Q1 2022 Anheuser Busch Inbev SA Earnings Call
Welcome to and How's our Busch Inbev first quarter 2022 earnings conference call and webcast hosting the call today from AB Inbev are Mr. Michel do Caris, Chief Executive Officer, and Mr. Fernando Tennenbaum, Chief Financial Officer.
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Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It.
It is possible that a bean bags 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 these risks and important factors that could affect <unk> future results see risk factors in the Companys latest annual report on form 20-F filed with the Securities and Exchange Commission on the 18th of March 2022.
A b Inbev assumes no obligation to update or revise any forward looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information.
It is now my pleasure to turn the floor over to Mr. Michel do Caris, Sir you may begin.
Thank you Jessie and welcome everyone to our first quarter 2022 earnings call.
<unk> has to be speaking with you all today.
First I would like to take a moment to share our deepest sympathies to all of those who have been affected by the situation in Ukraine and acknowledge the commitment and dedication of our teams.
Supporting our joint venture colleagues and their families. While wish you for this.
Today put another nice will take you through our first quarter operating highlights and provide you with an update on the progress we have made in the execution of our strategic priorities.
We will then be happy to answer your questions.
So, let's just start with forward operating performance.
Our business momentum continued this quarter and we are very pleased with our performance to start the year.
We delivered topline growth of 11, 1% with two 8% volume growth.
Revenue per hectoliter grew seven 8%.
Given by the implementation of pricing actions across our markets.
Hansen by ongoing <unk> and continued recovery of the on premise channel.
EBITDA increased by seven 4% as we manage.
Commodity cost headwinds and elevated supply chain costs.
We delivered normalized EPS of six to seven Sam.
Underlying EPS of 6%.
Now I would like to share some highlights from our key markets.
Our business in the U S delivered continued topline growth driven by consistent execution of our commercial strategy and the rebalancing of our portfolio. Despite a soft industry.
Both core portfolio continues to outperform led by Michelob, Ultra which grew volumes by double digits within the expense base is ready to drink segment. Our portfolio continues to grow ahead of the industry led by cutwater.
In Mexico, we've continued order momentum delivering double digit top and bottom line growth.
Volumes across all segments of our portfolio, resulting in further market share expansion.
Or are both core portfolio increased by double digits led by mobile Assembly and Michelob Ultra.
In Colombia, we delivered a double digit top and bottom line growth and continue to grow the beer category sort of the implementation of our expansion LAPIS, resulting in a new record high per capita consumption this quarter.
We followed a route to market now digitize it 30% of this customers I'd also these marketplace users.
Our business in Brazil delivered double digit top line growth.
Our beer volumes once again outperformed the industry growing by two 1% despite lapping a strong comparable.
We sell our road to market digitize it over 60% of these customers are now based marketplace users.
In Europe , we grew top and bottom line by double digits, driven by volume growth on premise the reopening and supported by revenue management initiatives, our premium Super premium portfolio led the way growing revenues by mid teens, representing now over 50 person.
Of our total revenue.
In South Africa, we continued our momentum delivering above 30% topline growth with volume increasing in the mid <unk> ahead of the industry.
All segments of our portfolio grew this quarter led by over 40% growth in our leading core brand Carling Black label.
Driven by beef our route to market is now digitize it with fall almost 90% of our revenues coming through digital channels.
In China momentum continued into the start of the year marked by a strong Chinese new year. However, the implementation of COVID-19 restrictions in March led to a total industry decline of low single digits in the quarter. According to our estimates these restrictions.
Similarly impacted our key regions and channels, leading to top line decline of one 2%.
Notwithstanding the restrictions there.
Your line consumer demand for premium products remains strong and the share of our total volume generated by our premium portfolio increases.
I would like now to turn your attention to a few <unk> highlights.
In the first quarter, we made progress across our ESG priorities, we select highlights including.
Recognition of our strong sustainability record ambitious commitments and our focused ESG strategy.
We have been awarded the gold medal for international corporate achievements and sustainable development.
The rule environment Center.
And the dancing water stewardship, we published a watershed health guide in partnership with the nature Conservancy to share learnings and capitalize the action in driving measurable watershed outcomes.
Fostering interpret new ship, we have launching applications for the fourth cohort of our award winning 100, plus a facilitator program.
Founded in 2018, they're 100, plus the facilitator event fights any scales sustainable innovations focused on solving key challenges within our ESG priorities.
Now, let's focus on our strategic pillars.
To enable the execution of our strategy, we havent Nelson our newly alignment commercial leadership structure designed to accelerate the next phase of innovation and growth at <unk> being that with the creation of the chief growth officer position.
