Q3 2021 Ambev SA Earnings Call
Our pharma spicules PGM distinct bore thing Gmail.
Each project.
Nashville, they see a new cables coming <unk>.
No, but are selling the mutual vivo abuse. Your March please opiate almost <unk> interest you at same thing, causing part of industrial visuals that delivery Maxine symbols of seniors geodesic through Florida <unk> yields.
We will sequence you mean stimulus.
He'll also European Union part of <unk>.
But as video which has lost you there.
<unk> <unk> <unk> <unk>.
It was a muscle so what was this has been kind of will this slowdown.
Hasbro's second here is our board's walk us per year.
<unk> quite anything today August you'll maybe you.
So Paul Smith.
Mogul Aneel I'm not first of all second hand is that walk the walk as per <unk>.
Circuit seem quaint interact well skilled was actually that visual loss.
You will note that Russell.
Yes.
Athena ranch, opiate overdose or deliveries or hearing those vessel beds or so might handle xanthosine conagra's year. It was really it.
You are searching Nielsen can put towards that.
But often homo bid are holding up.
If we will see further portfolio spot.
If it <unk> seems to be good.
<unk>.
Jason.
Those are things that goes with this.
The same thing.
Two examples of that.
Linda can you hear me more of a scalpel product is resolved.
Or is the sheer openings.
<unk> enables is Colorado deal does this year.
Okay.
Okay.
Also please arrows wants to backhaul.
Paragon.
Good morning, and thank you for waiting.
They would like to welcome everyone to Ambev third quarter 2021 results conference call.
Today with US we have Mr. Yes at a sideshow CEO for Ambev and Mr. Luc has leader CFO.
So and Investor Relations Officer.
As a reminder, a slide presentation is available for downloading on our website.
Hi, Doug can that dot com dot BR <unk>.
Well after the webcast link of this call.
We would like to inform you that this event is being recorded and all participants will be in a listen only mode. During the company's presentation.
<unk> remarks are completed there will be a Q&A session at that time further instructions will be given.
Should any participant need assistance during this call. Please press star zero cherish the operator.
Before proceeding let me mention that forward looking statements are being made under the safe Harbor of the Securities Litigation Reform Act of 996.
Forward looking statements are based on the beliefs and assumptions of <unk> management and on information currently available to the company.
They involve risks uncertainties and assumptions because they relate to future events and therefore depend on circumstance that may or may not all carry in the future.
Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results Hudson Beth and could cause results to differ materially from those expressed in such forward looking statements.
I would also like to remind everyone that as usual the percentage changes that we will be discussing during today's call are bill.
For Ganic and normalize it in nature.
Unless otherwise stated percentage changes refer to comparable with third quarter 2021 results.
Normalized figures refers.
Chicken farmers measures before exceptional items, which are either income or expenses.
Do not occur regularly as part of <unk> normal activities.
As normal lives figures are non-GAAP measures the company disclosed the consolidated profit EPS EBITDA and EBITDA on a fully reported basis, India in Israeli.
Now I will turn the conference over to Mr year journey, such CEO for Ambev, Let me say G. Research you may begin your conference.
Hello, everyone. Thanks for joining our third quarter earnings call.
This is our last call of the year, so what we'd like to do things a little bit differently today.
I will cover the highlights of the quarter in a moment, but I would like to begin talking about people.
I have been very vocal about how <unk> is on a transformation journey.
Transforming a company like ours, it's hard.
Next time.
Painful.
There is a lot of skepticism and setbacks.
In many respects we are learning as we go.
But we are doing this together as a team.
A couple of weeks ago something happen.
Personally may not a lot to me.
Beth was recognized by great place to work as the fifth best large company in Brazil to work for.
Just to give you an idea of how transformation of disease and 'twenty 'twenty, we have grandkids 27.
Yes.
A lot of great people build this company and we are a company of owners our people have been and will always be the heart and the soul of Ambev.
So I'm very proud to see that my team.
Being humble enough.
To face the brutal facts of the last few years and learn from our mistakes.
<unk> has shown an enormous resilience in the face of Covid made both bad and delivery results consistently as we recover from the pandemic and at the same time has helped this website.
Has it stayed committed to building a better more collaborative diverse and over to you and more sustainable company for the long term.
Anne is happier and more engage it along the way.
And this is true not only in Brazil, but also across the other markets where we operate.
A big Thank you to everyone that has been making this transformation happen on a daily basis.
The third quarter was another step on this transformation journey and frankly it was another solid steps in the right direction.
And at the last call, saying that our top line momentum would be to test in the second semester and.
And in Q3, we delivered 20% net revenue growth with volumes up nearly 8% year over year.
Nine of our 10 markets delivered volume growth versus last year and eight of them grew volumes ahead of 19.
And as a result, we delivered 180 million Hectoliters on a rolling 12 month basis.
8 million hectoliter us above our peak back in 2015.
