Ambev S.A.

Good morning and thank you for waiting. We would like to welcome everyone to Ambev's fourth quarter 2021 results conference call. Today with us we have Mr. Jean Gerasati, 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.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 listen-only mode during the company's presentation. After AMBEV's remarks are completed, there will be a question and answer section. 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 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 EMBEV 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 will be discussed during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparison with fourth quarter 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 on a fully reported basis in the earning release. Now, I'll turn the conference over to Mr. Jean Giresatti, CEO for Unbath. Mr. Giresatti, you may begin your conference.

Good morning, good afternoon, everyone. Thanks for joining our Q4 and full year 2021 earnings call. 2021 is now history, but it definitely left its mark. We had an all-time high engagement of our team which once again rose to the occasion and remains steadfast in transforming this company to a new chapter. We kept a very high reputation as we continue to focus on having a positive impact in society and growing together with our ecosystem. We have reached our record top line performance with yearly volumes at a whole new level, 180 million hectolitres. that's 15 million hectolitres of new volume on top of 2020, and pretty much all the industry growth in the period. Our normalized EBITDA went back to double-digit growth and above pre-pandemic levels, despite unprecedented cost headwinds. And we had free cash flow growing ahead of normalized EBITDA, improving our ROIC while investing heavily in the future. I want to deeply thank my entire team for this amazing year. Now let's talk about Q4. Our main objectives in the quarter were to consolidate our new volume levels. In here, we grew volumes in the quarter, improving our rolling 12 months performance. And to position ourselves to start 2022 is structurally better than we began 2021. We accelerated our net revenue per hectolitre growth, reaching 15.2%, which leaves us in a good place to start the year. Breaking it down by region, in Brazil beer, our volumes in the quarter declined 3%. amid a high single-digit industry decline, according to our estimates. Therefore, we sustained market share gains and we led, in 2021, both volume share and value share growth. In fact, this was the second year in a row in which we outperformed a growing industry. adding 4.5 million hectolitres in 2020 and 6 million hectolitres in 2021. In a quarter, net revenue per hectolitre grew 9%, and we expect to improve this performance in 2022. In Brazil, NAB volumes grew by almost 2%, and net revenue per hectolitre grew nearly 12%. thanks to better packaging and premium mix. We estimate we gained market share in the quarter, benefiting from a better visibility and improved distribution with bees, closing the year with all time high buyers in history. Our international operations continued to rebound consistently. Latin America South was our major growth engine, with volumes growing almost 9% and net revenue per hectolitre about 31%. We had a solid performance in Central America and the Caribbean. Volumes grew by 2.5% and net revenue per hectolitre grew by 16%, thanks to our premium and core plus brands that are gaining mixed weights. Canada, we grew approximately 4% in both volumes and net revenue per hectolitre. An easy comp given Q4 2020, combined with market share gains led by Corona and Michelob Ultra. On top of that, we are structurally better positioned to start 2022. Our portfolio is stronger and healthier. For example, in Brazil, Brahma Duplo Malte and Brahma were first and second in brand equity improvement among all brands in the market. And we are starting this year with 1.6 million more consumers that state that love one of our brands. Also, I would like to highlight the performance of Corona. that is the leading premium brand in Central America and the Caribbean, in Canada, in Chile, in Argentina, and grew 44% in volumes in Brazil. Innovation is working. We tested more than 65 new products throughout the year, including beer and non-beer products. There is an avenue of growth in health and wellness with Stella Gluten Free and Michelob Ultra. Our Core Plus segment already represents 10% of our Brazil volumes. After the successful launch of Brahma Duplo Multi, SPATLIN has had a very good traction in Brazil. This segment represents an enormous opportunity in all countries, with Andes Origin leading in Argentina, Cusqueña doing very well in Chile, and Skoll surprising us in Paraguay. We are going beyond beer. Beyond beer is already an important profitable growth driver in more mature markets, like Canada, where we have the mics and neutral franchises leading the way. And in 2021, to be ahead of the curve in our other markets, we strengthened our beyond beer capabilities. We created a new business unit to bring focus and consistencies to our strategy towards exciting new alcoholic beverages categories such as ready-to-drink, canned cocktails and seltzers. In Brazil, we have the Bits franchise broadening its portfolio, and we will continue to expand MIGS after a successful pilot in 2021. DTC initiatives have steps changed. This is especially true for Z delivery in Brazil, not only in terms of geographic reach, but also scale and assortment. In 2021, they reached 300 cities, delivered 61 million orders, and we begin 2022 with 4 million monthly active users. And this is revolutionizing how we connect with clients in Dominican Republic and in Brazil, where more than 85% of our customers are already ordering online and of which more than 80% make majority of their purchases through the Biz app. Also, our offering of non-AMBEV products on the platform reached a 1.4 billion annualized GMV in 2021 in total AMBEV. And this is just the beginning. In 2021, we kicked off the expansion of BIS software as a service capability with the agreement with BRF in Brazil, and we are speeding up BIS implementation in Argentina, Paraguay, and Panama. At this time of the year, last year, everyone was worried about the impacts from the pandemic, the reduction in government stimulus, the cost pressures given affects the valuation and commodity increases. After 12 months, the results were our volumes were up 9%, net revenues up 24%, and the beta growing 11%. We believe we adapted quickly in 2021, and we invested ahead to continue to lead in 2022. A lot has changed in the past year. In 2022, we will remain alert, attentive, and not let down our guard because COVID is still among us. We're going to see a lot of industry volatility given consumer inflation pressuring disposable income on one side, but we're going to also see a World Cup during the summer on the other side. Cost pressures give an unprecedented commodity inflation. In Brazil beer, cash cox per hectolitre is expected to increase between 16% and 19%. And despite all that, we will deliver consolidated organic EBITDA growth in 2022 ahead of our 2021 performance, with Brazil back to growth. we are structurally better prepared we have a plan and our team is already working on it to finish i would like once again to thank all of our people for the great 2021 and for this amazing transformation journey we have been going through thank you all See you in May.

