Q1 2025 Anheuser-Busch InBev SA/NV Earnings Call
Welcome to <unk> first quarter 2025 earnings conference call hosting the call today from AB Inbev are Mr. Michel to terrorists, Chief Executive Officer, and Mr. Fernando Tennenbaum, Chief Financial Officer.
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<unk> future results.
See risk factors in the company's latest annual report on form 20-F filed with the Securities and Exchange Commission on March 12 2025.
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Speaker Change: It is now my pleasure to turn the floor over to Mr. Michel to tariffs. Thank you you may begin.
Speaker Change: Thank you and welcome everyone to our first quarter $2025 on this call.
Speaker Change: It is a great pleasure to be speaking with you all today.
Speaker Change: Today for another night will take you through our operating highlights and provide you with an up to date on the progress we have made in executing our strategic priorities this quarter.
Speaker Change: After that we will be happy to answer your questions.
Speaker Change: Let's start with the key highlights.
Speaker Change: The global momentum of our business continued with the consistent execution of our strategy delivering another quarter offer reliable growth.
Speaker Change: EBITDA grew by seven 9% at the top end of our outlook range with continued margin expansion.
Speaker Change: In the U S. Our portfolio is building momentum and has reached.
Speaker Change: An inflection point and we are increasing investments in our brands to fuel this momentum.
Speaker Change: Our no alcohol beer portfolio continued <unk> performed globally, increasing revenues by 35%.
Speaker Change: These marketplace continue to scale, increasing gen Z by 53% versus last year to reach 645 million U S dollars.
Speaker Change: And the ongoing optimization of our business drove a 7% increase in underlying U S dollar EPS.
Speaker Change: With 20% growth in constant currency terms.
Speaker Change: Turning to our operating performance.
Speaker Change: Our overall volume performance was impacted by calendar related sectors, such as cycling the leap year and the later timing of Easter, resulting in a volume decline of two 2%.
Speaker Change: We estimate the second calendar shifts its accounted for a majority of our volume decline this quarter.
Speaker Change: Despite this technical factors impacting volume our revenue increase it by one 5% as the strength of our brand portfolio.
Speaker Change: And ongoing premium is Asia drove our revenue per hectoliter increase of three 7%.
Speaker Change: Our diversified geographic footprint enables us to deliver consistent results and has us well placed to drive long term value creation.
Speaker Change: Revenue increase at approximately 50% of our markets.
Speaker Change: And double digit bottom line growth in the Middle Americas, South America Africa, and Europe drove overall EBITDA at the top end of our outlook.
Speaker Change: Now I'll take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America.
Speaker Change: In the U S. Our portfolio is building momentum and has reached an inflection point and we are increasing investments in our brands to fuel growth.
Speaker Change: We gained volume market share of both the beer industry in spirits space ready to drink category.
Speaker Change: In be it Micaela bolter in Bush light what are the top two volume share gain is named to see for the second quarter in a row.
Speaker Change: In the spirit space <unk>, our portfolio grew volumes by strong double digits led by tipped water in neutral.
Speaker Change: While our portfolio continued to gain share adverse weather and the latest time of Easter impacted the overall industry performance in the first quarter.
Speaker Change: I thought it would be helpful to bring some data to the conversation so that we can look at it together.
Speaker Change: According to certain covenants.
Speaker Change: Off premise sales to consumer volumes declined by four 7% in dollar sales by two 9%.
Speaker Change: <unk>.
Speaker Change: <unk> range of around 1% to 2% in volumes and flattish dollar sales.
Speaker Change: When we disaggregate the industry growth.
Speaker Change: On a week by week basis, our analysis indicate that the majority of the performance of this quarter was driven by adverse weather and the later timing of Easter.
Speaker Change: When we look to April.
Speaker Change: Im encouraged that the industry has improvement with better weather and the Easter shift.
Speaker Change: <unk> volumes are likely more closely with the historical trends.
Speaker Change: The summer season is an important period for the beer industry and we look forward to building on the momentum of our portfolio and activating the category through our Mega platforms.
Speaker Change: Now moving to <unk>.
Speaker Change: In Mexico, the underlying industry momentum co tenants, we forward business delivering mid single digit revenue growth and double digit EBITDA growth.
Speaker Change: Volumes declined by low single digits in line with the industry, which was impacted by calendar related factors.
Speaker Change: In Colombia record high volumes and margin expansion drove double digit EBITDA growth.
Speaker Change: In South America, our business in Brazil delivered record high volumes for both beer and non beer.
Speaker Change: Total volumes increased by one 5% with continued margin expansion driving double digit bottom line growth.
Speaker Change: In Europe continued <unk> of our portfolio and further margin recovery drove double digit EBITDA growth.
Speaker Change: Our premium and Super premium brands contributed 60% of our revenue this quarter.
Speaker Change: This performance led by Corona and Stella Artois.
Speaker Change: In South Africa, the underlying momentum of our business contented, gaining share of both beer and beyond beer.
Speaker Change: Revenue and EBITDA grew by low single digits, we saw our performance driven by our premium and Super premium brands, which grew volumes by low teens.
Speaker Change: In China, the industry improvement sequentially. However, we underperformed primarily driven by softness in our key regions and the on trade channel.
Speaker Change: We remain confident in our strategy and we are focused on strengthening our execution by increasing discipline and that slowness in our route to market increase.
Speaker Change: Increasing investments in all of our Mega brands.
