Q4 2021 Anheuser Busch Inbev SA Earnings Call
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Welcome to and How's their Busch Inbev fourth quarter and full year 2021 earnings conference call and webcast hosting the call today from a b Inbev are Mr. Michel Duke Harris, Chief Executive Officer and <unk>.
Fernando Tennenbaum, Chief Financial Officer too.
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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 AB inbev future results see risk factors in the company's latest annual report on form 20-F filed with the Securities and Exchange Commission on 19th of March 2021.
<unk> assumes no obligation to update or revise any forward looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information.
It is now my pleasure to turn the floor over to Mr. Michel do terrorists, Sir you may begin.
Thank you Jessie and welcome everyone to our fourth quarter and full year 2021 earnings call.
It is a pleasure to be speaking with you all today and I hope you are staying safe and well.
Today, Fernando and I would like to cover three topics with you our fourth quarter and full year operating highlights.
The date on the strategic pillars of our strategy and how we are meeting the moment in 2022, we.
We will then be happy to answer your questions.
Let's just start we followed operating performance, we had a fairly pleased with our performance in both the fourth quarter and full year 2021.
In the fourth quarter, we delivered topline growth of 12 point, 12% with three six volume growth.
Revenue per hectoliter accelerated in quarter 422.
281% driven by the implementation of pricing actions across some of our key markets.
Ongoing premium amortization and continued to recover after the on premise.
EBITDA increased by 5%.
<unk> quarter 419, pre pandemic levels, we grew top line by mid teens in EBITDA by low single digits.
We delivered normalized EPS of nine cents and underlying EPS of <unk> 74.
Let's now move on to our full year results.
We delivered 15, 6% topline growth in full year 'twenty, one comprised of nine 6% volume and five 5% revenue per hectoliter growth.
EBITDA grew by 11, 8% at the top end of our 2021 outlook.
Compared to pre pandemic levels, we grew top line by more than 10% and mutually recover EBITDA on an organic basis.
Normalized EPS increased to $2.85.
Underlying EPS increased to $2.88.
As a result of our performance and strong cash flow generation, we reduced gross debt by nearly $10 billion. This year, leading to a net debt to EBITDA ratio of 396 times.
This ratio is now below four times for the first time.
Since the combination with <unk> in 2016.
The board has proposed a full year dividend of 15 euro cents per share for fiscal year, 2020 one.
Now I would like to share some highlights from our key markets.
Our business in the U S delivered a third consecutive year of topline growth driven by consistent execution of our commercial strategy focused on rebalancing our portfolio.
Our above core portfolio now represents over 30% of our revenue and grew by high single digits. This year.
In Mexico, we finished the year strong delivering double digit top and bottom line growth compared to both 2020 and 2019.
Market share expanded by over 150 bps versus pre pandemic levels.
In Columbia, we delivered double digit top and bottom line growth versus full year 2020, and the both pre pandemic levels led by the implementation of our category expansion model 2021 was market by the highest per capita consumption in Columbia.
In the last 25 years.
In Brazil, we delivered double digit top line growth with headquarters Hi, beer volumes. However, bottom line was impacted by anticipated transaction on the FX and commodity headwinds.
B is now covers more than 85% of our active customers and said delivered fulfilled $6 1 million orders more than double of 2020.
Our business in Europe recovered topline to pre pandemic levels premium and superpremium brands now make over 50% of our revenue and grew by double digits.
In South Africa, we grew the top line ahead of pre pandemic levels in both the quarter and full year.
The struggle similar to demand for our brands resulted in full year market share expansion in both beer and total alcohol versus 2019.
In China, we delivered double digit top and bottom line growth.
Premium and Super premium brands increased by double digits.
Our market share expanded versus both 2020 and 'twenty 119.
Moving on I would like to spend some time talking about the progress we've made we'll know what ESG agenda.
Our ESG play audits are organized it around three teams inclusive natural and local.
With this priority it's embedded into our commercial strategy, we can drive meaningful value and shared prosperity for our commandments and our planet.
I am proud of the journey our teams are all to advance our ambition <unk> S.
As part of our focus to drive de carbonization.
And builds climate resilience, we have announced that our ambition to achieve net zero by 2040.
In 2021, we made progress across our Fray audits highlights include.
Reduce it our overall value chain missions.
13, 5% versus our 2017 baseline.
Named to Cdp's water a list for the third year in a row.