Under he has looked at deals leadership this new structure will maximize data and digital integration with our marketing and sales capabilities.
We are also taking further steps to empower our teams locally.
The titles of each of our six zone presence has been updated to regional C E O to better reflect the scope and impact of this key positions.
Next let's turn to pillar one of our strategy lead and grow the category.
Driven by the execution of our captive what expansion model. This quarter, we grew volumes in more than two thirds of our markets.
Let me take you through our category expansion levers.
First we continue to focus on making the beer category inclusive photo consumers. Following the successful expansion of <unk> to meet the our smaller bottles packed offering for Corona, we introduce it further is mall in fact formats in several key markets in Latin America.
Provide consumers with price points in choice for consumption needs in different locations.
We are offering superior court propositions.
Our mainstream portfolio delivered high single digit revenue growth in this quarter once again outperformed the industry across most of our key markets.
Third Oh occasions development instead.
It's still a flat our leading brands in the news occasion grew by over 14% globally. This quarter with the planned expansion of our sign off Dine Bon Appetit campaign to a further seven markets this year.
In the non alcoholic beer category, our portfolio delivered continued revenue growth led by liquid and package innovations such as Corona Some brew that we.
We launched it in Canada.
Fourth we are leaving in premium mutation this quarter, our above corporate volume delivered over 15% revenue growth led by Nicola Ultra which is now available in 14 markets and grew by double digits.
Our global brands continued to lead personalization across all our markets.
Combined with revenues off of Budweiser, Stella Artois, and Corona grew by 6% outside of the brands' home markets led by Corona with 14, 2% and Stella Artois, We fell 11, 5% growth Budweiser grew by <unk>, 3% impacted by the re.
New COVID-19 restrictions in China.
Finally, we continue to expand the category with forward beyond beer offerings our.
Our global beyond beer business contributed over $350 million in revenue this quarter led by the U S. West pit water grew by strong double digits and South Africa were brutal fruit and flying fish delivered continued double digit growth.
Innovation this quarter supported category expansion across each of the five levers.
Contributing approximately 8% of our total revenue.
Highlights include extending our superior carper positions with the launch of Budweiser Supreme in the U S.
The relief of Stella Artois and filter in the UK.
And the launch of Corona <unk> cow across some of our key markets.
In the U K, we leveraged our direct will sooner solution perfect dropped fixed plausibly relief Estelle has blocked unfiltered through the E Commerce channel.
Based on the positive consumer feedback and insights from the launch we are now expanding the brand into other channels and packages.
Now, let's turn to our second strategic pillar digitize and monetize our ecosystem.
As we continue to invest to become a tech first FMC G company.
Beef continues to see remarkable acceleration in usage enrich capturing approximately $6 5 billion U S dollars in but also merchandising value in the first quarter up from approximately $3 5 billion U S dollars in the first quarter of 2021.
We are now live in 17 countries with.
$2 7 million monthly active users.
11 of our 17 countries. Our customers are also able to manage that orders for third party products through this marketplace.
We know that for many of our customers via typically makes up less than 25% of that is source states. These.
These marketplace offers a consolidated order and delivery and management platform solving pain points any powered and our customers.
As of the first quarter, we have seen increased adoption and exponential growth at 31% of this customers are now users of beef marketplace with annualized revenues of 800 million U S dollars.
Our partners and also benefit from the digitalization of sales with increases retailer engagement distribution reach and cost efficiencies.
We are still in the early stages of exploring the possibilities and we are excited by the results and feedback from our customers and partners.
Now, let's talk about direct to consumer business.
This quarter, our deepest sleep products generated nearly 300 million U S dollars and revenues across 20 countries.
The number of online orders grew by double digits versus last year, surpassing 17 million transactions.
Latin America is that delivery is already present.
Similarly, 300 cities in Brazil.
Covering about 50% of the country's population.
Revenue from delivery grew almost 30% year on year.
Based on the success of Zain, Brazil, we are scaling the career product to another 10 countries in Latin America.
We continue to deliver on our strategy with best in class creative marketing and innovation capabilities.
Following the announcement that <unk> was selected by <unk> as the creative marketer of the year. We were recently named in two fast company.
World's most innovative companies list for the first time.
First company, recognizing <unk> ability to quickly seat in skate innovation to drive performance and impact.
The award highlighted our be innovations.
Products in our biotech initiatives evergreen.
Big Congratulations to our teams and partners for this remarkable achievement in further recognition of how are we adding beds in creativity and innovation into our strategy.