Speaker Change: Accelerating our expansion in the in home channel and scaling up chemo patients such as Harvey zero sugar.
Speaker Change: Now, let's look at the key highlights of our three strategic pillars.
Speaker Change: Starting with leading and growing the category.
Speaker Change: We have evolved our portfolio management approach to focus our investments in our Mega brands to drive efficient profitable growth.
Speaker Change: We have around 50 Mega brands globally.
Speaker Change: Five per market and these brands continue to lead our growth with net revenue increasing by four 5%.
Speaker Change: Our global Mega brand Corona continued to drive print utilization across our markets growing revenue by 11, 2% outside of Mexico.
Speaker Change: 2025 marks the 100 year anniversary since <unk> launch and we just kick it off the celebration. We finally event on Copacabana Beach with over 2 million fans in a fabulous.
Speaker Change: We are looking forward to execute any strong lineup of activations around the world throughout the entire year in recognition of the heritage pre munis and quality of the brand.
Speaker Change: This quarter Corona volumes grew by double digits in over 30 markets globally.
Speaker Change: In its home market of Mexico Corona is the number one brands.
Speaker Change: And volumes grew by mid single digits.
Speaker Change: The brainpower and consumer preference for Corona has.
Speaker Change: The right for a premium price point.
Speaker Change: Corona sales on average at 20% premium to the nearest competitor.
Speaker Change: And to crawl its 100 year anniversary Corona was again named the most valuable beer brand in the world in 2025.
Speaker Change: Through the consistent execution of our category expansion levers, we are increasing category participation across our markets by offering superior card brands.
Speaker Change: <unk> imbalanced choices to provide consumers with no and low alcohol low carb zero sugar and gluten free options and expanding our premium and beyond beer portfolio.
Speaker Change: As a result on a rolling 12 month basis participation of legal drinking age consumers with our portfolio increase it by 60 basis points across our key markets the equivalent of adding 6 million new consumers to our ecosystem.
Speaker Change: In non alcohol beer, our portfolio momentum continued to accelerate with volumes growing by 34% led by the triple digit growth of Corona et cetera.
Speaker Change: While no alcohol beer is currently a relatively small portion of our global volume we are leaders in more than 50% of our key non alcohol markets and eastern may tweak gaining share in 75% of them.
Speaker Change: With 65% of the volume coming from new consumers and new occasions, we believe non alcohol beer is a key opportunity to develop the category and drive incremental volume growth.
Speaker Change: Let's now turn to our second strategic pillar digitize and monetize our ecosystem.
Speaker Change: In the first quarter beef captured 11 $6 billion in Gen Z.
Speaker Change: 10% increase versus last year with 32 million orders transacted through the platform.
Speaker Change: <unk> marketplace continues to scale with Jamie Z, increasing by 53% versus last year to reach $645 million.
Speaker Change: Indeed to see our digital platforms are enabling a one to one connection with thoughtful summers and the development of new consumption occasions, our digital platforms generated $19 2 million orders with revenue increasing by 12% to reach.
Speaker Change: $117 million.
Speaker Change: With that I would like to hand, it over to Fernando to discuss the third pillar of our strategy optimize our business.
Fernando: Thank you Michelle.
Fernando: Good morning, good afternoon, everyone.
Fernando: I will take a few minutes to discuss the progress we have made in optimizing our businesses.
Fernando: Our EBITDA margins improved by 218 basis points this quarter with expansion in four of our five operating regions.
Fernando: We know that each year will be different but we are confident the combination of our.
Fernando: Leadership advantages.
Fernando: Disciplined revenue management.
Fernando: Continued to premium position.
Fernando: An efficient operating model creates an opportunity for further margin expansion overtime.
Fernando: Moving on to EPS.
Fernando: We delivered underlying EPS of <unk> 81 per share.
Fernando: Seven 1% increase in U S dollars and a 22% increase in constant currency versus last year.
Fernando: Organic EBITA growth accounted for a <unk> 16 per share increase with translation effects in <unk> <unk> per share headwind.
Fernando: Lower net interest expense and the optimization of other below EBITDA items, such as cost of hedging and FX losses drove the balance of our EPS growth.
Fernando: Let me take a moment to talk about our operations.
Fernando: Our business is local.
Fernando: We procured produce distribute and sell locally.
Fernando: In fact <unk>.
Fernando: More than 98% of the volumes, we sell locally produced.
Fernando: If we look specifically at the U S. As an example.
Fernando: We have 18 breweries.
Fernando: Over 700 American farmers.
Fernando: And over 7000, local suppliers with 99% of our volumes locally produce it.
Fernando: As a result, we have limited direct exposure to Texas.
Fernando: Our results in the first quarter.
Fernando: The resilience of the beer category.
Fernando: The strength of our Mega brands and the continued momentum of our businesses.
Fernando: Our reinforced our confidence in our ability to deliver on our 2025 outlook of 4% to 8% EBITDA growth.
Fernando: With that I would like to hand, it back to Michele for some final comments before we start our Q&A session.
Fernando: Thanks for them to.
Fernando: Before opening for Q&A I would like to take a moment to recap on the quarter and look ahead and the opportunities our brands have to activate the category this year.
Fernando: We are encouraged by our first quarter results and we delivered EBITDA growth at the top end of our outlook.
Fernando: Underlying EPS increased by high single digits <unk> dollars.
Fernando: By 20% in constant currency, driven by organic growth and the ongoing optimization of our business.
