 43% revenue for Hektoliter. The reason body revenue management and Premiumization.
If this increased by 3% we send they did the monitoring of 36.5%.
Versus 30 work, they're 2019 people names levels, we grouped up line by low pings.
Driven by different system execution hold his strategy any strong underlying consumer demand for dollar brands.
This quarter. We also returned to grill at the did the level the third quarter twin 19, as we continue to manage our cost efficiently.
I would underline EPS inquiries from 80 cents to 85 cents an hour normal life EPS was 50 cents.
We've delivered a strong performance in the context of a challenging global put it in the environment could I said I said by ongoing COVID-19 restrictions commodity inflation and supply chain constraints.
Our results were driven by relentless execution demonstrated by our team.
System investments email or brown and accelerate the digital transformation.
He liked before consumable amount. So we are raising the bottom and offered a visitor grill guidance from 8% to 12% took down to 12%.
Looking ahead to 2022, the current supply changes Ructions, we result, the highest input costs.
We have a proven track records also put anything effectively inflation learning environments around the world.
We will continue to deliver on our best and clouds revenue management capabilities, why you're relying on the straightforward brand put fun any handset digital capabilities to open my our performance.
In like us to discuss the headwinds we continued to meet the moment and we have already taken action, we've increased pricing in several markets, such as Brazil, Mexico, Columbia, China, They may Julia among others.
Now I would like to share some highlights from our key markets.
And the less both revenue and it did that grew by mid single digits. That's the screen 19.
Compared to what they're 2020 hour top line decline it by Avb's.
This water driven by a lowering the street and supply changes ructions, resulting email the stocks.
We will remain focus uncle system execution, apart from Mercury strategy and rebalancing our portfolio towards faster growing Ah both court segments.
He Mexico, we delivered high single digits top line in mid single digits bottom line versus 10 19.
Fueled by ongoing portfolio development digital transformation and continued Chen new expansion through also and will dilemma.
All of this platform continues to expand now comprising nearly 70% of our revenue.
In Columbia, we delivered record volumes Dishwater growing top and bottom line I had the pandemic levels.
Support the bees parked bioware innovations B O to shut off total alcohol increases by approximately 120 basis points.
Year to date August versus the comparable period in 2019, resulting in the country's highest b a per capita consumption in 25 years.
<unk> now represents 85% of our revenue Columbia with an average N P. S. A score of 56.
In Brazil, we achieve all time high Rolling 12 months B, a volume in third quarter 2021 growing volumes by 7.3%, Dr. Seuss third quarter, 2020, and by 35% versus 30 factor 2019.
We outperformed the industry for the fifth quarter in a row according to our estimates.
All segments of our via portfolio grew by at least double digits versus the same period in 2019 with premium and <unk> segments, leaving daily.
Bees now covers more than 85% of our active customers across the country.
Our business in Europe grew revenue by low single digits and it did that.
By mid single digits versus the same period left ear supported by Premiumization operational efficiencies and additional revenue management initiatives.
As vaccination rates continue to increase in our key markets and that's the whole premise of recovers our performance is improving driven by health distributions and market share gains tordella portfolio.
In South Africa, our business delivered volume growth in the media twenties versus third quarter 20th 20.
Compared to third quarter twin 19, even though there were 25 fewer trading days, our revenue decline it by only low single digits, reflecting a strong underline consumer demand for dollars.
<unk>.
In China, the implementation of COVID-19 restrictions led to a total industry decline of mid single digits. According to our estimates.
The restrictions disproportionately impacted our two regions leading to a seven one volume decline.
Nevertheless, the Premiumization trend remains as strong as though they're super premium portfolio. Once again outperformed led by double digit growth of Blue girl and who Gardner.
Moving no, let's discuss the key commercial and sustainability highlights from this water.
We continue to develop a unique and diverse portfolio of brands to reach more consumers any modifications.
As you can see them dislike date, our mainstream brands grew revenue by 4% gain sure of segment across most of our main markets.
Our premium portfolio continued to lead the way delivery over the 11% revenue growth.
Our Bill's beer brands continued to Ed profitable growth delivering $1.2 billion in revenue ear to date.
Diving deeper into the performance of our global brands.
Combined with revenues of Budweiser is Stella twice Corona grew by 5% globally and by 93% outside of the brands home markets, where they typically command upbringing price.
Now, let me talk about innovation.
Our innovations are meaningfully contributing to our results, making up approximately 10% of our revenue ear to date.
