Ambev S.A.

Transforming our country Hearts we will conquer The show must continue Look at the people asking for peace So much thirst to renew The show must continue And from the eyes of Guilherme Eyes are always to deliver The show must continue Good morning and thank you for waiting.

We would like to welcome everyone to Ambev's first quarter 2022 results conference call. Today with us we have Mr. Jean Gerentate, 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 is being recorded and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a question and answer section. At the time, further instructions will be given. Should any participant need assistance during this call, please press star 0 to reach the operator. Before proceeding, let me mention the forward-looking statements are being made under the safe harbor of the Security 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 the general economic conditions, industry conditions, and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such a forward-looking statement. I would also like to remind everyone that, as usual, the percentage trends that will be discussed during today's call are both organic and normalized in nature, and the less otherwise stated percentage trends refer to comparisons with first quarter 2022 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Dombevi's normal activities. As normalized figures are non-DAAP 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 Gereissat, CEO for Ambev. Mr. Gereissat, you may begin your conference.

Good morning, good afternoon, everyone. Thank you for joining our earnings call for the first quarter of 2022. Three weeks ago, during our Investors Day, we focused on how our culture, our strategy, and our business model has evolved, how we embrace technology in benefit of our customers and consumers, why we see several opportunities to create value going forward, and our overall company's transformation. Today, I will, of course, focus more on our Q1 results. But as I do this, I will also highlight how many of the things we showcased during the investors day are already positively impacting our short-term performance. Let's talk about the quarter. During our full year 2021 call, I explained why I believe we were starting 2022 better positioned, while acknowledging we expected a tough start to the year. Q1 2021 had a very strong performance with volumes up 12%, net revenue up 28% and the bid up 24%, record growth rates for a first quarter of the year. And this year we were off to a slow start because we had a one-off January, a very tough month in many markets given the Omicron varieties. However, I was happy to see that the team managed to deliver a better overall performance than we expected, particularly in Brazil and Laos. For instance, Brazil volumes bounced back in February and were very strong in March, which drove consolidated volume growth of 5.5% in the quarter. Brazil net revenue per hectolitre grew not only year over year, but sequentially versus Q4 21, both in BEER and in NAB. In BEER, volumes grew 2.1% despite the tough January, thanks to premium portfolio growing high teams and core portfolio growing mid-single digits. According to our estimates, we once again gained market share versus last year. Our three main core brands, Grama Antarctica and Skoll, were ranked in the top of the 10 most valuable brands in Brazil, among 478 brands in 36 different categories, according to BrandZ. In the Corplus segment, Spotlin remains expanding its distribution and volume per outlet, and Brahma Duplo Multi launched new returnable and one-way presentations, which will address more consumption occasions. NAB volume grew 16.9%, driving market share gains, according to our estimates. The premium brands' volume grew above the rest of the portfolio, led mainly by energy drinks, H2O, Pepsi, and Gatorade. In last, volumes grew 2.9%, despite a strong comparable in Argentina and the volume impact in Bolivia due to another COVID-19 wave in January. In Chile, we gained market share, according to our estimates, and expanded distribution, despite lapping the start of the partnership with Coke bottlers. Our Core Plus and above portfolio continued to grow in Chile, as well in Paraguay and Bolivia. Of course, not everything worked. In CAC, volumes declined 4.7% due to supply constraints in the Dominican Republic, our largest market in the region. We expect supply constraints to ease going forward. However, above the core portfolio continued to gain weight in our volumes thanks to brands such as Corona and Modelo. In Canada, volumes declined 8.4%, mainly driven by the worst industry of the last 30 years in January, which then recovered in February and March sequentially, coupled with tough comps from Q1 2021. Despite weak volume performance, we estimate having gained market share in beer, and our net revenue per hectolitre grew 4% due to consistent implementation of revenue management initiatives. So let's go deep in what's behind this performance. Let's talk about our five pillars of our how to win framework. The first pillar, brands for each and every one. In Brazil, Focus Brands, Brahma Bags, and Budweiser added over 500,000 fans versus same period of last year, according to our estimates. And in last, number of fans increased by 300,000. After reaching a better balanced price relativity between one-way and RGBs, our pack price strategy, our returnable packaging grew double digits in Brazil, mainly in the 600 ML presentations in premium and the 300 ML presentations in core portfolios. Second pillar, thirst to lead the future. Our innovations continue to over-index market share, according to our estimates, reaching 17.6% of Brazil's beer net revenue, thanks to the continued success of Brahma Duplo Malte, Spaten, and Stella Gluten Free. Innovations also reached over 17% of last net revenue. We launched new can sizes and secondary packaging to serve more occasions in the off-trade channel to brands such as Budweiser, Brahma Duplo Malti and Original 2. Third pillar, a toast to our customers' success. The digitalization of our customers continued to prove successful and supported our net business to achieve a higher penetration per outlet and increase its number of customers. And we continued the successful expansion of Biz in Paraguay and Argentina. Biz marketplace in Brazil grew GMV almost 10 times versus the first quarter of last year. and in the last six months served more than 500,000 customers offering 400 SKUs which include partners such as Pernod Ricard and Bacardi. This bank continued its rollout in our operations reaching more than 270,000 accounts and more than 1.4 billion TPV in the month of March. And lastly, in April, we announced the deal between us and Transportes Imediato, which is a relevant player in the logistic industries in Brazil. Together, we will further advance on the urban distribution center's development.

