Ambev S.A.

Good morning, and thank you for waiting. We would like to welcome everyone to AMBEV's 30th Quarter 2021 Results Conference Call. Today with us, we have Mr. Gio Gereissati, CEO for AMBEV, and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a live presentation is available for downloading on our website at ri.umbev.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 UMBEV's remarks are completed, there will be a Q&A 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 forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of embeds 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 a bet 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 percentage changes that we'll be discussing during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparison with 30 quarter 2021 results. Normalized figures refers to performance measures before exceptional items, which are either income or expenses, that do not occur regularly as part of Ambev's normal activities. As normal life figures are no-gap measures, the company disclosed the consolidated profits, EPS, EBIT and EBITDA, on a fully reported basis in the earnings release. Now, I'll turn the conference over to Mr. Gere Satch, CEO for Ambev. Mr. Gere Satch, you may begin your conference.

Hello everyone, thanks for joining our third quarter earnings call. This is our last call of the year, so I would like to do things a little bit differently today. I will cover the highlights of the quarter in a moment, but I would like to begin talking about people. I have been very vocal about how Ambev is on a transformation journey. Transforming a company like ours, it's hard. It takes time. It's painful. There is a lot of skepticism and setbacks. In many respects, we are learning as we go. But we are doing this together as a team. A couple of weeks ago, something happened that personally meant a lot to me. Ambev was recognized by Great Place to Work as the fifth best large company in Brazil to work for. Just to give you an idea of how transformational this is, in 2020, we rented 27. A lot of great people built this company, and we are a company of owners. Our people have been and will always be the heart and the soul of Ambev. So I'm very proud to see that my team has been humble enough, to face the brutal facts of the last few years and learn from our mistakes, has shown enormous resilience in the face of COVID, made bold bets and delivered results consistently as we recover from the pandemic and at the same time has helped the society, has stayed committed to building a better, more collaborative, diverse, and more sustainable company for the long term and is happier and more engaged along the way. And this is true not only in Brazil, but also across the other markets where we operate. So, a big thank you to everyone that has been making this transformation happen on a daily basis. The third quarter. was another step on this transformation journey. And frankly, it was another solid step in the right direction. I ended the last call saying that our top line momentum would be put to test in the second semester. And in Q3, we delivered 20% net revenue growth with volumes up nearly 8% year over year. Nine of our 10 markets delivered volume growth versus last year, and eight of them grew volumes ahead of 19. And as a result, we delivered 180 million hectoliters on a rolling 12-month basis, 8 million hectoliters above our peak back in 2015. In this quarter, we delivered another solid net revenue per hectolitre performance, which grew 12% versus Q3 2020. Comparing with 2019, net revenue was up 43% on a consolidated level in the quarter, and year-to-date up 31% versus 2019. If we break down this performance by region, our international operations generally continued to bounce back nicely. In fact, volumes grew nearly 9% year-over-year and are just slightly below 2019 levels. As mobility restrictions continue to ease thanks to vaccination, our volumes continue to recover, led by the Dominican Republic and Panama. with the Core Plus and high-end portfolios continue to gain weight in our mix. In last, volumes grew double digits versus 2020 and 2019. Argentina, Chile, and Paraguay drove this growth, also thanks to our Core Plus and high-end portfolios. Bolivia posted strong recovery from 2020, but remains below 2019 levels, and there we still have a lot of work to do. Canada, however, had a tougher quarter in terms of top line. Although still above pre-pandemic levels, net revenue in the quarter declined at roughly 2.5% versus Q3 2020, with volumes down almost 7%, while net revenue per hectolitre grew 4.5%. The industry was still impacted by mobility restrictions, and we faced some supply chain disruptions, mostly in