Based on the success of Burma Duple multi in Brazil, we are expanding the double multiple concept to more than 10 markets, including the launch of castle double malt in South Africa this quarter.
To address the global trends of health and wellness and will duration, we are developing a portfolio of different shape did offerings.
We are seething makayla bold Trump our premium low carb low calorie beer impair markets.
We would also need chancing, our no milkaholic portfolio by expanding Bud zero, two more than Penn markets by the end of the year.
We continue to explore any mosaic in beyond <unk> space.
<unk> how to sell Sir is leaving the emerging Seltzer segmenting, Mexico reached nearly 50% market share.
In addition kept water continues to rapidly expanding grilling triple digits in the U S.
We had also scaling the my cards brand family to more than 15 markets busier.
Now I would like to talk about how we have to a swarming our business with technology.
Our digital beat to be sales platform beef is enabling us to turn customers pinpoints into opportunities for growth.
We have lives in 13 markets with 2.1 million monthly active users.
We all put up $5.5 billion in good Osmeterium dicing value this quarter.
Demonstrating an accelerated growth trajectory in the past 12 months.
Forgive you a deeper understanding of the value we had unlucky we forward digital transformation left me walk you through the journey.
In our bees pilots market the Dominican Republic.
We chose the <unk> as the first market for a full rollout of digital transformation launching beef in 2019.
This is an ideal candidate too fast and captured learnings to inform the global expansion of the platform.
First it is a market for relevant sites, which would allow us to understand the puppy shrink back off a full transformation.
It is also a market where do we have a significant presence we for high level of direct distribution, which factually faiths rapid expansion and adoption.
Lastly, it is a market with lower digital penetration and the high level of traditional trade, which would provide those with learning on how to address perceived barriers to adoption.
We have seen exciting results since we digitally pro swarm of the market.
The platform unlucky incremental growth for our business and our customers.
The digitization of a relative market enabled us to fully execute our commercial strategy.
The smell of making up over 90% of our revenue India.
We are reaping the benefits of accelerated revenue growth versus historical levels.
This customer's, particularly those that are fully engage it.
We followed features offer the narrower platform, we see accelerated performance put us several key matrix, we've hired revenue per auditor.
Hiya delivery frequents and more unique sku's put a chase when compared to 2019.
We have no rule adult bees 213 countries in the last two years and.
And we are incorporating the learnings we have gang the long delayed to accelerate the digital transformation across our global footprint.
Now, let me talk to you about another pillar I'll forward digital transformation, our own direct to consumer business, which generated more than $1 billion in revenue year to date and it is growing rapidly.
The biggest contributor is elwood e-commerce platform, which grew by 92% year to date.
In Latin America, we're building Omnichannel ecosystem, we followed E Commerce Korea platforms across more than 10 countries leveraging a best in class physical presence, we fall where retailers in brick and mortar direct to consumer businesses.
In Europe, we are delivering a superior and unique at home experience through income drop in Providence R.
E stores now delivering more than $100 million in revenue ear to date.
Now let.
Let me change gears and talk about sustainability.
I am so proud of our journey and other teams.
In the way, we are advancing our ambitious sustainability agenda.
We are taking action to decarbonize those footprints.
Ordinary busier, we announced our first carnival neutral brewery new China.
This factor we achieve is carnival nil trial at Fort Our second brewery Mlr's first small calls in Brazil.
F pioneers in sustainable brewing will continue to pursue innovation and partnerships in support of the transition to a low carbon economy.
Additionally in September at the 76 session of the United Nations Global Assembly, we were recognized it as one of only 37 global corporate lead companies for our ongoing commitment to the U N and global company.
If 10 principles for responsible business and the related sustainable development goals.
Congratulations to our teams importance for these important that shipments that are driving our sustainability agenda forward.
With that I would like to hand, it over to her number to discuss our financials.
Fernando.
Thank you Michelle.
Morning, Good afternoon, everyone. I Hope you are all safe and well, let me first get you through the drivers of our underlying EPS.
Our underlying yes increase it by five cents from 80 cents to 85 cents.
<unk> it increases.
Increases by 13 cents per ship.
Next finance course, we recorded lower interest expense due to gross debt reduction, partially offset by other finance class.
We saw higher income tax expense due to increase the profitability country mix and reduce the benefits from fixed attributes was five cents per share.
We also recorded highest shed of results from associates World one cents per share.
And highest croft attributable to known controlling interest or.
10 cents per share.
Resulting from higher profits of our lifted subsidiaries Budweiser, a beck and Embeds, along with the issuance of 49.9% minority stake in our U S base it metal container operations in December 2020.