Fernando: And that's turned out to just mentioned our first quarter results position us well to deliver on our outlook for the year.
Fernando: Looking ahead to the summer and the rest of the year, we are uniquely positioned to activate the category.
Fernando: The combination of our Mega brands, which the key global platforms that consumers love and that bring people together is a powerful opportunity to lead and grow the category.
Fernando: From the NBA to celebrating 100 years of Corona around the world.
Fernando: So the FIFA club World Cup. So the buildup of the Winter Olympics in <unk>.
Fernando: Last hurdles like Tomorrowland, and Lollapalooza, we will be focused on connecting with consumers and bringing to life, our purpose of creating a future with more tears.
Fernando: With that I'll hand, it back to the operator for the Q&A.
Speaker Change: Thank you well now be conducting a question and answer session, if you'd like to be placed into the question queue. Please press star one on your telephone keypad.
Fernando: We ask you. Please ask one question and one follow up then return to the queue.
Fernando: If you'd like to remove yourself from the queue. Please press star two once again Thats star one to be placed into the question queue and we ask you. Please ask one question one follow up then return to the queue.
Speaker Change: Our first question today is coming from Rabat and steam from Evercore ISI. Your line is now live.
Speaker Change: Great. Thank you very much and congratulations on a strong quarter. So I was wondering if Michelle if you could discuss your U S strategy and maybe put it in the context of the overall company.
Speaker Change: So first it looks like you've gained share now for the second or third quarter in a row.
Speaker Change: What's driving that and does that look sustainable.
Speaker Change: Second can you give us any color on your productivity programs that you've put in place.
Speaker Change: And will they build over the year. So that you can get to more flat EBITDA and then kind of tying it all together.
Speaker Change: You noted in the press release that you continue to increase investment in the U S.
Speaker Change: Why does that make sense and in what looks like a mature and declining market given the other opportunities that you have around the world too.
Speaker Change: Best Thank you very much.
Robert: Hi, Robert Good morning, and thanks for the question.
Speaker Change: So I need just to one that is.
Robert: Couple of components that I'll try to cover all of them.
Speaker Change: I think thats first.
Speaker Change: The U S is one of our key markets.
Speaker Change: It represents over 20% of the business that we have.
Speaker Change: And we always Talkable DSA.
Speaker Change: The mature markets.
Speaker Change: Very big profitable.
Speaker Change: Very big head room for growth for us.
Speaker Change: As our portfolio.
Speaker Change: It's an inflection point and I think that this covers the part of the market share gain.
Speaker Change: We've talked about this on quarter four last year.
Speaker Change: And we saw this momentum building.
Speaker Change: And as a matter of fact, if you look to the latest two weeks the momentum continues to build.
Speaker Change: Our balanced choices portfolio.
Speaker Change: Michelob Ultra Michelob Ultra zero.
Speaker Change: And Bush light as the number two brand.
Speaker Change: <unk> to gain momentum and the innovation pipeline that we've been launching this summer we will further support that and in the RTD. The choices, we made behind neutral and cutwater. They continue to build momentum and accelerates with strong double digits in terms.
Speaker Change: As of productivity.
Speaker Change: As always zone for us so we don't.
Speaker Change: We made the decision of not coming in launching new productivity initiatives.
Speaker Change: But we are.
Speaker Change: Working very.
Speaker Change: Steady AUM, including productivity quarter after quarter and this is kicking in into our results. The <unk> you can see that we continue to improve in terms of investments I think that is very logical.
Speaker Change: One as the portfolio is that this inflection point, we are fueling the growth and as I said before there is a lot of headroom for growth.
Speaker Change: For our portfolio.
Speaker Change: <unk>.
Speaker Change: We are in the business for the long term right. So three years ago. We said, we would getting to this multiyear investment growth marketing that would fuel the growth of our brands and that's not a one year program is a multiyear program.
Speaker Change: And we have massive upside as these brands that are growing continued to gain scale and more reach and penetration with consumers. So it only makes sense to continue to support the growing part of the portfolio and the sustaining part of the port.
Speaker Change: Momentum is good for our team now in the U S.
Speaker Change: Summer, we'll have a lot of activation so from FIFA Club World Cup to the finals of the Danish VA that are on fire now to them the innovation that we have.
Speaker Change: In the pipeline and then that's going to come back.
Speaker Change: If NFL.
Speaker Change: And later in the year with Olympics, so he's a very good lineup for the year in the U S.
Speaker Change: We are encouraged by the results we've seen share.
Speaker Change: Industry in April as I shared in the call much more normal and we know that summer is going to be intense and good for the industry because last year. It was subdued thanks.
Speaker Change: Thanks for the question.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question today is coming from <unk> <unk> from UBS. Your line is now live.
Speaker Change: Hey, Michelle has been under a couple for me. Please firstly on China. It seems that the beer industry is sequentially less negative.
Speaker Change: You will clearly be some underperforming, but can you give us a sense of where your channel mix is today.
Speaker Change: <unk> had a reset presumably in the on trade channel.
Speaker Change: The off trade now a bigger part of your mix or is the entre so bigger.
Speaker Change: And then just taking a step back.
Speaker Change: You had some big macro challenges in a couple of markets over the last 12 months.
Speaker Change: But how are you thinking about your ability to get back to positive volume growth going into Q2 in the second half of the year at the group level. Thank you.
Sanjay: Hey, Sanjay.
Speaker Change: Morning.
