Ambev S.A.

Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's first quarter 2021 results conference call. Today with us, we have Mr. Jean-Jerissa, CEO for Ambev, and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br. as well as through the webcast link of this call. We would like to inform you that this event has been recorded and all participants will be in listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, Let me mention that four looking statements are being made under the Safe Harbor of Securities Litigation Reform Act of 1996. Four looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. 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 Unbev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the presented 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 Q4 2021 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Unbev's normal activities. As normalized figures are non GAAP measures, the company discloses the consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the earnings release. Now, I'll turn the conference over to Mr. Jean Gereissati, CEO for Ambev. Mr. Gereissati, you may begin your conference.

very much for joining our call. In February, I mentioned that 2021 would be a challenging year, and COVID-19 pandemic was still very real. After that, we saw a steep deterioration of the sanitary conditions in Brazil, coupled with increased mobility restrictions, which impacted our people, customers, suppliers, and consumers. At the same time, we were better prepared this time around. As a result, we delivered a great start of the year. We grew EBITDA by 23.8%, driven by double-digit volume and double-digit net revenue per hectolitre growth in Brazil, CAC, and LAS. Consolidated volumes were 5.4% above Q1 2019. and we were able to get back to Flatty Shibita versus Q1 2019. This was another quarter we saw clear signs that our commercial strategy is working and that momentum continues. I was very happy to see the strong performance of our international operations, and Brazil continues to show that we are in the right path. We delivered volume growth in eight of our ten markets and market share gains in seven of these markets. We saw a solid net revenue per hectolitre growth in the quarter, driven by a more flexible and efficient revenue management initiative, including occasion-based promotional activities. We continued to strengthen our portfolio as we launched innovations across our markets. To name a few, Golden Extra in Panama, Bud Light Seltzer in Canada, and MyClub Ultra in the premium segment in Brazil. Last delivered strong volume growth in the core plus and premium segments, with a great performance of Corona. In Argentina, we had an outstanding volume performance and improved net revenue per hectolitre, delivering top-line growth of 67%. Tax restrictions were partially lifted during the quarter. That combined with the good performance of our above-court portfolio and effective revenue management initiatives delivered a top-line growth of 28%. led by Dominican Republic and Guatemala. Canada gained market share and grew volumes despite a tough comp in Q1 2020. Growth was led by hard seltzers and the above core beer portfolio with My Club Ultra and Corona. Brazil beer volumes grew 16%. Despite Carnival cancellation in February, and tougher mobility restrictions imposed in March. According to our estimates, we gained market share while growing volumes in all segments, with a special highlight to our global brands that had a solid high-teens growth, and Brahma Duplo Multi that continued its growth momentum. Brand health of the portfolio improved once again in all segments this quarter, And our digital initiatives continued to expand. The delivery fulfilled 14 million orders in this quarter, reaching an all-time high in March. Net revenue for Hectoritzer growth was strong again. This growth was mainly driven by effective revenue management initiatives. Bees also had positive impact as it helped to standardize and increase efficiency across our portfolio. Today, I would like to further focus on Bees, our super app for our customers. We believe that Bees has been important to deliver a strong commercial performance as it digitizes our route to market, enables our customers to place an order in three clicks at any time of the day, and offers assortment selections to POCs using algorithms. On top of that, Bees offer other services, such as financial services, scheduled delivery, rewards programs, and other products via Marketplace, providing a full e-commerce experience to our customers. Since our decision last year to launch Bees in Brazil, we managed to roll it out to all our DDCs and wholesalers. As a result, we now reach more than 65% of our active customers in Brazil via BIS, accounting for over 550,000 customers, and we generated more than 6.5 billion in GMV. Given this promising early results and to further boost the platform, In March, we announced that Menu.com, a startup marketplace for bars and restaurants that had been accelerated by ZTECH for the past few years, will be integrated into this ecosystem. Today in Brazil, we offer more than 100 SKUs from approximately 31 partners in 380 cities already. reaching more than 5% of our net revenue in some of these locations. Our platforms scale will open many new opportunities for us to grow together with our customers and our partners. Our platforms scale will open many new opportunities for us to grow together with our customers and our partners. Our digital platforms will be fully connected throughout our operation, integrating with and leveraging on our existing supply chain, logistics, and sales capabilities. As our digital transformation evolves, we will enhance each step in our supply chain and become more flexible, efficient, and integrated with our partners, customers, and consumers, improving our NPS throughout the ecosystem. As for the rest of 2021, our outlook remains unchanged, and we continue to expect a challenging year. COVID-19 is real and around us, and cost pressures will continue mainly in Brazil, not only thanks to effects, but also to commodities prices. With that said, I remain very confident in our people, our capabilities, and plans for 2021. Overall volumes at AMBEV continued its performance in April, and net revenue for hectolitre performance will remain as obvious, especially in Brazil, given the inflationary scenario we are living. We expect Our top-line performance should continue to drive our recovery, growing ahead of bottom line, as we work to get back in the full year to the normalized, consolidated beta of pre-pandemic levels. Thank you very much. Thank you for your time and attention, and I will hand over this over to Lucas. Thank you, Jean. Hello, everyone. This time last year, our financial performance was marked by declining net revenue, declining EBITDA, declining normalized profit, and declining operational cash flow generation. What's worse, we were still in the early days of the COVID-19 pandemic. What a difference a year makes. In Q1 2021, net revenue grew nearly 28%. EBITDA grew almost 24%, normalized profit grew close to 125%, and operational cash flow grew close to 84%. Brazil beer performance was strong, and the growth of our international operations was even stronger. Just to put things into perspective, all these indicators are either at or above 2019 levels in nominal terms. And in terms of outlook, even though COVID-19 is still around, I believe it's fair to say that things are not as gloomy as before. Quite the contrary, we expect recovery to continue as vaccinations pick up. So I'm proud to see that not only have we navigated the crisis well so far, but more importantly, that the commercial momentum we started to build in Q3 2020 has continued to translate into consistent improvement in our financial results quarter after quarter. We have two big priorities on the finance side. Number one, continue to protect liquidity given the still volatile environment. And number two, improve our return on invested capital. The team has done a great job since last year in terms of protecting our liquidity positions. which remained solid in each of our markets, while still investing about 1.3 billion reais in CapEx in the quarter. Most of this investment was directed towards increasing our brewing and packaging capacity, particularly in Brazil, to support our innovation pipeline. And the second biggest bucket of investment was in technology, such as our ERP integration designed to, among other things, support our B2B and B2C platforms. And in terms of ROIC, there's a lot of work going into improving resource allocation, as well as improvements in working capital. But there's no doubt that one of our biggest challenges remains the recovery of our profitability. FX headwinds will remain as our biggest hurdle throughout the year, particularly in Q2. whereas one-way package mix and commodity pressures should also be a factor. In addition, cash SG&A was higher in Q1 mainly due to provisions for variable compensation given the stronger-than-expected start to the year. Since 2020 was a zero-bonus year, should our performance remain on track, provisions for variable compensation should continue to impact our year-over-year SG&A performance going forward. On the other hand, this stronger-than-expected top-line performance should help offset higher SG&A for the remainder of the year. And we will keep focusing on our productivity initiatives and typical financial discipline regarding costs and expenses management. Yes, we will continue to work hard on improving our profitability and but we will not lose sight of the long term. The sense of urgency is there, but we have to be disciplined and stick to our commercial plan, which, after all, has been working. For us, the name of the game still is continuous and consistent improvement of our results. We have been on this improvement journey since the second half of 2020, and Q1 was another important step, so there's definitely more to come. Finally, a quick word on ESG. In June, we plan to host a webinar to focus specifically on how we have been working to embed ESG into our company model. I hope to see you all there. Thank you, and now let's move to Q&A.