Your passcode has been confirmed. Please wait while you are joined to the conference.

720,000 monthly active users. Together for a better world, we launched a collective effort to tackle Scope 3 emissions with more than 165 suppliers that represents over 65% of our total Scope 3 emissions. And for the first time, more than 50% of our newly hired employees in the quarter were women. All in all, I come out of Q1 encouraged, and we will remain focused on seizing the moment for the main consumption occasions to come during the reminder of the year. We continue to expect volatility in some of our markets and cost pressures coming from commodities for the remainder of the year, but we are not making any changes to our outlook for the year. Therefore, the full year guidance related to Brazil Beer Cash Cox per hectolitre growth between 16% and 19%, excluding the sale of non-unbath products on the marketplace, remains unchanged. And despite the challenges ahead, we are on track in terms of our main ambitions for the year. Get Brazil back to bottom line growth, to have consolidated organic EBITDA growth ahead of 10.9% organic growth that we had in 2021, and improve our ROIC. to close i would like to once again thank all our people that managed to deliver this quarter's performance and i would like to thank you for your attention and handle this over to you lucas thanks john good morning good afternoon and good evening during our full year 2021 call i laid out our approach towards 2022 and i mentioned what should be the same

and what should change during the year as compared to 2021. So let me walk you through how Q1 performance stacked up using this exact same logic, starting with what wouldn't change. First, top line growth would remain a priority and a key performance driver. The result, 18.5% net revenue growth overall, with Brazil being the main highlight. Second, input cost pressure would remain a headwind. The result, cash cogs per hectolitre grew nearly 20% at the consolidated level. And for Brazil beer, it grew a little over 15%, excluding non-AMBEV marketplace products. And third, we would continue to focus on value creation drivers. Here, during our recent investor days, we shared the financial logic behind our strategy and why we believe there is a path to sustainable long-term value creation for AmBev, starting with a focus on improving our return on invested capital, building on our progress in 2021. And as Jean pointed out, there are some good examples already of how our bets are translating into improvements in the short-term performance. Now, in terms of what should be different in 2022. First, Net revenue performance should be more driven by net revenue per hectolitre than volumes, as we adapt to a higher inflationary environment. The result? Net revenue per hectolitre grew around 14% and volumes grew nearly 4%. Second, Cost headwinds would come mostly from commodity inflation rather than effects. The result? Commodity inflation represented over two-thirds of the increase in Brazil beer cash cogs per hectolitre, driven mostly by aluminum and barley. Third, SG&A growth should improve. The result? Cash SG&A grew almost 16%, with sales and marketing growing a little over 12%, distribution growing 24%, mainly due to rising diesel prices, and administrative expenses growing just about 3%, given lower variable compensation accrual. And fourth, over the last two years, we had significant tax credit one-offs in Brazil that positively impacted our EBITDA, financial results, and effective tax rates. This was not a major factor in Q1, but will be a factor in Q2, given how much these tax credit one-offs positively impacted the second quarter of 2021. What this all means to us is that these results are a clear indication that we are on track to deliver a better EBITDA organic growth in 2022 than the 10.9% organic growth that we delivered in 2021. I would now like to cover two more topics. First, our financial performance below EBITDA in cash flow and then ESG. Cash flow from operating activities totaled about 520 million reais in the quarter, which represents a decline of about 82%. Q1 2021 cash flow from operating activities had grown about 84%, and this quarter there were two main factors that adversely impacted our operational cash generation. First, payment of variable compensation in March. And second, higher CapEx payments to start the year, given the calendarization of our 2021 CapEx commitments. Normalized profit, however, grew nearly 29% in the quarter, given EBITDA growth, a lower net finance expense versus Q1 2021 of about 600 million reais, and a lower effective tax rate. But as I mentioned, we face a very tough comp in Q2, given the tax