Ambev S.A.

Good morning and thank you for reading. We would like to welcome everyone to Ambev's third quarter 2020 results conference call. Today with us we have Mr. Jean Gerissat, CEO for Ambev, and Mr. Lucas Lira, CFO and Investors Relations Officer. As a reminder, a slide presentation is available for download on your website, ir.ambev.com.br. as well as through the webcast link of this call. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are complete, there will be a question and answer session. At the time, further instructions will be given. Should any participants need assistance during this call, please press star zero to reach the operator. Before proceeding, let me mention that for the local statement are being made under the safe harbor of the Securities Litigation Reform Act of 1996. For the local statement are based on the beliefs and assumptions of unbiased management and on information currently available to the companies. They 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 an invest and could cause results to differ materially from those expressed in such front-looking statements. I would also like to remind everyone that, as usual, the percentage chance that will be discussed during today's calls are both organic and normalized in nature and unless otherwise state. Percentage chance refers to comparisons with 30 quarter 2019 results. Normalized figures refer to performances measures before exceptional items which are either income or expense that do not occur regularly as part of unbalanced normal activities. As normalized figures are non-GAAP measures, the companies disclose that consolidated profit, EPS and EBITDA on a fully reported basis and the earnings release. Now, I will turn the conference over to Mr. Jean Gerasati. Mr. Gerasati, you may begin your conference.

Thank you. Good morning and good afternoon. Thanks for joining our call for the third quarter. If the second quarter was marked by resilience, adaptability, and agility, Q3 was all about building momentum. The overall environment remained fluid and challenging, but the team did a fantastic job in terms of executing our plans. Thanks to them, we remained on course for our recovery path. So before diving into the results, I just wanted to thank my team. Great people have always been the foundation and driving force of our company, and I'm very proud of all of them. The third quarter continued to be marked by the pandemic. Despite all the difficulties, our commercial strategy worked. The V-shaped volume recovery trend that started back in May continued throughout the quarter across all of our markets. The trends by country also remain very similar to Q2. Bolivia. Panama and Dominican Republic continued to recover more slowly. Although the volume performance is improving gradually on a monthly basis, these countries continue to have more severe restrictions. Argentina, the pace of the recovery was impacted mainly by the macro backdrop in the country. Paraguay, Chile and Guatemala recovered faster thanks to market share gains. While in Canada, our volumes benefited from the strong performance of our premium, core plus, and beyond beer portfolio that led to market share gains amid a positive industry. In Brazil, what we saw was our adaptability operational excellence and innovation all came together during this quarter. We estimate that the majority of our volume growth came from market share gains as our commercial strategy is gaining traction. The rest came from a combination of industry pricing calendar and tailings. We continued to see operational restrictions across the country, which varied between regions, with big cities and urban centers still being more affected. The good news is that their own trade is gradually reopening, and the small mom and pop of trade stores continue to gain relevance. To give a dimension, we have ended the quarter with an increase of 10% in the number of total buyers versus the pre-pandemic. Also, I like to say that Brazil got gigantic geographically in this pandemic. As customers and consumers were less mobile, Ambev was the trusted partner to deliver volumes in the most remote areas of the country. Following all safety and healthy protocols, our products were delivered from Moipoque, the most northern city in Brazil, to Chuí, the most southern city in Brazil. Just to illustrate this point, during this quarter, our fleet of trucks drove 22% more kilometers than the third quarter in 2019. Looking more to the long term, our strategy will continue to be built around three pillars. Unbath as an ecosystem, innovation as a mindset, and business transformation enabled by technology. Today, I want to spend more time on innovation. We are making a deep transformation on our business to respond faster to customer demands and shifts in market trends. We are in the beginning of this journey to bring solutions to our clients and consumers, but I'm very happy to see that results are starting to come. We will continue to focus on consumer centricity, flexibility to create unique recipes with exclusive ingredients, a pilot testing and learning approach, the creation of an ecosystem that benefits clients, consumers, and suppliers, and the logic of creating demand ahead of supply. We have a framework for innovation where we are betting on five growth avenues. The first one, flavors and value propositions. Looking for products such as Brahma Duplo Malte, which created its own space in the market and took over the leadership in the core plus segment and regionalization too with the affordable approach of the local supply chain. Second, health and wellness as the biggest opportunity for the future. Last quarter, we launched Stella Gluten Free and continued to test and accelerate MyClub Ultra in different countries. Third, convenience for our consumers with initiatives such as Zed Delivery in Brazil, App Bar in Argentina, and CoMap in Dominican Republic. Fourth, innovation in services for our clients. Dominican Republic continues to expand BIS serving as our laboratory market for the marketplace service. More than 75% of the net revenues there already come from the platform. And fifth, beyond beer, we are exploring new territories in the ready to drink wine among other beverages. As I said in a letter to all our colleagues in Ambev in June, we are rejuvenating ourselves. Our market share in the new products that have been launched in the last three years is greater than our total market share in Brazil. This shows that innovation has been over-indexing and will continue to be a key growth driver for us. Finally, as I mentioned in the beginning, the word that defines this third quarter is momentum. We are strengthening our bonds with our ecosystem and opening new perspectives for the future. Thank you for your time and attention. I will hand over to Lucas.