And this quarter, we delivered another solid net revenue per hectoliter performance, which grew 12%.
Versus Q3 2020.
Comparing with 19 net revenue was up 43% on a consolidated level in the quarter and year to date up 31% versus 19.
If we breakdown this performance by region.
Our international operations generally continued to bounce back nicely.
In fact volumes grew nearly 9% year over year.
And are just slightly below 2019 levels.
As mobility restrictions continue to ease thanks, Joe vaccination, our volumes continue to recover.
Led by the Dominican Republic, and Panama with the core plus and high end portfolios continue to gain weight in our mix.
In lash volumes grew double digits versus 2020 and 19 RJ.
Argentina.
Chile, and Paraguay drove this growth.
Also thanks to our core plus and high end portfolios.
I believe you posted strong recovery from 2020, but remains below 2019 levels and there we still have a lot of work should do.
Canada, However had a tougher quarter in terms of topline.
Although it's still above pre pandemic levels net revenue in the quarter declined at roughly two 5% versus Q3 2020.
With volume was down almost 7% while net revenue per hectoliter grew four 5%.
The industry it was too impacted by mobility restrictions and we face some supply chain disruptions, mostly in Quebec.
Turning to Brazil, starting with Nabs net revenue increase at 22% in the quarter versus 2020, and nearly 26% against 19.
Volumes were up nearly 10% compared to Q3, <unk> and almost 15% versus 19.
This performance was mainly driven by gateway at <unk> <unk> and whatnot.
All of which grew above 2019.
And last but not least Brazil beer.
Top line grew 16% in the quarter.
<unk> 2020, and 51% versus 2019.
Our step change in volumes.
Changes in the quarter with seven 5% growth versus 2020, and almost 35% growth versus 2019.
Outperforming the industry and gaining market share.
This is a result of our commercial strategy. This has consistently continue to award despite COVID-19, despite macro headwinds and despite competition.
It is not just one thing thats working.
It's a combination off.
A healthier portfolio at first.
With stronger legacy brands.
Our strong innovation pipeline, which.
Which once again represented over 20% of our net revenues.
In addition, we increased the number of fans of our brands by 3 billion people.
<unk> 2019.
Second a better service level.
Reaching 53%.
Net promoter score in the quarter.
Third.
Our technology Big bets, which has continued to structurally improve how we connect with consumers and solve our customers' pain points.
For East Coast business now use it by 85% of our active customers in Brazil.
Currently offering over 350 products from 43rd bodies of different industries.
In addition to that yesterday, it was announced that <unk> products will be made available through piece.
Which is consistent with our desire to offer better service and solutions to our customers.
And finally, great execution of our fact and channel strategy with the 300 ml returnable glass bottles, leading the way as the old premise continues to reopen.
All in all year to date topline is up 28% with volume growing 12% and net revenue per hectoliter, increasing 14% versus strange Duane.
When comparing with 19, we are up 31% in top line.
11% in volumes and 17% in net revenue per hectoliter.
During our last three calls I took the opportunity to focus on how each of our technological platforms in Brazil are enabling our transformation as a company.
That delivery in Q4 of last year.
<unk> in Q1, 2021, and Don knows our syntech last quarter.
Today, I would like to spend some time on what they like to call the logistics Revolution.
That is underway.
To allow this platter forms to fulfill their potential is.
Bass transforms itself, each what platform with inspiring brands that connect people and the ecosystem.
Creating shared value.
Best in class logistics operation is a must.
In the nineties, we created our second tier logistics operations betting big on direct distribution.
With currently more than 100 distribution centers is spread across Brazil, and making 80000 deliveries per day.
In the last two years, we have started just set up.
Third tier logistics operation.
Approximately $100 million has been invested to date on several footprint and technology related initiatives to better prepare us for these new operating models.
Or is this in terms of creating a delivery footprint designed as per our growth we are investing behind small European distribution centers.
Year high density regions, making our delivery capabilities more flexible and agile.
This urban distribution centers or Udc's, how we call operate only with small models like bikes light weight motorcycles, and small vans, which are faster.
<unk> for a small drop size orders.
The idea is to provide a better service level for smallpox using the right model with more efficient occupancy rates and lower carbon emissions leaves.
Leaving bigger deliveries for bigger trucks that.
<unk> integrate <unk> DTC and the marketplace platforms and we are also piloting offering services to partners, gaining even more efficiency.
We currently have five SKU disease in operations three of them in Sao Paolo we will end up the year with 14, and we are just starting.
To wrap things up.
Some quick words regarding our journey, the reminder of the year and 'twenty to 'twenty two.
<unk> it was a very tough year, but we stood our ground 20.
<unk> has also be challenging, but we have continued to improve our performance in a consistent way led by our fish shaped topline recovery. So I'm looking forward to what 2022 will bring with its risks and opportunities.
Lucas will go into more detail.
But although Q4 will be another tough comp we will continue to work to bring our nuomi now consolidated normalized EBITDA for the full year back to 2019 levels.