Speaker Change: Thanks for the question.
Speaker Change: First on China.
Speaker Change: That you are right the industry has been improving sequentially.
Speaker Change: I think that the more that we goal towards summer backend of the year the more we see normalized to the industry.
Speaker Change: China Wise remain.
Speaker Change: A weaker.
Speaker Change: On trade.
Speaker Change: We've a good off trade.
Speaker Change: Of course, the module cycle don't trade.
Speaker Change: The more is it going to be on.
Speaker Change: The last negative impact and then the more you cycle the more of the strength of the us off trade, we will add to the to the industry overall, we still facing.
Speaker Change: A less positive impact on the footprint that we have because theyre.
Speaker Change: Sure West part of the.
Speaker Change: The marketing Chinese to performing better than the eastern part but of course. This will also cycle as we go through the summer.
Speaker Change: And we have a lot to do in China ourselves because.
Speaker Change: We continue to believe that our business can perform better than what it's performing now despite of.
Speaker Change: Negative footprint impact.
Speaker Change: We are increasing the.
Speaker Change: The execution.
Speaker Change: Our focus with more discipline on our route to market and overall execution, we increased investments behind our Mega brands, especially Budweiser and Harbin.
Speaker Change: Preference power is moving the right direction FTR zone, just brands moving in the right direction, but more to do we are accelerating the expansion in the off trade massive opportunity there and as we focus more of our execution on the off premise, we're going to get better results and Dan.
Speaker Change: For US innovation scheme, China had been zero sugar is a scaling up very fast and I think we're going to have.
Speaker Change: Great somewhat with Harvey and we've heard this innovation when you think macro.
Speaker Change: Look at the quarter one.
Speaker Change: Volume performance.
Speaker Change: You should take the leap year out this is north of 1%.
Speaker Change: If you think about Easter shift.
Speaker Change: This can be anywhere from.
Speaker Change: Three to five so the underlying volume momentum looks good and as we had into quarter two and the rest of the year I think that we will see volume performance improving meaningfully.
Speaker Change: Okay.
Speaker Change: Alright, thank you.
Simon Hales: Thank you. Thank you for the questions. Thank you. Your next question today is coming from Simon Hales from Citi. Your line is now live.
Simon Hales: Thank you Michelle.
Speaker Change: A couple from me as well please.
Speaker Change: Michel I see one of your big competitor today is just lowered the full year guidance after a tough quarter.
Speaker Change: <unk> performance was certainly very different in Q1, and there's probably a number of specific factors impacting the business for the full year, but I wonder how youre viewing just the broader consumer environment now as we look forward into the rest of 2025, given the increased macro uncertainty.
Speaker Change: We've seen over the last sort of couple of months now youre thinking on that is perhaps evolved since your last update to this with the key for us in February.
Speaker Change: And then maybe just following on from that and specifically going back to the U S. I Wonder if you could just talk a little bit more about the momentum you've seen around some of your new launches like Michelob Ultra zero in Q1, how we should think about that as we head into the more important summer months and any other key innovations youre excited about for the U S business, specifically in Q2 and Q3.
Speaker Change: Hi, Simon good morning, Thanks for the question.
Speaker Change: I got like couple of questions within this this one and I'll take them.
Speaker Change: One by one here and maybe fernanda wants to to comment as well on the outlook, but overall.
Speaker Change: We didn't change our outlook our outlook remains the same and I think that we had in <unk> by the quarter one.
Speaker Change: Delivery so.
Speaker Change: Four to eight is our outlook for the year with what we know now.
Speaker Change: Macro and when you think about consumer which is the <unk>.
Speaker Change: The portion on your question that I can address.
Speaker Change: In more details I think that we are actively monitoring the consumer environment and they always are.
Speaker Change: Like to make this differentiation between consumer sentiment.
Speaker Change: Consumer behavior.
Speaker Change: While lots was already.
Speaker Change: <unk>.
Speaker Change: Sad about the consumer sentiment and we kind of see the same across the globe, it's almost like.
Speaker Change: The same sentiment that you have in elections, a year it goes a little bit down.
Speaker Change: There is a lot of news coming each and everyday consumer is more cautious.
Speaker Change: <unk> is an important to see and to monitor consumer behavior as well and.
Speaker Change: And on the consumer behavior part, what we see is that the it is more resilient.
Speaker Change: Than some other categories.
Speaker Change: Of course is our everyday.
Speaker Change: Affordable category.
Speaker Change: We have been activating the category on the key moments and what we cease participation holding on very well and as I said our participation. Our brands grew and grew the equivalent of 6 million consumers.
Speaker Change: We've been in the last quarter, so beer remains as a category resilience.
Speaker Change: And the underlying demand for our brands is very positive we are growing participation and part of that I think you are right to complement the question like this is a it's a good question on this SaaS comes through innovation.
Speaker Change: <unk> non alcohol is being an important driver for us with growth coming on the portfolio of north of 30%.
Speaker Change: Corona Cero globally.
Speaker Change: Ripple digits.
Speaker Change: And Michelob Ultra zero in the U S is the number one innovation in the category this year.
Speaker Change: So.
Speaker Change: We are not.
Speaker Change: 12 of thinking sure in the last few weeks, which is great. We are the number one player in the last this year Nicola bolt, Brazil, who just started now media because the first quarter was distribution. So we expect to see some acceleration now.
Speaker Change: Ultra zero is now the number five brand in zero in the U S and we think that we soon will go up on this ranking.