Moving on to Slide 18, you see that our debt mature profile is well distributed with most significant maturity over the next five years.
Let's elaborate further on our debt portfolio of show on the previous is right.
As a reminder, we've not had any financial covenants on our inside that portfolio, including our sustainability Lincoln revolving credit facilities.
Our bond portfolio remains largely insulated from interest rate volatility as approximately 95% holds a fix it right.
Furthermore, the portfolios comprised of a variety of currencies with 52%, but let me Nathan N U S dollars.
84% in Utah, and the remainder encourage such as the Canadian dollar palm sturdy and coriander diversifying our effects risk.
The weighted average maturity of our debt portfolio is more than 16 years. Finally, we continue to have a very manageable weighted average coupon of approximately 4%.
Now, let's talk about capital allocation.
She might be long term value creation drives how we balance our forest capital location priorities.
Our top priority for the use of caches to invest in our brands and to take full advantage of the organic growth opportunities in our business.
I will not smoke up through stricter remains around the two times met that we beat the ratio.
With respect to them and they will always be ready to look at opportunities when it needs to be a rice.
It is subject to all the strict financial discipline and deleveraging commitments.
Finally, we ain't to return excess cash to shareholders in the form of dividends and larger share buybacks.
However in line for financial discipline, and 11 is your objectives, there will be no entering dividend.
The board's proposal with respect to a full year 2021 dividend will be announced that we fall a full year 21 results on February 24th 2022.
I will now handed Beck suggested so we can begin to Q&A session. Thank.
Thank you.
Thank you the floor is now open for questions and the interest of time, we will limit participants to 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 remove yourself from the queue by pressing star too we do ask.
While you pose your question you pick up your handset to provide optimal sound quality.
Thank you I. Our first question is coming from the line of Mitch collect with Deutsche Bank. Please proceed with your question.
Good morning show good morning for Monday.
My first question is on pricing can you comment on the pricing environment and your cable kits uhm, you've been able to take up pricing in Brazil for example.
She can tell us what you were expecting for pricing.
And F 22.
Secondly, I'd like to ask about your direct to consumer growth I think the 60 million D. T. C orders you've achieved in the nine months and twice twice you 1 million in the third quarter will up 40% versus Q too. So can you comment on what's driving the acceleration and how.
You're benefiting from both the economics of D. T C and the additional data it brings to the business. Thank you.
Hi, good morning, everyone's industrial no. Thanks for the question Mish.
Michelle speaking here I think that taking on the first part of your question there wasn't related to price.
What we see is input costs going up across the globe thing that this is not new news and we see that that is inflation picking up different levels across different markets as well will continue to.
On the lines of routine and using your revenue management tool kits in order to face this moment and make sure that we are planning accordingly empty cans of consideration. The order was little business performance in the markets, where do we already moved with price this year some of them more than one.
So just Brazil, we see that the inflation speaking up so consumers and consumer demand remains strong.
And we have other examples such as Columbia, Mexico, Nigeria, China, where we are already on the move I'm taking actions.
When we look forward to disappoint is too early to see what's going to happen and how costs will be next year commodities and everything else, but we rely on this transfer for portfolio best.
Best in class resident management capabilities.
As well as our enhanced digital capability to help us and support us in optimizing our business.
Then moving on to the second question direct to consumer this as being a very important journey for us very relevant in delay that we've been implementing over to digital transformation.
Perhaps one of the most important components of our current strategy, we've been seen meaningful developments in the direct to consumer Covid as everybody talked about a similar rates of the lot consumer behaviors. In this front, we generated dizzy or more than 1 billion dollar in <unk>.
<unk> huge presence for a direct tickle submitting wasn't America. We are now in 10 countries, we follow that delivery our international Korea platform.
Delivering beer 30 minutes code to consumers that's great prices in Europe, we have a slightly different approach also omitted stores, but also doing perfect drafts, which would be helping those a lot to bring the direct experience between home E. K for example.
<unk>, we have a huge base of in home bar. So now that people are using referred persky thrust I think that the main mission on our direct to consumer easing month hand, best in class consumer sensory experiences.
But also gather more data understand better locations and making sure that we are there when consumers Needless Brazil's a delivery now covers more than 50% of the Brazilian population more than 200, a needy cities and continues to expand very fast not only Brazil, but.
It says a fab in another 10 countries in Latin America.
Thanks for the question.
Thank you.
Thank you. Our next question comes from Edward Monday with Jeffries. Please proceed with your question.