Thank you. Now we'll begin the Q&A session. If you have a question, please press star 1. And to remove the question from the list, please press star 2. Our first question comes from Marcel Moraes with Santander.

Good afternoon. Good morning, everyone. Congrats on the impressive results for our first quarter. My question relates to market share trends per segment. So you mentioned you gain, especially in Brazil, right, you gain share in all segments. Can you give us a little bit of color on the super premium and the premium plus core value segments, what's going on over there? Thank you. Okay.

Okay, thank you for the question. So, yes, we feel that our portfolio is much more prepared. We went through a big renovation, launching of new brands, resource allocation, betting on brands that really could drive the future. And our performance of global brands, specifically, they were quite double-digit, so it was close to the 20th. And this is what we believe it is above the performance of the premium segment overall performance. So that's why we mentioned that. We have been investing for a while in Budweiser and Stella Foix. And more and more, we are seeing BEX with a very strong performance, and we are seeing Corona doing very well too, and Colorado. So these are our top five brands that we are really investing for the future, and they are really doing well. Specifically, BEX is going triple digits growth. Corona is going on the 50s. Colorado doing very well on the in-home occasion too, still suffering a little bit in bars, but doing very well on the off-street. And on top of that, on top of market share, something that we are looking a lot now is really equity of our brand, that we really have to push equity ahead of market share, push to make the pool. and to build brand equity. And brand equity of premium brands are really moving much faster than the market share and then our clients. So that's an important KPI for us that we are very confident.