Speaker Change: And there are other innovation that the team is very excited I'm very excited to see <unk> is this seen announced with Bush light Apple.
Speaker Change: If you didn't see yet on the Instagram Twitter so people are traveling through the country.
Speaker Change: Hearing inside the stores volume is flowing very quickly out of the shelf and bush like Apple we will for sure be one thing that people talk about during the summer so watch for that because it's going to be big.
Simon Fernando: And Simon Fernando here, if I could add you ask on the on the outlook Sundar Luca I think Michelle covered very well with the top line.
Speaker Change: On our costs.
Speaker Change: Q2 comments here. The first one is that you know you have hedges in place. So we have very good visibility in our cost of goods sold.
Speaker Change: And it's always a one year delay so you'll know that.
Speaker Change: Last year, we had the kind of the devaluation of the emerging markets have been towards the second half of the year, which means that the first quarter is probably the easiest skol and then later on you start adding some pressure onto that.
Speaker Change: But then again as expected there is no known using here.
Speaker Change: On the translation side has the opposite effect more pressure in the first half and then in the second quarter that probably will have easier comps because the devaluation happened in the second half of last year, mostly Mexican peso and Brazilian real.
Speaker Change: And then always important to highlight that we've spoken about it during the initial remarks, but it is always important to remark that even our very local nature of the business very little impact if any strong from tariffs.
Speaker Change: So that kind of a comp.
Speaker Change: Combined combining the top line, we felt this kind of a cost comments.
Speaker Change: Needless to kind of maintaining the same outlook, we had since the beginning of the year.
Speaker Change: Thank you.
Speaker Change: That's great. Thanks, so much.
Speaker Change: Thank you. Our next question today is coming from Edward Mundy from Jefferies. Your line is now live.
Speaker Change: Yeah.
Speaker Change: Good morning, Michelle morning, Fernando So two questions. Please.
Speaker Change: Just in your wording around the priority to lead and grow the category does it bit of a nuance in your wording from occasions development to balanced choices and one of your bullets could you, perhaps provide a bit of context into this nuance.
Speaker Change: Does this sort of reflect any change in your strategy, perhaps a bit more focus a bit more resource behind some of these new growth streams.
Speaker Change: And then second of all just a question around perhaps a fernanda about driving leverage through the P&L.
Speaker Change: That's been a pretty decent drop through from EBIT to dollar EPS. Despite the FX headwind in the first quarter.
Speaker Change: Below depreciation and lower financial charges could you, perhaps talk about the sustainability of this oval shape into the P&L.
Speaker Change: Okay.
Speaker Change: Let me start and then you'll hear from your question I saw that.
Speaker Change: We've been talking about it but some of these things that is a little bit of a delayed effect, we've been working on optimizing our business one of the Kpis that you can see capex and Cape is coming down but.
Speaker Change: First Cape is coming down and you'll see that happening on cash flow and there is a little bit of a delayed effect when you see that coming through depreciation. So that's one of the components of the leveraged throughout the P&L and the second one which is kind of.
Speaker Change: A function of our efforts on deleveraging as you the leverage you have less debt as we have less debt to have a less interest.
Speaker Change: Less interest and if less interested that flows through the EPS as well so.
Speaker Change: Two to maybe add to your question as some of these benefits of lower Capex is junior to claim to depreciation and as we continue to make progress on our leverage is going to generate more cash flow you should see this kind of operational leverage happening going forward.
Michel: Now I will turn to Michel for the first question.
Michel: Add Michelle here thanks for the question.
Michel: And good catch.
Michel: We are not less focused.
Michel: On the occasions.
Michel: But we did just fine tuning.
Michel: As we interact with consumers and as our innovation pipeline comes to play on the actions that we have put in place in the market. We have been seeing a massive interaction on this balanced choices.
Michel: We have which today are a big business for us over $5 billion.
Michel: And occasions for consumers, let me just cover this a little bit more so non alcohol is one that <unk> been talking and it's becoming very August because.
Michel: 60%.
Michel: On either new consumers coming into the category.
Michel: Or the same current via consumer.
Michel: Having be adding more occasions, because now the non alcohol opens up.
Michel: This opportunity to them.
Michel: But this goes beyond only the non alcohol because we see these barriers.
Michel: For consumers to interact with beer.
Michel: And when we solve for this barriers they actually prefer our balanced choices rather than other alcoholic beverage and this in some markets.
Michel: Is gluten free.
Michel: In some markets.
Michel: Is zero sugar for some consumers is the low alcohol organic proposition and one very broad bear.
Michel: Barrier that we broke for a while Randy is the carbs and calories that try and michelob ultra gold so well in the U S. So this balance.
Michel: Choices that we have is over $5 billion today is growing high single digits.
Michel: Net revenue is being very positive for innovation everywhere and we are battling a lock as one of our main platforms to continue to grow the category as we remove barriers for consumers and we meet them on this healthier.
Michel: Lifestyle balanced choices.
Michel: Ideas that they have as they make their decisions everyday so from non alcohol to low alcohol.
Michel: To low sugar no gluten low carbs low calories, it's very fertile we have vetted bounce. It is already a very big business for us and we are investing big here to grow more occasions and to grow the category and our brands with consumers.
Michel: On the needs that they are.
Michel: Attacking <unk> and we are providing them a portfolio that.
Michel: It is important for them on the needs that they have.
Michel: For their consumption occasions.
Michel: Yes.
