Q2 2025 Ambev SA Earnings Call
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Good afternoon and thank you for waiting. We would like to welcome everyone to the Q2 2025 Ambev S.A. Earnings Call.
Today with us, we have Mr. Carlos Lisboa from Ambev, Mr. Guilherme Parolari, and Missy, CFO and Investor Relations Officer.
As a reminder, this conference presentation is available for download on our website, ri.com, as well as through the webcast link. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the company's presentation.
After the embedded remarks are completed, there will be a Q&A session during which we kindly ask that each participating sell-side analyst asks only one question.
Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities. Litigation Reform Act of 1996.
Involve risks uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.
Investors should understand that General economic conditions, industry conditions, and other operating factors could also affect the future results of a web and could cause results to differ. But really from those expressed in such forward-looking statements,
I would also like to remind everyone that as usual, the percentage changes that will be discussed. During today's call are both organic and normalized in nature and unless otherwise stated percentage changes refer to comparisons with second quarter 2024 results.
Normalize figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Abe's normal activities.
As normalized figures are non-gaap measures the company discloses, the Consolidated profit EPS, operating profit and Aida on a fully reported basis in the earnings release.
Now, I will turn the conference over to Mr. Carlos is BOA, Mr. Boa, you may begin your conference
Good afternoon, everyone.
Thank you for joining our second quarter 2025 earnings call. It is a pleasure to be here with you today. In our last call, I highlighted that Q2 would be a decisive moment, almost like a transition quarter, as we prepare our business to continue delivering another year of growth with value creation. I'm glad that our brands demonstrated their strength and supported the results achieved this quarter, positioning us well for the remainder of the year, given the anticipated acceleration in costs.
As leaders in our category, I am confident that we made the right decisions for our business. Executing with discipline, our growth strategy with special focus on revenue and cost management.
This drove a high single digit organic and beat the increase with 110 base points of margin expansion. Despite soft interest volumes in several markets mostly due to adverse weather conditions.
But rather than focus on only 1 single quarter like in soccer, half time is a good moment to step back and assess our year to date performance.
Therefore important to highlight that Our Brands continue to improve equity.
Top Line group meet single digits. A betta group double digits with 160 base points of margin expansion.
EPS grew 6.5% and cash flow from operating activities remain Brazilian growing 4% despite our working capital Dynamics.
Also, given our ear to date performance. The board of directors has approved, another intermediary, dividend payout of 2 billion heis, totally 6 billion, declare this year.
The foundation for our performance is based on the execution of our growth strategy.
Starting on pillar 1 leading grow the category.
Water. Reinforce our confidence. In the choices, we made across our portfolio.
Market share pressure leaked to revenue management. Initiatives was softened it by the strength of Our Brands built through a consistent execution and Investments over the last years
And even in the face of software Industries, the underlying performance of our strategic priorities continue to deliver solid results.
Our premium and super premium Brands delivered low team's growth expanding 7 out of top 10 markets of Home Bev.
The balanced Choice portfolio maintains strong growth momentum, expanding in the low 20s, addressing evolving consumer preferences and needs.
Activations on platforms, like FIFA Club World Cup and Holland. Gaho, he would post the results. Our branches stood out, as the most recognized in these events generating engagement and strengthening brand equity.
As for the car segment, while brand equity remains stable, volumes decline. This gives it the highest sensitivity to the industry environment and to our revenue management decisions.
As for pillar 2 digitizing monetized. The ecosystem.
And analyze the amount of $7.4 billion led by partnerships such as NLE in L'Oréal.
On the direct to Consumer front. That delivery achieved a 7% increase in gmv, despite the soft industry environment supported by 11% rise in average order value.
Additionally, our digital platforms are further. Strengthening our Core Business, through better services to customers and also consumers benefits that may not always be visible externally.
Over the years, our customers have been spending more time with us.
In Brazil, for instance, we now engage for an early 40 minutes per week through bees and also in-person visits 5-fold of what we had previous.
This deeper and more frequent engagement has allowed us to set missions to our business developers to focus on sell-out rather than selling. As a consequence, we continue to evolve a whole number of brands and ask you to use per block growing 3.4% this year only to better manage pricing and promotions, driving efficiencies to our net revenue per active leader.
As a result of a higher customization, in a more data-driven approach NPS of customers, continue to improve achieving all-time high levels, close to 70 points. This quarter
As for DTC today, e-commerce is the fastest-growing channel for undeath, and that is leading that growth.
However, it is not just about growth.
But about who is driving, it gen Z LDA and Millennials represent an early 80% of zest buyers. Well above their share in the population.