Thank you, Jean. What about the core segment? Any, you know, color on that?

Yeah, so the core segment, since the beginning of the pandemic, I have been – that was information that I brought to you all, that the core has been very resilient. And we've been really reorganizing our portfolio, creating the core plus segment, really launching pack innovation and different packs on the core segments. And after years of volume decline, our core segment was really marked by resilience, with grandma skull and Antarctica families growing by high single digits. So this is the combination of the RGV 300 ml bottles that we are really focusing during the pandemic as the fact that moms and pops and bars can do the delivery, can do the takeaway, So it's an important part that's really accelerating the core brands. And on top of that, the normal price strategies that we have been following. So core brands really bounced back. On top of that, the core plus segment, that's Bohemian, they are really on fire.

Okay. Thank you very much.

The next question comes from Carlos Loboy with HSBC.

Yes. Good afternoon, everybody. Congratulations on really strong results. I'm wondering, what have you learned about Brahma Duplo Multi through this period, and how do you drive that brand going forward? What consumer insights have you gleaned as you sit back and reflect on everything you've learned here for what's next there?

Okay, so thank you for the question, Laboi. You know, Brahma Duplo Multi, we say that was really the brand that the products that we took one year to develop. It was really tested with all the consumer sides, so we had this mindset of really get superiority on all the analysis that we were doing comparing with the core. And we get inspired by another categories like, for example, whiskey that has the double mouth, the single mouth, and everything. It was amazing how the Brazilian consumer got fit with the concept of two mouths that they combined. And we were able to really develop a liquid that it really calls attention on the mouth and on the eyes because it's really creamy and has a mouth, a great mouth taste. And all this process has been like For one year, we've been doing that. And then we decide really to first to bet on the flagship brand. So we are really talking about Brahma that has Brahma Duplomology and Brahma under the family umbrella. So we are really Brahma is the brand and Brahma Duplomology is the flagship product. And we went bold on that. So we really get... in terms of resource allocation, so we picked the passion point, the Brazilian passion point, that's more relevant for Brazil today. We have two, football and the country music, and we connected Brahma do Clumalto with this most important passion point that we had, and we have enabled to work as a family. And the good news is that Brahma is speaking back and is growing together At some point in time, we would think about some type of , but the whole assembly is really moving on. We are very excited about it.

Thank you.

The next question comes from Rob with Ernest Young.

Robert Ottenstein with Evercore. Thank you very much and congratulations for a great start of the year. A couple of, you know, sort of follow-up housekeeping items. Number one, it looks to us, Lucas, that you didn't reiterate the guidance on the COGS being up 20%. Is that correct or am I missing something? That's number one. Two, just a follow-up on the Brahma-Dilbo-Molchia question. and that is, you know, I believe that got launched last year, you know, biggest innovation you've had. Where are the costs toughest for you on that launch? So just kind of two housekeeping items there. And then kind of the bigger picture question is, you know, how do you see the beyond beer market, and business developing for you. It was a big theme for Brito on the ABI call today. Obviously, a lot of interesting stuff going on, you know, on that side in Brazil. I'd love to get a little bit more detail on your thoughts on that as well. Thank you.