And now it's over to you, Lucas. Thank you, Jean. And hello, everyone. Let's start with the numbers. Net revenue grew 16% in Q4 and nearly 24% for the full year. EBITDA declined about 2% in the quarter, but grew almost 11% in 2021, which is well above 2019 levels, even if you exclude the impact of one-off tax credits in Brazil. Normalized profit declined about 45% in Q4 due to tax credits one-offs in Brazil, but increased over 11% in the full year. And operational cash flow increased over 40% in the quarter, finishing the year more than 21% above 2020. What's more, our consistent improvement on the operational side also translated into better performance when it comes to our value creation agenda. With return on invested capital, economic profit, and free cash flow all back to growth, and all this while, first, continuing to invest behind our business transformation and future growth, with CapEx for the year totaling 7.7 billion reais, which is nearly 64% above 2020 levels, and sales and marketing growing 15% to support our portfolio strategy and innovation pipelines. And second, returning excess cash to shareholders, with a total payout of R$9.5 billion in the form of dividends and IOC in the year, which was about 23% above 2020. And in terms of sustainability, 2021 was another year of consistent and continuous improvement, and we remain on track to deliver our goals by 2025. For instance, we announced the first carbon-neutral large brewery and malt plant in Brazil, and we also reached 100% renewable energy for our breweries in Panama, the Dominican Republic, and Guatemala. We advanced several initiatives to decarbonize our value chain operations related to Scope 3, and we continue to dream big. We announced our ambition to achieve net zero for our operations by 2030 and for our value chain by 2040. All in all, we delivered the consistent improvement in performance we have been so vocal about since 2020. And now that we are pretty much back to pre-pandemic levels on the bottom line, and with 2021 behind us, we must look ahead. So let's focus on 2022. First, what doesn't change? One, top-line growth will remain a key priority and a key performance driver. Two, input cost pressure unfortunately remains a headwind. And three, our focus on value creation drivers such as return on invested capital, economic profit, and free cash flow generation remain. Now, what should be different in 2022? One, our net revenue performance should be more driven by net revenue per hectolitre than volumes as we adapt to a higher inflationary environment. Two, cost headwinds will come mostly from commodity inflation rather than FX, but at a lower growth rate than in 2021. Three, SG&A growth should improve, which was heavily impacted by variable compensation accruals. And four, the tax credit one-offs in Brazil that positively impacted our EBITDA, financial results, and effective tax rate over the last two years should no longer impact our performance in a material way. Let me give a bit more color on our COGS outlook in Brazil beer, which we are giving specific guidance. We expect Brazil beer cash COGS per hectolitre to grow between 16% to 19% for the full year. This number assumes commodity prices remain at their current levels and does not include the per hectolitre impact on the sale of non-AMBEV products on our bees marketplace, such as milk, vegetable oil, rice, condensed milk, and chewing gum. Given BEE's marketplace growth trend in 2021 and our plan going forward in countries like Brazil and the Dominican Republic, starting in Q1 2022 earnings results, we will report our net revenue per hectolitre, our COGS per hectolitre, and our cash COGS per hectolitre performance, excluding the impact of these non-AMBEF products sold on the BEE's marketplace. This is intended to provide more transparency to the market on this important growth driver, as well as avoid distorting the performance of the underlying beer results. When we bring it all together, what this means is that we will work to deliver better a bit the growth in 2022 than the 11% growth we delivered in 2021, despite a tougher Q1, despite volatility by quarter, and despite the cost headwinds I mentioned. Turning to our financial priorities, we will focus on optimizing our business through three things. First, improving our financial discipline with a focus on liquidity, as well as our typical cost and expense management initiatives, while reinvesting for growth organically and non-organically. Second, further our value creation agenda with a focus on improving our return on invested capital, economic profit growth, and free cash flow growth. And third, return excess cash to shareholders over time. Regarding value creation, we will continue to look beyond margin ratios and also focus on return ratios. Margins remain extremely important, but when it comes to creating value in a sustainable way in the long term, asset turnover is another important lever, and we see room for improvement here, as for instance, our tech platforms continue to expand. And yes, 2021 was still a tough year on the margin side, but on the return side, we managed to break the downward cycle we were on for a while. In 2022, the challenge is to build momentum on top of what we accomplished last year. So to wrap up, following good recovery last year, 2022 brings well-known challenges, but also several opportunities we've been investing behind since 2020. We believe we're better prepared and we will have to deliver once again the continuous and consistent improvement as we transform this company. Thank you, and now let's move to Q&A.