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 Michelle with morning, good afternoon, everyone. We.
We aim to maximize value by focusing on three areas optimizing resource allocation.
Robust risk management and efficient capital structure.
With respect to capital location, we went to maximize long term value by dynamically balancing our priorities.
We continue to invest in organic growth and support our strategy to lead and grow the category and digitize and monetize our ecosystem.
The excess cash generated by our business is been dynamically allocated to our capital allocation priorities deleveraging selective M&A and return of capital to shareholders.
In line with our capital location priorities. This quarter, we completed the redemption of $3 1 billion U S dollars of bonds.
Our debt maturity profile remains well distributed with no near and medium term refinancing needs with the weighted average maturity more than 16 years.
Our debt portfolio does not have any financial covenants and is comprises of a right of goodness diversifying our FX risk.
In addition, approximately 93% of our bonds have a fix it rates insulated from interest rate volatility and inflation with an average coupon rate of approximately 4%.
Our proactive revenue management, combined with Florida hedging policies and operational efficiencies contributed to seven 4% EBITDA growth.
And an increase in underlying EPS growing by five cents to 60 cents per share.
I'll now hand, it back to Michele for some final comments.
Michelle Thanks.
Thanks Fernando.
I would like to take a few minutes to recap, our reflections and learnings and how we are meeting the moments in 2022.
The beer category continues to demonstrate the strength.
We are operating the big profitable and growing category beer is gaining share of throat globally.
Our business has momentum.
Driven by our leading brand portfolio and our accelerated digital transformation. One was grew in more than two thirds of our markets.
On top of that this year presents unique opportunities to activate demand.
Such as continued on premise reopening.
And the return of my key events, such as Carnival and the World Cup.
In conclusion, we are confident in our business fundamentals and our team's ability to continue to meet the moment and create the future with more cheers.
I would now like to hand, it over to Jesse 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 that while you pose your question you pick up your headset to provide optimal sound quality.
Thank you. Our first question is coming from the line of Trevor Stirling with Bernstein. Please proceed with your question.
Hello, Michelle and Fernando.
Two questions from my side. Please first of all maybe moved from Michelle Michelle very robust price mix at 8% and the closure.
Are there any signs in any markets that consumers are starting to react against the pricing and we're starting to see some volume elasticity creeping in on this.
Second question, maybe more for Fernando.
Just trying to understand the various drivers of the gross margin Fernando I. Appreciate it's a very complex picture vary enormously from country to country, but within price mix can you give us some broad sense of the components of the price of brand mix of channel mix and indeed, the role of the third punchy, Brian sales through the <unk> marketplace and likewise on the <unk>.
Decide what is the mix between under overseas currency and again that product mix through.
<unk> marketplace.
I thought I've heard Michelle here good morning.
So taking on the first question.
I think we discussed this a little bit during the.
Full year results, we have announced or.
Or implemented the majority of our price.
In quarter, four and quarter one this year.
And we've been seeing across the globe inflation continued to move up.
Most of the categories.
Increasing prices.
I continue to think Thats, a little bit too early to measure all the impacts of that and the consumer elasticity.
But it's also I think that through and we see this across the globe that inflation is actually trailing are half of what was the expected numbers and forecast that we saw last year.
We can see clearly on the price to consumer that.
Is behind inflation so far.
We can also see investing the majority of the market that is this combination of the economy continues to do well employment rates are holding.
And some of the developing markets commodity it's not helping the overall economy. So the elasticity is not really PRASM yet.
Even though I think that as we face towards quarter two in quarter. Three we will have much better data to understand where and in which markets elasticity will play a bigger role.
And you also know based on what we discussed during the road show in quarter four full year announcements that we kind of forgot nice of the markets in three different clusters.
Although this anticipating potential assistance in fact, and we continue to monitor very closely how things are working but all in all two thirds of our markets with very robust growth in the quarter, one and <unk>, one double digit topline growth ill hand, it over to <unk>.
Number two to take on the second question second question is first question.
Okay. Hello travelled thanks. Thanks for the question. So at the end of the day when we look at the revenue per hectoliter.
Consistent with what we're doing of course, you have some wins in different regions like Europe . The on trade reopening definitely helped our net revenues per hectoliter, but when you you you step back and look at all probably the stronger the stronger Componentone net revenues per hectoliter was revenue management.
That's the major driver and when you go down to cost of goods sold of course, you always have some mixed impact, but it's fair to say that the bulk of the impact was the anticipated commodity and FX headwinds.