Okay. So, thank you for the question, Robert. So, yes, about the cash calls, our guidance was in low 20s for Brazil beer for the full year. So, this quarter we had higher than the full year, but it was already expected, given the curve of the hedges that we have in Brazil. For Q2, we will continue to see cash clogs above the full year guidance for the same reason, but we are not making any changes to this guidance, okay? So, this is one thing. The second thing is Let me give you a higher view on that. So what we are aiming is really to have a pipeline of innovation that really can transform my portfolio in the future. It's already been transforming the company. So one KPI that I looked big time, it is what is the percentage of of my net revenue that comes from products that did not exist three years ago. So this number was 5% in 2018, it went to 10% in 2019, and we reached 20% in 2021. And we are looking at this number for us to continue this trajectory with a strong view about where, what are the spaces, what we want to really increase. It's not just about any type of innovation. So we have a framework with five avenues that we want to launch and maintain this momentum of 20% of our net revenue coming from products that didn't exist three years ago. the peak, it was really the Q3, where it was really the moment that we are trade-loading and putting everything on the market. But what we see is that this number of innovation overall, it should not change this 20% that I want to go moving forward. So we have a pipeline that they are coming. So Brahma Duplo Malch still has some geographical rollout and some new packaging packages new occasions for us to to to work on that and and there is there is uh one important uh product on on the corpus side that we have been piloting and we are very excited it is really coming coming to the rollout phase right now that is there is one international brand having said that uh beyond beer is is It's really something that we are into it. We are very excited about our Beats brand and the partnership with Anita. We just launched GT under Beats, and then we launched Beats Zodiac. And there is this family of brands that they are very creative, very incremental, doing very well. And we have three or four pilots happening right now for us to learn and decide where to launch. So we are testing hard seltzers. We are in the pilot phase. We are testing Mike's hard lemonade. That is something that is a little bit with this juicy and natural vodka. And we are testing the fancy cocktails in can. So beyond beer, we have like four avenues that we are on full speed on beef, and we are on the pilot phasing on the other three. And then just to add something here on our international operations, Robert, beyond beer is already a reality in Canada, for instance, and the quarter showed very good results yet again from our beyond beer portfolio. not only thanks to Neutral, right, which we partnered with last year and showed consistent growth throughout last year, but in the quarter, we launched in Canada Bud Light Seltzer. Early days, but also a very good start as well. I think that's one additional benefit that we have to be able to learn from the Canadian operations and roll out these learnings to other AMBEV markets. To give a little bit more information, Robert, so you know that we acquired a winery in Argentina last year to build and have the capability of play with grapes, with wineries. So it's a business that in Argentina now is growing 16%, 16.16% compared with what we bought. And now we are really building the capability of putting wines in cans and really passing this across the board in South America.

Terrific. Thank you very much.

The next question comes from Tiago Duarte with PTG Textile.

Thank you. Good afternoon, everybody. I have two questions on the revenue per hectolitre in beer Brazil, and then a third question on brand portfolio. So the first question is, can you talk a little bit more about, you know, how you manage the decision on the discounts in the Brazilian beer division? Since the third quarter last year, we've seen discounts coming down considerably. It's certainly been an important push to revenue per hectolitre growth. So I'm just wondering, how you, you know, what were the conditions that allow you to more aggressively cut back those discounts during the pandemic when it comes to channel package and the competition changes that the pandemic brought to the business. So I think it would be interesting to hear. The second question is if we, as we look into the revenue per hectolitre growth in Brazil beer, 12.6% year over year, Can you help us break it down in terms of, you know, some of the main impacts that you had on a year-over-year basis? I'm specifically looking to hear in terms of the impact of the carnival or the lack of carnival this year and the digital initiatives such as Zed Delivery and Beast. That would be nice as well. And the third question, Joe, you mentioned in your opening remarks that the Brent Health of the portfolio has improved across the whole portfolio. So if you can elaborate a little bit more on what sort of metrics you're looking at when you make that statement and how your brand preference is back up against market share in each segment, that would be interesting too. Thank you. Okay. So let me give you one minute for me to kind of put this on a paper for me to type. I lost the second one. The second one is breakdown by driver. The third one is brand portfolio. Power versus share. Okay. My second. If I need something, we go over it. So, yes. So, for a while, I've been mentioning previous quarters that that over the long run, overall prices should grow in line with inflation. And this, we are talking big time here on shelf prices. And then, plus and minus, you have efficiencies on discounts, you have brand and channel mix, and then we have the impact of our portfolio strategy mainly through innovation. So these are things that we break down prices like that. And we have been much more flexible, nimble, agile in terms of revenue management to react to market conditions. We are in the middle of a pandemic still, so channels are really changing, different, what's growing, so transformation going on that you have to support. And so we really went deep on revenue management. And specifically, this piece of discounts, I think some things happen. First of all, this is helping us big time. It's so granular. We have a big chunk of our volumes already through this. You have better algorithms. We have better price trees because everything is really digitized and centralized. So it really creates a framework, an easy framework for us to to really understand the listing and the discounts and everything. So this is one thing. Second thing, we are more linear because of that. So we are kind of more less concentrated and preparing for everybody to have some access to the return in terms of discounts. So we are trying to get this a little bit with more standards. And we were able to make it. So, we really moved this vision of a lot of discounts to trade in to a much more discounts connected with sell-outs and connected with occasions. Okay? So, we are really with my strategy where this, for example, Brahma, Duplo Malte, So the promotions should be correlated with barbecue, and it should be the discount in this specific occasion for all the products. So we are really narrowing the brand building and expanding occasions and giving discounts on that direction. That is helping us to be much more effective. So these three things, I would say that they were the drivers for us to really upgrade our discount management and our discount efficiency, okay? So, talking about brands, talking about brands. So, the metric that we are really looking into it is really power. So, it's a combination. So, it's a proxy of, it's more than preference because it's a combination of, it's a proxy for the market share of the future, okay? And And we have a big portfolio, and we decided to kind of really elect inside this portfolio which are the brands that we are really concentrating efforts for the long term for them really to become leaders. And we are with this strategy of really concentrating back and back on some brands. And we have been able really to drive the brands that we believe that we need in the future Big time. So we are very excited that Brahma Guru Maharaj is doing very well in bringing Brahma together. We are excited that school kind of stabilizes at some point. I mentioned this in terms of volumes. We understand this in terms of on the brand side too. And then we have the premium business, as I mentioned before. So the combination of that five brands that I have, they are really moving ahead of my market share. So really, Baxter doing very well, Colorado doing very well, Corona. So when we put all these things together, so a total portfolio of ABI is gaining in this metric that we are looking. There is power with the focus brands really gaining even more, and the brands that were suffering the best, they are kind of stabilizing. So this is the type of equation on the equity that we are seeing in the market. And then, Thiago, and this is valid across segments, and also if you look at the film since last year, and not only the quarter performance, right? I mean, brand building takes time. right, requires consistency. And one of the things that we're seeing is really this gradual, right, improvement in our brand power across segments for the portfolio ever since last year. Perfect. That's very helpful. And, Gio, just one part of one of my questions. Is it fair to say that Carnival is should have had an impact in terms of how you translate revenue per hectolitre over your basis? So, if I had Carnival, I would have net revenue per hectolitre that was smaller than that, so that's the question? Yes. Let me see. I think if I had Carnival, I would have a mix of packaging that it was worse than what I have today because it's more concentrated on all the way cans. So I don't see an impact on the pricing side. If I had Carnaval, I would have something around one million hectoliters of cans selling in the market. I think that's how we should approach Yeah, that's a good exercise. Thank you. That's about price and more about packaging needs. Thank you.