credit one-offs that totaled about R$1.6 billion, of which approximately R$1.2 billion impacted our EBITDA and almost R$400 million impacted our net finance results last year. Turning to sustainability, recently we had some very important milestones. I would like to highlight three related to our focus on environmental sustainability. First, we announced two more carbon neutral breweries in Brazil, Agudos Brewery in the state of São Paulo and Cachoeiras de Macacu Brewery in the state of Rio de Janeiro. Together, they represent an emission reduction of over 14,000 tons of greenhouse gases per year, and we intend to deliver another seven carbon neutral operations by year end. Second, Guaraná Antarctica is now packaged in bottles that are made with 100% recycled PET. This was a groundbreaking initiative that our team embraced and managed to deliver a great outcome. We are very proud of Guaraná Antarctica's heritage in Brazil, what it represents to Brazilian consumers, and its leadership in the circular packaging agenda. Third, another unprecedented initiative, but regarding Scope 3 emissions. As part of our ambition to reach net zero in the value chain by 2040, we engaged over 165 suppliers that represent over 65% of our total Scope 3 emissions, covering not only reporting but also concrete actions to decarbonize. And lastly, our 2021 ESG report is out and can be found on our investor relations website. We plan to host another ESG day in the second half of the year so we can cover in greater detail our ambition, our progress and learning so far, and what's to come. That's it, folks. Better start to the year than we expected, which is encouraging. Challenges and volatility remain a reality, so our guard remains high, and we have more work to do. Let's move to Q&A.

Ladies and gentlemen, we'll now begin the Q&A session. If you would like to ask a question, please dial star 1. If at any point your question has been answered, you may remove your question from the queue by pressing star 2. The first question comes from Mrs. Isabella Simonato with Bank of America.

Good morning, everyone. Good morning, Jean, Lucas. Thank you for the call and the question. I would like to ask about Peer Brazil. You mentioned that the penetration of RGB has been improving. Can you extrapolate how much is the recovery of the on-trade itself and how much is the strategy of the repositioning of the RGB that you mentioned yesterday with more adequate prices and what we can expect from that going forward. If you're already in the optimized mix of RGBs or there's more to come, that would be my first question. And the second question is still on the consumption environment, right? I think it's not exclusive of you that January was very weak and that we saw improvements across different sectors in February and March, but Can you give us a sense how you guys see the beginning of Q2 in terms of consumption environment and eventually mixed performance? How are you feeling overall, the overall market now in Q2? Thank you.

Hi, Isabella. Thank you very much for the question. So I'll take the first one. Beer Brazil on trade recovery, right, in RGB bottles. What I can mention is that we still don't see in Q1 the full recovery of the social out-of-home occasion as we compare to the pre-pandemic level in terms of mix, okay? So we are still seeing mid-single digits down in terms of mix. uh and but it's really accelerating so we saw that this is this trend this recovery was uh happening quarter after quarter then we had a sequential improvement in q1 compared with uh q4 of last year but we are quite not there yet but moving okay so still uh still opportunity on that front uh but happy to see sequentially moving uh so this is the the first question the second one as i as i mentioned in the in the in the last call the previous call the big question of this year really would be about the volumes right so i think the other things were well set So we had a good starting point in terms of market share. The price sequentially looks solid. The COGS, it is really something that we confirmed the guidance. So the question was really about the volumes. We were going through a very tough January due to Omicron at that point, at that moment. And we had the questions about disposable income and inflation impacting the industry. But we knew that this year we would have to have carnivals, a lot of occasions related with beer, World Cup in the summer. So the big question was really about the volumes. And then we figured out during the quarter that January looked like really a one-off because of Omicron. And then February got better, March was a very strong month, and we have momentum. We have seen this continuing.