Advances, our smart drinking agenda by updating our label designs on 100% of our primary product packaging no countries, where guidance labels are not required.
Recognize it in the in their world ranking of Forbes toward stops familiar friendly companies in 2021.
Selected in the Reuters events responsible business awards in the categories of social impact and circular transition.
You can learn more in our 2021 ESG reports.
Now, let's pivot to an up to date on the three pillars of our strategy.
Allow me to start with pillar, one lead and grow the category.
Our commitment to lead and grow the category by investing in our brands innovation and creative marketing is already delivering results. We met the moment in 2021 with all time high volume.
As we move from being category leaders to lead the category growth, we continued to execute on the five levers of our category expansion model.
First we are building, an inclusive category III scaling back and product innovations.
In full year 'twenty, one our portfolio of inclusive brands, increasing revenue by double digits.
Second.
Offering superior court propositions.
Our mainstream portfolio gain is an estimated one four percentage points of share of the segment globally.
We have rolled off our double malt innovation concepts.
Cross 12 brands in 10 markets contributing revenue of over $450 million this year.
Yeah.
Third occasions development, we are stepping into new occasions, we followed a global portfolio.
Stella Artois grew over 20% globally supported by increasing penetration in the new location.
And our non alcoholic beer portfolio grew revenues by double digits.
The first lever is leading premium amortization.
Our premium portfolio delivered over 20% revenue growth in full year 'twenty one.
And now represents approximately one third of our total revenue.
Our global brands continued to lead this growth.
The combined net revenues of Budweiser, Stella Artois, and Corona grew by 23% in full year 'twenty, one outside of the brands' home markets.
Finally, we continue to expand the category, we forward beyond beer offerings.
Our global beyond beer business grew by over 20% contributing $1 $6 billion of revenue in full year 'twenty one.
Innovation supports category expansion across each of the five levers of our model.
For Wednesday, new occasions toward growing non alcohol portfolio.
So driving premium <unk> by expanding michelob ultra to even more markets.
Our innovations contributed 10% of our revenue.
In total more than $5 billion in 2021.
We are leading the way innovation across our footprint.
Our rolling 36 months Sheriff innovation increase at year over year, you almost all of our key markets, including the U S, Brazil and China.
We have leading and growing that category with best in class creative marketing capabilities.
Just this week Cannes Lions, all noted the Abi as the creative market here for the year.
I would like to take a moment to acknowledge our talented teams and agency partners, who made this remarkable achievement possible.
Now, let's move on to our second strategic pillar digitize and monetize our ecosystem.
We are investing to scale, our global innovative technology products to become <unk> first FMC <unk> company.
Products, such as beef zale delivered and never Pearl allow us to unlock value for our existing assets.
This is enabling us to turn customer pain points into opportunities for growth at <unk>.
Is now live in 16 markets.
Offering our customers flexible delivery and data driven insights while empowering our frontline sales team with real time information on customer behavior through our beef force application.
Beef has seen remarkable acceleration in usage and reach capture.
Capturing approximately $20 billion in gdansk merchandising value in 2021.
Up from $3 billion in 2020.
Total monthly active users more than doubled this year.
Now, let me talk about our direct to consumer.
Our DTC products generated more than $1 $5 billion in revenue across 20 countries.
Ready contributing nearly 3% of our topline.
Our E Commerce net revenue grew by 62%.
66 million online transactions.
That's $6 6 million opportunities to capture data and insights to solve real consumer problems.
Our DTC Tech products I believe the e-commerce growth by leveraging our ecosystem of brands that consumers love.
Our preparatory tech knowledge and our extensive distribution network.
In Latin America is that delivery is already present in roughly 300 cities in Brazil, and we are deploying the stack product across Pam additional countries.
In Europe , perfect draft delivered more than $107 million of revenue.
With that I would like to hand, it over to Fernando to discuss the third pillar of our strategy optimizing our business.
Fernando.
Thank you Michele good morning, Good afternoon, everyone. I Hope you are all safe and well.
We aim to maximize value by focusing on three areas.
Optimizing resource allocation.
Boost risk management and efficient capital structure.
First let me take you through the drivers of our underlying EPS this year.
Our underlying EPS increased by 37 from $2 50 to $1 to $2 $88 normalize at EBIT increased by 81 per share.
Net finance costs.
We recorded lower interest expense due to gross debt reduction offset by other finance costs related to Brazilian tax credits.
We saw higher income tax expense due to increased profitability.
Country mix and reduce.