The next question comes from with .

Hi, Gerald. Hi, Lucas. Thank you for taking my questions. I have two questions. First, it's about pricing. Listening to Brito at ABI conference call earlier, he mentioned about price increase for Brazil during June. So my first question is if you could elaborate a bit on your pricing intentions and the magnitude over the coming quarters in light of recent commodity cost pressure, but also in light of the commodity cost outlook next year. That will be my first question before I will wait before moving to the second one.

So Brito mentioned this. As we have been mentioned in the previous quarter, look, over the long run, overall prices should grow in line with inflation. And I'm talking pretty much about shelf prices, and then on top of that, you have the discounts, and then you have plus and minus. But there is this reference of shelves that on the long term should grow with inflation. And you know that we have been very flexible, nimble, and agile in a way to react to market conditions where we can go and move back or it can stick. So we are really taking every opportunity that we can, but it's really something that is very fluid. And so having said that, I would say that we cannot comment on prices moving forward. I would just comment that this scenario that we are living in Brazil is a more inflationary scenario that we have to understand that got worse than we had in the past. And here, look, I'm really looking to the consumer. I'm not looking specifically for my cost. my cash costs I gave the guidance already. I'm talking really about the basket of the consumer and the inflation that we have over there and how we get better prepared for that. So I cannot comment much further than that, just that we are in an inflationary scenario, that end of the year inflation was smaller than it was right now, and we have to find a way to adjust to it.

Thank you. My second question is about the SG&A. You mentioned on the outlook for this year and also in the call that you expect higher SG&A because of the bonus provision, right? So just to understand if you can comment something about the outlook of this increase for this line this year, what can we expect on that? Thank you.

Hi, Marcella. This is Lucas. Thanks for the question. So, for SB&A, in Q1, the biggest impact was indeed the provision for bonus, okay, based on our stronger than expected performance to start the year. Should we remain on track or ahead of our expectations from a budget perspective, we will continue to accrue bonus provisions throughout the remainder of the year. So, it's reasonable to expect some additional higher SG&A as a result. The second biggest impact that we are seeing so far this year is regarding distribution expenses, and that's mostly a function of volume growth. So as volumes grow, our variable logistics costs also tend to grow. The good news there is that there's a benefit in the top line. and it's a net positive at the end of the day. So the higher SG&A in the distribution side is compensated, is offset by the improvement in net revenues. And finally, the third bucket is sales and marketing, Q1. There was lower sales and marketing versus last year, but this was mostly due to phasing, particularly in Brazil as a result of of the restrictions that came back in March. So, we obviously had to adjust our sales and marketing spend given that restrictions were in place. So, going forward, as we recover, as cities reopen and beyond trade recovers, we are going to adjust our sales and marketing spend accordingly. Okay?