Moreover, that has become a powerful engagement platform for the category lovers. According to our internal data, consumers have a 47% higher frequency of beer consumption compared to the category average.
Therefore, being close to them means being close to the trends, and that drives our portfolio forward.
It is not a coincidence but a consequence that both premium and balanced Choice brands have a higher mix on the platform. For example, in H1, 14% of their users, added at least 1 product from an hour, balanced Choice, portfolio in their baskets, which grew over
Almost twice as fast on that compared to the total business and reach 3.6% of total platform sales.
Some of you have probably heard me saying this before: muscles have memory.
Our discipline focus on cost efficiency more than offset non-commodity cost. Inflation representing a saving of over 500 million in the quarter.
And sgna. We offset the impact of lower scale from volumes in distribution expenses. Overall, this efforts were essential to achieve an operational leverage of 2.2 times in the quarter.
Moving to the performance of our business units.
Consistent with the first quarter. All be used delivered a bit, the growth and 4 of them expanded margins. As we continue implementing our growth strategy with discipline across our footprint.
In this quarter, our diversified geographic footprint contributed in a meaningful way. Now let's look at the commercial highlights of our main markets.
In Brazil, beer volumes declined by 9%.
Mostly driven by unfavorable weather with 65 colder days compared to last year.
June represented over 60% of the quarters volume impact with critical regions for the category facing 2 to 4 degrees Celsius, lower temperature versus last year, even, so, Brenda Equity improved. The gain in this quarter.
Softening the market sharing impact from our Revenue management decisions to a low single digit decline.
Premium Branch grew meetings, gaining market, share in the segment.
Above core Brands. Sustained almost 30% of our volumes and maintain our leadership in the segment.
as for the core segment, it declined by low teams given higher sensitivity to Industry performance and to our Revenue management decisions,
And lastly, in our balanced Choice portfolio.
Stella Pure Gold more than doubled its volumes, while Michelob Ultra grew over 60%.
And no alcoholic beers grew meetings.
As a matter of fact, these Brands represent around 2.5% of our volumes in H1 up from 1.4% last year.
In Brazil and that volumes were slightly posted in the quarter despite the meetings, declining in June.
Top Line performance was driven by Health in that Revenue practice leader as our brand showed Brazilians, gaining market, share according to our estimates, and the non sugar portfolio, growing above 30%.
Moving to Argentina, volume performance presented another sequential improvement, with beer volumes returning to growth after 7 pours. However, we still underperformed the industry as a result of our revenue management choices.
The premium segment grew double digits, while the health of our Mega Brands improved once again.
Overall, we continue to post on the recovery of the category in the country, in the Dominican Republic. The consumption environment presented a sequential improvement.
In this environment beer gain share of growth as our main Brands, remain healthy with President family, gaining brand equity in the quarter.
Lastly, in Canada volumes grew 0.8% more than offsetting and soft. The industry affected by colder temperatures. Our performance was mainly driven by 1 the entire industry that continues to grow given the route to Market change that took place last year.
2, the no alcoholic beer industry, that expanded meetings with Our Brands outperforming by growing mid-20s and now representing almost 5% of our volumes. And lastly, the execution for our strategy and Investments behind Our Brands resulting in a fastest growing beer brands in
The country which Sheriff's throat and market share gains according to our estimates.
All we know is we delivered the best betta growth for the second quarter in years.
Now, let's move on to our financial performance flurry over to you.
Thank you and hello everyone.
Today, I will cover three topics: first, cost and expenses management.
Second, net income performance and third cash flow generation.
So let's get started as this ba mentioned quarter. 2 was the transition quarter.
We were expecting cost pressures especially in Brazil and we chose to act protecting margins by controlling what we can.
That meant discipline, resource allocation, proactive cost management, and targeted SG&A initiatives. The execution of our strategy is already making a difference. Let me walk you through one example in cost of goods sold in Brazil.
Effects and commodities account for approximately 45%, our cash costs. Most of that is headed which means the impact was largely locked in before they start of the year but the remaining 55% is where we can act and that's exactly what we've done. We've been focused on Curbing cost escalation where we have control rationalizing, our operations in 2020.
25 alone, we've reduced the number of SKUs by around 10%, eliminating low-churn items, therefore increasing the productivity of our breweries and distribution centers.
To put it simply this SKU. Rationalization means fewer line changeovers at our Brewers and better productivity helping our cost performance in Brazil, beer to be within our guidance, for the full year,
With the currency impacts of the year to date being carried out in the second quarter.
Now moving on to net income and starting with net Financial results.