Thank you, Jean. Hi, everyone. After a very tough Q2, it was good to see our financial performance bounce back into Q3. EBITDA grew organically year over year in three of our four regions, despite everything that COVID threw our way. And how EBITDA grew was also quite positive, with our four regions delivering organic top-line growth. In Brazil, last, and Canada, top-line performance was driven by consistent volume recovery, and in CACI, net revenue per hectolitre performance made the difference. We delivered a consolidated 12% volume growth, with improvement from all our operations since Q2. More importantly, volume recovery also translated into improvement in our financial performance. Growth margins and the data margins improved sequentially since Q2, in virtually all our business divisions. Normalized profit also grew year over year, even though net financial expenses increased, given exceptional gains in Q3 of 2019, increased carry costs in Argentina, and the impact of tax litigation regarding the ICMS in the tax basis of the BIS and the COFINS taxes. And finally, cash flow generation nearly doubled thanks mostly to our working capital performance and operational cash flow. This results further strengthen our solid liquidity position. Profitability though, remain the challenge. So let me comment on the main profitability drivers by business units. Brazil beer EBITDA margin improved sequentially, mostly driven by the operating leverage resulting from our 25% volume growth, reopening of the on-premise channel, growth of RGB, premium, and core plus RAM, and margin of creative innovation. Year over year, however, performance was still negative. Channel mix remained a factor. One-way mix led to under-hedged costs, primarily effects in aluminum. And SG&A was impacted by a combination of a tough cost given 2019 phasing, our decision to reinvest some of the savings from Q2 that made sense, given the strong volume recovery, and also our desire to invest behind our key brands as we approach the summer. NAB Brazil was also able to increase the business margin. The main reason for that was an easy comp from last year's phasing of tax credit, but it was important to see the mix of single serve improve as the on-premise gradually reopened. Last was where margin performance continues to struggle the most. In Argentina, the combination of price controls in food and beverages and hyperinflation continued to take its toll, and on top of that, Bolivia's slower recovery of the on-premise channel was also a factor. And finally, in Canada and Kaki, we were able to increase EBITDA margins this quarter year over year. This was primarily a result of volume trends and improved cost efficiency in Canada, and revenue management and discipline execution of our SG&A savings impact. The name of the game going forward will remain continuous and consistent improvement. The pace of our profitability recovery, however, will take longer because of the FX headwinds coming our way in 2021, but this is a priority for the entire organization. We know what we have to do in terms of top line, continue to grow volumes, support recovery of the on-premise and drive returnable glass bottles, GrowCorp Plus and premium brands, and invest behind margin accretive innovation, both in beer and beyond beer. As for costs and expenses, we need to remain with our heightened financial discipline behind working and non-working money and leverage our technology investments in our supply chain and sales organizations. More broadly, COVID generated a greater level of mobilization of the team, increased visibility, and is challenging us to rethink how we run many aspects of our business, from discounts management and cost management to resource allocation and return on invested capital. We still have lots to do, but after surviving Q2 and building momentum in Q3, we're definitely up for the challenge. Time for Q&A, and thank you very much.