Okay. Thank you so much for the answers.

The next question comes from Lucas Cejeda with Banco JP Morgan.

Hi, good afternoon. I have two questions.

Sorry if they are kind of too technical around your forward-looking statements.

The first one you guys mentioned that you already kind of envision turning to the pre-pandemic EBITDA, right, so assuming the 2019 number, for instance. But I assume that your profitability will still be impacted. My question is, is there anything structural that you see in the industry, especially in the cost structure of the industry, in the company, that would impair you to come back to the pre-pandemic profitability?

So in 2019, guys, the EBITDA margin was roughly 42%. So is there anything that you guys think that would be impairing you to return to this level?

And if for some reason, considering the pricing power, considering the reopening that you're seeing right now, you kind of already envision that this could be seen at some point in the foreseeable future.

So that's my first question. The second question is around the same topic. And looking at the second half of the year, if you guys are already rating the guidance for the cards to have the leader, I would assume that your kind of cards curves,

is more skilled for the first half of the year, considering your costs are perhaps a little bit up to 25% or so.

In terms of, let's say, margin comps, are you seeing an easier second half than first half? Thank you. Yeah, so let me tackle this one, and then Lucas can help me. So, We are in the middle of a pandemic, so I think this is what we should talk about. Since the beginning of last year, when we saw the scenario of bar shutting down, bar closed, mobility restrictions at some extent, sometimes more, sometimes less, so all these things happening, we brought so we went to the vision of transform the company towards the future, accelerate the things that we have been cooking during the pandemic, but really accelerate towards the future. And I've been mentioning that, so I want to really recover top line on V, and I really wanted to recover volumes for for the peak volumes that we had in 2014, that we lost 10 million hectoliters from that point on. And we are being very consistent on that, looking for new occasions, the consumers. I'm now having 100,000 more customers than I had before. We were very happy to develop this relaxed at-home occasion with our brands that something really is the future now. It's something that's more developed in mature markets. So we were really with this mindset of let's get back in V for the top line that we had at some point in time and really let's follow the consumer, okay? So what I mentioned today, it is that so we are confident on that. We are very proud of all the things that we achieved I think it's time for us to go back and say, look, so if the recovery of the bottom line, so when would we make it? And what I mentioned is it's time for us to look at the bottom line that we had before the pandemic and match it. So I really don't see nothing structural that's will not make us in this journey continue to converge the top line growth with the bottom line growth. But in terms of with this perspective of the pandemic and with this journey, we really decided to do one first and then the other. The next step will really be to talk about margin extensions. The good news is that Really, if you look at how we are, one big part that we are suffering with this margin contraction is really the currencies. And if you look, we are in 50% of my costs, they are in dollars with their effects related. And in the currency that I had in 2021, I mentioned that before, it's 530. I'm hedged this year. This connects with that guidance that I gave of low 20s in cash calls. So it's 529, to be more specific, the effect that I have today. If you look at the market today, so this is exactly the effect that we have today. So it looks like this problem that I'm having today is kind of cyclical. on this level of 529 that is already in my base. So I don't see on the effect side exactly nothing more structural than that. We could decide to hedge everything on that and then I would not have a problem with that, nothing that I'm going to do. And then we have the commodities that really pick it up in the short term, but we really have to understand how these things are going to to evolve moving forward. The other piece is that really, as I mentioned, we understand this inflationary scenario. We have a nimble and agile for us really to get all the opportunities that we have and really guarantee the momentum of our top line moving forward.

Thank you.

It's probably just a second point that we see the

The second half of emerging income is slightly easier, considering the new level of prices and considering the, you know, the CROGS guidance and emergency care for the first half. Yeah, so, Lucas, as I mentioned in my opening remarks, in terms of cash CROGS per hectare leader, for Brazil leader, right, which is the guidance, we anticipate that the pressure will be greater, right, in Q2, okay, followed by kind of less pressure in the second half of the year, okay? If you take a step back and look at the rest of the P&L, right, just if we go back to our performance during 2020, I think you can see that recovery driven by the top line was very strong in the second half of 2020, which means that we have a tough cough in terms of top line going into the second half of the year. And as I mentioned before, SG&A, we do expect it to be higher. primarily due to the higher provision for variable compensation.

Great. Thanks, guys.

The next question comes from Isabella Simonato with Drink of America.