The market place and all these things they are not that meaningful in the Grand scheme of things, it's really commodities and FX.
And.
Which was anticipated and it's all baked into our four to eight outlook for the year.
Okay, great. Thank you very much Michelle and Fernando.
Thank you Trevor.
Thank you. Our next question is coming from Tristan Van <unk> with Redburn Partners. Please proceed with your question.
Hi, Good day guys.
Two for me one just to follow up on forever. Some of your some of your peers are talking about taking another price increase this year.
How are you thinking about that as something that's maybe on the table for you as well, particularly in some of your developed markets where that seems to be needed.
The second question is on South Africa, which is a really strong performance, especially when you consider that there was a late Easter so I'm trying to understand what's driving that performance. What's the balance of the team. What you are doing versus perhaps the markets because both you and your biggest competitor seem to be doing well.
I wanted to just understand how that performance a bit better. Thank you.
Okay.
Hey, Tristan.
Thanks for the question Michelle here I think that on the first one when we talk about the price increase.
We discussed ideas and when he said that majority of the price actions were announced or implemented between quarter four and quarter one.
As you know each market has a little bit of a different agenda in some markets, where do we have very high inflation.
<unk> brought us to have more than one price increase.
During the year.
As I said now answering the question for the traveler.
One thing that's very clear.
Now is that inflation is moving much faster than what was anticipated and then the <unk> practices that are lagging inflation so far in the year.
So we continue to monitor how things are unfolding and we continue to work.
Very close to the market and making sure that we are meeting the model.
As we think as well about the experience that we have and the.
The entire revenue management that we have across the markets. We also know that as inflation is moving up and the environment.
Is inflationary.
Whether to take the price and to be.
With inflation than trying to recover. This later when inflation is moving downwards. So in principle, we continue to monitor.
<unk> market.
That has more than one traditionally inflation is ahead of what was the expectation embedded behind inflation, so far so ready to meet the moment.
The second question on <unk>.
South Africa, I think Thats fair.
Several of our emerging markets. They continue to confirm what we've been saying that there is big for us.
Optimal and growing.
And this growth is being led by the mortgage markets not only but most emerging markets.
Our category expansion model is being very helpful across the board as we focus on the five levers to continue to make the category more inclusive more premium.
South Africa is an outstanding example of four core products performed very well and our ability to expand to more occasions.
Bye.
<unk> be an expansion brutal fruit flying fish have performed very very well in South Africa, and when you think about the remaining parts of Africa as well for <unk>.
To come through.
S markets performing very very well so the amount that it will boost the levers that we are executing and the strategy of digitizing and expanding occasions is driving a very robust market and we are very pleased with the performance not only in South Africa.
But across most of our markets and especially emerging markets.
Thank you Michelle.
Follow up on that journey, because you mentioned that there obviously your constraint on the growth currently because of capacity is that something we should continue to expect in this result, I guess everybody is pricing at this moment to be covered currency declines over the last few years. So the way, we think about it or is capacity coming online soon.
In Nigeria, we had a very strong performance in quarter, one the underlying demand for our brands continues.
<unk> continues to be very strong our brands are being powered.
There is inflation and there is pricing the market and we have capacity coming.
But as you know the building the capacity, Nigeria is not very easy and very quick as it can be in some other markets, but we have more capacity coming this year.
And we are.
Repairing too to supply the demand that we have now in the future given the power of our brand and marketing pleased very pleased with the performance of both.
And topline growth, but also market share and brand performance there.
Thank you Teresa.
Thank you.
Thank you. Our next question is coming from Rob Arnstein with Evercore. Please proceed with your question.
Thank you very much.
Michelle.
In the U S. The the what could be termed adult alcoholic beverages.
Combining seltzer.
Ready to drink cocktails, you know both both molten spirit space really seems to be driving overall.
Beverage alcohol growth and I was wondering you know is is that the case to what extent that is the case outside of the U S.
You know how important a driver do you see this being again when youre looking at total share of alcohol.
And how is the firm looking at this opportunity.
Through our long term strategic lines. Thank you.
Robert Good morning. Thank.
Thank you for the question I'll try to towards rather it means that they got that entirely.
That you are asking for so I think thats in the U S. We continue to see this beyond beer or outlook alcoholic beverages as you call growing the quarter one was not different.
We saw growth there and one of the most important and attractive points that put us is that is really driving share of throat towards these ready to drink beverage.
And our capabilities from route to market production capacity ability to introduce innovation in new brands.
It makes us well positioned and optimistic to continue to drive growth in this area.