We'll now begin the Q&A session. If you would like to pose a question, please press star 1. If you want to remove your question of the Q&A queue, please press star 2. Our first question comes from . Hi, Luca.

questions here. First one, basically, a surge in volumes of aluminum-10 this quarter puts you in an unhedged position in terms of aluminum NFX, right, which resulted, therefore, in higher than expected costs increase. So I just would like to understand if we can isolate the magnitude of this cost impact at your gross or EBITDA margin. So meaning, in other words, what was your unhedged cost position this quarter and how much of this cost was above your hedged cost, and ultimately if we can connect that with your outlook amid the current constraint aluminum can and gas bottle supply environment.

With respect to the cost for Brazil Beer in the quarter, Well, a few things we already expected, right? So we already anticipated that the FX headwind would hit us, right, based on our hedging policy since last year, number one. Number two, we already anticipated that the mix would also be a factor because as we saw in Q2, in Q3, we also saw year-over-year increase of mix of one-way packaging, particularly cans. And that brings along with it an impact on our costs. And then finally, what was unexpected was really that the weight of the growth in one way, year over year, was greater than what we had hedged going into the year. And so... we ended up having to face an additional cost because it was not hedged in advance. Net-to-net, we estimate that the impact was around 90 basis points, just to give you a reference. But for this additional impact, our EBITDA margin for Beer Brazil would have been 90 basis points better. Could you repeat again the second part of your question, please?

Yeah, what's your outlook, you know, amid the current constraint in the aluminum can and gas bottle supply environment?

Sure. Well, I think, number one, we're still ramping up our can plant, right? So we launched during the quarter our can plant in the state of Minas Gerais, and it's currently ramping up. So as it continues to ramp up during the next couple of weeks and months, we expect that to play a role in helping us alleviate the supply chain pressure. Having said that, we do acknowledge that the supply chain pressure overall will continue in the country. What we're doing about it is we're planning ahead. And we're planning ahead, trying to leverage our global footprint and our global footprint of suppliers to really to be as prepared as possible for a summer that we anticipate will remain putting pressure on the supply chain.

Got it. Very clear. And secondly, very quickly, if I may, can you give us some color how much innovation or recently launched projects such as Gramma DuPonts were relevant for your games of market share this quarter?

So hi, Marcela. I can take this one. Yeah, so innovation is really a big part of our strategy. So we have been working on this for 18 months now. So building the capability. hiring people, redesigning the organization to have squads and to have an innovation team working in each avenue of growth. And Q3 was particularly very strong where innovation really played a very important role. We believe that our volumes, the majority of it really came from our commercial strategy. And a big part of it is innovation. And as you know, we just mentioned, Brito mentioned in the other call, I mentioned that Brahma Duplomati took over the leadership on the core plus segment. So what I can say is that majority, more than half of our growth really came from our commercial strategy. A big part of it is the acceleration of innovations, and Brahma Duplomouch is the number one brand on the corpus segment.

That's very helpful. Thank you both.

Our next question comes from Luca Siciccia, Goldman Sachs.

Hi. Good morning, John. Good morning, Lucas. Thanks for taking my question. I'm here well. I wanted to also ask something about the beer performance in Brazil. Evidently, 25% growth was a quite dramatic move. I went back and I couldn't find the growth above 20% since the early 2000s, so definitely a standout. But even if I look at it in absolute, actually there's nominal levels, 20, almost 22 million hecto, it's something that typically we see in the fourth or in the first quarter, in the summer quarter. So my first question would be, I understand some specific tailwinds and some exceptional levels, understand that Q3 didn't grow for the last five years, but even if I look compared to 2015, these numbers are about 77% higher. Can you help us understand how much the pricing discussion also played a role in relative terms compared to what the others have done in the market, but also whether there's an element of anticipation of orders if you've been eating into some of the fourth quarter volumes, if you can quantify that. And then secondly, On the pricing specifically, you make reference to the changes that you've made and more . What do you mean exactly? The price changes have been more targeted or more regional, or you haven't done them at all or not much? And how should we think about this going to the end of the year? Is it reasonable to assume that this year is about volumes, is about mix, but it's not going to be about pricing? or it's something that you leave open to changing market conditions or other factors. If you can comment first on these two points, it would be great.