And base it on our year to date performance. We believe there is room for improving this number.
Close a better 2021 and be better positioned for the next year.
With that said let.
Let me hand, it over to Lucas, who will cover our financial performance.
Everybody.
Thanks, Joe Good morning analyst afternoon, everyone.
I would also like to start by talking about transformation. So I will kick off with climate action, where we also took a transformational step in the right direction during the third quarter.
Q3 was marked by the announcement of our first carbon neutral brewery and multi plant in Brazil.
Our both across our brewery in the state of Parana and our plant in Paas will fall to in the state of yogurt entered the suit delivered 90% reduction of seal to emissions versus 2017 and have the remaining 10% emissions neutralized via carbon credits.
This process began in 2012, when we built these plants designed to be low carbon operations and we're proud to see it come to life.
To get here, we focused on four things.
It produced onsite from biomass boilers Green energy produced onsite from biogas of the effluent treatment system.
Energy consumption efficiency, leading to more than 15% total purchased energy reduction.
And 100% electricity purchased from renewable resources in this case hydro.
As next steps, we will implement electrical forklifts, starting in Q4 2021 and built on site solar farms starting next year.
And these investments make total financial sense as well.
Our decisions to move to.
<unk> carbon neutrality has not only led to efficiency savings in terms of energy consumption, but also allowed us to secure renewable energy sources at more attractive rates than before.
Also this milestone is not an isolated event, we are developing a roadmap to have 100% of our production facilities become at least carbon neutral in the future, which we expect to be able to share in the coming months.
Turning to our financial performance in the quarter overall, we saw a similar dynamic to the first half.
EBITDA growth driven by topline recovery, partially offset by cost and expense headwinds.
The difference. This time is that in Q3, we faced much tougher top line comps than during the first half of the year.
But the team's disciplined execution came through once again.
In the quarter net revenue grew nearly 21% organically lapping 15% organic growth in Q3 2020.
EBITDA grew approximately 9% organically against one for organic growth in Q3 2020.
Normalized profit grew about 50% following two 2% growth in Q3 2020, while operational cash flow declined almost 10% lapping 99% growth in Q3 2020.
Versus Q3 2019 net revenue grew 43% EBITDA was up almost 16% in organic terms, while normalized profit increased 54% and operational cash flow improved 80%.
Margin pressure. Unfortunately remains a reality with gross margin contracting to 50% and EBITDA margin contracting to slightly below 30% in the quarter. However, we did see sequential EBITDA margin improvement versus Q2, 2021, which stood at 26% at the consolidated.
Mid level, if you disregard the one off tax credits in Brazil.
We still have a long way to go but we see this as a relevant improvement nonetheless.
Now let me go through the main costs and expense drivers.
Cogs per hectoliter increased 18, 5% on a consolidated basis in the quarter.
We once again saw adverse FX and commodity costs as the main factors, particularly in Brazil, while better mix offset higher unhedged commodity costs.
Brazil beer cash Cogs per hectoliter in Q3 totaled almost 16%, which should be the lowest growth for the year.
FX and commodity pressures should still be an issue in Q4, but we continue to expect Brazil beer cash Cogs per hectoliter to grow in the low <unk> for the full year.
As for our cash SG&A year over year growth totaled $23 six on a consolidated basis.
Sales and marketing and distribution expenses grew mid teens, so below net revenue growth.
The main drivers here were the same ones from Q2, albeit at lower levels of growth year over year.
And administrative expenses were nearly 81% higher year over year, which was primarily a result of provisions for variable comp since our performance for the year was once again better than expected.
And should our performance remain on track during Q4 variable comp accruals should continue to impact our year over year performance.
In addition, it's worth sharing that when we break down our administrative expenses ex variable comp accruals in regions like Brazil for instance, what we saw in the quarter and this was also true since 2019 is that overhead packages are growing below inflation with the exception of two packages.
First our investments behind <unk> to be deeply C and fintech platforms, and second technology spend to enable our transformation.
Despite the near term impact we have no doubt whatsoever that these investments make sense given our overall strategy and we've managed to find non working dollars savings in other lines to fund this transformation to a great extent.
And as these platforms scale up and we find smart ways to leverage <unk> scale and reach we do see opportunity for more attractive returns in the future.
Looking ahead, given year to date performance and should the recovery continue in the final months of the year, we feel more confident in our ability to deliver on our two main ambitions for 2021, despite a tough comp in Q4.
First a healthy balance between improved volume and improved net revenue per hectoliter growth as part of our topline led recovery across markets.
Year to date volumes are up 12, 3% and net revenue per hectoliter is growing 14, 1%.
And second normalized consolidated EBITDA performance for the full year above 2019 levels in nominal terms, which we more and more C. S feasible.
Year to date normalized consolidated EBITDA stands at approximately 16 billion Reais, which is four 5% above 2019 in nominal terms, excluding the one off tax credits in Brazil.