That's clear, Jean. Thank you very much.

The next question comes from Mr. Thiago Duarte with Banco BTG Pactual.

Hello, good afternoon, everybody. Thanks for the opportunity. Two questions on my side. The first one, first of all, we appreciate very much the breakdown you're giving in terms of the known MBEV marketplace sales and the impact on the results. I mean, this is very helpful. And particularly on that, I was looking for some more color when we think of the revenue per hectolitre performance in the Brazil beer division. Can you break down to any extent how packaging and brand mix impacted the year-over-year performance or even the sequential performance? I mean, Jean just discussed how the RGB is gaining traction there, but not there yet fully. So can you talk a little bit how, again, packaging and brand mix impacted the revenue per hectolitre? That would be great. And the second question is regarding the performance of the core plus segment, right? It's clear from the statements that premium did really well. Core was once again resilient, but there is a sense that core plus lost a little bit of ground. So just wanted to see and hear your thoughts on about how that specific segment performed during the quarter. Thank you.

Okay. Okay. Thank you, Duarte. So let's see if I can break it down. I'm not sure if I can break it completely down, but overall, brand mix was over-indexing, right? The net revenue per hectolitre and the pack mix went a little bit down, as we mentioned in our investors' day. that during this previous year, we were rebalancing our pack price strategy on ways and RGBs. So in the end, net-net, it was positive. We are somehow with, we are confident on the net revenue per hectolitre. I think one way for you to look at it, it is that sequentially it is going up comparing with Q4. And if you look at my previous year, this specific Q1 of the previous year was really something that it was strong, but then moving forward, so the mix effects diluted a little bit in the previous year. And we are confident that now it's really sequentially going up and very solid. It's a good level. when you look at the full year and the level where we are now. So in terms of revenue, practically. Talking about brands, brands and packs, I think we are very pleased with the volumes. So if you look at our volumes and compare with the pre-pandemic levels, With 2019, if you look at production numbers, we are 6% above, 5% above 2019, and we are seeing overall competitors in a level that is much below that. And in the short term, year over year, we are happy with the 2%. So the bright spots, it was really the high end, so that we grew higher high teens, right? So for me not to say it's wrong, high teens. So the mainstream was very solid to meet single digit, the combining brands. in the core plus uh we put a basket there that's uh brahma diplomat spotting uh bohemia and it it's already represents more than 10 percent of our volumes uh with the highlights for brahma diplomat in in spotting and boy bohemians uh we we took some discounts out uh uh regionally uh but so uh core plus we feel that uh that the strategy is right and represent more than 10% of our volumes so far. One big thing too that I mentioned is that in terms of strategy of portfolio and brands, the RGB basket, it really went up double digits and it's not there. So it's, as I mentioned to Isabella, so the mix of 600 ml is not still in the pre-pandemic level but when we look at the the full basket of rgb they are really growing double digits they are more on the on the twins okay thank you that's helpful the next question comes from mr sergio matsumoto with city group

uh yes uh good morning i wanted to um uh ask people on uh one of the topics that came out in the investor day about you know those uh four brands the the three bs plus button um and kind of i ask you about you know how do you balance you know between the you know those priority brands uh versus the complementary brands um do you see Spaten, Budweiser, and Beck's, like those three that are not as big as Brahma to, you know, to kind of get just as big over the medium to long term and, you know, perhaps overtake the size of Antarctica and Skoll? Or, you know, how do you see, you know, this balance between these core, these priority brands?

Okay, thank you for the question. I think when we put our vision on innovation and wide spaces to launch new brands and build the portfolio of the future, I think what was very clear for us, it was that we have a space in Brazil on the core plus segment that is highly developed across the board in China, in US, in high maturity markets, in Canada, in UK. And somehow the space that would be created over there on the core plus, the potential should be something around 25% of the industry, right? So somehow in the long term, I think so premium at some point in time could be like 20, core plus 25, and then We have current value, core a little bit more than 3040 and the rest of the value. So this opportunity that we are focusing on the core plus uh and the entry premium so they are we are aiming on on build something that we over index in market share in 25 percent of of the of the market and so far our two bets are uh brahma diplomatian spotting so spotting has to be sizable it has to be a play That can, together with Brahma Duplo Multi, lead this segment. And then you can do the math for that. We are very excited. It is just starting, but we are very excited about the performance, about the feedback that we are having. So we believe that it really can be a sizable brand spotting in the core plus. Talking about the premium segments, we really think that Budweiser, it will benefit from the reopening overall, the entertainment agenda, the World Cup. that it was very depressed in the previous years. And we believe that BEX and Corona, they can play really an important role coming from above and building the super premium segment. So I'm not quite sure if I really answer exactly, but this is a little bit the vision. I think the core plus can be 25, the premium can be 20%. We have a dream really to over-index overall, and these brands should get sizable to make this mission for us.