Thank you. We will now start the Q&A session for analysts and investors. Questions may be sent by pressing star 1 on your telephone. Our first question comes from Marcela Petia, Credi Suisse.

Hi, Gia. Hi, Lucas. Thank you for taking my question. I have two questions here. First one is if you could give us a little bit more of color on the main components behind the guidance for the NKBITDA growth acceleration to above around 11% levels seen in 2021. And the second question is, if you have any assessment of elasticity impact on price increase on volumes so far and going forward, right? We have seen that the industry is highly focused on pricing to manage cost headwinds, and I think that is also the case for you guys. So how you are seeing that impact in terms of elasticity? Thank you very much.

Hi, Marcela. Thank you very much for the question. Let me get a bit of driver's growth first. Overall, talking first about net revenue per hectolitre, I think most of the price is already done. So we entered in 2022 with a good carryover. Anyway, we are very confident on improving mix during the year because I think that some trends are in our favor as their own trade reopening as the 600 ml bottles are gaining traction. This would help us. Innovation on the core plus and the premium is really working. So at that part, we are confident. We mentioned that in Brazil our cash cogs would be in between 16 and 19. That is better than the last year that it was in the low 20s. And sales and marketing should be below inflation with administrative really going knock. Okay, so I think there is, so with this balance, We believe that we can accelerate EBITDA. Of course, the volumes in the industry are, I think, the most tricky part. We are starting with a very good market share in key countries. So this helps on one hand. We had Omicron impact in January. But somehow, on the other hand, looks like we're going to have two half carnivals. One now, one in April. We're going to have a World Cup in the summer that we never had. There's always impact. It's a big occasion for the Brazilian market. So that's where lands a little bit more of the doubts. But we are very confident that we are with a better portfolio, structurally better, brand actually growing up and great innovation working in the market. So this is the first one. The second about elasticity. So what we are seeing is really that when we think about segments, that the value segment has been one that suffered the most. OK, what we saw during the past and the last year, it was so our core plus it's something that is a structural change. that helps and brings new news, new recipes for consumers. So it's an important piece of the market that is going beyond any historical of elasticity. Premium is solid. And our core, with the returnability strategy, rebounded to growth, so it's really been resilient. So I think Talking about segments, what's really been more impacted overall is the value segment and the brands that does not have equity. So from our side, we have momentum on mainstream, on corporates and high end. So we are excited about our portfolio in general.