The increase in financial expenses continues to have the same drivers as in Q1: 1) carry cost in Brazil coming from the interest rate differential between Brazil and the US; 2) effects related to the dollar purchasing power in Bolivia; and 3) a non-cash impact linked to the appreciation of the BRL during the quarter from hard currency cash balances translation.
And for income tax, our effective tax rate for the quarter was 18.4% compared to 28.6%. In the second quarter of 2024, the year-over-year decrease is mostly driven by a non-recurrent event in the second quarter of ‘24 related to crude withholding taxes over distributed profits from labba, coming from the depreciation of the BRL against the Canadian dollar during that period, in accordance with IAS 12 accounting standards.
Second, the effect of income tax exemption over part of our state VAT, government grants, following a favorable court ruling obtained in the second half of last year, and lastly, a favorable country mix of earnings this quarter.
On a year-to-date basis, our effective tax rate remains at the same level as the prior year.
In the quarter, the resilient operational performance and disciplined financial management led to a net income of $2.8 billion, a 15% improvement versus last year.
Last topic: cash flow generation in our halftime review. Cash flow from operating activities grew 4%, led by the beta growth in the quarter. Our cash flow from operating activities reached $3 billion.
The 9.2% decline versus last year reflects the volume dynamics in the quarter, with lower sales tax payables, partially offset by better receivables and inventory.
Cash flow from investing activities was 1 billion. Negative driven mainly by capex Investments during the quarter. Similar to the investment of last year and cash flow from financing activities reached 4 billion. Rise negative primarily due to the payment of intermediary. Dividends in April, the repurchase of shares according to our B.
Back program and Bolivia fees to purchase dollars that, as I mentioned, impacted the financial results.
Before I hand it back to this boa, I would like to reinforce the message that we remain focused on, delivering sustainable value, creation to our shareholders, through a diligence execution of our Capital allocation priorities.
Thank you for your time today. And back to you, is boy.
Thank you flurry before we conclude, I would like to offer a few closing thoughts.
As I noted earlier, reaching halftime gives us an opportunity to assess how we are performing against the mission I set forth. When I first came on board,
Firstly, avoid disruption.
On track.
And in fact, the most recent results of the foreign Employee Engagement survey show improvement across all functions, reinforcing the belief in our future.
Secondly, keep momentum.
On track so far in the year, we have achieved better brand Equity, top and bottom line growth, and also a bit, the margin expansion.
Lastly.
Build a stronger version of our company.
On track. I believe that momentum invites more momentum. Our performance in first half position us, well to second half our roadmap to success shall be paid based on a consistent performance of our business.
and before finishing,
I want to take a moment to recognize our team.
Who made a huge difference in our quarter performance, over the delivery, on everything we have under our control.
Thank you very much.
Thank you for your attention. And now, I will hand it back to the operator for the Q&A.
We will now begin the Q&A session. To ask a question, we kindly ask Southside analysts to click on the 'Raise Hand' button at the bottom of the screen.
To remove a question from the queue. Or after your question has been addressed, please click lower hand button,
We kindly reinforce our request that each participant asks only a single question.
Our first question comes from Isabella Simionato with Bank of America.
You can open your microphone.
Thank you. Good afternoon everyone. Um, hi Carlos. Uh, g. I I have 2 questions, uh, sort of related. First of all, uh, regarding the top line, and the volume performance, right in Brazil, I understand, uh, the reasons you mentioned to to drive this weakness, but it seems
Uh, a much deeper, right? Uh,
Change year in year versus events that we've seen in the past, right? If I'm not mistaken, this is the largest year-on-year volume contraction we've seen, with the exception of what happened during the pandemic. So,
I even with a bad weather, right? Or or in um for you guys leading pricing freezes that were not necessarily followed by competition.
What is your read? Write on the size of the decline. Um, and in that sense, what makes you confident?
Then the second half and, and, uh, ABI also mentioned that that the second half of the year will, will show a significant recovery or will show, uh, an improvement. I think, uh, that's what we we wanted to, to better understand and the second Point, uh, you've got showed, uh, I think a much better than expected margin performance despite this more limited dilution, right? And, uh, you guys mentioned some of the initiatives, but
I I I, I wonder if you could elaborate a little bit more on those things you can control, right?
Uh, if the the, the, the, the bulk of what you plan to do is done in this quarter, or if you guys see more room, uh, to continue to cut costs and have a more efficient portfolio. I mean, I I think we wanted to get a better sense, uh, of what we can expect.
Going forward in terms of um initiatives and and where we are right in and this and this pipeline. Thank you.