Okay. So let me start with the last one. Let me start first with the pricing. So I've been saying that we have been studying the previous Q3 guidelines and our pricing strategy. And we, in the past, we have been very disciplined, very rigid on our strategy. And we just believe that we should kind of move to really have a strategy that could, in the long term, bring more value for us. So we are being more flexible in general. If you see, we are playing a different playbook across the countries. If you look at Dominican Republic, we are playing a playbook. If you see Canada is another one, Paraguay a different one, and Brazil different too. So we are really looking with more variables to really understand how can this lever really bring value to our company, okay? So coming down to Brazil, what happened is really that we were in the middle of the pandemic, and we really tried to find the best moment for us really to go and recover a little bit of net revenue per hectolitre in a way that it could stick and it could be manageable by our customers and our consumers. But in the end, this looks like more... a little bit outside of the pandemic, closer to the peak season, I think it was the right moment. But even though I really don't think that that was a major change on the volumes of the quarter, anything that we talk about elasticities of pricing and volumes, I don't think that that was the major change. motive of the volumes of this quarter, mainly because it was really finding one week, some weeks after what we did in last year. But it was important really to make it more close to the peak season, to really see in a way that it was more flexible, in a way that it was like protecting a little bit the own trade that is needing to get traction still. And so we are very happy with this strategy that we are taking, okay? So having said that, the volumes, I think this call we are talking about momentum. So the volumes that we did, it is not really a part of it is when we compare is about easy comps, but the point there is that we really believe that our commercial strategy is really working. And in the end, if you see this type of volumes compared, they are more close to Q4 volumes. And if you see in a de-seasonalized way, they are really, really strong volumes that we have seen in the Q3. So majority of this growth really came from our commercial strategy. our portfolio is really in a much better shape than we had before. I point out the fact that we have seen the core very resilient. The point is that the consumers and the occasions that we have seen that arise in During the pandemic, there's more relaxation, more in-home with friends. They are really benefiting the core. So it's really a big chunk of it is our core is really getting more consumers and occasions than losing. Our value strategy is really working, too, with the market affordability that we have now going for five states. So the value, it is not – so we are not seeing trade-outs. but we are performing well in the value. What we are seeing is really the core resilience. And then on top of these two things, global brands growing 40% and the innovations bringing differentiation to the core and really creating this core plus segments. When we put all of this together, it's really what we believe it is doing, the 25% growth that we had.

So you don't think there was a meaningful element of, you know, Q4 volumes going to Q3 because, you know, there's an expectation that, you know, you're going to hit with a price hike and I better stock up now. Or if there was that consideration, it was not material. Is that the right interpretation?

So we monitor the level of inventory stocks in the market, and that's definitely not what happens.

Okay. And if I made just a quick one, more of a holistic question, maybe an unfair one, but I wonder if a 25% growth in beer volumes doesn't move the share price, I don't know what will. And my hunch would be, aside from market conditions and other factors, is that people are worried about margins or have questions on where the margins will land as we move forward. We know that you're going to get hit by effects, mix. some other elements, but maybe there is less clarity on how much pricing or operating leverage will be able to offset that. So is there anything you can give us to, let's say, anchor margin expectations within a reasonable range as we think about 2021, 2022, that I think is what remains a major concern for investors?