Perfect. Thank you very much.

Our next question comes from Sergio Matsumoto, City Group.

Yes, hi. Good morning, Gianna and Lucas. Thank you for taking my question. I want to ask about the revolution in logistics to urban distribution centers. You commented on this in the last couple of quarters, and we understand that you're building it out in Sao Paulo and other parts of Brazil and also transitioning clients into bees and, uh, for the ordering and 85% already there. So two questions on this. The first is Jen, where do you think you are in this whole process? Because you know, it's revolution is a, is a big word and I'm sure it's a, it's a, it's a long evolved process. So what do you think you are? Do you think you just started or, do you think you're about halfway through or like, you know, if you can give us some color there. And the second is if you could frame the benefits in terms of top-line growth benefits and any cost savings that you might expect by transitioning to this new process. And if those cost savings, if any, if we're going to see them or would you be investing them back into the market? Thanks.

OK, thank you for the question, Sergio. Yes, so let's go. We talked a lot about it is an important piece of our transformation journey just for you to to have in mind. So so what we are talking that the major piece, it is that ambidextrous warehouses that they work for direct to consumer initiatives and they work for B2B initiatives together. Okay, so I think this is something that there is a game changer in terms of getting it right and really being efficient. So we have the urban centers and around we have already something around 40 new urban warehouses that can manage consumer and customer in the same platform. What is great about it is that our DTC initiatives, you have 80% of the volumes that goes, that comes, the orders comes on Friday nights, Saturdays and Sundays. And the B2B is something that is more planned, it is more weekday, so it's highly complementary, the initiative, that will help us a lot to build this capability to reach consumers and build this capability to aggregate much more products that we have today that goes beyond our portfolio, that helps our innovation. but really accommodates some partnership that we are doing with other industries. OK, so this is really about capabilities at this moment. So in the end, it is something that we are just starting. So the part of the question where we are is just the beginning. And for now, so the DTC is really getting more positive so everybody comments and asks about the DTC last mile and this is really a piece that will make the last mile of DTC a creative to us at some point in time. For now we are really ramping up and we are just starting. And for the benefits, Jun? So the phase that we are today is really about expansion. So this is really to get the DTC more efficient. We know that Z delivery is not in the same level of margins that we have in the company. So it's like to mitigate this growth and to get the DTC at some point in time with the same margins that we have in the company. So it mitigates the growth of DTC for now. It gets DTC accretive at some point in time.

I guess what I meant to ask is on the B2B part, there is that change in the way the customers order, and there's probably a sales uplift and some sort of a cost savings, perhaps fewer salespeople needed less frequency in visiting the clients. If you can frame those, that would be great.

Okay, so it's a little bit disconnected, so delivery and order taking, okay, so that's why I'm talking pretty much about the warehouses and the supply chain. Talking about from a broader perspective, so what we are seeing is that clients, customers can be much more organized with bees, they can elect, they can plan themselves where to receive So they are paying additional money to have more days on terms of frequency. We are much more efficient on discount optimization and management because of our data. So this piece is really a creative on this discount management and organizing the logistics. And it will be as it's it's marginal to really with all this platform to really have the partners in the same truck that we are delivering, that we are delivering beer. OK, so somehow it's very good for the base business. The base business gets efficient. But then when we aggregate the other products, when we aggregate the marketplace products, it's really something that we are talking more about growth of this piece of the equation that we are there. So we mentioned that assortment that is known on that in this reaches 1.4 billion in GMV. So this piece is already is below the the average EBITDA margin of the company is growing. In this piece, it's getting profitable with this logistic approach. Thank you so much. This business is really getting more efficient with all this critical mass. Thank you.

Our next question comes from Alan Alani Santander.

Thank you, and congratulations for the results. Hi, Lucas. Hi, Jane. I have a couple of questions, one around the balance sheet, and you're sitting on $3 billion of net cash. What's the outlook in terms of dividend payout and potential share buybacks? That will be the first question. The second question is more around the market in the super premium category. You mentioned Corona moving up 44%, very, very strong. Congratulations for that. Heineken mentioned that they were reporting 10% increase in volumes. Could you explain a bit what's going on regarding the super premium category? Why is it so strong again in Brazil? And for the same token, why or what's the contribution in terms of margin expansion or margin contraction of this super premium category in Brazil, please? Thank you.