Quebec. Turning to Brazil, starting with NAB, net revenue increased 22% in the quarter versus 2020, and nearly 26% against 2019. Volumes were up nearly 10% compared to Q3 2020. and almost 15% versus 2019. This performance was mainly driven by Gatorade, H2O, and Guaraná Antarctica, all of which grew above 2019. And last but not least, Brazil Beer. Top line grew 16% in the quarter versus 2020, and 51% versus 2019. Our step change in volumes continued in the quarter, with 7.5% growth versus 2020 and almost 35% growth versus 2019, outperforming the industry and gaining market share. This is a result of a commercial strategy that has consistently continued to work despite COVID, despite macro headwinds, and despite competitions. It is not just one thing that's working. It's a combination of a healthier portfolio, at first, with stronger legacy brands, plus a strong innovation pipeline, which once again represented over 20% of our net revenues. In addition, we increased the number of fans of our brands by 3 million people since 2019. Second, a better service level, reaching 53% net promoter score in the quarter. Third, our technology big bets, which have continued to structurally improve how we connect with consumers and solve our customers' pain points. For instance, Visa is now used by 85% of our active customers in Brazil. currently offering over 350 products from 40 third parties of different industries. In addition to that, yesterday it was announced that BRF products will be made available through BEAST, which is consistent with our desire to offer better service and solutions to our customers. And finally, great execution of our pack-in-channel strategy with the 300 ml returnable glass bottles leading the way as the on-premise continues to reopen. All in all, year-to-date top line is up 28%, with volumes growing 12% and net revenue per hectolitre increasing 14% versus 2020. When comparing with 2019, we are up 31% in top line, 11% in volumes, and 17% in net revenue per hectolitre. During our last three calls, I took the opportunity to focus on how each of our technological platforms in Brazil are enabling our transformation as a company. The delivery in Q4 of last year Bees in Q1 2021, and Donus, our syntax, last one. Today, I would like to spend some time on what I like to call the logistics revolution that is underway to allow these platforms to fulfill their potential. As Ambev transforms itself into a platform with inspiring brands, that connects people and the ecosystem, creating shared value, a best-in-class logistics operation is a must. In the 90s, we created our second-tier logistics operations, betting big on direct distribution. With currently more than 100 distribution centers spread across Brazil and making 80,000 deliveries per day. In the last two years, we have started to set up a third-tier logistics operation. Approximately $100 million has been invested to date on several footprint and technology-related initiatives to better prepare us for these new operating models. For instance, in terms of creating a delivery footprint Designed for growth, we are investing behind small urban distribution centers near high-density regions, making our delivery capabilities more flexible and agile. These urban distribution centers, or UDCs, how we call, operate only with small models, like bikes, lightweight motorcycles, and small vans. which are faster and cheaper for small drop-size orders. The idea is to provide a better service level for smallpox, using the right model with more efficient occupancy rates and lower carbon emissions, leaving bigger deliveries for bigger trucks. The UDTs integrate B2B, DTC, and the marketplace platforms, And we are also piloting, offering services to partners, gaining even more efficiency. We currently have five UDCs in operations, three of them in Sao Paulo. We will end up the year with 14, and we are just starting. To wrap things up, some quick words regarding our journey, the reminder of the year in 2022. 2020 was a very tough year, but we stood our ground. 2021 has also been challenging, but we have continued to improve our performance in a consistent way led by our V-shaped top-line recovery. So I'm looking forward to what 2022 will bring with its risks and opportunities. Lucas will go into more details. But although Hill 4 will be another tough comp, we will continue to work to bring our nominal, consolidated, normalized EBITDA for the full year back to 2019 levels. And based on our year-to-date performance, we believe there is room for improving this number, close a better 2021, and be better positioned for the next year. With that said, let me hand it over to Lucas, who will cover our financial performance. Thank you, everybody.