Reducing benefits from tax attributes worth 30 cents per share.
We also recorded the highest share of results from associates was <unk> <unk> per share and higher profit attributable to noncontrolling interests worse.
Three cents per share.
With respect to capital allocation, we aim to maximize long term value by dynamically balancing our priorities.
Our main priority for the use of cash is to invest in organic growth opportunities that fall within the first two pillars of our strategy.
We then grow the category.
And digitize and monetize our ecosystem.
The excess cash generated by our business is then dynamically allocated to our three capital.
Capital location priorities.
The leveraging.
Selective M&A and.
In return of capital to shareholders.
As you can see here too.
Two times net debt to EBITDA is the point at which we maximize value.
Approximately 90% of the benefits from the leveraging can be captured as we approached three types.
This year, we achieved an important milestone in our deleveraging path with net debt to EBITDA falling below four times for the first time since the combination.
In the near term deleveraging is this to the most value accretive opportunities.
As we continue to move towards our optimal capital structure, returning cash to shareholders and pursuing selective M&A opportunities can have a more meaningful impact on value creation.
In balancing the company's capital location priorities and dividend policies, while returning cash to shareholders. The board has proposed a full year dividend of 50 euro cents per share for the fiscal year 2020 one.
We have taken significant steps in recent years to accelerate debt reduction we have reduced gross debt by approximately $34 billion since 2016 with almost $10 billion in 2021 alone.
Moving on you will see that our debt maturity profile remains well distributed with no significant maturities over the next five years with the weighted average maturity more than 16 years.
Let me elaborate further on the characteristics of our debt portfolio.
As a reminder, we do not have any financial covenants on our entire debt portfolio.
Including our sustainability linked revolving credit facility.
The portfolio is comprised of a variety of currencies.
<unk> in the U S dollar Euro Canadian dollar pound Sterling and Korean won diversifying our FX risk our bond portfolio remains largely insulated from interest rate volatility as.
As approximately 94% holds a fixed rate with a very manageable weighted average coupon rate of approximately 4%.
Before I hand, it over to Michelle I'd like to highlight the key metrics that reflect how we are optimizing our business.
In 2021, we reduced gross debt by $10 billion totaling $34 billion of gross debt reduction since 2016.
Our net debt to EBITDA ratio is now at $3 96.
Below four for the first time since our combination with <unk>.
94% of our loan portfolio is fixed rate with a manageable 4% coupon.
And we have no near term refinancing needs.
I'll now hand, it back to Michele for some final comments.
Michelle.
Thanks Fernando.
I would like to take a few minutes to recap, our reflections and learnings and how we are prepared to meet the moment in 2022.
The beer category continues to demonstrate strength.
We are operating in a big profitable and growing category.
B it is gaining share of throat globally.
We remain flexible and agile in a challenging operating environment to deliver strong results.
Driven by our leading brand portfolio and our accelerated digital transformation, our volume hit all time high and.
And we gained share across key markets our business has momentum.
Looking ahead to 2022, we have already implemented or announced it our revenue management initiatives in the majority of our markets.
We will monitor how the year develops across all our markets and are prepared to continue to meet the moment.
Additionally, this year presents unique opportunities to activate demand.
Such as continued reopening.
The on premise.
And Mark key advanced returning in full force such as Chinese New year Super Bowl Carnival and the World Cup.
In conclusion, I am proud of our ongoing transformation as we position the company to deliver a future of marches.
I would now like to hand, the rover, suggesting to begin the Q&A session.
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.
Two we do ask while you pose your question you pick up your handset to provide optimal sound quality.
Thank you. Our first question is coming from Rob Hottenstein with Evercore. Please proceed.
Great. Thank you very much obviously inflation is on everybody's mind, Abi perhaps more than most given the.
The background in Brazil has had.
Tremendous amount of experience dealing with inflation.
You're known for your cost discipline.
So kind of two part question first you know how how is the organization dealing with greater across the board cost pressures are you pivoting at all changing targets anything, especially to deal with it and then and then second related.
You do have a different business model today, given the digitization of the business with B to B and D to C.
How has that impacted your ability to deal with the inflationary environment. Thank you.
Hi, Robert Fernando here.
Thanks for the question and then I'm gonna when they stopped and then I'm going to have Michelle offer some thoughts as well so in our outlook. We we stated on an organic EBITDA growth for 4% to 8% in full year 'twenty, two which of course taking into account. These dynamic cost environment. We add we are seeing.