So let me get the overall view of this question, and then I will hand it to Lucas for us to – it's a good question for us to talk about. So as we highlighted before, we were really forecasting a V-shaped recovery, and we were really working on the volume, stay focusing, strengthening the connection with our clients, renovating our portfolio. Our commercial strategy – It's really working. We believe we have momentum, so we are gaining momentum, so we are confident on that. So this was a particular Q3 in Brazil, a quarter, that we delivered strong top line, resulting with EBITDA growth year over year, and sequentially EBITDA margin improvement. So this was a quarter that we were very happy with it, because we could overcome the pandemic and the impact of mix and the initial impacts of the currency with our commercial strategy that really sticked and we paid with the top line and had a bit of growth year over year. So as you know, it's important. So we have significant transactional effects headwinds moving forward. But in the end, we will continue and work with our long-term view, working on the volume recovery. So you have to understand that I already had 10 million hectoliters more than I had last year. So that's a number from our peak volumes in 2014 that will help us in this recover in a sustainable way of margins. So the own trade reopening, and so it's halfway still. So it is really something that we begin, so we believe it will come. It's not structural. We believe it will come back. So the core plus and premiumization strategy will bring us a way for us to mitigate what we are seeing in the short term of FX headwinds. and the continued of a strong innovation pipeline. On top of that, strategic capex investment on technology footprint. We are working on all of that for us to mitigate the impact on the currencies. But just to make it clear, so this Q3 was a shape that we liked, a strong top line mitigating the profitability issue with a bit of growth and really having sequential a bit of margin still with a lot of opportunities to move this forward, okay?

Great. Luke, as to the first part of your question, we really can't comment on the share price and share price movement and reaction. A multitude of effects go into that. It's ultimately for the market to decide what the price of the share should be. What we can comment on is what we're trying to achieve as management, and that is to continue to improve our results consistently over time. This won't happen overnight. Q2 was very tough. We survived. We think we're starting to build good momentum. We have to continue to deliver by executing our strategy. We're constructive on the business opportunities we see. We're constructive on our portfolio, where it is today. We're constructive on our team and their ability to deliver. So that's going to be our focus going forward. What the share price will be, the market will decide from time to time.

Absolutely. Thank you. And I wasn't expecting you to comment on the shift, guys. I was just channeling as a as a way to refer to concerns or questions around the margin outlook. So, totally fair, and thanks for the questions. Very clear. Thank you.

Our next question comes from Thiago Duarte, BTD.

Thank you. Hello, Jean. Hello, Lucas. Hello, everybody. I've got three questions. The first one is circling back to the discussion on pricing. I think it's clear, Jean, the flexibility that you're trying to implement on your price policy. But one aspect that called our attention here was as you try to combine effective price increase with your revenue management, particularly how you play the discounts over gross revenues. Looking at the financials, particularly when you look at the parent company level for ANBAV, discounts were pretty low relative to the levels that have been seen for several quarters now. So just wondering, we discussed that in the past, so just wondering whether you think discounts can go even lower as a way, as a tool for you guys to play you know, pricing with customers or whether they should be seen as a runoff or something like that. So if you comment on that, that would be nice. The second part of my question is on brand performance, right? You guys brought in the release some comments about, and I'm talking about Brazil beer here, some comments about international premium brands performing really well, Corp Plus with Bremer Duplomology performing really well. So just wondering how your core portfolio, your core brands performed in the quarter. You mentioned it was resilient. So just if you could situate us a little bit in terms of how they did relative to the average of the portfolio, it would be nice. And the third question is on dividends, right? You guys, if I'm not mistaken, this is your all-time high net cash position that you guys reported for September. So, Lucas, if you could comment on your dividend policy, whether we should expect it to be similar to what we saw last year when you guys paid the entire fiscal year-related dividend one time or something different, it would be nice to update as well. Thank you.