Thanks, John. Good morning and good afternoon, everyone. I would also like to start by talking about transformation. So I will kick off with climate action, where we also took a transformational step in the right direction during the third quarter. Q3 was marked by the announcement of our first carbon-neutral brewery and malt plant in Brazil. Our Ponta Grossa brewery in the state of Paraná and our malt plant in Passo Fundo in the state of Rio Grande do Sul delivered 90% reduction of CO2 emissions versus 2017 and had the remaining 10% emissions neutralized via carbon credits. This process began in 2012 when we built these plants designed to be low-carbon operations and we're proud to see it come to life. To get here, we focus on four things. Heat produced on-site from biomass boilers, green energy produced on-site from biogas of the effluent treatment system, energy consumption efficiency leading to more than 15% total purchased energy reduction, and 100% electricity purchased from renewable resources, in this case, hydro. As next steps, we will implement electrical forklifts starting in Q4 2021 and build on-site solar farms starting next year. And these investments make total financial sense as well. Our decisions to move towards carbon neutrality has not only led to efficiency savings in terms of energy consumption, but also allowed us to secure renewable energy sources at more attractive rates than before. Also, This milestone is not an isolated event. We're developing a roadmap to have 100% of our production facilities become at least carbon neutral in the future, which we expect to be able to share in the coming months. Turning to our financial performance in the quarter, overall, we saw similar dynamics to the first half. EBITDA growth driven by top-line recovery, partially offset by cost and expense headings. The difference this time is that in Q3, we faced much tougher top-line comps than during the first half of the year. But the team's disciplined execution came through once again. In the quarter, net revenue grew nearly 21% organically, lapping 15% organic growth in Q3 2020. EBITDA grew approximately 9% organically against 1.4% organic growth in Q3 2020. Normalized profit grew about 50%, following 2.2% growth in Q3 2020, while operational cash flow declined almost 10%, lapping 99% growth in Q3 2020. Versus Q3 2019, net revenue grew 43%, EBITDA was up almost 16% in organic terms, while normalized profit increased 54%, and operational cash flow improved 80%. Margin pressure, unfortunately, remains a reality, with gross margin contracting to 50% and EBITDA margin contracting to slightly below 30% in the quarter. However, we did see sequential EBITDA margin improvement versus Q2 2021, which stood at 26% at the consolidated level if you disregard the one-off tax credits in Brazil. We still have a long way to go, but we see this as a relevant improvement nonetheless. Now let me go through the main cost and expense drivers. Cogs per hectolitre increased 18.5% on a consolidated basis in the quarter. We once again saw adverse effects in commodity costs as the main factors, particularly in Brazil, while Better Mix offset higher unhedged commodity costs. Brazil beer cash cogs per hectolitre, in Q3, totaled almost 16%, which should be the lowest growth for the year. FX and commodity pressures should still be an issue in Q4, but we continue to expect Brazil beer cash cogs per hectolitre to grow in the low 20s for the full year. As for cash SG&A, year-over-year growth totaled 23.6 on a consolidated basis. Sales and marketing and distribution expenses grew mid-teens, so below net revenue growth. The main drivers here were the same ones from Q2. albeit at lower levels of growth year over year. And administrative expenses were nearly 81% higher year over year, which was primarily a result of provisions for variable comp, since our performance for the year was once again better than expected. And should our performance remain on track during Q4, variable comp accruals should continue to impact our year over year performance. In addition, it's worth sharing that when we break down our administrative expenses, X variable comp accruals, in regions like Brazil, for instance, what we saw in the quarter, and this is also true since 2019, is that overhead packages are growing below inflation, with the exception of two packages. First, our investments behind B2B, D2C, and fintech platforms, and second, technology spends to enable our transformations. Despite the near-term impact, we have no doubt whatsoever that these investments make sense given our overall strategy, and we've managed to find non-working dollar savings and other lines to fund this transformation to a great extent. And as these platforms scale up and we find smart ways to leverage AMBEV's scale and reach, we do see opportunity for more attractive returns in the future. Looking ahead, given year-to-date performance, and should the recovery continue in the final months of the year, we feel more confident in our ability to deliver on our two main ambitions for 2021, despite a tough comp in Q4. First, a healthy balance between improved volume and improved net revenue per hectolitre growth as part of our top-line-led recovery across markets. Year-to-date volumes are up 12.3%, and net revenue per hectolitre is growing 14.1%. And second, normalized consolidated EBITDA performance for the full year above 2019 levels in nominal terms, which we more and more see as feasible. Year-to-date, normalized consolidated EBITDA stands at approximately R$16 billion, which is 4.5% above 2019 in nominal terms, excluding the one-off tax credits in Brazil. Finally, some quick comments on our financial priorities of protecting liquidity and improving our return on invested capital. Liquidity remains solid given strong cash generation, despite the several headwinds we've faced since last year. But the environment does remain uncertain and volatile, so we continue to believe a prudent approach remains warranted. Our use of cash priorities also remain unchanged. reinvest for growth, organically and non-organically, and return excess cash to shareholders over time. And in terms of improving return on invested capital, the name of the game continues to be operating efficiency coupled with better resource allocation across the company. Given the evolution of our business, such as our bets behind B2B, G2C, and fintech platforms, we believe that, when thinking about profitabilities, we need to look beyond margin ratios and also focus on return ratios. Don't get me wrong. We will always focus on improving the drivers of margin ratios for each of our segments and ventures. But given their different financial profiles, we've been focusing more and more on return ratios to manage our business. 2020 was tough in terms of profitability in both dimensions. But the good news is that 2021 has the potential to deliver better returns than 2020, which is important progress despite sustained margin pressure. Our journey of continuous and consistent improvement is well underway since 2020, step by step. This goes way beyond quarterly performance, and we will stay the course towards creating value over the long term. Thank you, and we can now go to Q&A.