Finally, some quick comments on our financial priorities of protecting liquidity and improving our return on invested capital.
Liquidity remained solid given strong cash generation. Despite the several headwinds we faced since last year.
But the environment does remain uncertain and volatile. So we continue to believe our prudent approach remains warranted.
Our use of cash priorities also remain unchanged reinvest for growth organically and non organically and return excess cash to shareholders over time.
And in terms of improving return on invested capital. The name of the game continues to be operating efficiency, coupled with better resource allocation across the company.
Given the evolution of our business such as our best behind B to B D to C and Fintech platforms, we believe that when thinking about profitability, we need to look beyond margin ratios and also focus on return ratios.
Don't get me wrong, we will always focus on improving the drivers of margin ratios for each of our segments Adventures.
Given their different financial profiles, we've been focusing more and more on return ratios to manage our business.
2020 was tough in terms of profitability in both dimensions.
But the good news is that 2021 has the potential to deliver better returns than 2020, which is important progress despite sustained margin pressure.
Our journey of continuous and consistent improvement is well underway since 2020 step by step.
This goes way beyond quarterly performance and we will stay the course towards creating value over the long term. Thank.
Thank you and we can now go to Q&A.
Thank you the floor is now open for questions. If you have a question. Please press star one on your touched on phone at these are anytime.
At any point. Your question is answered you may remove yourself from the queue by pressing star chip.
Questions will be taken in order to receive it.
Hold while we poll for questions.
Our first question comes from all of our chart.
Hi, Evercore.
Great. Thank you very much.
There is.
What I can tell there's really been a kind of an.
There's a lot of background noise there.
President is it kind of change and some of the competitive dynamics in Brazil.
Particularly in terms of categories with with your leading competitor.
Apparently abandoning a lot of their core.
The value brands.
And then just kind of totally restructuring their overall portfolio can you talk about.
What is going on.
In the Brazilian beer business in terms of pricing architecture.
You know what the opportunities are.
You know as you look at that you're obviously, bringing in Spartan as kind of a core plus proposition.
But what does it mean when you have such a dramatic change in the.
The competitive landscape and you have a whole portion of the business.
Katami your or value beers being walked away from buy by a major competitor. Thank you.
Yeah.
Thank you very much for the question Robert.
In general in it we will continue to be for.
For awhile.
But I mentioned that some point in time that.
Just when I arrived at that.
I would foresee the competitive landscape more with the trends on our side.
Since that we have been working a lot on on our plan.
Turning a consumer trends understanding the competitive landscape.
And we are very excited about what we have been accomplishing.
The numbers of volumes that we had.
This quarter. They showed that if you look at the numbers. It is not just about competition.
We are really X ending.
Our.
Reach.
Expanding the number of consumer versus Trump section in our brands.
So we are really very exciting.
Our plan innovation already then.
20% of our net right. So we are speaking.
The right the right products and the right the right place.
We have been talking a lot about.
The Brahma our cheap debt.
That really came to be either of the core plus segment that offset that was very under developed in Brazil and has a potential. So we have been growing fuel brands.
These centrally.
Hum.
Year to date, our high end is growing 20%.
Consumers are more and more electing to one of our brands as the number one brand at a loss. So we have 3 million more.
Consumers that we had in 2019, all this transformation technology to reach.
The convenience that bees, and set delivery I, bringing for consumers and customers so really about.
The performance is really about our plan 100%.
The of the volumes.
Expanded in the industry came for our brands and on top of that we have seen.
Peppers really moving in.
Some direction that it is hard to two to really figure out exactly what's going on.
So when we look at production.
Number.
The EBITDA of far off of the industry and in our form factors.
In the end competitors, they are producing less than 2019 levels.
So so this is this is something that we.
We are much ahead of that.
And I'm not sure if thats really.
If a decision is really something that we are selling and we are getting it right, we're getting the consumers and it looks like.
Somehow consumers are more.
And customers more towards our brand.
So we're going to keep looking and I on competitors actually gets a big opportunity for us anything that happens on the competitive side, but we are really excited about.
How we are bonding with our consumers how we are all time high relation with our customers in net promoter score and how we have been able really to drive industry expansion.
Terrific. Thank you very much.
Our next question comes from MS <unk> <unk>.
<unk> Suisse.
Uh huh.
Hi, Yes, hi, Lucas Ah Congrats on the results and thank you for taking the question I have two questions on Brazil peers.
First is about loading I would like to understand better if after announcing the second price increase in mid September.
Any signs of mismatch between selling and sellout.
Late in the quarter that could have given an extra boost to the trick keel. Following performance that would be my first question and secondly.
It's about packaging supply we have seen constraints for both glass bottles in aluminum cans globally and ahead of the first quarter, which is a seasonal peaking period for the industry, Yes, I would like to see if you are seeing a rise in signs of constraints at the packaging industry in Brazil or even.