How shall I Fernando Uhm afternoon morning, everyone. Two questions. Please you're 100 days into the role in you highlighted in your presentation. Some of the things that are working well in that category development side and also three digital transformation.
Double down on these what extent do you think there'll be sustainable leave us a growth beyond the cover current recovery period.
And then my second question is gonna come in about two cokes.
You didn't really have the same digital capability last time industry faced these cokes headwinds how do you beat to be in deep sea assets make it easier to navigate the rising cokes environment.
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Ladies and gentlemen, please stand by we are currently experiencing technical difficulties again. Please stand by we are currently experiencing technical difficulties. Thank you for your patience.
Hi, Ed.
Michelle here. Thanks for the question I think that's where you are in new to deflect so far.
Talking about the 100 days I think that that has a lot to learn in 100 days. It goes by very fast, but when you are focused at the same time you can achieve a lot I think that your question was more into the digital part and we are doubling down on that I think that Tom digital is as a <unk>.
Nonetheless quarter that is this concept of stepping stones right. So we started this journey five six years ago, and we knew that as we progress we would be learning much more and we would be building momentum with the data that we gather we should experiences.
And we've been learning along the way what is very relevant here is that this is a long term investment very strategic we're doing first and foremost focusing on consumer and customers on the consumer front is renewable experiences and being there for.
Consumers when they want us on the occasions that they want and making us more available in a broad range of occasions, and caffeine too the digital trends that consumers are really engaging with on the beat to be this this is a very interesting opportunity to digitize part of our.
<unk> strategy, making sure that we learn more pearl noticed scale through data and then switched captured this data in we improve our execution capabilities. Our overall strategy get some much bad execution, because we free up time from our people from our team too full.
So what matters the most the premiumization of hope recalled the activation of all occasions, and this unlocks new revenue streams for US and of course, we have 13 countries now with this we continue to expand quickly in this country's we're going very deep.
72, more than 80% of our revenues now coming from bees and the more we go the more do we learn and the more we get further to put two needs to continue to expand beyond only our own business. So we have examples of marketplace. We have examples of service.
We have examples of credit and when you think of bulk Cogs, how this digitalization of our ultra market enrolled to consumer helps us it gives us more information.
Bed that ability to forecast our own volumes and how to adapt and adjust our supply chain to be more effective. So there is a lot of learning that we are building, they're a very unique position, giving you our size and our footprint and this is also giving us.
That that ability to utilize and maximize our revenue management strategy.
Thanks, Michelle and just just coming back to your examples dependent can Republican Slide 13, you said that net revenue per deliveries also going out to help for pricing standpoint.
Have have bees.
Yeah. The earliest again the very interesting market for us was the market where the team.
Decided to take these two full.
Execution, the best team did a great job that understanding all consumer pinpoints building up the tech knowledge enhancing all the models that we had a working Dr. Two weeks ago with the team reviewing everything and all the progress that we're making there so we're showing here.
The only.
Only revenues from the example, and you saw that there was an acceleration deceleration of course is a proud of tough following tyre Como true strategy not only this because that is more criminalization into market that is more innovation that is more deliveries and there.
Is more of a feel of village and this is help it and supported by bees on top of that we also have now lawlor.
Marketplace down with this so there is more revenue than the one that we put on these light and of course part of our overall strategy revenue management. So this growth that we signed these lines is the combination of volume growth.
Plus revenue correct to later growth and they are both enabled by this but also by our overall commercial strategy that has put them in this nation that has digitalization that has a very strong execution in the marketplace.
Yeah.
Great. Thank you.
Thank you.
Thank you. Our next question comes from Trefor Sterling with Bernstein. Please proceed with your question.
Hello, Michelle named Fernando.
Two questions from my side.
Internet are you increase to guidance today I was just wondering if you wanted to highlight that went so well in the third cruiser that gave you the confidence to increase the guidance.
Second Christmas was coming back to your first 100 days Michelle what she thinks the biggest changes we've made since you took over a CEO.
Thanks travel.
On the guidance and the beginning of the year, we provide that guidance of when they beat the group of eight to 12 now we already have nine months behind us. So it's natural that we raise the bulk around before guidance now we added 10 to 12.
And we continue to maintain that is going to be 10 to 12 in our revenue is likely to grow ahead of the.
It's going to be a health combination of volume and price.
It's fair to say that our teams worldwide has been successfully navigating a quite a complex environment with customer and consumer centric approach and we are confident about the momentum of our business, but farmers. So as a consequence. We are we are raising the lower end of the guidance and now we are at 10% to 12%.