We are not providing specific cost per hectoliter guidance, but why do we mention our look is that revenue is going to be growing ahead of the data.
And and then Michele I don't know if any other additional thoughts.
Yes. Thank you Fernando Thank you Robert for the question.
I think that you are right when we think about the very dynamic environment.
And inflation costs.
So I think that 2022 in a way is going to be very similar to 2021.
And what we learned during this pandemic and its something that you mention is very core to our DNA is visibility.
And being flexible, but always focusing on results.
If you think about the quarter for 2021, we have already implemented or announced that most of our revenue management initiatives in the majority of our markets and this is consistent with what we've been talking since last year that we were prepared to meet.
The moment.
In quarter four net revenue per hectoliter at eight 1% is already a proof point on how agile the company's been in dealing with that.
You know and you mentioned that that we operate in very different markets. So we have inflation.
Now across the board, but we've been dealing with inflation for many years in developing markets and our revenue management toolkit is being very helpful over the years, but it's almost like if we are adding the two.
2.0 version with.
With data that we have in hands now because of bees because of direct to consumer that is much more data thats certainly not only the way that you go to market more efficient, but also how we manage our promotions activations in a way that's much more dynamic but as much.
More efficient as well and as a proof point you think about us achieving all time high volumes in 2021, and then I think that last but not least our brands continued to perform very well.
And enhance it by the digital capabilities that we have today, we are very well position for 2022.
Terrific. Thank you very much.
Thank you. The next question comes from James Edward Jones with RBC.
Morning morning, Thanks for taking my question two questions can you just talk a little bit more about resource allocation between different price segments.
You mentioned that you grew share in mainstream for my sense is that Youre focuses more on the premium end of the market.
Correct.
Your sales and marketing ratio dropped by 120 basis points in the year.
Bye.
140 basis points since 2017 is not one of the things that change.
This new management team.
Okay.
Hi, James.
Thank you for the question I'll take the first one.
First time down try to address the second one if I understood right you are talking about sales and marketing as a percentage of net revenue right. So.
So is that correct.
Yeah. So the first one in terms of a location.
We have.
A dynamic way of locating resources by segment and as Fernando mentioned <unk> during our Investor meeting last year that we improve it big time, our model and despite the focus that we having good owing.
And accelerating the premium segment, which grew 23% last year, we continue to allocate resources across all segments and trying to be very efficient and as we rebalance the portfolio, we have clear objectives for each segment while.
Share of segment in the mainstream business is very important and we are driving innovation and growing with propositions such as double Malte. We are also investing in premier Nizing and accelerating growth because it's very very important to get to scale, we followed a global brand.
Well, Dan we can harness most of the benefits in our category expansion model.
Is a very good tool because based on the five levers we can deploy resources, where do we have highest chances to win.
And this connects very well with this second question because in a way looking only into the percentage.
Sales and marketing.
Versus net revenue Theres, no really paint the full picture.
Let me, let me put this way like in one hand, we are becoming much more efficient as we digitize.
As we get more data, we come down tailored much about our investments by segment by region to the tale of cluster of clients that we can through the usage of data be very precise.
Combined and as we said that our creative work driving the brands is also becoming much more efficient. So we are driving higher rois campaigns.
You just saw.
We shared with <unk> now being recognized by Ken as the creative market here of the year has a reason and these creative power drives efficiency.
So more creative usage of data.
Higher percentage of sales going direct to consumer allows us to really really improve our efficiencies on the other hand, as we accelerate growth in our revenues grew 15% last year. The full picture is really more into how much money how do we deploy four.
Growth and then just to get the figure from 'twenty 'twenty to 2021 we invested more than $400 million. Additionally to continue to drive momentum and power.
On the other brands. So this is I think thats a good explanation maybe why your business has the momentum to has to date and why we ended up 2021 at all time volume high.
Thank you.
Thank you. Our next question comes from Trevor Stirling with Bernstein. Please proceed.
Hello, Michelle and Fernando.
So my first question Michelle is I Wonder if you could give us a little bit more color on terms of the components and the elements of your guidance of your food to seven hilli, you're implying a little bit of margin compression going on but in terms of the top line growth do you think it's going to be mainly volume mainly price mix in some sense, maybe which geographies do you expect to drive the growth in the coming year.
And my follow up question, maybe one more for Fernando.
Your EBITDA is not back to where slightly ahead of where we were pre pandemic, but the tax rate is staying quite high is that because it's a fundamental change in the country mix.