Michel: Great. Thank you.
Speaker Change: Thank you. Your next question today is coming from Sarah Simon from Morgan Stanley. Your line is now live.
Sarah Simon: Yes, thanks for taking my questions I've got two.
Speaker Change: <unk>.
Speaker Change: First one was on Mexico, a lot of consumer.
Speaker Change: Consumer companies have been talking about Mexico, being Wes you Havent really flagged that off other than the calendar effects I Wonder if you could talk about.
Speaker Change: You'll see it in the market.
Simon: And the second question was around the boy one for Fernando can you just help us with Skype because.
Simon: Obviously, it's had a positive contribution in Europe from San Miguel in terms of volume, but we had a negative.
Simon: So that goes through the segment. So just if you could help on that please thanks.
Speaker Change: Okay. So let me let me take the first one and then Mexico takes the second one on the on the on the scope.
Simon: A few things here.
Speaker Change: Somewhat kind of between financial line and indeed, some central boost the hedges and I think Sean can go into more detail with you but to an estimate of semi OCC is just starting its more a little bit of a phasing that we should expect some 70 finished.
Simon: One other collectors.
Simon: But these are kind of the main one is this financial one which the carrying cost of some commodities and then.
Simon: Some girl facing.
Simon: On the industry in Mexico.
Simon: And consumer sentiment I think that I'll start with that.
Simon: Point I raised it on the previous question, which is that as consumer sentiment.
Simon: When a consumer behavior.
Simon: So the behavior.
Simon: For chase penetration everything looks very normal in Mexico consumers are interacting well with the category and the underlying trends remain very positive.
Simon: Of course in the quarter one.
Simon: When you look at the Mexico volumes in the industry.
Simon: There was the last one trading day.
Simon: And there was Easter, which is very relevant for the Mexican market. The same weather pattern that we saw.
Simon: Hitting the U S was somehow extended to Max So there was some impact on that as well, but if you discount for that the underlying trend was very good and as a matter of fact, I think that we will see this shift.
Simon: On Easter from quarter, one to quarter, two adding some good momentum to Mexico. So I think that we're continuing to monitor consumer environment.
Simon: And what is moving well underlying demand for our brands very strong <unk> and at this point there is not much more that we.
Simon: We are concerned that <unk>, so continuing to activate the brands work hard each and every day towards the business that we have there.
Simon: Alright, Thanks, a lot.
Simon: Thank you.
Speaker Change: Thank you next question today is coming from Chris pitcher from Redburn Atlantic. Your line is now live.
Chris Pitcher: Hi, good morning. Thank.
Speaker Change: Thank you Kevin a couple of questions.
Speaker Change: Maybe one follow up on China, you are talking about the importance to focus on the off trade and bill premium that I think thats, a very good proposition to building.
Speaker Change: Budweiser et cetera in the nightclub channel you've got the resources on the ground I mean, clearly you can borrow experience its mother market I just want to understand how easy it is to try to incent volume.
Speaker Change: To that channel and then secondly, we don't often talk about the underlying business in Argentina, but it certainly sounds like things are starting to improve.
Speaker Change: Inflation keeps falling you could start to have a better backdrop and how healthy is the argentinean business you've done a good job to protect dollar profitability given everything.
Speaker Change: It's not a market we should be getting more encouraged about some in the coming quarters years. Thanks.
Chris Pitcher: Hey, Chris Good morning, Thanks for the question so first on China.
Speaker Change: And China.
Speaker Change: We will continue to have a very good business in the on trade.
Speaker Change: Our brands are very strong.
Speaker Change: And the on trade.
Speaker Change: We will rebound with time as consumer confidence gets.
Speaker Change: <unk> recovered so that business is a good business will continue to support and we will rebound over time.
Speaker Change: The growth in the off rate is something that we actually seeing all markets as the markets mature.
Speaker Change: Consumer stem to have more occasions more in home occasions, and the off trade growth.
Speaker Change: I think that in China is just that that's mainly other things is happening very fast.
Speaker Change: And the number one asset that we need to have to have the off trade consumption and volume is really strong brands.
Speaker Change: And when you think about <unk>.
Speaker Change: Corona Budweiser Blue Girl Harbin ice they are all very strong brands.
Speaker Change: But there is of course, some tweaks on the sales force on the route to market and this is where the team is working now so we need now to see how the year will play.
Speaker Change: Current quarter third quarter to see what our volumes will start to rebound and the rate of success and the speed in which we can capture this opportunity on the off trade, but the most important asset strong brands, we have it in China.
Speaker Change: In Argentina, that's a good point, we've talked about that last year a lot.
Speaker Change: It was a very.
Speaker Change: Abnormal disruption for the industry in Argentina that was.
Speaker Change: Unrelated to the category itself, but much more based on democracy.
Speaker Change: Macro is improving in Argentina, and as a consequence sequentially the industry is getting bad debt.
Speaker Change: And I think that we will see further improvement through the year.
Speaker Change: The business itself very good cash flow.
Speaker Change: <unk> very strong.
Speaker Change: Market share remains.
Speaker Change: Positive and I think that now is a method of giving time to the macro economics to improve consumer purchasing power to return and we will see gradually an improvement on volume and as you said because margins are in the right place profitability. It's in the right place Brad.
Speaker Change: <unk> remained strong we will see this flowing through the P&L for sure.
Speaker Change: Thanks for the question.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question today is coming from Trevor Stirling from Bernstein. Your line is now live.