Hello, everyone. Thanks again for joining the call and hi, Isabella. Nice to talk, to you. Super clear your question. And I, I, I fully understand the point, so I'm going to answer the first and hand over to you to flip for the second 1, okay? So, I think it's, it's important to step back a little bit. And first and foremost, understand what happened with the industry in second quarter. Okay?
We estimate a mid single digit, sell out industry. The the client, which is pretty much, uh, in line with new estimations, right? And this was pretty much driven, uh, as I mentioned during the intro as, um, very adverse weather during this period, okay? So, I think the first message from my side is, is there is no structural change in consumer demand in Brazil.
70% of the industry decline is based on the client.
based on our industry models is explained by the weather and the reason why is the following
We faced 65 coder days versus last year, with a high concentration.
In one month, June was a big outlier, Isabella.
With a double digits decline. Mid twins decline, right? Just in this month impacting um, important regions for the industry, which represent 60% of the industry volume.
These regions saw a temperature variation of 2 to 4 degrees Celsius lower, right?
Which has a very important impact when you assume the correlation of temperature into uh volumes right in this month.
Alcoholic and alcoholic business in our CSD business, despite slightly growing volumes in the quarter. And by the way, we were growing in a very healthy way in April and May.
In June, we also suffer, right? The same level of impact, right? Due to that versus whether that I mentioned before, right?
Additionally, the remainder 30% of the industry impact comes mostly from inflation, right? Special impacting essential Goods which you know came, right? The inflation came above CPI, right and continues to put
Some sort of pressure in disposable income from Brazilian consumers.
It's also important to consider another aspect from an industry sell instant point performance.
The performance was also impacted by 2 fewer business days in the period. Right now, moving to our selling performance, right? First and foremost, as I mentioned before, 34% of the volume, in fact, was driven by the industry.
Pretty much right explained by the weather, right? Additionally, there were 4 of the volume performance explained mainly by a wider Consumer Price relativity caused by something that we anticipated to you. During the, you know, our first call announcement, right? Our Revenue management decision.
This resulted in a low single-digit market share loss, according to our estimates and also pre-line with news and sellout data. Regarding share performance, brand equity continues to improve, softening the market share impact when we compare it to our historical market share models. The second point is that the premium group is seeing gains in share again in the segment, while the core is experiencing a decline.
Came uh in pretty much in line with low teams due to segment higher sensitivity to the diverse weather conditions and also is important to mention the core side of the segment. Relies more in out of home, consumption of occasions which were more impacted by adverse weather, right? And these brands are also more sensitive to revenue management decisions and greater price elasticity, okay? And it's important to reinforce as well that our market share over index in the core performance Visa V, the overall performance of our business. All in all looking ahead without a going into details about our quarter 3 Performance, what I can say is the following July doesn't look at all.
In terms of weather conditions, which means that we do see a significant Improvement throughout the month, right? Despite the fact that the beginning of the month was also impacted by residual adverse uh weather. And the second comment that I have is the following. We are also observing initial readings on consumer price relativity. Starting 2 years, improving along the month. Okay, Beyond July. We remain confident. No, fundamental of the fundamentals of the beer, industry impacted in the quarter and we continue to see clear opportunities for us. In terms of pick up, pick up in the future. And also, super important to emphasize that with you today, our company stronger, right? As a whole better prepared for the year to come, then we were in the beginning of the year, since our growth.
Is prepared right set for the acceleration of costs that we already observed impacting the second quarter.
And his boy, if I met Isabella slowly here, uh, let me just start by saying that, uh, our approach remains very focused. When you think about cost, we want to optimize where we control.
And important to remember that, while preserving the commercial levels as is ba mentioned to drive Top Line and brand Equity over the years, we know that cost of food. So it was the main source of margin pressure.
Our zero budgets based budget and that's something that will continue to exercise throughout the year. And I would like to say to finalize that the team is very engaged with that.
Thank you very much.
You're welcome.
Our next question comes from Hinata, cobra with SI
You can open your microphone.
Hi. Hi everyone.
Thank you so much for taking my question. And my question is to follow up in terms of calls, um, that you you just mentioned. Of course, we have the, the guidance for, for 2025, in terms of cash, cogs, and first half of the year, had a lot of volatility in terms of effects, but we have some Horizon for what can happen for 2026. Um, um, my question is, if you can give us, give us some caller on what you see and what you have been done in terms of hedging, uh, specifically for raw material costs.