Hi, Trevor Michelle taking on the on the second.
Part of your question related to the 100 days as I said before 100 days. They go by so fast, but focus always help and they queue to execute an extract more on what you're doing I think that.
The real deal on the 100 day, so far was really.
Talking toilers team and listening from west body.
I'm very impressed have been humbled by their fashion.
The execution and focus on what we need to do I continue to learn over these 25 years and really our team has been teaching me and sharing a lot with me. So I shared with you before that mine to refocus.
As I got started was really about mid the moment and deliver a great 2021 make sure that we are very clear about what's working and therefore able to investing in the solar right. What's already working why you're building. This extreme focus on being a sustainable leader with <unk>.
Assistant financial performance I think that I've talked about this on the press release, so what I'm really trying to bring to the team here has a sense of simplicity and focus and really focus on relentless execution in vast behind our branch play to my strengths I'ma market here by her.
And this is what I like doing and that Sylar rates, our digital transformation. So those are the three points, so relentless execution focus and investment behind our grants and accelerates over to digital transformation.
Yeah.
Thank you very much gentlemen.
Thank you. Our next question is coming from the line of Sandy Allah with Credit Suisse. Please proceed with your question.
Hey, Michelle Fernando My question is really looking at many of your market.
Industry demand is went ahead of prepandemic levels.
Billy Colombian Brazil.
Think is driving that and how sustainable is this do you think volumes can continue to grow on this new high base.
Thank you.
IPhone chip good afternoon show speaking here. Thank you for the question so I think that.
When you look at the market demand and the way that the category has been developing I'm very glad to see markets such as Columbia, Brazil.
Maxie call, we talked about Canada industry growing the last quarter and I'm very excited within the category of development I'm, even more excited when they think about Brazil in Columbia This quarter, because there's really category growth.
All time high volume Soviet unleashing the category growth in we Abi we are leaving does growth so he's really innovation.
The performance so far brands.
The execution of all these two strategy just two countries that has been bringing considers to be closer to our brands and therefore, we are reaping the benefits of this category of development. When you think about the long term I think that in both countries and Moreover across the globe the category continues.
To have a lot of opportunities to develop an hour learnings firmed Seb model and never seen that there has been building over the last five years and accelerating now we forward ideas of what the category expansion module can do and be for US is very exciting and beer is gaining.
Sheriff throat globally desire and they think that this is very good for the long term prospects in the category in Brazil and in Columbia is about innovation is about an incredible execution for a lot of teams new to markets and is about the pace of forward a digital transformation.
Thank you. Our next question is coming from the line of Simon House with City. Please proceed with your question.
Oh, Thank you home shows hunting under two for me as well. Please Michelle you talked to the beginning about sort of into the pricing you've been taking.
Late and how they're probably going to be more to come.
We look forward over the next few months.
Some of your competitors has been highlighting that given the broader inflationary backdrop, that's sitting consumers pockets that they've started to see some signs of a slowdown in some markets in terms of consumer off take for beer I'll do you think on how confident tell you in the big categories ability really to hold its fair share of the consumer's wallet again.
Inflationary backdrop as we look into 2022.
And then secondly on the U S.
How do you see the backdrop for the U S business is we're looking to keep for you clearly have some stocks in Q3 is that correct thing itself or ongoing glass and supply constraints likely to intensify from here into the year and.
Hi, Simon.
Thank you for the questions I think I got the two questions here I will start with the first one though pricing and category in with specific I think that the beef category globally has been proving to be very resilient and they think that is not resilient over the years, but.
Well the pandemic, we saw that in spite of fall changed and shifting channel Lockdowns. The consumer demand was there and continues to be there in the category continues to grow and as I said before gaining shut her throat globally I.
I think that the key markets, where do we already.
Got the price going examples, Brazil, China, Mexico, Columbia, the demand for our brands continues to be a very resilient and this has to do it for being vestments that we've been doing our brands and the number of consumers that love or brands. This has to do.
Do is forward execution sore things have been working very hard and has to do as well we have the ability to innovate and continue to support and drive the consumer demand I think that input costs. They continued to be on the rise I don't think that we have both the data to date to be quite honest.
We queue or what's going to happen as all categories. As you said an increase in prices when inflation continues to pick up but what we see as well is that there are like.
Shortage in labor solid instead of going up and consumer purchasing power continues to be strong. So in facing these inflation that a scenario, but at the same time, having consumer put chase power, we expect the Catholic World continue to perform well.