Thank you. The floor is now open for questions. If you have a question, please press star one on your touch-tone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Questions will be taken in order that I receive it. Please hold while we pull for questions. Our first question comes from Paul Richard Oppenstein, Evercore.

Great. Thank you very much. There's, you know, from what I can tell, there's really been a kind of a – there's a lot of background noise there. An unprecedented kind of change in some of the competitive dynamics in Brazil, you know, particularly in terms of categories with your leading competitor – apparently abandoning a lot of their core value brands and just kind of totally restructuring their overall portfolio. Can you talk about what is going on? in the Brazilian beer business in terms of pricing architecture, what the opportunities are. As you look at that, you're obviously bringing in Spartan as kind of a core plus proposition. But what does it mean when you have such a dramatic change in the competitive landscape and you have a whole portion of the business that economy or value beers being walked away from by a major competitor. Thank you.

Thank you very much for the question, Robert. The Brazilian market has always been very competitive in general, and it will continue to be for a while. But I mentioned at some point in time that just when I arrived that I would foresee the competitive landscape more with the trends on our side. Since that, we have been working a lot on our plan, learning consumer trends, understanding the competitive landscape, and we are very excited about what we have been accomplishing. The numbers of volumes that we had this quarter, they showed that. If you look at the numbers, it is not just about competition. We are really expanding our reach, expanding the number of consumers that are transacting in our brands. We are really very excited about the plans. Innovation already represents more than 20% of our net worth. So we are picking the right products and in the right place. So we have been talking a lot about the Brahma Double Pouch that really came to be either of the corporate segment that was very underdeveloped in Brazil and has a big potential. So we've been growing new brands, a Distantly, year to date, our high-end is growing 20%. Consumers are more and more electing one of our brands as the number one brand they love. So we have 3 million more consumers than we had in 2019. All this transformation technology, the reach, the convenience that these and that delivery are bringing for consumers and customers. So really about the performance, really about our plan, 100% of the volumes expended in the industry came for our brands. And on top of that, we are seeing competitors really moving in some direction that is hard to really figure out exactly what's going on. So when we look at production numbers of the IBGE, of the industry, and of competitors, In the end, competitors, they are producing less than 2019 levels. So this is something that we are much ahead of that. And I'm not sure if that's really a decision. It's really something that we are selling and we are getting it right. We are getting the consumers and it looks like somehow consumers are more excited and customers more towards our brand. So we're going to keep looking an eye on competitors. I think it's a big opportunity for us, anything that happens on the competitive side. We are really excited about how we are bonding with our consumers, how we are all-time high relation with our customers in that promoter score, and how we have been able really to drive industry expansion.

Terrific. Thank you very much.

Our next question comes from . Hi, Jean.

Hi, Lucas. Congrats on the results, and thank you for taking the questions. I have two questions on Brazil Beer. First is about loading. I would like to understand better if after announcing the second price increase in mid-September, you saw any signs of mismatch between selling and sellout late in the quarter that could have given an extra boost to the 3Q volume performance? That would be my first question. And secondly, it's about packaging supply. We have seen constraints for both glass bottles and aluminum cans globally. And ahead of the fourth quarter, which is a seasonal picking period for the industry, Yeah, I would like to see if you are seeing already any signs of constraints at the packaging industry in Brazil, or even if it could become a risk going forward. Thank you very much.

Thank you for the question, Marcela. So we brought that graphic of the rolling 12-month performance of our volumes in Brazil and in Ambev because I think that graphic is really important. It is really on a yearly rolling 12-month basis. It really mitigates any type of inventory change in levels. So I think that it was a good graphic for us to talk about. I'm very excited about the Q3 volumes because they happened amid a sequential improvement on our net revenue per hectolitre. So when we compare net revenue per hectolitre of Q3 compared with Q2, there were a lot of efforts in the Q3 to really keep it up with our inflationary scenario that we are living in Brazil that peaked very fast, faster than we expected. And then it was announced that the price increase in October. I really don't, I really feel that the selling and sell-out, they are pretty much in line, and the inventories in the market, they are really, we didn't see any movement on that. We have been controlling that in a very sharp way because we know that summer is coming. and heading to your second question, what we are seeing, the supply chain, and if the supply chain has been under pressure since the pandemic, we were able to keep it up with cans and resolve the availability of cans where we see a more normalized supply chain. When we come to glass, industry is more pressured. We expected to see some normalization more in 2022 on the glass side, but somehow this type of disruptions are in a much lesser extent that we had in 2020.