I'll get the first one and then the second, I'll get the second one. I'll get the second one first and then I get to to Lopez. OK, thank you. Yes. Yes. So the so we mentioned at some point in time that our long term view for the high end portfolio that we have in Brazil, it was really true. have brand equity ahead of volumes, okay? So ahead of market share, build the brand, build the desire, connect with consumers. And we have been doing this for a while, and it was a very successful strategy that we have. Past year, somehow, four major brands of our high-end portfolio really got power brand equity up. Okay, so Corona is doing very well. Stella is doing very well back on the brand equity side is doing very well. And we are beginning to see demand to those brands. So we are seeing Corona, it was a 44% up. We see Beck's with 59% up too. Stella is doing okay. Original, a domestic brand, was 35% up. And this is a major piece of our strategy to improve margins moving forward. These products, they are 150. on average of the average price of the market and they are accretive in terms of margins. But our main strategy is still to seed, to have brand equity ahead of market share. For example, Corona has three times the brand power that it has in terms of market share. So there is a lot of space still that on consumer pool on that is an important piece of our equation. We add to that the innovation, the core plus there is another part that will bring the creativeness for us in our portfolio.

OK. Hi, Alan. Thank you for the question. A few points here in terms of use of cash, the framework, the mindset continues to be the same as the one we've had over over the years, meaning, number one, we want to reinvest in growth opportunities. And over the last few years, I think we've. Found very attractive organic growth opportunities, either in our base business or in these new business ventures that we've been investing behind leveraging technology. So plenty of opportunity to reinvest the strong cash flow generation to generate more growth. Number one. Number two, non-organic growth opportunities. We're always looking at interesting opportunities, again, in the base business, in markets where there are still white spaces or in these new new business models, new ventures, opportunities to enhance our capabilities, to drive the expansion of these of these ventures going forward. OK, so that's priority number one. Reinvest in. in future growth. And then we will continue to return excess cash to shareholders over time as we have been over the course of the last few years. Just to give a bit more color on this, if you take 2019, 2020 and 2021, right, what we ended up doing was we had, if you look at the fiscal year, right, total payout, we had roughly 7.7 billion um of of payout between dividends and ioc in 2019 and 2020 right reminding that 2020 right there was a there was a very tough year but we managed to keep the payout at the same level and as the business performance and the financial performance bounced back in 2021 we managed to increase the payout And we ended up making the largest payout, I believe, since 2016. It was the third largest total payout in history, growing 23% versus 2019, while profit grew roughly 8%. So the way we continue to think about this is as the business improves and after we've reinvested for growth, we will continue to look to return excess cash to shareholders and improve the payout over time. The way to return excess cash to shareholders will remain very much focused around maximizing the IOC as we have in the past. supplemented by dividends. And from time to time, we will look at buyback programs, but that's a discussion that we have with the board from time to time. For now, the decision remains to prioritize IOC and dividends. And this is a conversation more towards the end of the year for us.

Thank you so much, Lucas. That's very useful. Thank you, Judge. Congratulations again.

Thank you.

Our next question comes from Lucas Ferreira, JP Morgan.

Hi, guys. Thanks for taking my question. Some additional clarification on the guidance, if possible. Just wanted to understand how much you think you could outperform the market this year. So, in other words, how much you see the Brazilian beer market growing in 2022? And just to have a view about this growth, if you think it's going to be a bit more back loaded into the year. Since your volume is declining in the fourth quarter, if you can give us a sense of how the year is starting. So how should we think about reconciling the beginning of the year with your full year guidance? And the second question around the same thing here, if you can give us a sense of how relevant, uh, both these and that anybody are for you guys to believe that these results in 22. So you, you guys, if I'm not mistaken, like, uh, the, uh, the, the, this marketplace is already growing, like probably 40% from the last number you guys gave us in the third quarter. So just wondering if you can, if you can, uh, uh, uh, explain to us a little bit, how. and that really contributes to the performance in 2022. Thank you.