And then if it could become a risk going forward. Thank you very much.
Thank you for the question of Marcellus. So we brought that graphic that were off the rolling 12 months.
Performance of our of our volumes in Brazil, and Ambev, because I think that that graphic is really.
It is really on a yearly rolling 12 months basis, it really mitigate any type of.
Inventory change in levels. So I think that it was a good graphic for us to talk about.
I'm very excited about the Q3 volumes because they happened Amit.
Our sequential improvement on our net revenue per hectoliter. So when we compare the net revenue per hectoliter of Q3 compared with Q2, there were a lot of efforts.
In the Q3 to really keep it up we're fine inflationary scenario that we are leaving in Brazil that ticket very fast faster than we expected.
And then.
It was announced that the price increase in October I really don't I really feel that the sell in sell out theyre pretty much in line in the inventories in the in the market that they are really are.
We didn't see any any any movement on that we have been controlling that.
In a very sharp way, because we know that somewhere is coming.
And head into your second question.
What we are seeing the supply chain and as the supply chain has been under pressure.
Since the pandemic, we were able to keep it up.
Afghans and resolve the availability of gains of cans, where we see a more normalized supply chain. When we come to glass industry is more pressured and we expect that you'll see some normalization more in 'twenty Schwinn Ya Chu.
On the glass side, but somehow this type of disruptions are in a much lesser extent that we had in <unk> 'twenty and then just to add there. Joe. This is Lucas Marcel up I think when as when it comes to glass bottle.
One thing to keep in mind is that we have vertical right bottle production capacity in countries like Brazil. So that also gives us a very reliable source of supply for bottles and more flexibility to adapt to pressure in the supply chain. Overall in addition to our long term <unk>.
<unk> chips with suppliers.
And we are leveraging our global footprint to on that.
Got it that's very clear thank you.
Our next question comes Crowe He car dwell is Morgan Stanley.
Good afternoon, everyone.
For the color John Thanks, Lucas impressive numbers you need.
<unk> had a couple of questions.
One follow up on the competition side.
You alluded to this but.
On the main competitor I think the first question was.
More on the main competitor, but when you look at your numbers and we'll look at the industry numbers that we can track.
Your performance is significantly above even youre significantly outperforming other smaller players as well.
Could you just shed a light on how you're performing relative to them are there any perhaps specific categories.
Where you're outperforming or specific regions.
Where do you think you're performing better than you were a smaller company competitors.
<unk> seen from the Coke system for example, different regions performing very differently. So I don't know if that that could be part of the story.
That's my first question.
Okay. So let me try to elaborate more on that.
So so.
So if you put our numbers together you are you're going to see that debt.
That we are gaining a lot of market share is not as not just a leader with a lot of market share.
And.
This is based on our plan I think the core plus segment.
It was a bad debt we did.
Two years ago, that's really paying off the innovation there is a lot of innovation there.
But among the promotions gummy Spartan has come in very well true.
So we had the strategy of helping.
The on trade to transform itself.
During the pandemic and have takeaway initiatives.
With these more formats very affordable office 300 ml bottles.
This is performing very well too.
This brought to us.
From pre pandemic levels, we had 750000 customers now we are reaching $1 billion 1 million.
Customers in Q4, so our plan is really structural I think is really working.
And when we look at competitors both of them the true proof.
Producing.
Less than half produce it already.
Below 2019 levels. It doesn't it doesn't seem to me that this is a supply.
Restriction it really is not because you have a plant that you can sell so consumers has to by the customers and should be in your hands. So I really see that our commercial strategy is really.
Quiring more customers in like seducing more consumers, we have 3 million more consumer so I feel that our strategy is is going is doing okay. So we did the right investment on capacity.
In the last two years.
You'll be prepared for this type of volumes.
And I just feel that competitors, they are not being able to really get the transaction right and really really to sell.
In an even this announcement that we are.
Listen all the time about competitors increasing capacity.
Question myself if it if this is more of an upgrade.
On capabilities that really are potential to put more more volume in the market. So I think this is this is a big question for us So having said that we.
We are selling very well on on nor.
North North East Middle Middle East Middle West.
Most of the areas are doing very well is amazing how we have been growing.
All of the segments. So we are growing core that it was a handicap that we had in the past the core was really going down we have seen our three brands, but all my scope in attach rate growing.
We kind of created the core plus segment, where we're we are really having Bohemia bimodal promotion a spotty in our high end portfolio is really year to date growing on the 20th so I'm seeing a very balanced growth a win in segments I'm seeing.
A very balanced growth in regions that shows that looks like.
Our commercial strategy is really paying off.
Besides the challenge that we have on the macro side. Besides the competitor the competitive landscape I really.
Im really happy with with our commercial strategy.
Super helpful. Thanks for that one final question very quick one on the revenue per hectoliter also in Brazil beer.
Youre thinking about the fourth quarter, just wondering what are your latest thoughts are.