And then just to add there, Jean, this is Lucas, Marcelo, I think when it comes to glass bottles, one thing to keep in mind is that we have vertical right bottle production capacity in countries like brazil so that also gives us right a very reliable source and of supply for bottles and more flexibility to adapt to to pressure in the supply chain overall in addition to our long-term relationships with suppliers and we are leveraging our global footprint too on that got it that's very clear thank you guys

Our next question comes from Ricardo Alves, Morgan Stanley.

Good afternoon, everyone. Thanks for the call, Gianna. Thanks, Lucas. Impressive numbers indeed. Had a couple of questions. One follow-up on the competition side. You alluded to this, Gianna, but, you know, on the main competitor, I think that the first question was more on the main competitor, but you know, when you look at your numbers and we look at the industry numbers that we can track, I mean, your performance is significantly above even, you're significantly outperforming other smaller players as well. You know, could you just shed a light on how you're performing relative to them? Are there any perhaps specific categories where you're outperforming or specific regions where you think you're performing better than your smaller competitors? We've seen from the Coke system, for example, different regions performing very differently. So I don't know if that could be part of the story. That's my first question.

Okay. So let me try to elaborate more on that. So if you put our numbers together, you're going to see that we are gaining a lot of market share. It's not just a little. It's a lot of market share. And this is based on our plan. I think the corpus segment, it was a bet that we did two years ago that's really paying off. The innovation, there's a lot of innovation there. Brahma Duplo Mountain is coming. Sparking is coming very well too. So we had this strategy of helping their own trade to transform itself during the pandemic and have takeaway initiatives with a small format, very affordable of 300 ml bottles. This is performing very well, too. This brought to us from pre-pandemic levels, we had 750,000 customers. Now we are reaching 1 billion, 1 million customers in Q4. So our plan is really structural. I think it is really working. And when we look at competitors, both of them, the two producing less than they have produced already below 2019 levels, it doesn't seem to me that it's a supply issue. It really is not because you have a plant that you can sell. So consumers have to buy. The customers have to be in your hands. So I really feel that our commercial strategy is really acquiring more customers and, like, seducing more consumers. We have 3 million more consumers. So I feel that our strategy is going – is doing okay. So we did the right investment on capacity. in the last two years to be prepared for this type of volumes. And I just feel that competitors, they are not being able to really get the transaction right and really to sell. And even this announcement that we are listening all the time about competitors increasing capacity, I question myself if this is more of an upgrade on capability, that's really a potential to put more volume in the market. So I think this is a big question for us. So having said that, we are selling very well on north, northeast, middle east, middle west. Most of the areas are doing very well. It's amazing how we have been growing all the segments. So we are growing Core, that it was a handicap that we had in the past. The Core was really going down. We are seeing our three brands, Brahma, Skull, and Antarctica, growing. We kind of created the Core Plus segment where we are really having Bohemia, Brahma Duplo Maltia now is passing. And our high-end portfolio is really, year-to-date, growing on the 20s. So I'm seeing a very balanced growth in segments. I'm seeing a very balanced growth in regions. That shows that looks like our commercial strategy is really paying off, besides the challenges that we have on the macro side, besides the competitive landscape, I'm really happy with our commercial strategy.

Super helpful. Yeah, thanks for that. One final question, a very quick one on the revenue protector leader, also in Brazil beer. When you're thinking about the fourth quarter, just wondering what your latest thoughts are because of the price increase. I don't know if there's any major mix of category or mix of channels that we should have in mind when we're thinking about the unit revenue, but even more interested on the price increases, how they've been accepted so far. So, if you're able to share any call on how October is performing on that front, that would be helpful. Thanks again.