Okay, let me get this one. Lucas, thank you for the question. So thinking about, I think that we talked about the lines. I think that the trickiest one is really the volume, right? So that we mentioned. We are confident because We are starting with a good carryover in net revenue by hectolitre and we're starting with a very good position in terms of market share, a solid, with returnable performance really going up. So we are confident that we are structurally better to address the year and starting the year with a market share much above that we started the previous year. So that's how we think that we are structurally better in starting the year. So having said that, we had the Omicron impact in the beginning of the year. Last year, the carnival was already some week in what we are seeing. So we are seeing a recovery in February, but somehow looks like we're going to have like a half carnival. It's just a holiday. And then we're going to have another one in April because Rio de Janeiro and Sao Paulo already mentioned that they will have some activities on. we have all the reopening and then we have elections and world cup so somehow i think uh that's the most tricky part so it is really something that uh we have to be attentive uh disciplined uh agile and flexible to address to address the industry overall uh that i think that's the most uh i can mention to you with let's see no crystal ball on that There is plus and minus that we have to address. We are starting a good position. Having said that, this is really about growth. So this really helps the base business overall. But when we talk about the other assortment, it's really about growth. So we are building growth. Zed delivery, we are more sizable already now and we begin to see efficiencies coming as we get the last mile more efficient overall. So we are more and more doing two deliveries in the same motorcycle, so we are more and more getting efficient on revenue management on that piece, so we see Zed more sizable and really getting more efficient and this is really the other piece, it's really about growth. Okay, so I think that's the most I can mention. That's pretty much it. Thank you, JJ.

Our next question comes from Henrique Brestling, BTG.

Hello, Jeff. Hello, Lucas. My question is on the cost outlook for 2022. The cost per hectare in Brazil should grow the 16 to 19% you mentioned in Brazil. And that is now mostly coming from commodity pressures rather than the effects as it was in the past. So if you could just provide some additional color on how that could also apply to your other business units. and also how the outlook for revenues growing by higher revenue per hectolitre rather than volumes may relate to that in terms of potential price hikes that you see during the year. Thank you.

Yeah, thank you for the question, Henrique. Our outlook for cash cogs per hectolitre, right? in terms of the guidance, is really focused on Brazil Beer. We're not providing any guidance with respect to the other business units. However, when we look at the commodity inflation, no business unit of ours is immune to it. And as we have the hedging policy in place, rolling 12 months forward, you can get a sense of the impact that commodity inflation has. can have across our other business units. But just given the importance of the Brazil beer business to the overall performance of the company, we wanted to provide this additional level of detail so the market can have a better sense of what to expect in the year. And could you repeat the second part of your question on the net revenue per hectolitre, please?

Yeah, sure. It was if the goal or at least the outlook of growing revenues mainly by higher realized prices, if that implies that you see, in the end, a better environment for price pass-throughs. And now, mainly overseas, you mentioned before that some of the price hikes should come from better mix and you have already a positive carryover. But just thinking if we should also expect higher, you know, price hike, then you should see a positive environment for that overseas.

Okay, so outside Brazil, I think one of the key drivers of our net revenue per hectolitre performance has been premiumization, okay, number one. And that is true not only for core plus volumes, in markets like argentina in markets like many markets in the caribbean the dominican republic panama and also canada okay and this is also true for our premium brands across these markets So I think both in 2020 and 2021, we really saw this momentum building around above core or plus and premium volumes increasing the mix. And that has helped us on the net revenue per hectolitre performance side. I think that's one of the major the major contributors. over and above the core pricing. And as Jean mentioned earlier today on the call, right, we've pretty much started the year where we want it to be in terms of pricing. And so we count on this carryover to give us also a good tailwind going into 2022. That's very clear, Lucas. Thanks very much. Thank you for the question.

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

Thank you. Good afternoon, Jean, Lucas. Thank you for the call. My first question is on the volume performance, but more from a channel perspective, right, both in Q4 and how you're seeing the beginning of the year. If you could give us a little bit more color on the performance between the on-premise and the off-premise in Brazil. uh the weakness that we saw in the industry where was that more concentrated and and uh how are you seeing the pace right of the on trade recovery throughout uh the next couple of quarters uh that would be my first question and the second question is it's interesting you guys mentioned uh the the sgna relief right for for 2022 um any sense of magnitude or how should we think that versus inflation for the year, I think that could be helpful. Thank you.