Yeah, understood. It does make sense. It sounds like Spaten, there's a lot of opportunity that you see going forward and that is something that we should keep an eye out on. Thanks very much.

Yeah, for sure.

The next question comes from Mr. Lucas Ferreira with Banco JP Morgan.

Hi, good afternoon, everybody. Thanks for your time. My first question is regarding the costs, the cost guidance that you have for the year. Specifically, if a volume is coming, you know, strong or performing well, put it this way, if you start feeling a bit more comfortable with costs kind of coming more towards the low end of the range, eventually coming even below that range, like it was the case in the first quarter, adjusted for the marketplace. Is this something that we can say or not yet? And the second question maybe to Lucas regarding the working capital, specifically this quarter, which was a bit heavier, put it this way, especially on the accounts payable line. So if there's anything particular about this quarter, that you can highlight and how to think about that going forward. Thank you.

Okay, so I will get the first one and then Lucas get the second one. So I think when we gave this guidance in the previous quarter, So it was in the day that the war started, right? So at some point in time, we were a little bit anxious about it because we didn't know how everything would evolve with the war, but we were confident. So we did a lot of math. to get to this range. And we are very confident that we will be in that range. We are working very hard for that. And it's hard to say, it's too early to mention that we can go under, but we are very confident to say that we're going to be inside that range. Okay.

Hi, Lucas. This is Lucas here. So on working capital, um, I think the two you're, you're spot on. I think the big difference in the quarter is really when it comes to payables and within payables, there were two main main factors. Okay. Factor number one was the payment of the variable compensation. Okay. In Q1, remember, uh, 2020 was a no bonus year. So 2021, there was no cash outlay for variable compensation. which was not the case in 2021, where there was a bonus paid out and it hit us in the first quarter of 2022. So that was the first big impact that we saw in the payables line. And second, related to CapEx, as you may remember, we have payment terms that vary depending on the category of suppliers. And many of our suppliers, particularly CapEx, we have longer payment terms. And so depending on the calendarization of our CapEx spend, there are instances where we commit, we book the expense in one fiscal year. but the actual payment, the cash outlay falls in the next fiscal year. And so what happened this quarter was exactly that. So there were capex commitments that were booked in Q3 and Q4, and the cash outlay has fallen in Q1 of this year, okay? So those are the two main drivers of this variation on the payables line. I think for the year, we continue to work very hard on improving working capital performance overall. So I would see Q1 performance as these two factors and nothing more than that. And then we're continuing to work on it. Okay.

Excellent. Thank you very much.

The next question comes from Mr. Gustavo Troiano with Itaú BBA.

Hi, Gia, Lucas. Hi, everyone. Thanks for taking my question. I was wondering if we could explore a little bit the EBITDA organic growth forecast for 2022 of 11% that you have mentioned in the fourth quarter. especially trying to analyze how this first quarter compares with your initial expectations so it would be really helpful to hear from you if this word came in line with your forecast especially focusing on a business unit breakdown so is there a business unit that has surprised you to the upside or to the downside and looking forward as we walk through the second quarter do you believe these positive or negative highlights are on track to reach your original forecast. So any call that you could give us on this would be really helpful. Thank you.

So thank you for the question, Gustavo. So let me try to elaborate on this. This is a bit the ambition that we had. So we mentioned that we should grow faster than in the consolidated level with Ambev than we grew last year. The number is 10.9. uh so we feel that somehow uh what happened in the in the if you look at the growth on the previous year it was uh really brazil on the negative territory uh and international operations uh doing well uh somehow we believe that our acceleration for the year it will it will be the continued performance of international operations and the rebound of Brazil. And net-net, when we look at this quarter, everything that I look on it, makes me confident that we are in line to make this guidance. I think Canada, it was a place, Canada and Dominican Republic, it was a place that they were a little bit off. But somehow we saw the other areas really compensating. So I really feel that this quarter confirms our journey to deliver the ambition of accelerating the beta growth that we mentioned before. And the main changes really in Brazil, beer and NAB really bouncing back strongly.