And on our site, which is very important we continue to invest in order brands to drive consumer demand innovation and enhancing our digital capabilities.
Moving them to the second thoughts, which is U S. I think that we need to step back for a second I know that you are doing this and looking at last year, if we think of more.
Third quarter last year was an amazing quarter for beer with industry growth in lead group, both top line and bottom line last year as we cycled. This third quarter, we are faced with tough comps, but also a lot of supply chain disruptions.
The disruptions came most as you just said now from glass there was two unfortunate events one was there.
End of the winter storms in the south that just cause the big Crunch and transportation, but also glass availability and the second one is the well known at this point cyber event that also correct in the north of the last this supply chain availability. So.
We have a lot of trouble together thing industry in the quarter three hour positions in terms of involuntary now are much better we are coming back to a much better supply for our wholesalers into for retailers, we're not over yet, but the position for the quarter for.
Looks to be much bandit as we got started.
Silver as a matter of fact, that's the end of September and now we're forecasts with what we know now is that is going to be bad there for quite a <unk> of course, there one next year.
Thanks for the question.
He.
Thank you. Our next question is coming from the line of Olivier Nicolai What Goldman Sachs. Please proceed with your question.
Hi, Good morning, Michelle Good mining Fernando just one question actually in the U S and.
Hops is that category, which has been throwing dawn in the recent months.
Also seen a pretty duration of Brian and in Latin extensions of only from you mature. So for many of your competitors now do you expect to be slow down to be temporary and do you think you've got to carry it could accelerate again and also what's your view on hot says.
Europe off of the U S. Sorry, and then forget about Europe or America.
Thank you.
Hi, Olivier Thanks for the question.
So two parts here's the first one is in the U S category and I would like to go back to dance so that they just gave.
And when we compare the last three months out of the quarter. Three there was really this test comp verse last year and if we all just like just think about everything that we discussed last year the U S.
Had a very different behavior in terms of industry during the pandemic as compare as the rest of our markets right and this difference was driven by Q things I would say maybe more of a two things one is the different channels in the less well off trade represents more than eight.
80% of the category and when you have though the Lockdowns Daft trade was open and there was a lot of Panther loading. The second part was how quick the government's reacted in the last switch this camel's back.
Package, and then people had money and they had the channels open and they bought a lot of beer a lot of projects sold the <unk>.
Industry in the U S performance quite well during the pandemic. So much so that even though we should this little down in the quarter. Three the question <unk> was Ah both.
<unk> 320 19.
For the industry as well as for our top line and bottom line. Therefore, I think that there was a tough comp, but the industry overall remains in good shape and the prospects of that our view are very positive for the U S. On the second part of your question when we think of <unk>.
Selzer's I always go back to this point that salesperson beyond beer are very good to deans and we see aimed as soon as like the U S. I always refer back to Canada as well that has a different beyond beer compositions are really selzer's. These industries is structurally for long.
Time, they've been with since lowdown growing growing revenue, but 90 volumes and in the last two years, they're growing and they are growing because selsor and beyond dear they attract consumers from outside of the category and more than 50% of growth of our beyond beard.
Selzer's they are thrown wine any spirit occasions, and consumers. Therefore that has a lot of increment value today.
The manifestation of this billing beer it came across this markets indifference shaping farm bright so was for siders than Celsius, then ready to drink cocktails in Canada. There is very strong.
Ready to drink beverages, but also vodka selzer's. So this is good is in transformation of the time, but what is true is that this VAT incremental and we do have capabilities because of the packaging in reached the beyond beer.
Shows up because of the channels and because of our ability to constantly innovate to take advantage of this not only North America, but also globally. We are very well we equipment as we expand beyond via globally look at South Africa, the results of flying fish and brutal fruit.
Look at Mexico, how fast, we're gaining sharing the beyond beer and down we continue to expand this in other markets I think thats seltzer and beyond.
Continues to grow in North America of course, we discuss it does at the beginning of the year, we said that growth would be around 20% to 50% as of today grow fees around 20%. The bottom end of what we said there and we continued to grow 1.8 times, what the category is growing so.
We continue to invest to continue to innovate and we are very excited reef ready to drink cost us. So put water is expanding first year to date triple digits cost is three triple digits and we are investing to continue to expand distribution, but also brings preference and grow with.
Right.
Thank you for the question.
Thank you very much.
Thank you. Our next question comes from the line of Saline penalty with JP Morgan. Please proceed with your questions.
Okay. Thank you very much good afternoon, good morning of England and my first question is from gross margin.