You can take the first one. Jean will take the first one on volumes and then I'll answer the SG&A one.

So, Isabella, thank you very much for the question. So, what we saw in Q4, it was a lot related with weather, that it was a very bad weather overall. So, we saw this industry deceleration on that part. So, impacting all the channels equally. And then we had Omicron that impacted more the on-trade again. So, we have been seeing a structurally better comeback of the on-trade, but then Omicron stopped that and then we saw the impact on the on-trade again. But Q4, it was mainly pretty much about the weather overall. We believe that this own trade coming back is more structural when Omicron goes. It's really getting better. We've seen the own trade. overall reorganizing, transforming itself to do deliveries, to do takeaways. Of course, the occasion of gathering outside of home with friends, it is volatile, so it was getting better, it stopped, I think it will get back again. So I think throughout the year, this should be a positive, as we've been seeing all over the previous year. Overall, OK, so in terms of channel, we believe that the trade in traditional trade will continue to rebound during the year.

And that was pretty much it. And with respect to your question on SG&A, Isabella, a few things here that I think are worth highlighting, I think, number one, 2021 was a year where SG&A growth was heavily impacted by admin expenses going up. And within admin expenses, there were a few dynamics that we highlighted during our Q3 call. um number one if you think of the the growth of overhead excluding our investments behind technology right the overhead growth was actually uh much milder uh and below inflation okay but since 2020 we've taken the deliberate decision to write over invest in technology to to to build the future okay and that had an impact on top of the variable comp And as it relates to variable comp, I think it's fair to say that the variable comp accruals in 2021 were on the higher end of historical accruals, given that the rebound in performance was much stronger than we expected, right, going into the year in 2021. So when we look at 2022, I think a good way to think about SG&A is less growth on the SG&A side coming from admin because of lower variable comp accruals versus the level at which we accrued in 2021. We will continue to stay very, very disciplined around overhead growth, right, as we have historically been. But we won't be shy about continuing to invest behind technology, okay? But all in all, a much better level of growth on the admin side as opposed to 2021, okay? Then when you go to sales and marketing, sales and marketing in twenty twenty one was heavily impacted by the comparable base because in twenty twenty sales and marketing was was at a much lower level as we adapted to COVID and we tightened the belt. So there was a tough base of comparison and that to a great extent explains kind of the year over year growth, albeit below net revenue, net revenue growth for the full year. So sales and marketing, I think perhaps the best way to just to have a reference is to look at historical sales and marketing performance and use that as a reference, though we're not giving any specific guidance on sales and marketing for 2022. So I would look at historic levels, okay, as a reference. And then on the logistics side, I think one of the main impacts was the increase in initiatives like D2C, right, as Jean mentioned, that they bring the last mile distribution costs. We will still invest behind that expansion. So there's still some increase on the distribution cost side. but nothing to flag here out of the kind of ordinary expansion of the business, okay? So all in all, SG&A growing less than it grew in 2021, given these different levers that I mentioned.

Yeah, it's very clear. Thank you.

our next question comes from robert ottenstein evercore great thank you thank you very much first just a short detailed question any update in terms of state or national taxes that that impact beer in brazil and then my my main question really is on how you're addressing total beverage alcohol opportunities in your key markets, and particularly spirits, how beer is doing versus spirits, plans that you have to perhaps get into spirits or address spirits occasions with more ready-to-drink products. You've done some of that in the past, but I'd like to get an update on where those initiatives are. Thank you.

OK, I can I can take the first question on taxes and then John can can answer the second one on total beverage alcohol on the tax front. Robert, there's there's there's no real update. I think just taking a step back, our our view is that given how hard right covid hit our markets, we think that everybody needs to support recovery. And so in our view, the way forward, right, is to invest behind recovery of the on trade, um for instance and and and so to the extent there's further taxation right that's going to increase the burden right on the industry increase the burden on the trade uh we think that's not going to be right constructive for the recovery um of the industry uh as a whole okay um but There's no real update since Q4 on the tax front.