Awesome. Thank you.

The next question comes from Mr. Robert with Evercore.

Great. Thank you very much. First, a more detailed question on the operating environment and then a bigger picture question. So can you talk and give us a little bit more detail in terms of what kind of pricing is going on in the Brazil beer market? today that you've done, that the competition's done, and maybe break it out a little bit more by tiers. From what we can tell, it seems much more geared to the high end and an increasing gap between core, core plus, and the high end. Maybe we're wrong, but that's kind of what our trade visits suggested. So that's the first topic on pricing. And then the second topic, kind of just a bigger picture of some important management changes at the ABI level, you know, a growth officer, Ricardo Tadeo, with a lot of businesses coming into him. Can you talk about how that impacts how you run your business and if anything changes there and whether it's beneficial? Thank you very much.

Okay. Thank you for the question, Robert. So, Robert, Q1 net revenue per hectolitre was 8.4% versus last year, excluding in beer, just talking mainly in beer, excluding the marketplace. It was driven mostly by the price increases carryover that we had during Q4 and revenue management initiatives. Our last price increase was in October 21. So Q1 is really a tough comp when we look at what happened in the previous year. But sequentially, we've seen Q1 going ahead of Q4 and solid. which put us in a good position to the rest of the year. Sequentially, we improved 0.7 compared with Q4 2021. And historically, the Q1 and Q2, they go, because of seasonality and regions, it really usually goes down. And we were able to put it up and we are seeing it solid moving forward. We're going to remain flexible watching inflation. Inflation is not controlled in Brazil. Watching disposable income and elasticity. Demand among the factors to continue to be flexible and get all the opportunities that we need. Talking about competition and segments, I think from our perspective, the segments that really have a rate of price increase the most, it was really the value segment. The value segment was the one that increased the most prices overall in the industry. And what we saw in this Q1, Q2, it was the the price to consumer relativity was open uh we moved ahead uh competition took a little bit time uh to follow uh and and follow more by the mid of the the q1 uh and so when you look at it this q1 that we had it was with uh a open relativity to competitors when we we see the historical So I think this is a little bit what I can mention. So we are confident that the things are solid and then we have momentum. Talking about Ricardo Tadeu's strategy, we have been working together for a while. There is a lot of collaboration with that. Ricardo worked with us many times. a long time with us, knows a lot our operations here in Brazil. We expect to continue the collaboration on this, this banking and DTC, that these are a big bet for us. And I feel that the structure that ABI proposed with Ricardo, it's really something that's the right thing to do and will help us to think all this transformation holistically, as a platform, not siloed, and really will make all these things connect and be leveraged. So I'm very excited about Ricardo's structure.

And just on the price increases, value up the most, yes, but that's not a segment that is very big for you. How would you compare the difference in your price increases between Core, Core Plus, and Premium?

So, I think in the end, Robert, this is a little bit of sensitive information. We do not comment that much on that, but there is no big difference on that. It's a little bit aligned. uh what we are what we are doing across the segments it's it's pretty much pretty much the same of course inside we have a different strategy on on branding as i mentioned in the call before we we took some uh some discounts of bohemia for example that was a brand that it was a regional play in the core plus segment uh to really uh focused on brahmadu promotion spotting so inside there is uh some some strategy brand wise but segments overall they they are pretty much uh uh going up uh almost the same rates yeah just to just to complement here robert uh lucas speaking i think in 2020 and 2021

I think there was a more deliberate decision on our part to focus pricing more on one-way packaging, right? As opposed to RGB, right? As we kind of revisited the entire price tree. And also we didn't want to overburden the on-premise, which was suffering a lot during the COVID pandemic. So we felt that if we were to take pricing during that period of time, where the consumption occasions out of home were depressed, right? We would be kind of overburdening and slowing down the recovery of the channel. But this was more a reality of 2020 and 2021. And so now I think it's more of a overall kind of pricing strategy, obviously looking at segment by segment, brand by brand, region by region, channel by channel to see where there are fine tuning needed. But I think this was more in the past, okay?

Got it. Thank you very much. Okay.