Okay. So, in the end, we don't disclosure that much and do forecasts on the pink. It was public that we did it in the beginning of October. So what we have seen is that it's in the market. So the numbers are in the market. And it's pretty much around the same shape that we have been doing for a while. What I can tell you that is really exciting me, it is that the on-premise Recovery has been stronger than we anticipated. We are seeing, because at some point in time, we helped the bars to transform, and then they became platforms to take away and deliver. That delivery helped them a lot. But now we are seeing the social out-of-home occasion getting traction again. So there is pretty much when you get with your friends and go to the bars and really drink, in the bar, so we are seeing this occasion really picking up faster than we expected, and looks like this will help us on this occasion. There is an occasion that is very profitable for us that we have been always designing for it, and it's really coming back strongly. And we foresee, for example, the RGB bottles and the RGB mix really they are growing sequentially more than we expected. We foreseen 2022, they are above 2019 levels. All right. Thanks, Tiago.

Our next question comes from Tiago Duarte, BTG Pactual.

Thank you. Good afternoon, everybody. I have two questions. I'll stick with the Brazil beer discussion here. The first one is a question on how should we think of Ambev's brand's fair market share in Brazil beer right now, particularly in terms of the price point relative to the actual market share that you have achieved. It looks like you're capturing a lot of market shares, as you said just now. pricing is evolving, but it continues to lag the overall beer inflation despite the premiumization of the mix and margins. And I'm not even, you know, relative to basis points, but even in unitary terms, margins are not much higher in nominal terms than they were, you know, several years ago. So, Jean, you mentioned in the opening remarks the healthier portfolio, better service level. You mentioned you're reaching 3 million more people, consumers relative to 2019. So I wonder how that should translate into the discussion between your actual market share, your fair market share, and the price point that you see for your most relevant brands today. I mean, if we look historically, this is a point in time where you guys would probably be capturing a lot more pricing power than we have seen so far. So that's the broad discussion I was looking to have. And the second question is on the industry. I mean, even putting the market share discussion aside, I think ABI in their conference call, they mentioned a beginning gaining share of growth in many markets, including Brazil. But it's still, for us, it's striking to see how the aggregate beer industry volumes are growing in spite of the very tough comp from last year. So, if you could comment on how the category growth is sustainable in your view relative to other alcoholic beverages and, of course, in terms of per capita consumption relative to where we were before and into the future, it would be nice to hear as well. Thank you so much.

Okay. Let me see if I can get this right, Duarte. So, Duarte, it's true we are with a market share gaining, when we put all the numbers together, better than we expected, better than we anticipated. So this Q3, when we compare with what competitors are doing, there is a lot of market share gains over there based on our strategy. We have been building the high-end in the core plus segments. If you remember the beginning of the year, we gave a guidance of our VIC India Brazil growing in the low 20s. So we knew that this was coming. So a big part of it, it was because our hedging policies and the impact of the currencies that we had in the hedges this year. And we are really putting our pricing strategy based on the consumer side, what consumers can really pay to maintain our volume of health. And then based on that, on top of that, really work on the mix of innovation, the mix of channels, and over-deliver based on that mix. I think we have been able to – we kept our guidance and our VIC numbers. So we are really working on that, even though lots of things happening on the commodity side. But this year, we are really maintaining our guidance. And then we have the consumer ability to pay. That's what happened in Brazil, which was that inflation picked up very fast. And that is the reference on our pricing decisions to really guarantee that the beer in the basket is competitive for us to continue to develop share of strokes and continue to develop per capita. And with that type of volume that we are having and with the inflation picking up this equation, we're going to follow. to really guarantee that our revenue per hectolitre is above and what we need. And we believe that the next year, this equation will be more on our side, okay? So somehow we follow the inflation with rates. On top of that, we have the innovation and criminalization strategy. On top of that, we have the revenue management. And we believe that we are really getting these muscles right and pricing will get better. One thing that I would like to mention on the transformation side is that we are learning a lot on the revenue management side with our FinTech and with this. And we are beginning to pilot the tradeoff of discounts and cashbacks. how our customers and how consumers really react to that. It's a whole new world of possibilities for us, and this is something that I'm very excited. It's a project that will help us a lot on this revenue management of the future, okay? So having said that, thank you. Talking about industry, so yes, we have been very excited about the way we have been developing the industry in Brazil. All the industry expansion is really coming from our initiatives. When we looked Brazil on a granular base, we still have a lot of opportunity per capita. When we compare regions, Sao Paulo and Middle West, they still have a very different level. of per capita consumption. When we looked at frequency, that it was something that peaked during the pandemic, and we looked at U.S. and maturity-free markets, we still have a lot of opportunity on the consumer side to increase frequency, so we believe that a big part of it will stay. So we are still very excited about the per capita consumption and the industry expansion moving forward. in the future. And on top of that, we just put in place, and this is more of a shut-off-throat view, our business unit of Beyond Beer and Future Beverages that I think is a huge opportunity for us here in Brazil to learn what's going on in Canada, in the U.S. We are really working on the Mike's brand. We are bringing RTDs. We are bringing wine in cans. And I'm really excited about this another avenue of growth that we really, that is a creative, is net revenue per hectoliters is higher. And there is a lot of opportunity on share of growth to continue to grow on that side.