Is it because its underlying tax rates in any of your key geographies.
Hi, Trevor Thanks for your question, let me, let me start by taking the second one and then I'm going to go back to the first one so on the tax the tax outlook is a function of the country mix.
Youre correct on that and it's underpinned by the strong performance of emerging markets like Mexico, Columbia, which which are growing at a faster pace than the rest of.
And the rest of the operations and this translates into an average higher tax rate but.
No.
No other reason than that and then on your question on it all Blue collar book is actually four to eight.
And why do we said is that <unk> four to eight and with revenues growing ahead of the data.
And refer health combination of volume and price. So so this is this is what he said and this is as far as we roll on kind of making a statement on the outlook.
So it's important for us to focus on the fluctuate.
Thank you Fernando.
Thank you.
Thank you. Our next question is coming from the line of Pinard Aragon with Morgan Stanley . Please proceed with your question.
Hi, Thanks for taking my question.
I have one on the U S. This is now the third consecutive year of organic sales growth in the country.
As your portfolio shift towards more premium areas got this business to a point now where you would be able to maintain this growth momentum going forward and it would be useful if you could please also comments on the STR versus ftw's in stock levels and anything you can share about the U S. EBITDA evolution going forward. Thank you.
I cannot and Michelle here thanks for the question.
I think that we are very pleased with the momentum in the U S and if we go back when we talked about.
The U S strategy, the new commercial strategy and the.
Challenge that we had that in turning around the business and rebuilding momentum.
I think that we can.
Now say that with three consecutive years of top line growth the topline momentum is back in the right direction.
This is <unk>.
Doug tough our portfolio rebalance.
We accelerated a lot the growth in segments, where we had good headroom.
<unk> brands to drive this growth and that are growing segments. So we structurally the business just now in bad shape.
And of course, we need to earn each and everyday consumers retailers in partnership with our wholesalers and of course as these brands at scale.
And as we getting to a more normal situation, which we hope that's going to be sooner than later this growth will translate in margins and EBITDA and we've been seeing that top line is coming margins at Tommy we continue to invest not only behind the brands.
But also investing in maintaining our marketing momentum there.
This will translate into EBITDA just to give you one metric we have today around one third of our business in the U S already in there both core segments and this one third is driving the overall top line growth because the growth is far ahead.
Of what <unk>.
<unk> I think you'll remember.
Over the last one year and a half because of fall disruptions in supply chain. We ended up being very short inventory low inventory with forward wholesalers. This is more like normalizes now so is almost back to the same level.
Off STR is W.
When you put like the last 18 months combined and eventual residing in our health.
This stage today, there so as we prepare now to face towards spring and summer.
We believe we will have a much bad there are similar in terms of product availability this year in North America.
Thank you.
Thank you. Our next question is from the line of Mitch <unk> with Deutsche Bank. Please proceed.
Thanks, Hi, Michelle Hi, Fernando.
My first question is on the guidance again I'm afraid so.
The 4% to 8% EBIT growth guidance.
Is I would say a relatively narrow range given then.
Current level of geopolitical uncertainty in this.
Scope for further COVID-19 related disruption and even.
And potential for more input cost pressure. So can you talk about some of the scenarios you've considered.
When coming and saying you could come in with the medium term guidance range and then my second question is on Columbia, specifically.
Where you have been affected by capacity constraints and yet you also said you hit the 25 year high in terms of per capita consumption and when do you expect to be able to ease the capacity constraints and where do you think.
And you can get to when you do thanks.
Hi, Mitch Fernando here, so when monarch provides the the outlook of 4% to 8%. We provide this outlook based on the all the information that we have our hands and other capabilities that our team have.
So of course, it's a dynamic environment, we mention that but given all the different puts and takes and our revenue management capabilities. The strength of our brands. We felt that it was the right outlook to provide the 4% to 8% for full year 'twenty two.
Yeah.
And on the second one.
Thank you Michelle.
Yes, Mitch Michelle here on the second question in Columbia, I think that Columbia is.
Great example.
Of our market.
Expansion model.
And that knowledge.
If beef and direct to consumer.
Working at its full force right. So we see a market that is grown industries growing is premium nizing at the same time, we had.
Double digit growth there.
Top and bottom line.
Brands performing very well some of the Ken Awards came from Columbia.
Good creative work there.
Very good integration commercially speaking and innovations helping in further accelerate category expansion.