The next question comes from Mrs. Fernanda Sayon with Credit Suisse.

Hi, Gia. Hi, Lucas. Fernanda Sayon from Credit Suisse. Thank you for the opportunity to ask questions. I have two on my side. So first, I was wondering if you could comment on market share dynamics across markets. specifically across segments and brands. And then also, if you could give us some more detail on what happened specifically in Canada and how you see the business going forward. Thank you.

Okay, thanks for the question, Fernanda. Talk about region first, and then we jump into segments. Overall, we are with a solid market share at Ambev, right? So if you look at, I'm really putting the rolling 12 volumes a month. That is really something that we are looking into it. We know that we are the leaders of the industry, so we have to think not just about gaining market share, but we really have to think about occasions and industry expansion. And we are very excited about our volumes. When we were discussing in the previous quarter, if We have cycled all the growth and then it would be the story of volume growing would be behind or if we're going to continue to be able to grow volumes. And then we delivered at unbeatable levels at the rolling 24, rolling 12 months again, that it was very strong. to led us to 182 000 hectoliters at unbev level so this is this is the first thing so going in thinking just in terms of market share the breakdown on market share on the regions so it is solid too so we are gaining market share in brazil we are gaining market share In Chile, Canada, we gained the market share. We have a very solid position in terms of market share in Dominican Republic. Argentina, somehow we are in line with the market share that we always had over there. And so region-wise, we are pretty much with a good performance of market share. And looking at segments in Brazil, somehow... So let me just mention that, that we don't mention usually. And then NABs, we are selling a lot and gaining a lot of market share with the strategy that we had on the portfolio rebalance. with the digital platforms really helping us to gain market share overall in NABs that we don't talk that much and we really see as a model of growth moving forward. So talking specifically about Brazil, and and the segments so we are seeing uh we were very excited about the high-end performance that we have in q1 that we had in q1 in terms of volumes it was uh high teams performance. Decor Plus, it is solid with Brahma Duplo Multi and Spartan. Decor is really outperforming the industry overall. And we make some decisions on the value side, mainly in cans on the value to really put prices up. And then so there is less volumes and less market share over there. But somehow market share feels uh feels solid and we are focusing on a basket of brands that you mentioned uh in the investors day we are focusing across the board on the core plus segment so we have uh we we launched it two years ago school in paraguay in the corporate segment we have uh undesigned argentina in the corporate segment so we across the board focusing a lot on the corporate segment and somehow the focus brands that we mentioned to Brazil on the investors, that are the bees, the strategy that we have over there. In Canada specifically, Canada was a tough industry. Somehow the heat of... Omicron and the tough comp that we had previous year. It was really something. The good part is that this quarter is not a big quarter in terms of seasonality for Canada. And we are seeing industry recovering and we are seeing that the market share that we are gaining market share in Canada. So somehow it was pretty much a combination of a tough company and a bad industry that we have in Canada, but the business is solid, innovation is working, the brand is working, the Beyond Beer that we are launching, they are solid in Canada, so somehow we are confident when it comes to market share in Canada.

Yeah, just to add here on Canada specifically, I think Just to give you a little bit more detail around the market share performance. First, I think we saw good performance market share-wise in premium. This was led by Stella and Corona. When you go to Core Plus, Niccolo Boltra continued to also perform well. So these three brands have delivered for us over the last few quarters. in Canada. So it was great to see that despite a very negative industry, particularly in January, these brands continue to outperform the market and gain share. And then in addition to going beyond volume, because net revenue per hectolitre was actually positive, growing 4%, but on the cost side, The operation obviously suffered from the commodity headwinds that have been impacting many, many markets across the board. And in terms of SG&A, I think the main impact was on the distribution side, given rising freight costs. And so that was also a factor in Q1. But again, going forward, we have a plan in place to improve performance and and what we have to deliver. So that's the challenge going forward.

Thank you, and congrats on the results.

Thank you.

The next question comes from Mr. Thiago Bertolucci with Goldman Sachs.