The example, Thats why were giving here is because water, which is a very new brand that continues to grow very strong double digits ahead of the industry. This quarter, we just launched it.
Paris Saint introduced neutral in the market because of the way the leading brand in Canada, and we are now expanding to the U S. So far very successful as well in your market that we launch it is more on the light refreshing area, but is moving very fast and growing distribute.
<unk> very fast it's going to be.
Before Sharon Northern important play in our portfolio as you look at this globally. The manifestation is different market by market I just mentioned to three from now for example, flying fish and brutal fruit in Africa growing strong double digits very poor.
<unk> contribution to the South Africa market, we have between Brazil doing very well, we have now corona expanding with stroke Qawi, Mexico, and some other Latin American markets and different manifestations, but an opportunity that is a global one.
Our capabilities and how we are positioned globally to really take advantage of this.
Consumer trend and this opportunity.
Makes us feel very good I'm very optimistic about that because again, we have the grants we have the knowledge from the developed markets, we have being novation and liquid capacity.
We have distribution.
And we can take advantage and really lead.
This expansion level globally and that's why this is one of our five category expansion of levers in the model that was tested and we've been proving that works very well in different markets is not the same product manifestations of what the beyond beer.
It's different across different markets, but it is a huge opportunity for us globally to gain shelf grows.
And I think I think Brendan mentioned at a recent conference.
This was roughly 70% incremental in the U S are you seeing that same rough level of incremental <unk> outside of the U S and and just can you tell us just a little bit more about the corona tropical product. The packaging is amazing is this something that you.
You see taking globally.
Yes.
Solid numbers they.
In the U S are very clear that you have all this household penetration and the panels, where we can manage it and depending on the innovation is between 70 and 80%. So Brandon is a spot on his comments on the 75 and Thats why the sheriff drove the opportunity is so big.
As we go into this.
And the Oklahoma beverage in the other markets. What you see is that this helps us and continues to drive share of throat, because <unk> itself is already gaining share of growth in the majority of the emerging markets, but more hopper it opens up more occasions.
Two and it's for us to continue to premium nine and drive growth.
The Mexican and the Colombian Inova.
Innovation in this area.
If corona.
Great opportunity to make the brand even more glad he's.
Even more premium and even more available in different occasions for difficult tumors. So the early indications are very good we need to solid fly the <unk>.
And the innovation there.
Fourth then of course, there will be opportunities to expand to other markets because we've been working as another very important.
The advantage that I think could have on Disney charter global brands. So we have months microcards eliminate across different markets.
We have kept water that has opportunity to go to different markets and Corona is already a global brand and introduce innovation awards as well as we expect and there are signs that there is no reason why this chemical global as well under the Corona franchise.
But this decision will be made later.
Terrific. Thank you very much.
Thank you.
Thank you. Our next question is coming from Edward Mundy with Jefferies. Please proceed with your question.
I have a shelf life in under two questions for me. Please the first is could you provide some examples as to what in practice the newly aligned commercial leadership structure might mean.
We're accelerating the next phase of innovation and growth.
And then the follow up question is really around your trading momentum from the first quarter.
If we back out the.
The near term disruption from Covid in China, how is trading momentum and the rest of the business continue to enter into the second quarter.
Yes.
Hi.
Good morning, as I said no. Thanks for the question on the structure I think that.
The hotel in a nutshell what their main idea is.
Going back to the idea that this structure should always followed a strategy.
And this is specific part of the structure has one single objective, which is to accelerate growth the.
The question down it comes down to how will that happen right and I think that today, we've been building.
On both sides on the sales and marketing capabilities, but also in data and digital fronts and it's only natural now that with the strategy simplified on lead and grow the Hittite and monetize and optimize the combination.
Some of the capabilities that we're building in data and digital.
Okay, great it with our sales and marketing capabilities.
Enable was not only for executing our strategy, but also to accelerate innovation.
And we think that this comes in a simple way because these are structural now simplified the way that the global level, we may cover glass products and programs interact with the zone.
And we simplify a lot the idea of where the capabilities have been developed global level versus this regional CEO , where the accountability for execution and implementation of these initiatives like switches in the EU and in the region. So simplified structure.
Integration of data and digital capability with marketing and sales capabilities and he cargoes available as only the right guy to do that great experience in the Bu great experiences zone, President and now at the forefront of the digital transformation in the company.
We are putting them to China.
What we saw was a very strong start of the year Chinese new year was great.
At the end of the quarter in March.
Because of the implementation of the Covid restrictions was down much lower and we saw like half.