Thank you very much, very much, Lucas, for the call and for the question. Can you elaborate of the soft drinks output in Brazil and also how do you expect cost pressure to come on that line of business this year? And if you could give us a little bit of more color about the quarters as you gave for beer, that would be very helpful. And also on the international part, on last, top line performance is also being quite strong. But the measures in terms of restrictions and et cetera have been more volatile, right? How are you seeing the beginning of Q2 and the evolution throughout the year? Thank you.

Okay. Thank you for the question. Our net performance volume overall, we saw some improvements in Q1 2021. So we have a 0.8% growth. It's really... So we are still with a lot of restrictions, important occasion on the soft drinks is really this on the go. And so mobility really connects with that industry and we are still limited on that. But even though we were able to get to slightly positive volumes, the brand is really, Guaraná Antarctica is coming back, getting, performance better than it had before, so it is doing good. Energy drinks, they are doing good, too, when we talk about the full portfolio. And all of this partially offset by the occasions. The mix, there is an important thing for the profitability of soft drinks, so the smaller bags, the channels, they all go. In the end, It's better than we expected, but it's still not there, and we believe that it will get better as the vaccination moves forward and the restrictions go down. Okay? So this is that. When you talk about CAC, yeah, so last, last, when we talk about last, so last was an important quarter for us. It was a great performance, I believe. So we had, we felt the restrictions more in Brazil on March. We are feeling restrictions in Chile now, a little bit on Paraguay, too. When we go to Argentina, so talking overall about last, so it was a strong performance on Argentina, Chile, and Paraguay. mainly driven by corporates and premium segments, gaining market share in all of these countries, Argentina, Chile, and Paraguay. Bolivia is a place where we feel still under pressure over there, Uruguay too, but Argentina, Chile, and Paraguay with a very good performance. Yes, we saw some restrictions moving forward over there, but As you see, fluid, like the pandemic, it comes and it flows. So we are excited because last we made, we had some important changes over there. There is Chile is really being, we have a structural change, a new combination of partnership with Coke over there. They're really bringing us So different capabilities and possibilities. So it's really something that we are very excited that we are able to gain market share on the on-trade segment. That's something that we have been struggling in the past to do. So voting is very strong. We are very excited. Argentina, too, we see the portfolio is really, really more, it is stronger. And this year, we were able to be, so the government and all the things, we have been more flexible with more freedom for us to work on the revenue management side, on discounts and on everything. So, structurally, I believe that I'm really excited about last. And pandemic, yes, we saw some restrictions, but it's something that comes and goes through it.

Sure, thank you.

The next question comes from .

Hi, good afternoon, everybody. Thanks for taking the questions. I have two quick questions.

The first one, you had a very interesting discussion on the discount.

But it's interesting to see that you're using your online channels to enhance your intelligence, right? And I imagine that especially through the D2C, you've been gaining a lot of intelligence on the consumer.

So if there's anything, Jim, that you could share with us regarding consumer behavior trends,

possibly capacity to absorb further price increases and how that connects to the recent trends that you've been seeing, like the fact that brands have suffered in the past and now it's stabilized.

So anything that connects with this consumer behavior that you can share with us would be very, very interesting. So that's my first point.