Trevor Stirling: Hi, Michelle and Fernando just one from my side. Please.
Speaker Change: Bigger picture as picture one.
Speaker Change: You know theres been a big huge debate going in the USA about the extent to which younger people drink less alcohol participate less in the category and what not.
Speaker Change: Has implications for category growth, but if you think about your big emerging markets about Mexico about Brazil about Colombia do you see any similar trends emerging there may be amongst the more elite user perhaps moving more influenced by the U S or.
Speaker Change: Is it business as usual.
Trevor Stirling: Hi, Trevor Thank you for the question.
Trevor Stirling: And as Youll know in our business that is never a day when business is just business as usual so as fast good consumer goods.
Trevor Stirling: We worked very hard to earn the business every day.
Trevor Stirling: And we discussed it in some different occasions.
Trevor Stirling: Covid generation.
Trevor Stirling: And the fact that mainly mainly after the behaviors that are.
Trevor Stirling: Naturally evolving when you our 'twenty one 'twenty two 'twenty three years old for this generation was a little bit.
Trevor Stirling: Later right so from there.
Trevor Stirling: College.
Trevor Stirling: You had to be one year or two years out of your home or from the dorms.
Trevor Stirling: Participating in sports events music events gatherings with France.
Trevor Stirling: And I think that when we look at that is somehow.
Trevor Stirling: Somehow the same everywhere.
Trevor Stirling: But his recovery and moving.
Trevor Stirling: Every way out as well because behaviors normalize a lot.
Trevor Stirling: As we look at the 'twenty four 'twenty five cohorts and down there are idiosyncratic issues that are different in each and every market.
Trevor Stirling: In some markets very fast penetration of non alcohol beer in some other markets Youll see economic disruptions likely just spoke about the China, Audi, Argentina, but overall participation.
Speaker Change: Okay across the globe.
Speaker Change: As mall or on this younger cohorts, but normalizing as you go from 21 to 24 to 27.
Speaker Change: We see on the other side the same thing so participation.
Speaker Change: Stronger on the older cohorts because people are just like living longer.
Speaker Change: Going out more often spending more money. So there is puts and takes on the participation, but there is a big normalization on the core of the category from 24 to 35 looks very normal and we of course, we are monitoring this very carefully we are working on our balance choices portfolio.
Speaker Change: Because the risks are lakes, very well with consumers from zero sugar to gluten free to low carb to non alcohol. So we are offering a proposition that caters for every different taste in a moment.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you next question is coming from Jim Cross from BNP Paribas. Your line is alive.
Speaker Change: Hi, Michelle has Fernando and thanks for the questions just a couple on costs for me.
Speaker Change: SG&A it looks like it declined by roughly mid single digit organically in both South America and Middle America regions in Q1.
Speaker Change: Obviously, you've got organic revenue growth in both of those regions. So I'm just wondering if there's any color you could share in <unk>.
Speaker Change: Rajiv decent reduction in your SG&A expenses in those two regions.
Speaker Change: And the second one is kind of going back to actually I had a question on.
Speaker Change: Home finance cost switch, so quite meaningful reduction year on year.
Speaker Change: And recurring net finance costs being below about below the $1 billion Mark in the past couple of quarters now.
Speaker Change: And as you commented on Fernando's debt levels continue to come down do you expect to stay below the $1 billion mark per quarter going forward. Thank.
Speaker Change: Thank you.
Speaker Change: Hey, Hi, again so.
Speaker Change: So on the first piece of the question SG&A.
Speaker Change: The ongoing optimization I think we have this kind of a phone going effort doesn't Michelle mentioned is not that we announced that we're going to do and therefore, this or that but on a recurring basis. We always look at our cost basis and see how we can further optimize so can you just kind of part of our day to day on.
Speaker Change: On the second question on finance costs, it's a function of.
Speaker Change: Same same kind of a rationale ongoing optimization and as you're kind of reduce your leverage.
Speaker Change: Start having kind of these benefit of a lower interest expense kind of it's kind of a.
Speaker Change: Kind of just keep getting momentum on that so we will continue to work on that we don't provide any guidance kind of AUM.
Speaker Change: And kind of.
Speaker Change: What is our next quarter's finance expenses, we just provide the guidance.
Speaker Change: Or when some of our accruals, but definitely we mentioned that on the fourth quarter last year on the full year.
Speaker Change: The step change in the free cash flow helps helps because you'll have less debt than helps because you have more cash which also an interest on it.
Speaker Change: Definitely.
Speaker Change: Two topics that you mentioned, it's part of the pillar three of our strategy optimize order business.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Your next question is coming from Olivier Nicolai from Goldman Sachs. Your line is now live.
Olivier Nicolai: Hi, Good morning, Michel founder Shawn.
Olivier Nicolai: Just two questions. Please just to follow up on the U S. First of all do you have a very detail.
Olivier Nicolai: <unk> some by consumer by postcode, you flagged out to a pretty is effectively better thanks to the weather and the Easter timing, but do you see any consumer demographics or any specific states.
Olivier Nicolai: You are seeing any sign of consumer weakness.
Olivier Nicolai: Things.
Olivier Nicolai: Overall, lower consumer confidence since the beginning of the year, but the first question and then secondly, you had a very strong margin improvement in Q1, but was driven by gross margin being up strongly.
Speaker Change: Could you give us perhaps a bit more details on the drivers behind this.