Because of the price increase I don't know if there's any any major.
Mix mix of category, our mix of channels that we should have in mind, when we're thinking about the unit revenue, but even more interested.
On the price increases how they've been extended so far. So if you are able to share any color on how October is performing on that front that would be helpful. Thanks again.
Okay. So so in the end, we don't disclosure that much and do forecast zone on the pink.
It was public that we did it in in the beginning of October.
So what we are seeing is that so it's in the market. So the numbers the numbers are in the market.
And.
It's pretty much around the same shape that we have been doing for a while.
What what I can tell you that is that is really excite that is exciting to me is that the old premise recovery has been stronger than we anticipated.
We have seen because at some point in time, we held the bars to transform and then they became platforms to takeaway and believe we said delivery, helping them a lot, but now we have seen the social out of out of home occasion getting traction again, so there is pretty much when you.
With your friends and go to the bars and ready to drink.
In the bar. So we're seeing this dislocation really picking up.
Faster than we expected.
And looks like this will help us on on dislocation. There is a patient that is very profitable for us we have been always design it.
For it and it's really coming back stronger strongly and we foresee for example.
The the RGB bottles in the RGB mix relief.
They are growing sequentially more than we expect and we foresee twenty-twenty true.
They there of above 2019 levels.
Alright, Thanks, Jeff.
Okay.
Our next question comes from Chicago to ACH.
As your backdrop.
Thank you good afternoon everybody.
I have two questions I'll stick with the Brazil beer discussion here.
First one is is is just a question on how how should we think of <unk> brands, our fair market share in Brazil beer right now, particularly in terms of the price point relative to the actual market share that you have achieved it.
It looks like you're capturing a lot of market share as Jeff said just now.
<unk> is evolving but he continues to lag.
The overall beer inflation and despite the premium innovation of the mix and margins and I'm not even.
Relative to two basis points, but even in unitary terms margins are not much higher than nominal terms than they were.
Several years ago. So <unk> you mentioned in the opening remarks.
Health care portfolio.
Service level, you mentioned youre, reaching primula more people consumers relative to 2019, so I wonder what how that should translate into your discussion between your actual market share your fair market share and the price point that you'll see for your most relevant brands today.
If we look historically.
This is a pointing time, where where you guys would probably be capturing a lot more pricing power there.
We have seen so far so so that's the that's the broad discretion I was looking to have.
And the second question is on the industry I mean, even putting the market share discussion aside I think API in their conference call. They mentioned <unk> been gaining share of throat in many markets, including Brazil.
But it is still for us it's striking to see the how the aggregate your industry <unk>.
Volumes are growing in spite of the very tough comps.
From last year. So if you could comment on how the category growth is sustainable in your view relative to other alcoholic beverages.
And of course in terms of our per capita consumption relative to where we were before and into the future. It would be nice to hear as well. Thank you so much.
Okay, Let me see if I can get this right.
So.
So it's true we are with our market share.
Gaining when we put all the numbers together.
<unk>.
<unk>.
Better than we expected better than we anticipated. So so this Q3, when we compare with what.
What competitors are doing there's a lot of market share gains over there based on on our strategy.
We have been building their high end and they're.
In the core plus segment.
If you if you if you remember.
At the beginning of the year.
We gave a guidance of our V I seen beer, Brazil growing in the low twenties.
So we knew that this was coming.
So a big part of it was because our hedging policies and the impact of the currencies that we had in the hedge it in the hedges this year.
And.
We are really.
Our pricing strategy based on on the consumer side, what consumers can really pay and to maintain our volume was health and then based on that on top of that really work on on the mix of innovation that mixing channels and over delivered based on on that mix.
I think we have been able to.
We kept our our guidance in our the IC numbers. So we are really working on that even though lots of things happening on the commodity side, but this year we are really.
Maintaining our.
Our guidance and in then we have the consumer ability to pay that what's happening in Brazil, which was the deflation pick it up very fast.
And in that is the reference to tool on our pricing decisions to really guarantee that the beer in the basket is competitive for us to continue to develop share of throat and continue to develop per capita and and with that type of volumes that we are having in <unk>.
With inflation picking up.
This equation, we want a follow up.
Two really guarantee that our revenue per hectoliter is above.
And in and what we need and we believe that next year. This equation will be more.
On our side okay. So.
So somehow we follow we follow the inflation with rates on top of that we have the in.
Innovation and Humanization of strategy on top of that we have the revenue management and.
And we believe that we are really getting these muscles rights and and in pricing.
We will get we will get better.
One thing desktop.
To mention on the transformation side that is that we are learning a lot on the revenue management side with our with our Fintech and with beef.
And we are beginning to pilots.
Tradeoff of discounts and cashback, how our customers and how consumers really react to that is a whole new world of possibilities for us and this is something that I'm very excited.
A project that this will help us a lot on this revenue management.
Of the future, Okay, So having said that.