Oh, thank you. And at the floaty here. So, 2 things with you, we are maintaining our hedging strategy, the same as a prior year, so it's uh, it's a hedging strategy that you look 12 months forward and it's not a speculative. The idea of the hedging for us is to protect the business number 1. Number 2, is that, uh, we are very confident about the cash clogs per active leader guidance that we have given to the market, which is Brazil, beer, excluding, non and B market place to be within the range of 5 and a half and 8 and a half. And even though we look that, uh, it's still being at the lower part of that guidance. For now, this is something that we work towards the year, but I cannot give you any guidance uh, on that topic now.
All right. So thank you so much for your call.
Our next question comes from Leonardo, Lingard with XP.
You can open your microphone.
Thanks for taking my questions. Um, I want to to dive a little deeper on discussion on on pricing, you know, it's a sensitive issue. But if you could discuss the Dynamics between of trade and on trade, uh, talking about this, this economic situation, which is not really favorable. But then with this weather advanced weather by the end of the quarter and maybe not so bad but still
Challenging, the beginning of the third quarter. So what's the what can you expect between this channels between on and off trades? And if you could even give a little more detail, you know, color on pricing between categories. I understand that you you've been pushing premium and super premium and you've been gaining market share on that sector and despite losing volume, this, this quarter
You managed to increase net negative, so but then maybe less than expected. So just to understand where we should expect it. The biggest price increase within categories, that's the 2 main points. I want to understand further. Thank you.
Thank you for the question. Uh, it's a very sensitive topic, as you said. So let me elaborate here in order to answer your point.
Our revenue management agenda started in March, right? Just after the carnival, as I mentioned earlier, it was built throughout the quarter, right? So we increased prices pretty much in all segments, right?
Which helped us to achieve the quality, net revenue, and practically the performance that you saw in Brazil. It is always good to emphasize that, you know, within the net revenue, the correct leader, the rate is pretty much in line with inflation, right? And we are capturing, right, the premiumization benefits on top of that, right?
As for the, for the core of volumes, right? Uh, as I mentioned before, volume, uh, volume decline due to the industry, right? So pretty much we saw the the vast majority of the impact impacting these Brands because they are more sensitive to pricing performance, right? Uh, pricing differences and also to something that you mentioned in terms of channels, right? The only main difference that we observed within the quarter was related to the on premise side of the industry because this
More infected by the adverse weather conditions.
You know, despite that we brought as I mentioned before a positive a net positive effect from the from the mix on top of the the rate initiatives that took place right? Looking ahead, net revenue practical leader will remain a key lever to support our ambition to continue expanding margins in Brazil, right? And we will always balance the long-term pricing aligned with CPI while managing the short term cost inflation.
Protecting profitability.
And for sure, we will always have an eye on our portfolio, the performance of our brands. Because in the end, everything must, must, must work together, right? We must find a, a, a perfect balance to make our business reach the ambitions we have for the year.
Okay. Okay, thank you as well.
Our next question comes from Philippe Orus with Scotia Bank.
You can open your microphone.
Operator and good afternoon. Please go ahead, thanks for the space. Um, a couple of questions on digital and last. So, the first 1 on digital, the marketplaces gmv accelerated quite a bit this quarter. Um, so, so congrats on. That just wondering if we can give us some, some, some details on what drove this. Uh, you mentioned the new brand that you've been timing on the platform, uh, but perhaps a little more from the strategy perspective. You know, you're, you're coming off of a few quarters of consolidating the cost and expense structure of the digital platform. Uh, so just wondering if you've started pushing harder on the expansion again, or maybe it's just other factors, uh, like the timing of signing your agreements. Um, and then, on last, um, I was a bit surprised about the net revenue per hectare leader, uh, in the region. I I imagine this was mostly driven by Argentina based on the comments and the release, uh, but wondering if you can talk to
Us a little bit about the drivers here, particularly given the environment where the inflation's pretty high. Uh, we've already seen a few beverage companies report in Argentina. They have, they had very good performances. Uh, but it seems like everyone in the industry is taking the the foot off the accelerator on, on, on price mix. So just wondering if you can give us some comments on what's happening there. Thank you.
Hi Philippe, thank you for for your question. So and you are right uh 1 of the aspects that we are. Make us feel, you know, very positive about our year performance is the the the good balance between the 3 pillars of our growth strategy. Being the pillar number 2 are very important highlights for the period, right? And within the pillar number 2 uh Marketplace continues to create a pretty interesting Revenue stream for around right with minimum Investments. But we very interesting right performance year to date and show even more potential in the future, right? And, and we do see a pretty interesting correlation as well with the level that that our service level to our customers. They continue to rise The NPS right, you know, a quarter by quarter View, in terms of marketplace, we grew 90%.