Off deals right Fox closing like the night life blocks, we saw like 10% to 20% to slow down in the restaurants.
And we saw.
The maintenance of the off trade. Because then you have a lot of orders in ecommerce on that.
The underlying momentum remains strong, but it's called visa restrictions.
Also in place through majority of April and early May but now in May you'll start to see Guangdong.
Will it be stocked food, Jim coming back and this number of box clothes are improving is likely and Mazda restrictions are lifted.
Consumption comes back.
And we see China as one thing, but even in the APAC. When you look for example, Korea. The momentum is very strong and now side of Asia down their line momentum remains strong as we phased that out of the <unk>.
Great. Thank you Michelle.
Thank you Ed.
Thank you. Our next question is coming from the line of Mitch Collett with Deutsche Bank. Please proceed with your question.
Your line is live you May proceed with your questions.
Okay.
Hi, Michelle Hi, Fernando.
My first question is actually pretty straightforward.
You did seven 4% organic EBITDA growth in Q1.
Which is pretty close to the top end of your guidance range for the medium term.
Can you talk about the puts and takes.
The balance of the year.
That could see you at the top of the bottom of the range. So I'm thinking about Cogs pricing tends to lockdowns on trade recovery.
And then anything else and then maybe a second.
Open question about PS because you're now rolling that out into geographies, where you don't maybe have the same.
Scale advantage do you still get the same benefits when you take these into markets, but your market share is is lower.
<unk>.
Thank you Mitch let me, let me get the first one.
We are reiterating the outlook, we have the 4% to 8% of course it has been a very dynamic environment and is likely to continue to be a very dynamic environment. We have very good visibility in our in our cost given our hedging and we have a team that over the last.
Three years has become a more agile more digital and data driven and that just say better equipped to navigate a more than anything vitamins.
We continue to see strong demand and strong consumer demand for our brands.
And we are confident that our team is going to be able to meet the moment and reiterating our outlook for 4% to 8% growth for the full year.
Acknowledging that revenue is Glenn is likely to grow ahead of our dividend.
And for the second one I'm Michelle.
Image.
Obese.
What we we explained that and we've talked about before was this idea that I like.
Three weeks I would say on this implementation.
One is where do we have direct distribution.
One is one of the products in this suite called link that we are developing specifically for our large key.
And this is a way to make the MDI that exist for 2030 years much Amanda I always say that it's trying to transform the landline phone on their mobile phone right because we can't add a lot of tech knowledge to what was the old Adi and Thats.
Going to be a big wave that we are already testing in countries, such as Brazil, and the U S. And then you have this.
Three tier type of markets and some of them is just sad lower share that we need to implement and the implementation of these brings one more complexity, which is the integration of DXP is not only that we're taking auditors the real value is how we do the integration of the data.
The algorithm selling and rewards with the partners to make that business better than I think that the value proposition works well across the board because the value proposition is a powerful tool that allows you to gain time to have visibility on the products to manage our business and everything else that.
It comes as a benefit with beef.
The speed of this implementation of Ford, where do we have less integrated systems lower market share is different but to give you. One example.
China, which is a three tier type of market, where the language has added difference, whereas the technology needs to be a little bit adapted for the Chinese standards beef is moving very fast and we have lower market share overall in China as you know.
But the excitement around this is the same and the speed in which we are ramping up in China is a very good one as well with challenge each market is different but we continue to make progress in the number of customers that we have using beef in the number of partners that are joining us.
On the marketplace and in our ability to make the platform.
Great and solving pain points for our customers because at the end of the day. They are they're worth carrying on beef and using right in as they use more and more opportunities.
And that happened for us and for them, which is great.
Understood. Thank you.
Thank you.
Thank you. Our next question is coming from the line of Sanjay It all off with credit Suisse. Please proceed with your question.
Hey, Michelle Fernando a couple for me. Please firstly can you just comment on the on trade recovery, you're seeing across your major markets.
Where are you versus 19 levels and tied to that on the returnable glass bottles also coming back to 19 levels.
And then my follow up question is just on the online marketplace.
Annualizing around $800 million of revenue.
Hmm.
Is that profitable for you yet standalone.
Move revenues do you need to achieve to breakeven there. Thank you.
Hi, good afternoon.
I will answer the other thing is if you had two questions. If I got this right one is a bolt on trade.
And the other one was a bulk BSM marketplace on they're all trained what we've been seeing is different behavior market by market I think that's very clear for us that.
As you see markets reopening in some places restrictions coming back partially leased lifted our fully lifted that is different behavior.
And on average.