And the second point, you talked a lot about, you already talked about the commodity cost pressure. We're already halfway, almost halfway through the year aluminum prices have been going up. So if you can talk about any initiatives ongoing apart from the revenue management that you've been doing to maybe mitigate this potential cost for going to next year would be very interesting as well. Thanks. Okay. So let's talk about consumer behavior and revenue management first. So consumer trends. So we are seeing this thing about the in-home consumption. So it's really, so how the whole pandemic was really about how to win in the in-home occasion and consumption. So that was the most important thing for us to, and I think we reacted very fast and we had a lot of learnings on that. We know that the occasion in home is more about Relaxation is more about Mondays and Tuesdays and frequency, much better than before, that was very concentrated. And now people are more willing to like watching TV, live stream, relaxing. So this is important that for us to win, you have to connect brands and out in the market and be profitable and is okay. So, we are working a lot on that. We know that consumers are convenience. Convenience is everything, isn't it? So, consumers are really looking for convenience. So, they are buying locally. So, they are buying in buns and pops, close to their home, in e-commerce, in delivery. So, they are mums and pops and bars. They are transforming really to become small takeaway supermarkets of some things. So there is this thing that we are, that for example, for you to know, so we are betting on the RGB 300 ml bottles as the pack that really can, that's leading the takeaway occasion for all the bars and mugs and box that they are transforming. So if they cannot deliver it, they have to have a takeaway strategy. And this strategy is really working very fine because we designed it so the pack is a good pack for us to do that. So the price point is designed for that. We are doing most of the places, six bottles for 12 reais. So it's a good price point for six units. people can take. The customers are really adopting because they need this takeaway because the pandemic is fluid. They open and close, so they need something for people to take away. So this is something that is really working from our side. So that delivery, I don't have to mention again. We have been talking a lot about it. So it's really about convenience. It's something back on that. We know that there are two occasions that we are developing too. There is this thing about signature beer. We have another strategy that is the Stepping Casa where we have, like, signatures for the whole year. That same price, this number of beers every month in your home. So, this is, we have investing in Brazil. This is exploding in Argentina. It's really something. We've got interaction there. So, the delivery is stronger here. Same thing in Gaza. It is stronger in Argentina. So, we have to find the value proposition, the prices for that. We are developing that. for pantry-loading parties. It is not about the set of leaders, it's about big parties that you want to discount for big. So we are really working on these missions and occasions that are enabled by technology for us really to be ahead of the time on that. So all these learnings and all the technology that we have, we are passing big time to be ahead, to be ahead of the game. And talking about talking about cost of commodities headwinds. Are we still here? Yes. So, as anticipated, this year was a year that we faced transactional effects headwinds, given the depreciation of real. 50% of our costs is dollarized, and now we are seeing this commodity that is something that is coming to the table. But the things that we are doing are very consistent, and it's really about this, to not lose this momentum, the volume growth continuity is really something that helps us big time, sweat the assets, and have a better VLC, logistic cost, and have a better operational leverage when the volumes go up. So, I'm really, we are really excited about more towards the end of the year. About the vaccination, there is really something that we believe that RGB is 600 ml bottles, and this socializing out of home occasion is really something that we will pick back. We are preparing for that. So, we think some euphoria. we're going to have around that, and we have a much broader base of clients, so the prices are well set. We are prepared for when this moment happens. So this innovation strategy that we have that is really like driving mix and prices through new products, so this Core+, the Premium Portfolio, all these adjacencies, So Duarte asked here about the Carnival. In Carnival, I sell a lot of that product that we have, that is beats, that is so accretive for the company. So that product is really designed for parties and it's kind of, so this occasion, big parties, outside events. And we believe that if it doesn't come in Q4, it will come in Q1 of next year. So this innovation vision of occasions and missions are helping us, will help us big time. And we will not lower the guard. So financial discipline is still there around costs, around expenses. So the CAPEX is really about strategic investment. So we are really concentrating CAPEX on the technology piece, on the footprint for us to really have the better service possible for customer and consumer. So this part here, there is a lot of learning because consumers are really paying for convenience. So they pay in the delivery. So our customers are beginning to pay for more days of delivery as a service. So understanding these missions and these demands, we are really being able to have some additional revenue on services too. So that was pretty much it that I could mention on the commodities litigation. Great, great vision. Thanks for the call. Okay, so I think that was the last one. We have one more. That was the last one. I really want to thank, first of all, my team that is here working on that, working for AMBEV. So the team is working very hard to have this quarter for one year. inside a pandemic to achieve these results, to have this great start in a very challenging environment. I also want to thank you all, the analysts, everyone who joined the call for the time and attention. And to wrap up, I'm really confident about the future for some reason. So we are on the path of a very good commercial momentum. I think this is has been confirmed quarter by quarter here with you all, not only in Brazil, but we are really picking up international operations, like Argentina did very well, Chile, we are so excited about Chile, TAC. We are beginning to see that once the vaccination in the U.S. is really moving forward, so the summer in TAC is already, the hotels are already booked and everything, so we are really seeing this momentum. not just in Brazil, but international operations. Although transformations, the feedback on technology that we are doing takes time, and the environment remains challenging, we can see contributions of our digital efforts. So this is like bringing a lot of possibilities for us. Zen Delivery is doing great, so we have another effort on that side. This portfolio is stronger. Our portfolio is much better than it was like two years ago. High-end brands are really gaining equity. BEX is there. Corona is doing very well. Colorado is doing very well. Budweiser is a brand very important for us that's growing too. So we see brand power. The Corpula segment is also something that we get advice and we're going to continue to bring new news on that with our innovation pipelines. And one thing that we don't talk that much, but cash generation, it is really something that is really structurally solid at Ambev because we have been prepared for that. These channels somehow, they help us on this core working capital. So my cash generation is really solid when you look last three years and this year. And we remain committed to transform the company and invest ahead. So that's it. Thank you very much. Thank you all. Anything you need, just get in touch with Lucas and the team, and we can continue the conversation.

On behalf of First Water 2021 Results Conference, call is concluded. You may disconnect your lines from number one. Have a nice day.