In the quarter with Brazil growing.
PP like Nestle L'Oreal in PepsiCo Foods, right. Very interesting to to highlight that 80% of our Brazil customers base bought in the marketplace in Q2 up.
Double digits from last year.
Also, very interesting to highlight that we are increasing the number of asking use per Park and you know on a first half standpoint this achieved right a level of 30% year-over-year, right? First half on bad market. Place is improving in terms of margin as well, right to something that you also mentioned mentioned right, improving, 400 base points. To 15% in Brazil, this improvement improvement was even higher to 600 base points, reaching 17%, right? So, and the point that I made in my intro, right? This is also allowing us to better understand our customers now with a even more touch points where having even more, you know, a broader assortment giving us a lot of Data Insights right in early years to better attend their needs.
And and thank you Philippe, talking a little bit about this boy. Just mentioned about uh, the marketplace gross margin. So let me tackle like, Argentine and how we're seeing it. We continue to see a sequential Improvement in the market. Uh, overall. Uh, even though it's Dynamic, we see like the consumer confidence is gradually improving. And that is, what is reflected in our results in Argentina. Since the past the beginning of hyperinflation, we've been very careful on protecting our margins by also looking into costs and looking into the capacity of the consumers to absorb price increase and that's what we continue to do in that market.
Under.
Thank you.
Our next question comes from Nadine sarwat with Bernstein.
You can open your microphone.
Um, I believe I dropped the queue. So I'm going to move on to the next person in line, which is Lucas Fedaa with JP Morgan.
You can open your microphone, sir.
Hi guys. Uh, thanks for for the space. My question is on below, uh, lines, um, specifically those lines, um, slowly you mentioned about, uh, the non ribs. How to think about those lines because they have been relatively, uh, meaningful, right in the last few quarters. Like you mentioned, you explained, the reason for that. My, my question is, how to, to think about those lines. And then, let's say 12 months are you guys will you guys continue to, uh, push money out of, uh, some of these countries you mentioned and have, uh, uh, impact, um, in, uh, in the, in these operations, uh, or this line should go. I don't know, nearly zero at some point, uh, but just to general terms how to think about your financial expenses line, uh, and these volatility volatility in the next few quarters. Thank you.
Well, thank you, look.
Here. So, you know, that's a difficult for us to give any projection how we think about the future the way I think about that is probably thinking about uh what how Bolivia could probably be on the macro side, perform on the coming months and we don't have any reason to believe that would be different from the past. So we always have on our side we need to
Be careful on repatriate, if I may call a cash from other markets, that will not be changed. So in overall, I think, uh, there's there, will be no material change on this line and from what I foresee from now, but that is, as much as I can tell you, and I've been careful here, not to give you any forecasts and things that I should.
Of course, thank you very much.
our next question comes from and with bradesco,
You can open your microphone.
To the beginning of the year, if it gives greater comfort, you know, on, on achieving that Target. Uh, and I know the, the, the start of the goal is for, am I want to consolidate a level? But any comment relating to Brazil beer as well specifically, uh, on the potential to sustain margins and pricing where your positions right now, if if you know how confident you are in, be able to sustain that and a quick, follow-up on the pricing, in Brazil beer, uh, was there anything relevant when it comes to price relatively relativity? When you look at the premium segment to the mainstream segment, that could explain part of the, the the, the underperformance in the mainstream. Those are the the 2 question. Thank you.
Hey, thank you for your question. Uh, let me see how I can address your point. Okay. But I think the most important aspect to highlight about where we stand today is the following, okay? And I'm going to use the three pillars of our growth strategy to explain, right? First and foremost, brands. I mentioned as part of my intro, we see our brands stronger today, right? I think we have.
Very different from my moment in Brazil many years ago, we now have a way more complete portfolio, not only composed of strong local domestic brands in the core, but also very powerful brands above core, right? And this gives us way more optionality to work with, right? So.
Pay attention to the following when we migrated from 24 into 25. We had zero pricing carryover.
And as, you know, we already implemented a good part of our, you know, plan for this year, especially in the second quarter, uh, of 25. So now, this put us in a very different type of type of position looking forward, right? Second point.
Uh, digitalization of the business, right? Uh, the digital ecosystem, it's, it's always, I always emphasize this point, you know, the beauty is when you connect the three pillars, right? And the second pillar is a free import important bridge between the first and the third because it provides us a way better, you know, push about customers and consumers.