So that your group marching went down I think I think that'll be 130, internet <unk> going to need a quarter.
He did cause People's call you to give us a bit of the building block because I would presume you still have some mixed benefit and abuse me your price impact could either went this went better. So if you could answer there and given I. Appreciate you can keep <unk> for 2022, Romanticization, but I forgive me.
You have a view for the first half of the year does it mean that we should expect that kind of a triple digit gross margin pressure as we looking to each one and my second question is on innovation. So you said that innovation west 10% off your sounds here to date, how do you define innovation.
Like.
And can you put <unk> on how many I mean on my time frame bases and I stood at you as a plan a lot up rule out uhm, yet so HED and then in.
In the quarter was flat so what is the absolute fool is TNA as we look into the next yeah. Thank you.
Oh, Thank you psyllium phone number here on your gross margin question I'm going back to our guidance our guidance would be to grow it beat the 10% to 12% and we were saying that our revenues would be growing ahead of.
Of our data and the main reason for that and we discussed that several times you've given the effects in commodities pressures that would have on a cost of goods sold that will have an impact easier.
On 2022, we're not giving any outlook yet.
So, but why do we why do we be seeing is kind of the different forces for Michelle comment about being would cost pressures. So they they are here they are real.
On the other hand, we have a lot of thought that initiatives on our revenue management on our digital cable Davidson innovations to be able to manage through that.
Okay.
In your questions on innovations what innovation, how we calculate innovation.
Nation is is.
New products that didn't exist over the last three years or 36 months. So that's how we define innovation on all the numbers.
And an entertainer.
No. We're not also giving outlook on S. A J.
The only outlook that will give you an hour the deeper the 10% to 12%.
Thank you.
Thank you. Our next question comes from the line of Nick Oliver Wood UBS. Please proceed with your question.
Hey, Thank you for the questions to from my site as well firstly on Brazil, if you could just share a bit more color on what appears to be a material outperformance in the market in Q3 at least versus the production data that we old trek.
Secondly, a longer term question I guess in the past we tended to think about a b in Bev as an epidural margin expansion story.
The state is more about the company know installer profit growth.
As opposed to purely margin given some of the commodity precious we've talked about and also some of the innovations, which I guess maybe additives.
Dollar basis, but not always from a percentage basis.
Thank you.
Hi, Nick Michelle here.
Thank you for the question so starting we if Brazil I think that.
Lots of things.
About Brazil, but maybe you start can leave one general concept, which is probably when we look at Brazil, and our commercial strategy. The top line growth, Brazil as one of the countries in reach our strategy is more developed and the.
Implementation is well advances flown portfolio rebalance to innovation to digital transformation in the consumer end, but also in the retail and we have a great team in Brazil that execution itself standing and Dave.
<unk> pushing this will this strategy.
Relentless even face of hold the challenge that we had during the pandemic for the advertising our people our communities and our business partners I think that the destroying Brazil. As you can see is really a topline land recovery because there is a locking effects.
And commanded sets for another was saying before and three main points and Brazil rebalancing the portfolio reigniting and the silver rating innovation and digitizing our business in the consumer front, but also in the retail front.
When you think about the monitoring question I think that's an excellent question because we we have from the mental drivers.
That day.
Give us believing.
Margins that we haven't things right. So dobrynin portfolio for brands that we have and the premium price that this brands command in each and every market.
Our consumer centric strategy and digitizing now our right route to consumer and our growth to market. It only gives us enhancing capability to continue to drive our margins our leadership position in the key markets VAT imports.
Since industry Kraft foods, our operational excellence.
And the way that we manage our business and most important of all our ownership culture. When do you think though about the long term and just think about this year. For example, our top line growing ahead. The bottom line is because that is a lot of growth that we are pursuing in this group.
Can be incremental in terms of monitoring and cash flow generation.
And therefore, we want to pursue growth and I think that you're right. When you say that the dollar growth is what it is more important than the only the margin growth.
As a matter of fact I always use like two examples to build on that I think that one we just talked about.
Beyond beer and Cutwater for example.
On that dollar product delita, each and every case that we sell cutwater has higher margins productivity.
But because there is a lot of costs that go in between the next revenue in the marching and because we are still building scale on cuts water.
For Central marching that you get on each case is not as good as a case of beer on a case of Bud light in the U S, but it's too.
Total marching total practical later is VAT incremental.
When you're down deploy your full commercial strategies digital proud that we have example, ditches just gave in Dominican Republic, you can take a lot of examples where you're monitoring is on a percentage base much about it because he is.