Volumes really move it faster than our ability during the pandemic to build up capacity, but we have to.
Trenches of capacity come alive this year 2022.
That will allow us to service the demand.
While we'll continue to invest to further accelerate growth both in the category and in our portfolio. So Q.
Big investments come to life this year in Columbia to help us with more product availability.
Okay.
Thank you. Our next question comes from Edward Mundy with Jefferies.
Good morning, Michelle morning, Fernando two questions from me. Please so innovation delivered 10% of sales.
In 2021 double what it was a big success can you talk to your degree of confidence that your innovation pipeline can sustain this level of innovation.
Into next year and beyond and as a follow up.
We've seen a big step up in revenue per hectoliter in the fourth quarter, how sustainable is this into 2022 and could accelerate further.
Benefit of pricing in developed markets drops through.
Hi, Ed.
Let me start with the first question on innovation.
I think that this is a very important topic for us.
Is a journey that we are adding the company for some years now.
Understanding that there.
Our insights and consumer needs.
And being able to tailor products packaging and even consider expansions beyond beer to address more occasions and drive these growth and category expansion. So this innovation has been great to add to the current brands and segments.
That we have as well west to allow us to tap into new occasions, and gather more consumers around the products and offerings that we have this is becoming much more mature inside the company is approved.
So we are innovating in product development, we are innovating technology products. So bees is a great example is that delivery is a great example, as well as business models, you think about perfect drafting Europe is more than one product is more than the only tech knowledge is a new business model.
Implemented in a very innovative way and we have a strong pipeline you just think about the U S. For example, what came to life now this year with hard sodas and Salesforce with zero carb.
And Bud light.
Our brands and beyond beer continues to power and innovate.
And if we think about the second question in the revenue per hectoliter, we talked about this.
During the quarter three last year that we were actively and proactively.
Implementing the actions to meet the moment quarter.
Quarter four net revenue was the highest.
In the year.
<unk> was as I said before a consequent soft.
Many markets already having the price increase in place for this year or announced it in some other very important markets and we will continue to monitor as the environment remains very dynamic.
As said before we are prepared to continue to meet the moment.
Thank you.
Thank you. Our next question is from Laurence <unk> with Barclays. Please proceed.
Hi, Michelle Fernando Thanks, very much for the questions can I ask on your digital capabilities now reiterated that 50% of your revenues are coming through digital could you break that out into the system you talked a lot about and we heard a lot about the capital markets day to the other digital systems that I think you put in place in.
In the past and then building on that within bees, how much of bees comes through your own brands and how much is coming from the marketplace and do you have any potential ideas on how big the marketplace part of these could get in on that I'm just interested on what that could do to margins. If you do a lot of markets.
<unk> type work, thank you very much.
Thank you Laurence I will try to tackle the question here.
Piece by piece, but the 50% of our revenue coming from digital is on our sales to retailers.
We add on top of that this 3% that we communicated on direct to consumer. So the 50% is very meaningful because it's kind of a landmark right so more than half of our sales now being digital.
This proves that the tech knowledge the product that we have it's very good product.
That has the stickiness and past performance and this is the obsession of our team at <unk> is deliver a great experience for our customers and they've been doing that they usage is very high $2 5 million customers already adopted and used.
This all the time and they use this because it's convenient.
<unk> powers them to have better visibility on that business to have better ways to put their orders in place and control and learn things about their business.
With that our business becomes more efficient.
And becomes a win win solution for the us and customers and this is by far.
<unk> technology than any other system that we had before and Thats wide adoption is so fast and thats why the usage by customers and by our sales team with this force is so big as well. So it is a great step and we continue to expand going to more.
Countries and gathering more customers to use this when we think about down the second part of the question.
Uh huh.
Which relates to the marketplace.
We are in.
Implementing marketplace in different markets of course, it goes together with beef.
As the convenience of that and the logistics.
Reach that we have and the ability to bring partners on board with Great service level to the partners as well, we see that today that is a big amount of our customers already buying in marketplace.
We see that they buy a great amount of products. So we have like single digits is still when you think about the revenues on beef being from marketplace like 5% to 7%.
And Youll see that more customers are joining which is very good because when you think about the average composition of these small and medium outlets that we service.
Accounts anywhere from 20% to 25% of their revenues their purchases.
So therefore, we have between three and four times.
Addressable market, that's non beer for us to tap into with marketplace. The two is good the service level is very high adoption. So far has been very good because more and more customers are buying beer and other products into the marketplace.