That's helpful. Thank you, Jean.

Our next question comes from Isabella Simonato. Bank of America.

Thank you. Good afternoon, everyone. I have two questions. First of all, thinking about 2022, right, I understand that you guys will release the guidance on POS in the beginning of the year, but if you could give us a color on where you're seeing the cost pressures, and especially your ethics, given the recent depreciation of the BRL. That would be helpful to understand how to think about next year. And second of all, Lucas, you mentioned in the presentation, right, about protecting liquidity and the balance sheet. And at the same time, we have a potential tax reform in Brazil. How are you guys thinking about returning cash to shareholders not only in terms of timing, but if we could expect an increase in this year versus 2020. Thank you.

Isabella, thank you for the question. Starting with 2022 cost outlook, I think the first important message here is that the scenario for input costs remains fairly volatile, as I'm sure you've all been following. particularly in Brazil and Argentina. And there's still some hedging to do before the end of the year, right? We continue to work under our hedging policy to give us the predictability, right, going forward, and will give us time to prepare, adapt as need be from time to time. But what we can say at this point is that although 2021, the main headwind was FX followed by commodities. In 2022, what we're seeing as of today is that FX should be less of an issue, okay, because of the hedge and happening kind of on a rolling basis and how the DRL especially kind of evolved throughout the year as hedging was underway. So we see less pressure going into 2022 from FX and more pressure coming from commodities. And again, as I said, there's still some hedging to be done. Okay. And last but not least, one of the things that has helped us in 2021, and we hope that could also play a role favorably going into 2022 is the mix, right? As I mentioned in my opening remarks, one of the things that has contributed to our better than expected performance, is the mix starting to work in our favor? And in case of the COGS impact of the mix evolving better than expected, the mix has helped us offset our unhedged commodity exposure. That picked up, right, in Q2, picked up again in Q3. So I think the mix, to the extent the team continues to do a good job on the commercial side, as the on-premise recovers, as returnable glass bottles continue to come back in a healthy way, hopefully MIX will also once again play in our favor. And then, as you said, we hope to be in a position to provide more visibility with respect to what to expect in 2022 at the end of February when we announce the full year results. As for the second question in terms of returning excess cash to shareholders over time, This is a year-end decision, so we continue to work, as I mentioned in my remarks, under the same paradigm in terms of how we think about capital allocation in the company. So priority number one remains to reinvest in growth, be it organically, be it non-organically. So that hasn't changed. In addition, we will continue to return excess cash to shareholders over time. But that's more of a year-end conversation that we will have with the Ambit Board.

That's clear. Thank you.

Our next question comes from Tiago Bortolucci, Goldman Sachs.

Hey Jean Lucas, good afternoon everyone and congrats for the results. Just trying to add up your revenue per hectolitre growth in Brazil in a bit more details. You guys mentioned earlier in the call the positive impacts of the on-trade mix into your average prices, right? However, when I see net revenue per hectolitre in Brazil bear, it is still up but sequentially decelerating. Can you please break up in more details what were the drivers for the sequential deceleration there? And in terms of overall trends, I know we don't have a guidance for the quarter, but what should we expect for the fourth quarter, bearing in mind that cash cogs for actual leadership sequence should accelerate? Thank you very much.

Yeah, so in the end, when we started the year, we have always been mentioning that our revenue management strategy will be very agile, nimble, for us really to get the best opportunities in the market to learn with regions and with everything. And to be very honest, this June, so this decision, so the inflation picked up very fast, and we were trying to catch up as we move. So that was something that it was not planning in the beginning of the year. And somehow we were very happy to, in this context, to see the Q3 net revenue per hectolitre really, like, peaking. So it was better than Q2. And when we look if it's accelerating or not, you have the last year basis where we have to compare. What I can tell you, it is that this elasticity that we saw in Q3 when we compared with H1 and Q2 of the price moving with this type of volumes, it really surprised us. And this equation was an equation that come above our expectations. which suggests that our brands are stronger. We have more volumes to the net revenue practically to increase. So we are very happy with this type of, with that algorithm and with that type of equation. So having said that, so what was really planned in the beginning of the year for us to do right, to do accordingly, it was really the October move that we announced it, it was public. We made it happen. It's in the market. And I think this is more substantial.