Okay, so let me get the one on the discounts and the resilience of the core. So, yes, Blas, so we are... So when I mentioned that long-term-wise, we really want to follow the inflation on the price increases, it's really our long-term view, so what we want. And on top of that, you have many factors, that does not affect consumers. So there is this part of the channel mix, this part of packaging mix, discount optimization. So we are working a lot on other levers to guarantee that our price conduct is the one that will really be inclusive with consumers, guarantee a healthy industry. But we are working a lot on other levers for us to have a better profitability in the future. So we are studying the price, the decision of the price, much more on the macroeconomic scenario, elasticity, mixed trends. But in the end, we have another leverage moving forward that we believe that will begin to play in our favor. That is, the channel mix moving forward should be something that would be positive for us. And the brand mix, that is something that we've been talking, but we are really seeing it with more strength right now, mainly because, as I mentioned before, the core is resilient. So what we are seeing, so if I can give you some numbers, so we have 25% of our volume growth. So the core was pretty much, when we put core and core plus together, they were pretty much in line with that. The premium was global brands growing 40%. And then the value, it was really under-indexing in growth, but gaining value. So this is an equation that is a good equation for us, core resilient with innovation, core plus helping on this equation, and then premiumization on top of everything, and a healthy value, gaining market share, but do not really impacting that much downward. The part of the mix and discount is an opportunity. So I mentioned to you, so it's a broader view of that, okay? So what we see is that we are already selling to 10% more customers that we sold pre-pandemic. because we are really getting linear, so we have been the reliable supplier, and we are across the board looking for more customers, smaller cost of customers, so there is less of intermediates on this process, and then you have opportunity to, on the discount optimization, when we have this mix of customers really moving in the right direction. Core Plus is positive, and region mix is something that usually it is less accurate because we are really growing in Northeast, North, and the Middle East. So opportunity discounts, opportunity in core plus, so the resilience of the core performance when we put everything together in line with the total volume and the decision on pricing that affect consumers really looking at more variables and really having the right moment to do it.

Hi, Chad. With respect to your last question, starting first with the cash position, the cash position that we ended up in the quarter is the result of, I would say, three main factors. Number one, the liquidity question we built during the second quarter because of, because of COVID. Okay. And that liquidity question is something that we're constantly, um, assessing, right. Um, based on, uh, what's going on in markets and in our business and the needs. So that's something that we will continue to monitor, uh, very closely. Um, We still live in a fairly volatile, uncertain, and fluid reality across our markets. So even though we survived Q2, building momentum in Q3, we're not out of the woods yet, right? A lot can still happen and a lot can change rather quickly. So we think a good dose of prudence is still warranted, okay? But that's something that we'll continue to keep on our radar and monitor. The second thing is currency translational adjustment. This is basically a result of the cash positions in our foreign operations, and given the devaluation of the real versus the US dollar, when you translate the balances, it creates an impact. And then the third one is really the strong cash flow generation that we had in the quarter, which was great to see. So that's kind of where we ended up in terms of cash and the main drivers for it. As for dividends, as you will know, the AMBEV bylaws do provide for a mandatory dividend of 40% of our adjusted annual net income. So it's always good to remind folks of that. When we think of use of cash, our thought process remains the same. Okay, so number one, reinvesting in the organic growth of the business. We continue to see opportunity and we will continue to invest behind growth, be it CapEx, be it investing behind our sales and marketing to further strengthen the portfolio that we're trying to create and strengthen and further develop. Number two is investing in non-organic opportunities that may pop up from time to time. obviously hard to pinpoint if and when they will happen, but we see value in retaining the flexibility to be able to pull the trigger and invest resources behind that. And then, last but not least, return excess cash to shareholders. And in doing so, we will continue to focus on maximizing the IOC payout, given the deductibility that comes along with it. So that remains a priority when it comes to returning excess cash to shareholders. And the balance is going to be a combination of potentially dividends and share buybacks, depending on kind of a multitude of conditions that we evaluate from time to time together with the board. So this is an ongoing discussion towards the end of the year. Once we have finalized our budget, have a clearer view of our plan for 2021 and beyond. and taking stock of kind of where we see the environment going forward, we will make a recommendation to the board and update the market as needed.

Thank you so much.

Our next question comes from Robert Woltenstein, Evercore.