And is also creating on top of that, on top of the benefits brings to the, you know, the core side of the business. Also, new revenue streams. So it's a a very powerful, right? Part of our growth strategy and it is evolving in a very consistent fashion. As I just mentioned and explained and the pillar number 3, right? How you make the 1
Together with, you know, the ambition to put the other muscles of the organization right to work at the same pace in order to, you know, evolve with our business to create growth with value.
Simultaneously, right. So and and, and you heard me saying that during the first, uh,
Quarter announcement that we put for ourselves a big ambition, right, to be way more productive than we used to be before in order to make this year another year of margin expansion, despite the fact that we're going to have not a tailwind but a headwind on the cost side. Right? So that's the reason why, in my point of view, we will feel more confident about the year to come, right? And we've got regarding your second question, pricing. Right? What is the major difference between?
Court in premium is pretty much the fact that core relies way more.
On the, on the on the side of the industry, that was more affected by the by the weather. Right? The adverse weather and we know that these brands are both core, they have also, they, they have more resilience to support the differences. Right? And we know that, you know, moving forward, we already see those differences easing right. Which is a good indication that we're going to have in the second half a pretty different right reality that we than we face in the second quarter.
It's very clearly. Thank you very much.
Our next question comes from Thiago. Dr.
You can open your.
Yeah, thank you. Very nice, touch base. Um, yeah, I'll I'll, I'll, I think I have to Circle back on a follow-up on this Brazil beer, pricing discussion. Uh, a couple of things here. Uh, number 1. Uh, how much of the revenue per hectare gain uh was through mix considering the outperformance of Premium uh relative to to the core segment. Uh, this this would be the first point and the second on pricing is the, the revenue management initiatives in Q2 they differ in terms of timing. In the year, a lot from what we have been seeing historically and have typically, you know, adjust prices, uh, in the second half of the year ahead of the summer. So, so given how much pricing you?
Already implemented. How should we think about Revenue Management in the second half of this year, uh, particularly ahead of the summer? So that would be the the second part of this question. And and if I met on a on a more
Fundamental question. Uh, we we started the year talking about revamping the core investing behind the brands that have somehow been under-invested, uh, and that's all against the backdrop of a portfolio that has expanded significantly through Innovation and new offerings in the last few years. Elizabeth just, just talked about this, right? And, and when we look at the quarter, and even the year to date picture, we have Brands like Corona Stellar to up your gold uh, all doing relatively well.
And they're all relatively new to the portfolio.
And on the other side, we have brands' core brands losing share. Um, Flirty shared this 10% SKU reduction in the portfolio. So, you know, it seems different from both in terms of the implementation and in terms of the results from what we were discussing in the beginning of the year. So if you could elaborate on how we should think about these variables going forward and the priorities for the business. Thank you so much.
Uh, thanks for the question. And again this is a very sensitive topic. So let me elaborate here in a way that, you know,
Makes sense. Um,
Agenda. Okay.
It's not necessarily fair to say correct to say that we always increase prices right in a specific moment, in the year, right? That will, this will always depend on market dynamics. This is the first point. The second point is the following, we started, right? As I mentioned during the first quarter announcement, just after the carnival, and this was built on. During the quarter, write the rate impact was pretty much in line with inflation, which means that the difference is coming from a positive mix effect, right? And it's interesting as well that within mix, we had a negative impact from Channel mix and some Regional mix, and a very positive impact from Brands mix, right? And this brought the post net impact, right? Moving forward, we will always
Contain our long long, long term goal, right? As um, as a North for us, they keep prices in line with inflation, which is pretty much what we we have done. And we did within the the quarter 2 prices are not above inflation because everything that we mentioned before about consumers and the pressure on disposable income and we know that a part of population.
It's very sensitive to price increases, but on the other hand we will always take in consideration the inflation. Impacting us on the cost end and this will drive our decisions, right? This is the, you know, the further I can go with this topic, right?
On the other side, uh, nothing changed about the core.
More pick up the increase right in the future. So, in other words,
core will remain being a Cornerstone of the category, a priority for us. However,
we cannot move on with our plans without making decisions, right? So when you analyze just 1 quarter, maybe it's a a little bit unfair, right? These are the what we have in terms of expectations and plans for the future for the year entire year. So we know that this part of the portfolio was more impacted within the quarter.
But again, the majority of the impact came from a non-structural side, which was related to weather.
The pricing side was one of the smallest impacts that we had.
Right. So, and again, it's part of our strategy moving forward always to take decisions again, having.
In mind, what happened in quarter 2? And as a consequence, you can imagine that will will move forward. The way that is necessary to protect the balance between the core segment and the above of course, segments
Right. And this part of the the the the category is showing way more resilience.