Fixed cost is a third of this type of margin you'll get more dollars in a lot of incremental margie from the digital products that you're offering. So the boss offered her thing is very hard to fly on a short period of time, but the most important thing getting.
That you brought the point is how we bring incremental profits incremental cash flow.
Great Great that's super clean up thank you so much.
Thank you.
Thank you our final question will come from the line of Rob Einstein with Evercore. Please proceed with your question.
Great. Thank you very much when I when I look at the the global beverage space and particularly the global alcohol space.
I don't think I can remember a time in which the valuations.
Between the beer companies and the spirits companies has ever been this great and.
And certainly the Dr shows in the per knows are fantastic companies, they're doing really well, but the valuation differences between them and and you know yourselves and Heineken are really hard and my mind to kind of get around and clearly the spirits companies are doing better than the U S U.
Mentioned, though.
Throughout the presentation that globally.
Beer is gaining share of alcohol. So given the extreme disparities in valuation can you talk a little bit about how that informs your strategy and maybe a little bit more details about what is going on around the world in terms of beers performance versus spirits.
And whether you see opportunities in the spirit space, Obviously RTD is something you've mentioned thank you.
Ah Robert Good morning, and thank you for the question, so I think that.
That is several pieces of the question I will try towards Razzing the sequence that too broke to us.
But in terms of valuation I'm not going to to get to deepen that they know that you all are much better than I am in the work of making the devaluation of the companies I think that there is a couple of points, though that are very important for us to highlight here as I said before first.
I think that we all saw how resilient the beer category, what's over the pandemic and they think that these needs to bring us to reflect the ball the way that we've been thinking and talking about the vehicle category.
And it's true.
When you look at data are monitored we've been putting some data to gather because this data is not really available for one single source across all countries, but when you combine the different pieces of data is very interesting to see that despite of narrative that they don't know homeless beautiful there be it is gaining sheriff throat globe.
Right and I think that is growing.
And it has a lot to do with it.
Illicit alcohol.
That.
Is no longer growing R b as capturing because of them will duration and because of that for the bill it.
It has to do with the expansion of the category. Some very important markets, you'll mention China, Columbia, Brazil, Mexico as we just saw and there is much more that we can continue to do so I think that we learned from west savvy.
The model of the category, but the model itself is just like the picture. The really important thing is how we are now activating the different elements of the category in the north <unk> to drive growth. When you think even more mature markets I think that it is good for us to remember always to think about.
North America U S. A Canada do you think about the U K.
Be it is a growing since 2020 since 2019 and beer is growing by innovating.
B it is growing by tackling new occasions in be it is growing by driving growth with the beyond beer.
So this very important intersection between one.
Liquid E B, it where did beyond via the fourth category as people call with here in the United States is an incredible opportunity it sources more than 50% of its growth come whine and throw her liquid.
And because we are well positioned with counts we have four production facilities and we've seen novation to drive growth in this space. We can continue to drive the category forward and we can take this lungs down to developing and emerging markets and drive further growth.
Markets, such as Brazil, Mexico, Columbia, South Africa.
We've been using a lot of data to drive this growth we've been digitising, our relative market and they'll route to consume it to understand bad not only the points of sales, but also the consumer occasions, and they believe that we are very well positioned.
To lead this next wave and to continue to lead the <unk> category to a bed their momentum and to further growth and we see this I.
Will not take this lightly but record volumes in Brazil.
Records per capita consumption in Columbia those are not the small markets. Those are very relevant markets. What has been proving that he as we can do it we can premium <unk>, we can innovate and we can leave the category. So I'm very excited with that.
Thank you.
Thank you thanks for the question.
Thank you. This was the final question. If your question has not been answered please feel free to contact the Investor Relations team I will now turn the floor back over to Michelle <expletive> Harris for closing remarks.
Thank you, Jeff and thank you all for your questions to wrap up we are staying focused on meeting the moment and delivering a great 2021 will continue to build on our momentum by investing and accelerating what's already working and focusing on Arkansas.
<unk> and customer centric mindset to drive long term value creation.
I would like to invite everyone to join our capital markets date, which would take place virtually on December six.
Additional details and links to register will be available on our website in due course finally I would like to thank the opportunity take the person here to think and express my gratitude toward 106 to 4000 colleagues globally for their continued to execution fashion and.
Ownership. Thank you all putting our time today and 40 ongoing partnership in support of our business. Please stay safe and well and I'm looking forward to talk to you soon.
Thank you.
Thank you. This concludes today's earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day.
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