Great, thank you very much and terrific progress. I'm wondering if you could go into a couple of things and just trying to get a little bit of a sense of the sequential improvement or changes. And that is, number one, returnable glass bottles as a part of your mix. I don't know if you can kind of give us a sense of what they were in Q1, Q2, Q3. you know, really trying to get a sense of, you know, that sequencing. And then second, you know, any color on Zed delivery. I mean, you gave us some numbers in prior quarters. Love to kind of see where that is, how that's growing and progressing. Thank you.

Okay, Robert. So talking about returnable bottles and canned, So we saw a sequential recovery in RGB mix in this quarter, driven mainly by this strategy that is really picking up of small RGB for in-home consumption in moms and pops and small off-trades that continues to gain traction. And this is just to make a comment to the question of Duarte, too. This is an important piece of the resilience of the core, the small RGB 300 ml strategy to go over in-home occasions. So in September, the 300 ml RGB is already growing and getting more traction than CAMs, for example. And on top of that, we foresee that the reopening on the on-trade channel, that it will really help us to continue to grow on the RGB. So what can I say? We are more or less halfway what we lost, but gaining traction with the reopening of the on-trade and the RGB strategy moving forward. So that's pretty much where we are in the RGP. The delivery is doing very well during this pandemic. We have a great window of opportunity in Brazil to really take customer engagement to the next level, consumer engagement to the next level. It's really something that we have been working for five years, And we are seeing all coming together with a big window of opportunity for us. The Zed delivery particularly delivers, you know, cold beer, one hour at home. It was really important in this moment of the pandemic, really solves our consumer pain points. We are in more than 27 states. right now and we reached 200 cities and aggregating cities more and more. And what I can say is that we did in this quarter six times what we had in the previous year. So it's really accelerated, really something that's solving a lot of consumer issues. On top of that, I think that we are really, again, talking about technology. So we have the marketplace coming. We call this. We are really piloting it and using Dominican Republic as a laboratory. But it's already arriving in Brazil. So we are really enhancing our platform with our customers, digital connection, customer satisfaction in another level. We are really seeing the engagement of our customers here. in Brazil, really going up with the arrival of bees. That's the marketplace that we're going to bet for the future. There's another great opportunity that we will be talking in the next quarters.

If I were to kind of guess, you know, Zed delivery in terms of getting to 5% of your business in five years, would that be low or high based on your best assumptions?

So, Robert, what I mentioned, I mentioned this in another course, our DTC strategy should lead us to 10% of our customers. of our total net revenue in five years. And that delivery is a very important piece of it. It's not a loan, but it's a very important piece of our strategy.

Great. Thank you very much.

Our next question comes from Lucas Ferreira, Bank JP Morgan.

Hi, good afternoon, gentlemen. I have two questions on the consumption environment in Brazil. The first one is about the coronavirus share. You mentioned this in the lead. It's been one of the supporting factors of the decision volumes. We are seeing already a decline in the vouchers. It went up from 600 to 200 reais. And we're starting to see some of the supermarkets associations complaining that it's already taxing sales. And also we've been seeing a very high food inflation. So I'm wondering if these two factors are already having some sort of impact in sales as of, let's say, October or September, which you sense that this is an issue. And then my second question, you also mentioned in the release that the number of active clients you have right now is the same as the pre-pandemic's. And I remember discussing a lot of this with the association of the bars and restaurants that they were expecting initially sort of a 30% reduction in the number of points of sale or something like this. So wondering if you can comment on sort of the definition of health of the employment channel, how that has been behaving in the context of a loss. And if you can talk a little bit about it, if this is kind of to brighten you to the upside or not. So I'm wondering if you can comment on the environment space.