Speaker Change: Increase in if you think that will continue at this pace for the rest of the year. Thank you.
Speaker Change: Yes.
Speaker Change: Olivia let me start by by your second question on the margin improvement I think the margin improvement in the gross margin improvement as I said, the hedge kind of.
Speaker Change: We have very good visibility on our costs and given the dynamics of the FX and commodity last year, which has a delayed effect on us first quarter is the one that who have more of a tailwind.
Speaker Change: As you will not the year throughout the year, probably youre going to have some more precious.
Speaker Change: On the cost of goods sold.
Speaker Change: Starting already in Q2, but more pronounced in half two of the year, but having said that.
Speaker Change: We have our outlook the fluctuate kind of nothing changes here, we think kind of Hawaii.
Speaker Change: You should have a little bit more pressure on the transactional cost of goods sold if you look from a translation standpoint that should be quite the opposite kind of officially have harder comps in the first half of the year end user comps in the second half of the year.
Speaker Change: And on the first question Michelle.
Speaker Change: I will again show here so on the U S. I think that we included this page on the webcast because they thought would be very helpful. For us to look at this together is published data from silicon.
Speaker Change: That shows.
Speaker Change: Better industry in April.
Speaker Change: Industry in January was rather more normal and the weather patterns being cold weather and precipitation being the main factors for this tough industry that we saw during the quarter one.
Speaker Change: The main explains majority of what we saw in terms of deviation from normal.
Speaker Change: If you think about consumer.
Speaker Change: Why do we see as participation normal.
Speaker Change: Our brands are gaining participation on the last which is very positive for us at the beginning of the year.
Speaker Change: And we have a portfolio that coal versus oil price points. So during the course of last year. There were several questions about inflation, where consumers are going and what we were seeing other categories and I emphasize at this idea that we have Stella.
Speaker Change: Premium brands.
Speaker Change: Michelob Ultra premium card plus mainstream brands and a very strong value portfolio is not a surprise for those that bush light as the number two brand now for two or three quarters in a row. So our portfolio is well positioned.
Speaker Change: To cover the current environment, because we offer an expanded gold strong strong value brands to premium brands and recover national wide all channels.
Speaker Change: And regions. So I think that is weather impacting the quarter, one let's see how the quarters Chew, we our position with a good portfolio and we see that this portfolio is gaining participation in the us. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our final question today is coming from Mitch Collett from Deutsche Bank. Your line is now live.
Speaker Change: Hello, Mitch perhaps your phone is on mute.
Michelle: I'm, Michelle Hi, Fernando just a quick question on beyond beer, which accelerated to I think 16% growth.
Michelle: This quarter from low single digits in 2024, well what drove that acceleration and can you sustain it and.
Michelle: And you are clearly a beneficiary of the growth.
Michelle: In the ready to drink cocktails in the U S. I'm sure that's a contributor but where else you're excited about the opportunity and beyond there. Thank you.
Michelle: Hi, Mitch.
Michelle: Thank you for the question, so I will start by stating something that three years. The goal when we discuss our strategy and the opportunities for growth.
Michelle: As we aim to lead and grow the category.
Michelle: I mentioned this beyond beer space.
Michelle: This interesting intersection between hardly court wine and beer.
Michelle: That was very incremental for the year. So we know like two thirds of the volume there.
Michelle: Hi.
Speaker Change: <unk> adds to the beer category.
Speaker Change: The capability that we have because people want convenience.
Speaker Change: They won the small packs cans and we as Brewers are well positioned for that.
Speaker Change: And we said that we would go after this opportunity and use this as a driver for our growth and this is what we are doing right. So on the strategy of clear view on where to play.
Speaker Change: And on the how to win we've discussed said many times.
Speaker Change: Rams because people want to buy brands here, the one generic liquids and they liked brands that are new to the world. That's why neutral the soil. That's why I kept water the soil are flying fish.
Speaker Change: And we have to reorganize our portfolio here because we had two menu offers so you're familiar with this idea that we streamlined our portfolio globally by 30% in terms of Skus.
Speaker Change: Now we have clearly.
Speaker Change: <unk> global brands on this space flying fish.
Speaker Change: Cutwater neutral and brutal fruit, we are rolling this brands to more countries.
Speaker Change: But in each country, where these brands were born and we operate they are gaining momentum that's the key.
Speaker Change: For cut Watson in the U S for Neutrolin, they've asked for fly fishing Africa. So on so far so because we first streamlined the portfolio. We had a very clear view that this is a growing segment and that we can win big globally. Now we are in full execution mode and because of that.
Speaker Change: Volumes are accelerating.
Speaker Change: Applying this facility the rollouts they open up huge opportunities for us to be more markets.
Speaker Change: First consumers one disparate position across the globe and the brands that we have now they fit for each of the needs that consumers have there for more light and refreshing to more complex and full taste, so from neutral to occur to water and everything in between.
Speaker Change: We can cover at least this five brands. So is an exciting space is a growing opportunity and we think that we are well positioned.
Speaker Change: To continue to drive the growth of this segment with our portfolio.
Speaker Change: And to be of course incur.
Speaker Change: Increasing our volumes and penetration of the car brands.
Speaker Change: As this repositions the risks are made somehow globally.
Speaker Change: Thank you.
Speaker Change: Sorry.
Speaker Change: Thank you we've reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Hey, Thank you think of body. Thanks for your time today for the ongoing partnership and support for our business stay safe and well and we talk so thank you.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.