And we've been partnering with great companies that are joining us in this quest to service with high search to level our customers. So as exciting is still at the early stage, we will share more with you whenever we have some materiality that's worth sharing with more details but it.
This moment is growing very fast both in adoption and total revenues, it's represents somehow 5% to 7% of the bees revenues across the markets and the opportunity for us to tap into is three to four times.
<unk> Z.
There is more in medium haul flights.
Okay.
That's great Michelle Thank you very much and just to follow up on that if it's around 5% to 7% of bees revenue today, assuming bees continues at the rate it's growing in many years sort of 510 years out how big do you think the market place could be as a percentage of bees revenues.
We are not speculating about numbers for the future. We are trying to give you facts and data about the numbers that we have on quarter four and full year 'twenty, one, but again is growing fast much faster than the overall revenue of the company.
The market opportunity three to four times, the <unk> that we have with be it in these small and medium voltage <unk>.
And we have confidence in that.
So technology is great on beef is a great product we are confident on our partnership with the small and medium enterprise.
And so far all companies that have been joining us today, we have more than 150 partners on b is across different markets, they've been enjoying growth as well on their business. So it's a win win win solution. When you think about the marketplace.
Yes.
Thanks, Michelle Thank you very much.
Our next question comes from Tristan Van <unk> with Redburn Partners. Please proceed.
Hey, Hello, two questions from me one looking on those just wanted to ask about your working capital.
<unk>, which was quite incredible about $2 5 billion. We're just trying to understand I think thats, the best ever and flow you've had.
What drove that.
Exactly and how sustainable are those kind of inflows are as we think about this going forward.
And my second question Michelle I think this is the first time in 20 quarters that AB Inbev is not mentioned the affordability strategy I think in lives and holding inflationary environments and economic pressures, where does that sit in your thinking how relevant is that going forward. Thank you.
Hi, Tristan Fernando here. So on your question on working capital given that.
We have a negative working capital once we have volumes, increasing that's very powerful and the cash flow line.
So that's one of the effects. They are the other effect when you look at the working capital.
<unk>.
When you compare 2020, we increased the Capex expend too so that has an impact on payables.
Also as Michelle Michelle pointed out for example, Columbia and some of our markets that are growing volume of lot inventories were more on the lower side and that also have a positive effect on the working capital. So on the long run as long as you have volume growth the negative working capital always plays in our favor.
And but some of the or the other effects are more temporary and we should not see repeating.
Thank you.
So listen Michelle here.
Thanks for the question I'll take the second part on the affordability.
And in a way we are talking about that.
Talking a little bit different.
And we will expand and explain you. This so the affordability part is a very important component on the category expansion model, but we decided when we talk about the five levers we decided to make this brother and we are calling inclusive.
<unk> category.
And why we are talking about inclusive category, rather than only affordability because when we think about inclusive it and you think about all the consumers.
That beer does not have penetration to date.
They are consumers that we can target and grow that category you include women.
You include people with lower purchase power you include people that they are drinking different beverage and the innovations that we have are different formats and backs can address.
So today they are afforded the ability part.
Zero new before.
Is included as one sub component of what we call now inclusive category because that is much more inclusive. It then the only price.
And you are right to say that the inflationary scenario, we will be working is modestly with back price and innovation. So we can achieve both our revenue targets, but also our volume ambitions as we continued to lead.
And grow the category because the taste of this all time high volume.
Is that a suite.
And as we work to build our company and create the future if more tiers, we need to continue to develop the category and grow as we lead the category. So we need to include more people into the future.
Thank you that's very insightful I appreciate it.
Thank you. Our next question comes from Simon Hales with Citi. Please proceed.
Well. Thank you all I'm sure Hudson on day three for me as well. Please can I just come back to the issue of pricing and the strong revenue per hectoliter momentum.
You've reported.
As we look forward into 2022 do you expect the price actions that you would be.
Taking will need to recover the cash impact of the Cogs inflation youre seeing and maybe just building on that affordability issue relates to <unk>.
In the short term how do we think about the incremental elasticity impact in 2022 on your volumes from these price moves so that was the first question.
And then secondly, just.
In terms of supply chain and supply bottlenecks in the business is there anything we should be aware of with the movements in any of your geographies and has this plus supply situation now normalized fully in the U S.
Thanks, Simon this is Phil none, though I'm going to I'm going to take the the the.
The question <unk>. So so out of all of your questions. So the first one is on the <unk>.