OK. So first of all, so as I mentioned before, this quarter was a quarter that we are very, very happy with the volume performance and the momentum that we have. we are really focusing on things that we can control. And majority of our performance, more than half, it was really about our commercial strategy, things that were in our hands. So the acceleration of innovation, the resilience of the core. So the new positioning of Bohemia is really gaining traction in the north and northeast region. So global brands really, really, really growing fast, 40% operational excellence and improving service level across the country. So these are the things that really brought the majority of our volume growth in Q3. When we put together the corona voucher, together with the disposable income that went down and the shutdown of bars, so this thing is really something that – It is important, but it's not net-net that big. The Corona voucher alone is important, but when we put all these things together, it is important, but it's not that big. Another thing that really helped the industry, it was really our pricing calendar, our flexibility in doing the right moment, I think somehow expanded the industry a little bit. But when we put the quarter together, majority, 60%, more than 60% of our performance, we really attribute to our commercial strategy things that it's in our hands, okay? So this is one thing. So talking about channels and customers, so yes, I mentioned that we are already selling for 10% more customers that we usually sold pre-pandemic. So we are really seeing the moms and pops is really in these small formats of trade are the big winners. So they are really with volumes up, more clients, so we are reaching more, so we are more prepared to deal with them. Our strategy of digitalization and getting orders online is really something that is helping on this process. is really a competitive advantage that we have. We already see bars on the same level that we had pre-pandemic, but still with the occasion that number of tables and restrictions in terms of opening hours really still making less of a volumes in the channel, but we see number of clients in the channel already in the same level of the pre-pandemic.

Our next question comes from Ricardo Alves, Morgan Stanley.

Hi, Gian, Lucas. Good morning, everybody, and thanks for all A couple of follow-up questions. The first one, back to the channel mix, kind of related to this last topic. Based on the chart you showed in the release, it seems that Brazil went from 70% off trade to slightly below 60% now in the third quarter, if I'm not mistaken. It's a pretty big move. So could you talk a little bit about that? I mean, you talked about how the bars and restaurants are kind of ramping up. But, you know, talking specifically about your exposure to the entree, I think that that would be a helpful way to train if, you know, perhaps you saw a major improvement in September versus July and August, or maybe to see more of that now in October. I think that that would be helpful. The second question is also a follow-up on the premium side, also in Brazil. You mentioned, I believe, premium brewing in the double digits, and now on the call you mentioned a 40% growth for global brands. So just wanted to see if you can give a little bit more call on the other stuff as well, the domestic brands, how they're performing on the margin with everything that you just said, right, on the restaurants and bars, if you see signs of improvement on that specific segment as well.

Thank you so much. Okay. Okay, so let me get a little bit more information on that. So our sales mix for Brazil beer in Q3, it was divided in 42% on-trade, including small mumps and pops, and 58% off-trade. So by comparison, in 2019, on-trade was around 55% and off-trade 45% in the same metric. And in Q2-20, on-trade was around 30 and off-trade 70. So we are more or less halfway in the mix that we had in the past. Even though we have seen the on-trade gradually reopen and the number of clients of the on-trade already in line with the pre-pandemic situation, bars are not operating at full capacity due to social distancing safety measures. And mainly, and most importantly, VIP, so the bars that are more in important urban centers. On top of that, consumers are still reluctant to fully return in the same pattern that they had before. So the bars are there, the number of bars are working, but the occasion is something that It is still not completely there. When we think about channel mix and this impact of occasion, we are halfway returning in the back for what we have in the past. So having said that, our global brands are doing very well, 40% growth. Average with Corona and Vax growing much ahead of that. because they have a footprint, that they can go off-trade, they can go in-home. When we talk about premium, the big hit that I have in my portfolio are two brands, that is Chope da Brahma, that is really one related with the occasion, that is not there yet, so the occasion, and Original, big bottles, 600 ml, that they are really the two most important brands of this occasion. There is socializing out of home in bars. So these ones are really still not there. But global brands, Budweiser, Corona, Bex, that we have long necks, cans, and we can go off trade and in home, they are very... That's helpful, Gerard.

Thank you. Just a quick follow-up on premium. When you talk about double-digit growth, you know, for the whole category? Or you could try to say that it was more or less in line with your consolidated Brazil beer volumes?

Hello?

Excuse me, Mr. Jennifer, your line is open. Excuse me, the Q&A session is closed. I would like to turn the floor over to Mr. Jean-Gilles Sade for your closing statement. The Ambev's conference call is finished today. Have a nice day and thank you for using Curve's call.