Uh huh.
Talking about the industry.
So yes, we have been very excited about the way you have been developing.
The industry in Brazil, all the industry expansion is really coming from our initiatives.
And we looked Brazil on a granular basis, we still have a lot of opportunity on per capita when we compare regions. So Paulo in Midwest. They still have a very different level of break up the consumption. When we looked at frequency that it was something that peaked during the.
They're making we look that U S and maturity.
Markets, we still have a lot of opportunity.
The consumer side to increase frequency. So we believe that a big part of it we will stay so we are still very excited about.
Per capita consumption.
In the end the industry expansion moving.
In the future and on top of that we just put in place.
This is more of a share of throat to view our business units of beyond beer in future beverage that I think is a huge opportunity for us here in Brazil to learn what's going on in Canada.
In the U S. A we are really working on on the mics brands, we are bringing rtd's, we are bringing wining cans.
And I'm really excited about is another avenue of growth that we really are.
There is a creative.
Net revenue per hectoliter is higher and there is a lot of opportunities shown on share of throat to continues to grow on that site.
That's helpful. Thank you John.
Our next question comes from Isabella from monarch.
Bank of America.
Thank you good afternoon, everyone and Jim Lucas.
All I have.
Two questions first of all.
Thinking about 2022, right I understand that.
We're really the guidance on cost in the beginning of the year, but.
If you could give us a color on where youre seeing.
Cost pressures and especially your FX hedges given the recent depreciation of the BRL that will be helpful to understand how to think about next year.
And second of all because you mentioned in the presentation right about protecting our liquidity and balance sheet.
And at the same time, we have a potential tax reform in Brazil, how.
Are you guys thinking about returning cash to shareholder not only in terms of timing, but if we could expect an increasing this year versus 2020. Thank you.
As our Bella. Thank you for the question.
Starting with 2022.
Cost outlook.
The first important message here is that the scenario right for our input cost remain.
Fairly volatile as I'm sure you all been following particularly in Brazil, and Argentina, and there are still some hedging to do before the end of the year, we continue to work.
The work under our hedging policy to give us the predictability going forward and will give us time to prepare adapt as need be from time to time.
But what we what we can say at this point is that although 2021 the main headwind was effect.
Followed by commodity.
In 2022, what were seeing as of today is that FX should be less of an issue.
Because of the hedging.
Happening kind of on a rolling basis, and how the BRL, especially kind of evolve throughout the year as hedging was underway. So we see less pressure going into 2022 from effect and more pressure coming from commodities.
And again as I said, there is still some some hedging to be done, okay, and last but not least one of the things that has helped us in 2021, and we hope that could also play a role favorably going into 2022 is the mix right as I mentioned in my in my opening opening room.
Mark one of the things that has contributed.
To our better than expected.
Hum.
Performance is the mix starting to work in our favor and in case of the Cogs impact of the mix evolving better than expected. The mix has helped us offset our unhedged commodity exposure that picked up right in Q2 picked up again in Q3.
So I think the mix to the extent the team continues to do a good job on the commercial side as the on premise recovers as returnable glass bottles right continues to come back in a healthy way hopefully mix will also once again play in our favor and then as you said, we hope to be in a position to.
To provide more visibility.
With respect to what to expect in 2022 at the end of February when we announced our full year results.
As for the second question in terms of returning returning excess cash to shareholders over time.
This is a this is a year end decision.
So we continue to we continue to work.
As I mentioned in my remarks.
Under the same paradigm in terms of how we think about.
Capital allocation in the company so priority number one right remains to reinvest in growth.
He is organically be it non organically.
So that Hasnt changed.
And then.
In addition, we will continue to return excess cash to shareholders over time.
But that's that's more of a yearend conversation that we will have with the end of the fourth.
That's clear thank you.
Yeah.
Our next question comes from Chad go Bertolucci Goldman Sachs.
Hey, gentlemen, good.
Good afternoon, everyone and congrats for the results just trying to add to your revenue per hectoliter growth in Brazil in a bit more details you guys mentioned earlier in the call the positive impacts of the on trade mix linked to your average price is right.
However, when I see your net revenue per hectoliter in Brazil beer. It is just too up but sequentially decelerating.
Can you please break up in more details what were the drivers for the sequential deceleration there and in terms of overall trends I know you don't have a guidance for the quarter, but what should we expect for the first quarter bearing in mind that cash Cogs per hectoliter should sequentially accelerate thank you very much.
Yeah. So.
So in Dan's when.
When we when we started the year.
We have always been mentioning that our revenue management strategy will be very agile nimble.
For us we need to get the best opportunities in the market to learn.
With regions and with everything and to be very honest.
This.
This June.
So this decision also the inflation picking up very fast.
And we were trying to catch up as we as we move.
So that was something that it was not planning in the in the beginning of the year and in somehow.
We were very happy to in this context to see the Q3.
Net revenue per hectoliter really.