<unk> that is the point that you are looking for is when everything goes back to normal.
That is a pretty good 90 plus percent of the book and the volume.
Versus 2019 back right away and that was the reality in the United States. When we saw the reopening that was the reality in Brazil, when the southern reopening it he was in Europe .
Interesting enough.
This number.
<unk> to be above 100%.
As you are rebuilding the pipeline and the Resupplying the points of sales.
And after this quarter, let's say right because if volume goes up beyond the 100% SaaS tools in between 90 and 100 I think that the main reason for that is because in some places started the majority of the places the basic infrastructure, meaning the number of points of sales.
It does not come back day one.
As the markets remain reopen you'll see that new restaurants are being opened new buyers. They are being wrote them and I would expect that at some moment. This will stabilize pretty close to the 100%, but it is like the average is 90 to 100 it gets to be beyond.
100, <unk> as you are with supply and then settles between 90 and 100 increased structure, meaning number of box is the main reason why it's not 100% of yet in some places youll see.
New wave of new Boston restaurants, being reopened on the marketplace as we said like.
Close to Perm markets today operating for marketplace.
Number of customers growing.
Average to date, 30%.
The highest level is around 60% lets say Brazil.
Number of partners growing.
A number of quarters growing exponentially more license revenue as of March $800 million, which is already meaningful in a way.
For the year results.
But as you know <unk> is the only life.
Around 25%, 75% of the revenues come from water.
Categories and products, we are just scratching the surface here is just at the beginning and in fact got the backend of your question is like the revenue is growing very fast we are servicing the customers as well as we can lease with partners.
And one thing that we we have operating principle here is that we are making money on the orders right. So your question is not whether or not we will achieve breakeven. So the breakeven spreads since the beginning now it's a matter of how fast we can grow.
How well we can serve both the customers on <unk> NAND and our partners on the other hand, because it's very important for us that our partners get to get bigger reach so bigger distribution their brands can perform well and grow and they can get a much better.
<unk> of their go to market through data and the analytics that <unk> can provide to them. So those are the gaming we decided to share here. Some numbers with you. They are not as material as we think that they would be in the future, but that 30% marketplace buyers already <unk>.
<unk> is a very exciting part of what this can become.
Thank you.
Thank you. Our next question is coming from Laurence <unk> with Barclays. Please proceed with your question.
Hi, Michelle Fernando Thanks, very much for the question.
Just following up on again on because there's a number of markets that you've achieved 90% or around 90% of your revenues coming through the digital channels.
Mexico remains somewhat familiar with that level at around 75% is there anything specific about the Mexican market that means it can't achieve similar success.
Surrounding neighborhoods is there any anything you would highlight in Mexico that means you can't get the.
Thank you.
Hi, Laurence.
Thank you for the question.
There is no really special points I will go back to this idea I'm trying to simplify.
Three waves of implementation so in Mexico Interestingly enough. We have the combination of everything we have direct distribution, we have large key accounts and we have wholesalers distributors. So the entire direct distribution in Mexico is already.
Using this and has very high adoption and very high coverage.
This link is not yet available for the key accounts so into key accounts, we continue to use regular ways of taking the orders and we are implementing what they called the third wave, which is this part of the wholesalers in Mexico, but it's not fully implemented yet that's the difference.
Why in Mexico, we have 75 and in Brazil, we have above 85%, but Max Hulu for shot to get there very very soon.
Okay.
Excellent. Thank you and just perhaps following up on Mexico, you use and so the number the OXXO.
<unk> stores, which are in the stronghold of your nearest competitor I was wondering has that all gone to plan.
You expected or.
Anything you'd highlight that perhaps is slightly different to your expectations in that part of Mexico. Thank you.
<unk> is an incredible opportunity and a great partner a great retailer in Mexico, we have now over two thirds give or take of that store and the remaining part of the last wave recall this way.
Wave wave definitely we just got into is more in the north.
More when our market share is a smaller and our availability.
It's more restricted therefore, the opportunity and the growth opportunity is that is the only bigger than what it was before so we are very happy so far with the evolution two thirds gone one third to go and in this one third the opportunities bigger because our market share.
And our distribution are much smaller than our average in the country.
Okay.
Excellent. Thank you very much.
Our next question is coming from the line of Olivier Nicolai with Goldman Sachs. Please proceed with your question.
Hi, Good morning, Michelle Fernando just a couple of questions. Please all focusing on the U S.
First of all we've seen a bit of his slow down in the hot stuff like category, which used to be a tailwind for you and for some of your competitors youre gaining share, but how do you see the prospects of growth prospect for the category.