Robert, and let me get the second one. So thanks for the question on total beverage. Let me start with something that we don't talk that much. We have been building NABs across the board in Brazil, Argentina, Uruguay. And we are really excited about what we, the foundations that we built this year. So we have resilience on that side. We are gaining market share. Pepsi Black. is really something that we are very excited about. The taste is really something that consumers are cheering with us. Guaraná Antarctica is doing very well. So in business, it's really helping for us to give more space for NABs. So this is the first thing. I think it will be a strong year for NAB across the board in our company. because we built, that was a year, 2021 was a year that we built a lot of things to help MAPS. Having said that, so we stepped change the share of throat of beer in the previous, in 2020, in 2021, it was a step change. You've seen my volumes. Somehow we get it right, the innovation strategy and the affordability strategy on the mainstream, on the core. So we step a change here, so our category is very resilient. in Brazil, in Argentina, in Chile, in our major footprints, beer is really, as a category, really doing well. We are taking the lead on innovating, on deciding the relative price on the basket, so we are very excited with that. Having said that, we just put in place a business unit to think about Beyond Beer. that is thinking about all the options that we have. So RTG is really something that we are starting. So with Beats in Brazil and Mikes, there is Vodica Soda that we piloted. It is doing very well. It's really something that we believe that will have traction in our major markets. And then it is pretty much this spiritual occasion. And then we are starting everything and open on all the alcoholic beverages, but it's easy to say how we're going to move. So we put in place the capabilities. We hire ahead. We are studying deeply. RTG will move first, and we are studying the rest. Thank you.

Our last question comes from Gustavo Troiano, Itaú BBA.

Hi, Jean, Lucas. Hi, everyone. I was wondering if we could explore a little bit more the EPIDA guidance for 2022, especially trying to analyze the magnitude of the forecasted growth within different geographies. So it would be very helpful if you could help us navigate through a build-up, maybe, of the consolidated EBITDA growth across business units. So which regions could increase EBITDA ahead of the consolidated growth? Which ones could act as headwinds for the consolidated growth to meet your EBITDA guidance? So any callability to give us, mainly focusing on your international operations and how we compare this Brazil Bureau EBITDA Outlook for 2022 would be very helpful. Thanks.

Okay, thank you for the question, Gustavo. We're not going into that level of detail, but let me try to give you a good way to think about it. And one of the reasons why when we project 2022 based on our plan, what are the reasons to believe that we're going to work towards delivering more than the 10.9% organic EBITDA growth for AMBEV at the consolidated level? I think a good way to think about it is in 2021, we delivered the 10.9% organic growth year over year. with a bit of decline not only in brazil beer and a bit of decline in brazil knob whereas our international operations in las kaki and canada really really made a difference in terms of allowing us to deliver this uh this organic a bit of growth Despite all the FX and commodity headwinds that we faced across markets, we still managed to deliver good recovery and double-digit EBITDA growth. So when we look at 2022, we see, given the momentum and given that we're starting the year better prepared, we see a 2022 with Brazil bouncing back in terms of EBITDA growth. So just by having Brazil bouncing back and growing a bit after three years of decline, right, and given the size and importance of Brazil, not only beer but also NAB to the overall company, that gives us confidence that we can deliver this improved performance and growth level for 2022. I think that's the main difference. It's Brazil bouncing back and growing a bit in organic terms.

To add on that, Gustavo, Central American Caribbean has been a clock, right, has been some steady, Canada too, it has been easy to predict. Last, we are doing very well, so the core plus strategy is really working, Chile is really something that we are accelerating, Paraguay is doing very well, Argentina too, So in the end, NABS is what I mentioned. Somehow we don't talk that much, but I think it will have a strong year. And then we have Brazil turning.

That's clear.

Thank you.

Thank you. The Q&A session is now closed. Now, I would like to turn the floor back to Mr. Jean Gillesetti for final remarks.

So thank you very much. Thank all analysts, everyone who joined the call for your time and attention. 2021 was a great year in our journey. We are transforming our business. The milestones that we accomplished, it was something that we are very proud of. Q4, we consolidated a whole new level of volumes. We are structurally better prepared to 2022. We know that 2022 will have its challenges, but we are confident on delivering consolidated organic EBITDA growth in 2022 ahead of our 2021 performance. So thank you very much for everybody for the call. I see you in May and have a great day.

I'm back. Thanks everyone for participating in today's event. The conference call is concluded. Have a nice day.