When you're asking about the pricing and then what does it mean for revenue in dynamics on costs.
We know what to Luca.
Going back to it we said, 4% to 8% and we said that the revenues are growing ahead of the Vista.
So there are some some pricing and cost dynamic is implied in this outlook, but we remain we remain we remain on the fluctuate that's why do we should be delivering this year.
Then on the on the <unk>, two I'm going to transfer tool to Michelle.
Simon Thank you for the question.
Let me try to address it to you on the elasticity Bart I really think that we can not only learn from the past.
Use the model to project, but of course as the environment has been very dynamic.
We need to.
Continued to monitor the evolution and if you go back to 2007 2008 when was the last time that we saw such spikes in costs, followed by price inflation what.
What we saw was actually depth across many categories, including Birr day elasticity kicking in charge of the price. So there was indeed.
The contraction in the market was different developing developed markets.
<unk> was also different from today. So I think that's one that our elasticity zinc played there indeed.
And it's still too early given the recent price movements for us to precisely say, how big the elasticity will be.
But the environment today is also different because in many countries people have enough money, giving all the stimulus that were given during the pandemic.
To maintain purchase power.
Even with an inflation that we're seeing.
And in other countries, we will need to be monitoring closely because in some of this countries all the incentives and the stimulus that people had the burnout during the pandemic and then people will need to rely on salaries, increasing aligned at or ahead of inflation.
In order to be able to keep purchase smaller I think that our brands are in very good position.
Think that momentum that we have today in market sharing volume helps us to continue to moving forward and because most of our markets implemented or announced that price is already in quarter. Four we are now very focused on activating the demand.
And we have this year.
Violence.
The difficult inflationary environment.
Combine that with a very unique opportunity for demand activation think about.
All of them are key events related to export but beyond that that they didnt happened in the last two years and now as we see all mccrone phasing out in many markets and reached the best information that we have today. Many of these events are coming back we just move it.
For the Super Bowl two weeks ago, there was a great activation volumes in the on trade grew 35%.
Weak versus week Superbowl diseased vessels last year was up.
And we have like a great.
Uh huh.
Celebration in the west.
Event was our debt a soft people on the streets people in the stadium and high consumption think about <unk>.
On trades reopening now in Europe , and everything that this can add in terms of occasions coming back for consumers to enjoy beer and most importantly, then we have summer, which is going to be I hope a different one from last year and in the backend of the year FIFA, which.
As a global event right because more than 40 countries participating everybody watching football and soccer. So I think thats. We now are very focused on driving.
Consumer demand in activating our brands and the leading and growing.
Category, So we need to balance so there would be of course Charlie.
Each and every year has its own challenge, but I'm very confident on the opportunities that we have to activate them in this year. Our plans are ready and our team is executing this excellent.
On the supply chain just to to finish I think that you ask a about the you asked if I got that I think that overall the dynamic in the market continued to be very intense so shifts that happening.
Across the board, but if you think about the last two years I think that we've been adapting to each and every situation I'm very proud of our team's flexibility and non this ship and how much they've been working hard to deliver these strong results that we delivered in <unk>.
2021, so I think that there'll be more continuation of flexibility more of that station as we address that and one point that I might highlight on that is that with the return of the on trade.
We've seen now bottles glass package growing we see returns of kegs that Ford is a very good packaging, we have very good spacing lines less demand on the aluminum because of the off trade now.
Not.
Not pumping at the same speed that was during the pandemic because there was the only channel and this helps us well and getting the supply and demand equation.
<unk> balanced, but theres going to be another year in which we will need to work very hard to deliver.
That's great. Thank you.
Thank you our final question will come from the line of Sanjay <unk> with Credit Suisse. Please proceed with your question.
Hi, Michelle Fernando My question is just on <unk> again, I think a lot of your progress has really been in markets, where you have direct distribution.
How are you approaching digitalization in markets, where you have indirect distribution is it also a significant opportunity for you here.
Hi, Sanjay.
Good morning.
Thank you for the question.
And I think that toward addressing a point that's very important.
And I would say that we have ways in which the tech knowledge will be deployed and the wave that we built the product that our team from beef.
Design that their market approach and that expansion strategy the direct distribution markets are.
Well tailored for us to quickly implement rolling in our country to country. So today, we have 16 countries and having fast adoption.
<unk> fast.
Retention utilization of the tech knowledge with our own teams, but if you think about the next wave. So we are now.
Tackling.