That's clear. If I may just follow up on the delivery. You reported volumes essentially flourished quarter on quarter, right? Any early signs of some change in mix or cannibalization with the reopening thus far?

So let me get your question to talk about the the technology platforms, I'll talk about that, and then I'll jump into Bs and Donas. So Zed delivery is on the right path. It's really, we are very excited about it. So we have, so we stopped it a little bit, the city extension. for us really to get all our strategy right. So we spent less cities than we expected. We didn't see that much change on the project, on the plan that we have with that delivery. But that delivery is really thinking more and more to be more omnichannel, to really think about not just the convenience piece, but all the journey of our consumers. We are starting back the expansion on the cities And we are working a lot on the less mile efficiency. So these are the two things, major things that we are doing on the delivery. And the delivery, it's really a success and it will continue to grow a lot. But we have these three fronts that we are working on. Omni-channel, expansion city by city, and then less mile efficiency. That is something to have the business sustainable in the long term. And one information that... That's just for you to know. So we were able to get that delivery already that is pretty much focused on the in-home occasion with the same RGB mix that we have in the average of the company. And that's really something that it happened ahead of time. So 40% of the mix of that delivery is already coming from returnable bottles because the the motorbike, it takes the bottles and get it back. So, this machine is really working. So, we are really excited about that. So, that delivery is in place. We will grow. It's really going to the next level in terms of having more occasions, be more omnichannel, restart the expansion, and really get it with the left mile efficiency right. So, one thing that I would like to mention is that really, We talked a lot many times about this. I mentioned that 85% of our active buyers are already in the platform, that we achieved a $1.1 billion annualized marketplace GMV in Ambev of this, just mentioning the products that are not from Ambev's portfolio. So this is something that is doing very well. And yesterday we announced the partnership with BRF. And I would just like to mention, because this partnership is different from what we are doing, we have been doing this pretty much the 1PL. So we buy, we sell. It goes through our warehouses. But this deal with BRF was the first one that it was really – a contract of a software as a service. Okay, so Biz in the end is really providing a software service to BRF and then BRF will have Biz on their sales reps, on the palm tops and their customers will use the platform of order taking and BRF has around 250,000 customers that they go direct and they will have access to a 1 million base of customers and with this really providing a service as a software, okay? So this is really something that is different from what we are doing. I'm very excited about it to have BRF with us. And the third one is really Donus, the syntax that is really growing very fast. So we are now with 1 billion reais of TPV year to date. So just in Q3, we have 650 million reais in TPV is really tripling sequentially. We have 145,000 customers that downloaded the wallet. And we are really working on the machines that take rates we are really doing credit for our customers and really moving into the revenue management and the trade-offs of discounts and cash back. So these three initiatives, I'm very excited. They are really getting sizable. They are really beginning to bring a lot of value for our company.

That's amazing. Thanks, guys. Very clear.

Excuse me. This concludes today's Q&A session. I would like to turn the floor over to Mr. Gerisati for his closing remarks.

So I would like to thank my team again, once again, for this quarter. I would also want to thank all the analysts and everyone who joined the call for time and attention. And to wrap up, in the full year, despite the anticipated tough comps in Q4, we continue to work to maintain our commercial momentum delivering a healthy top-line recovery. Also, we will not lose sight of the long-term and return on the investments that we are doing now, and we will continue to invest in our portfolio in the transformation through the tech ventures, which continue to grow and become more sizable. Cash generation remains solid. Even in a year that we invested on the ventures, we invested on capacity, we invested on tech as part of our transformation journey. And I'm very excited about the relationship and the bonding that we are having with our consumers, not just here in Brazil that we talked a lot, but I'm seeing brand equity and I'm seeing consumers read towards our portfolio in all the countries that we operate. So thank you very much. See you next year and have a great day.

That does conclude the MBEPS conference call for today. Thank you very much for your participation and have a good day.