<unk>.
Like Beacon.
So it was it was better than Q2.
And when do we look at that if it's accelerating or not.
You have the last year base is where we have to compare what I can tell you is that this elasticity that we saw in Q3, when we compared with each one in Q2 of the price moving with this type of volumes it really surprises us in this equation was an equation that.
Come above our expectations, which suggests that our brands are stronger.
We had more more volumes to two two.
Net revenue per hectoliter increase so we are very <unk>.
Happy with this type of with that algorithm and with that type of equation. So having said that so what was really planned in the beginning of the year for us should do rights to do accordingly, It was really the October move that.
We announced it it was public.
We made it happen.
It's in the market.
And I think this is it.
It is more substantial.
Oh, that's clear if I may just a follow up on the delivery.
You referred to the volume was essentially flattish quarter on quarter right.
Any early signs of some change in mix or cannibalization with the reopening this far.
Okay.
So let me get to your question to talk about.
The technology platforms, and I'll talk about <unk>.
Ill jump into <unk>.
So zelle delivery is on the right path.
Really.
We are very excited about it so we have.
So.
We started a little bit the CD expansion for us really to get all the all our strategy right. So we spent less Cds.
Than we expected we did not see that.
That's much change on on on on on the project on the plan that we have with the delivery, but said deliveries really thinking more and more to be more omni channel.
Do you really think about not just the convenience piece, but all the journey of our consumers.
We are starting back the expansion on the cities and we are working a lot on the left <unk> efficiency. So these are the three things measure things that we are doing on the delivery and the delivery.
If we will.
It's really a success and it will continue to grow a lot, but we have this three fronts that we're working omnichannel expansion city by city and then less Meyer efficiency. There is something that you have the business sustainable.
In the long term in one formation that.
That just for you to know so we were able to get the delivery already that is pretty much focusing on focused on the in home occasion with the SEC.
<unk> RGB mix that we have in the average of the company and in depth and that's really something desktops. It happen ahead of time, so 40% of the mix of deliveries are already coming from returnable bottles because the.
The motorbike it takes the bottles and get it back so this.
This machine is really working so we're really excited about that so as that delivery is in place we'll grow it's really going to the next level in terms of.
Having more occasions be more omni channel restarts, the expansion and really get it with the less my <unk> right.
So one thing that I would like to mention is that really we've talked a lot in many times about bees, I mentioned that 85% of our active buyers are already in the platform.
That we we achieve is a $1 1 billion.
Annualized it.
Our marketplace, Jim Z in Ambev of.
Of BS.
Just mention in the products that are not from Ambev portfolio. So this is something that is doing very well.
Yesterday, we announced.
The partnership with Brs and I would just like to mention because this partnership is a difference from what we are doing.
We have been doing this pretty much the one P. L. So we buy we sell.
It goes through our warehouses, but this.
Deal with <unk> was the first one that.
It was really.
Our contract of a software as a service okay. So building the answer is really providing.
Our software service to Brs and Brs.
Have been on their sales reps on the mountain tops and their customers, we will use the platform of order taking.
And Brs has around 250000 customers that they go direct and they will have us access to a $1 million.
Our base of customers and with these really providing a service as a software. Okay. So this is really something that is different from what we are doing and I'm very excited about it to have <unk> with us.
And the third one is really dawns.
The syntax that is really is really growing very fast.
So we are now with $1 billion.
Hi.
Of TPB year to date, so just in Q in Q3, we have 650 million realizing in TPG is really tripling sequentially.
We have 145000 customers downloaded the wallets and we're really working on the machines that take rates, we are really doing credits.
For our.
Customers and really moving into the revenue management and the tradeoffs of discounts and cashback. So these three initiatives I'm very excited they are really getting sizable.
They are really beginning to.
Bring a lot of value for our company.
That's all it does amazing things correctly.
Excuse me. This concludes today's Q&A session I would like to turn the floor over to Mr. Gerry Sutcliffe for his closing remarks.
So I would like to thank my team again once again for this quarter.
Also want to thank all the analysts and everyone who joined the call for time and attention and to wrap up in the full year. Despite the anticipated tough comps in Q4.
We continue to work to maintain our commercial momentum delivering a healthy healthy topline recovery also we will not lose sight of the long term and return on the investments that we are doing now and we will continue to invest in our portfolio and the transformation through the tech ventures, which continues to grow and become more.
Sizable cash generation remains solid even in a year definitely invested on the ventures, we invested on capacity, we invested in tech as part of our transformation journey and I'm very excited about.
The relationship and the bonding that we are having with our consumers not just here in Brazil that we've talked a lot, but I'm seen Brenda equity <unk> seen consumers re towards our portfolios in all of the.
The countries that we operate so thank you very much see you next year I have a great day.
Okay.
That does conclude <unk> conference call for today. Thank you very much for your participation and have a good day.
Okay.
Okay.
[music].
Okay.
Yes.
[music].