Yes. Hi, Gigi and Lucas. Good afternoon, everyone. I have two questions. The first one, following up on the discussions on market share, Could you please elaborate a little bit more in volumes growth in Argentina, please? This is the first one. And the second one, regarding the additional information you shared on these, especially the portfolio from Ambev, we're seeing at this point cash growth margins close to mid-single digits, right? But I understand that part of this is basically because you're leveraging your existing footprint and existing capacity within the truck, so most of this should flow to EBITDA. and please correct me if I'm wrong on this, but going forward as you scale up the platform, how should we think about margins for this business unit on an underlying basis? Should we expect additional SG&A to come over the next quarters, or should we take these current levels as an underlying base for margins going forward? Thanks.

I'll get the first one and then Lucas help me with the second one. So somehow, let me talk first about last Argentina. We had a good performance in top line in last. So it was a 40% up. So we have to remember that we have the countries that we have here is Argentina, Chile, Bolivia and Paraguay and Uruguay. So it was a good performance, it's an area that's relevant for our growth. Talking specifically about Argentina, our volumes in Argentina, they were negative on this quarter. in beer so they were low single digits negative cycling a strong q1 that we have in the previous years with nabs on the more positive territory over there but with a market share that was pretty much in line with what we had in the previous year in Argentina okay So talking about Bs and margins, I will hand over to Lucas. Sure.

Thanks for the question, Thiago. I think overall, given that the platform is still in expansion mode, again, we've come a long way in the last year, but there's still a lot of opportunity ahead. The honest answer is it's still too early to establish a steady state type kind of margin level for the marketplace business. But given how we are structured and how we're working with this, meaning leveraging the capillarity of our distribution network, our reach to clients, I think conceptually, It makes sense to think about gross margin flowing more to a beta margin and less SG&A expense than you would see if you looked at other similar type operations. Conceptually, that makes sense. It's hard to give you a more precise indication of how much of it flows through at this time because we're still expanding.

Lucas, if I may follow up on this, thanks for the call. Would you think it would make sense to comp this absolute level of margins with the cash and carry guys or wouldn't it make sense?

Well, you guys are the experts here, right? You guys are the experts on what are the best comps, okay? uh we we we obviously right look at other market participants and and but again we're focused on we're focused on the client and delivering the best possible service and assortment to our clients um i'll leave it to you guys the experts on what are the best calls thanks lucas thank you okay

The next question comes from Mr. Ricardo Alves with Morgan Stanley.

Hello, Jean, Lucas. Thanks a lot for the call. Most of my questions have been answered. Just some more specific ones. On administrative expenses in Brazil beer, we did see the year-over-year decline. As a percentage of sales, I think we're running at 8% or so. but still seems a little bit above historical. So did you guys expect this line to go lower from here? Did you expect to see a lower number already in the first quarter? Just for the sake of modeling the rest of the year in 2022, any caller here would be helpful. If there's anything within the admin line that surprised negatively in the first quarter, and maybe that will change going forward.

Yeah, I think the big, Lucas here, Ricardo, thanks for the question. I think regarding Brazil beer specifically, I think the main thing I would call out was that last year, sales and marketing expense, right, was actually down year over year, okay? And so in a sense, we actually had a tough comp on the sales and marketing portion, okay? of of brazil beer sgna okay uh number one on the distribution side we we we continue right to to to face um cost inflation particularly from from diesel right so we do operate a large direct distribution network. And so the logistics operations tend to suffer as diesel fuel prices continue to increase. So I think looking ahead to your question, that should continue to pressure. And last but not least, I think the administrative cost side of things was a major factor in 2021. given the variable compensation accruals that were done quarter after quarter. And for this year, we're not seeing, we didn't see in Q1, and we don't expect to see going forward that type of growth on the variable comp accrual side. Just because of the dynamics between 2020 and 2021 and the level of performance that was ahead of our expectations in 2021. Okay, I hope this helps.

It does help. So thanks for the details, Lucas.

Okay.

The Q&A session is over. I would like to turn the floor over to Mr. for his final remarks.

So thank you all. Thank all analysts and everyone who joined the call for your time and attention. To wrap up, we had an encouraging quarter and we will remain focused on seizing the moment for the main consumption occasions during the reminder of the year. We still expect some volatility and cost pressures coming mainly from commodities, but despite all the challenges, we remain on track in terms of our main ambitions for the year that I mentioned here to deliver consolidated organic EBITDA growth in 2022 ahead. of our 10.9% organic growth that we had in 2021, mainly because of Brazil back to growth. So thank you very much. See you in July and have a great day.

This concludes Ambev's conference call. Thank you for your participation and have a good day.