Which means again in the end optionality for us.
Here are just two things on my side to contribute here. One is that everything that was mentioned was something that we had planned since the beginning of the year, booking it to how we knew cost would probably perform number one. The second point is that when I mention the 10% rationalization of SKUs, you need to take into consideration the size of our portfolio, including the number of brands, and so on. We are working on formats and SKUs that were low moving and/or would have a lower contribution to our portfolio, which does not create or should not create any confusion about what was explained before regarding our strategy with the brand and the portfolio.
It's all clear. Thank you so much.
Thank you as well.
Our next question comes from Rodrigo alcantra.
You can open your microphone.
Hi, uh, good afternoon, and thanks for for taking my question. Um, would be for, for this. What if I may, I would say that for the sake of of clarification here and to understand your, your, your mindset? Uh, well, we, we saw that the price action, right? We saw the the prices electricity affect and, and the and the share, um, outcome, right? So just choose to want to understand, uh, what are the, the the the topic points, the facts?
That make you sets uh that brand Equity across brands.
Uh have improved or or improved uh, get your point that is not afford to to just uh, you know, judge on just 1 quarter. So maybe you were uh talking about on a you know, first half results. So essentially I wanted to understand what the the the points that make you uh set of, you know, having a brand Equity uh across Brands improving and the other 1. Very quickly would be just to to to get an update on on the revamp strategy on on on on on scope. And know that uh we don't necessarily share know the specific details about about this plan. But just just wanted to know, like, kind of like the progress on on on this and how you see the brand ahead of the second half of this year. Thank you very much.
Perfect Rodrigo. Uh,
Let me ask you a question. Uh, two questions, okay? The first one is about Equity Improvement. What is the big reason to believe our brand is improving? First and foremost, we track, right? Every single month, we track what we call Brand Power. And this Brand Power is based on three different components: how different a brand is, how salient a brand is, and how meaningful a brand is to our consumers. The combination of the three components, right, brings to life what we call Power, and we do see Power improvement in a pretty important part of our portfolio, which gives us even more confidence about the future because Power is a very good proxy for sure.
We had, uh, you know, Consumer Price, uh, Dynamics, writing Q2. In other words, right? The price relativity gap. We faced, right? The level of impact we had in share was lower than historically.
Used to see.
You know, portfolio, which also reinforces the point that the power is bringing more strength to our portfolio, right? And regarding your, your your question about skull, I think this is a very
interesting aspect that we didn't discuss. Uh, so thanks for bringing the point. I don't want to highlight here any, you know?
Huge, uh, uh, revolution in terms of performance for the brand, but we have been, as I mentioned, uh, a few times with you all, we have been working right in order to, you know, adjust, correct a few aspects about our plans for the portfolio, especially for Skull. We have been observing interesting, uh, improvements. One of them is about placement, right? Distribution suffered during the, you know, Q4 2024, and now we are bringing back, since the beginning of Q2 2025, distributions to a way healthier level.
Both for the brand and we know that availability is critical. If we want to put the brand back in a growth trajectory, the second aspect is not only being present, but being well, executed, we also improve the level of support we have for the brand at a park level. And we do see that, you know, level of, you know, support bring it better turn for the brand, right? Which means share of handles for a score within the pots and last but not least, right? When we compare from the beginning of the year, today we see a sort of a v curve.
And why a v curve. Because in the mid, in the middle of this period, we had Carnival, right? And the skull was not a priority for us right in terms of bad brand activation for this period. So the the brand still suffered a decline and since then we see a recovery as you know, a very consistent recovery right in, share right, small after month again, too early, I'm not claiming here we solve it right? But this is the type of indication that we need to give us confidence that we are touching the right you know buttons to put the brand back on a growth trajectory
Thank you very much.
Thank you, that was useful. Thank you.
Thank you. This concludes the Q&A session. I would like to invite Mr. Carlos Lisboa to proceed with his closing remarks. Please go ahead, sir.
Thank you for joining our call today. Uh,
We feel encouraged by our first half of the year. As I mentioned before, we are progressing in our three pillars of growth strategy: we have a stronger portfolio of brands, our digital platforms are gaining traction, and we are delivering margin expansion through revenue and cost management.
I feel that we are a stronger company today than we were 6 months ago, positioning us. Wow, better for the second half of the game. Looking forward. Why our operating environment remains dynamic
The quarter we just went through gives us reasons to believe we are on the right track to continue pursuing another year of growth with value creation for MBS.
Thank you very much again. See you hope to see you soon.
This concludes today's presentation. You may disconnect and have a nice day.