And then in the U S. Just for the previous quarter STR is about down 5% I know is it comps was difficult.
But we've heard a lot of commentary around pressure on disposable income. So I was wondering if you're seeing any changes in consumer behaviors.
Those are cool mainstream beer drinker into the U S. I know you indicated in your press release that premium was growing but more interested as a as a mainstream drinker yeah. Thank you.
But it is in the industrial <unk>. Thanks for the question I think that there are two parts. So we also of course the cell survived and the beyond beer I think that'll seltzer.
Three comments to make the first one is that we've been repeating over and over again that Telstra. Despite of this beyond beer space and he is one of the manifestations of how consumers interact on these ready to drink.
Space.
Pardon me.
And the growth of Celsis was accelerated during the pandemic based on there at the right moment being dead Hot New kids on the block. So there was a lot of facility could growth driven by being home consumption.
And this is a very fast moving parts of the industry <unk> via as like give or take 10% to 12% of the industry. We have seen before all of their monetization.
And now what is growing very fast is there ready to drink coffees no longer the cells. So the beyond beer continues to grow and this is the exciting part so despite of the fact that Celsius are growing less or a decline the beyond beer overall is growing.
And this is being led by a ready to drink cocktails, where do we have Fortunately cutwater performing very well and we just launch a neutral which is our spectrum lag into this market continues to be great for the category continues to be incremental to the category Robert was saying.
75% and the numbers that we see as always between 70, and 80% and we are well positioned with cutwater and neutral which is somehow like the next wave of growth that we see coming on that the second point on self serve and beyond beer over at all.
Is that is that a seasonal and <unk>.
So far the quarter one is the low seasonality for this beyond beer and it was colder than average and you had the one we've grown at the beginning of the year, we checking that impacted overall the category and that's why the industry was down in the quarter one.
In terms of main streams.
Mainstream brands mainstream brands that also similarly seasonal as the categories. They got heavily impacted by January which was a very very tough math to the industry and as you can imagine and then show that Youll know mainstream is more impacted by seasonality than premium offers.
So we are all looking forward to the summer.
The North American zone, it looks like that the winter is definitely gone by the time that we speak here today and we need to see now how may and June will perform and down our expectation is that mainstream brands, we performed well during the summer because we don't.
See indications of heart of elasticity or the last consumption. So far in North America, and given how robust economy. So far solid as they are moving up employment is up I think that via the web they're very well, what's coming you're having in the North America, but we need to.
Similar to stock that's what we are looking for.
Thank you very much we're looking forward towards the summer as well.
Thank you.
Thank you our final question will come from the line of PNR Aragon with Morgan Stanley . Please proceed with your question.
Hi, Thanks for taking my question Avid's balance sheet should be stronger by the end of this year compared to the last few years no I. Appreciate the organic growth is still your top priority, but I was wondering if you are coming across any interesting M&A opportunities it would be good.
So if you could please remind us of which categories or geographies would be of most interest. Thank you.
I cannot thanks for the question Fernando here. So as you said our balance sheet continues to improve with have just another.
Important data points, we just redeemed at another $3 $1 billion of bonds this quarter and.
And we should be in a better place by the end of the year.
Please keep in mind that there is a natural seasonality in cash flow generation and deleveraging has historically been strongly weighted towards the second half of the year.
It's important to highlight that leverages, a metric, but having a fix a 4% interest rate in rising interest environment and high inflation, it's a very good place to be.
Yeah, we I always like to highlight that though we reiterate that we kept the majority of the value creation as we continue to move closer to two times net debt to EBITDA.
On the business itself, we definitely have a great business and as you mentioned, we continue to invest in the organic growth opportunities, which there is no shortage of.
On the inorganic question.
We're going to assess and evaluate opportunities when it needs to be a rights and of course marketing to Chad at this moment, but the right framework to think about is is with the excess cash that is generated by our business. We aim to maximize value creation more than anything else and we will do that by dynamically balancing the capital location.
<unk> priority switch, our deleveraging M&A and return of cash or the return of excess cash to shareholders.
Thank you.
Thank you.
Thank you. This is the final question is your question has not been answered please feel free to reach out to the Investor Relations team I will now turn the floor back over to Michelle Duke Harris for closing remarks.
Thank you Jessie and thank you all for your time today and for your ongoing partnership in support of our business. Please stay safe and well and we look forward to see you all.
Okay.
Thank you. This concludes today's earnings conference call and webcast. Please disconnect your lines and have a wonderful day.
Okay.
Yes.
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