AB InBev

Welcome to Anheuser-Busch InBev's full year and fourth quarter 2022 earnings conference call and webcast. Hosting the call today from AB InBev are Mr. Michelle Bucharest, Chief Executive Officer, and Mr. Fernando Tenenbaum, Chief Financial Officer. To access the slides accompanying today's call, please visit AB InBev's website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Center page. Today's webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. If you should require operator assistance, please press star 0. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, risk factors in the company's latest annual report on Form 20F filed with the Securities and Exchange Commission on the 18th of March, 2022. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris.

Sir, you may begin.

Thank you, Jessie, and welcome, everyone. to our full year 2022 earnings call. It is a great pleasure to be speaking with you all today. Today Fernanda and I will take you through our full year and fourth quarter operating highlights and provide you with an update on the progress we've made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our operating performance. We are very pleased with the continued momentum of our business and the strength of the beer category across our footprint in both the fourth quarter and the full year 2022. For the full year, our top line grew by 11.2%, with volumes increasing by 2.3%, reaching a new all-time high. Revenue per hectolitre increased by 8.6%, accelerating in the second half of the year, driven by revenue management initiatives and continued premiumization. Driven by the consistent execution of our strategy and top-line growth across all operating regions, our reported revenue is now 5.5 billion U.S. dollars above full-year 19 pre-pandemic levels, with our volumes 5.8% ahead. Adida increased by 7.2% at the upper end of our medium-term growth ambition and 2022 outlook. Underlying EPS was $3.03, a 5.2% increase versus last year. As a result of our performance and strong free cash flow generation, gross debt decreased by $8.9 billion this year. leading to a net debt to EBITDA ratio of 3.51 times. Following our leverage and progress, the board has proposed a three-year dividend of 75 euro cents per share, a 50% increase versus 2021. In the fourth quarter, we delivered top-line growth of 10.2%, with accelerated revenue per hectolitre growth of 11.2%. Driven by the implementation of price actions, ongoing criminalization and other revenue management initiatives. Our volume declined by 0.6%, driven primarily by the significant impact of COVID restrictions in China and a softer industry in the US, which was impacted by the phasing of price increases and abnormally poor weather in December. We delivered an EBITDA growth of 7.6% and underlying EPS of 86 cents, a 12 cents increase versus quarter four, 21. Our diverse geographic footprint provides a unique combination of growth and reliable cash flow generation, positioned as well to deliver superior value creation. In 2022, we delivered broad-based growth with a top-line increase in all five of our regions and volume growth in over 60% of our markets. Now let me take you through the operational highlights for the year from our key regions, starting with North America. In the US, we continue to transform and premiumize our portfolio. Our business delivered another year of top-line growth and stable EBITDA. despite the elevated cost environment. Our above-score portfolio continued to outperform the industry this year, and combined with our Beyond Beer brands, now represents over 40% of our revenue. While industry volumes in the fourth quarter were soft, we are seeing improved performance to start 2023, with year-to-date beer industry volumes down 1%, and US dollar sales up 5%,

through the 12th of February, according to IRI. Our business in Indo-America continues to deliver outstanding results.

In Mexico, we delivered another year of double-digit top and bottom line growth, with record high volumes continue to outperform the industry. Volume growth was broad-based across all segments of our portfolio with our above-court beer brands growing over 20%. In the fourth quarter, we completed our OXO chain expansion with our portfolio now available in approximately 20,000 OXO stores nationwide. Looking ahead, we are focused on continuing to build the partnership, and we are excited by the opportunity to activate our brands and gain our fair share across the network. In Colombia, our business delivered double-digit top and high single-digit bottom line growth. Led by the consistent implementation of our category expansion lab, the beer category continued to grow, gaining 80 base points share of total alcohol this year, and with 2022 marking the highest beer per capita consumption in over 25 years. Moving on to South America, our business in Brazil reached record high volumes and grew top and bottom line by double digits as we continue to expand our market share. Our performance this year was led by over 20% revenue growth of our premium and super premium brands.

Now let's talk about EMEA.

In Europe, we grew top line by double digits and EBITDA by high single digits. Our portfolio continues to premiumize, with over 55% of our revenue now coming from premium and above premium brands. In South Africa, we delivered record high volumes this year, growing both top and bottom line by double digits, despite capacity constraints in the fourth quarter. And finally, APAC. In China, both the industry and our business were impacted by significant COVID-19 restrictions throughout the year, leading to a total revenue decline of 4.2% and a data decline of 10.8%. While 2022 was a disrupted year, underlying demand outside of COVID-19 restrictions remained strong. As restrictions have eased and infection rates decline, we are optimistic about the industry recover and returning to growth as channel traffic and mobility normalizes in China. Now, I would like to share with you a few highlights of the progress across our sustainability priorities. Our priorities are centered around the beer category, which is inclusive, natural, and local. With these priorities embedded into our commercial strategy, we can create value and share prosperity. for our business, our communities, and our planet. We continue to make progress across our priorities. Highlights include investing over 700 million U.S. dollars since 2016 in social normative marketing campaigns, promoting smart drinking and moderation, reducing Scopes 1 and 2 absolute emissions by 39%, and improving water efficiency by 14% versus our 2017 baseline. We are working with nearly 24,000 farmers in our direct sourcing programs through research, technology, and hands-on support to help skill, connect, and financially empower them. Additionally, we progressed our circular packaging goal with 77% of our products now in packaging that is returnable or made from majority recycled content. Kicked off cohort four of our 100 plus accelerator, program that continues to identify breakthrough, sustainable, and innovative solutions. Increases representation of women in the top five leadership levels of our business, from 19% in 2017 to 28% today. Now, let's move on to our strategic pillars. Let's start with pillar number one, lead and grow the category. This year, our volume reached all-time high with growth across more than 60% of our market. This is a direct result of our commitment to lead and grow the category by investing in our brands, innovation, and category expansion levers. Our total volumes are now 5.8% ahead of pre-pandemic levels. Our above-cord beer brand has led the growth, increasing almost 17% versus 2019, with Corona, the star performer, growing volumes by 42% outside of Mexico. Despite the challenge of COVID-19, We invested an average of 7 billion U.S. dollars per year over the last four years. On a currency-neutral comparable basis, in 2022, we invested more than 400 million U.S. dollars in sales and marketing versus 2019. The consistent investments, combined with our digital capabilities and increased effectiveness, is driving the power of our portfolio and organic growth of our business. In 2022, we are named Creative Marketeer of the Year by Cannes, the most effective marketeer worldwide at the EFI Awards, and the number one advertiser in the Created 100 by the World Advertisement Research Center. Once again, congratulations to our teams and partners for this truly remarkable achievement. We continue to execute on our five levers to drive category expansion and deliver a strong year of consistent and profitable top line growth. We are making the category more inclusive, offering superior core propositions, developing consumption occasions, and expanding our premium and beyond beer portfolios. Our global brands continue to scale. and are driving premiumization across our markets. The combined revenues of Corona, Stella Artois, and Budweiser grew by 8.9% outside of the brand's home market, led by Corona, which grew by 18.6%. Budweiser's growth of 2.5% outside of the US was significantly impacted by COVID-19 restrictions in China, the brand's largest market. Excluding China, the brand grew revenue by 12.6% in 2022. Innovation continued to support category expansion across each of the five pillars, with innovations contributing approximately US$5 billion in net revenue in 2022. From expanding our no-meltable beer portfolio by launching Corona Zero in 11 countries, to growing our Beyond Beer portfolio by scaling cut water and neutral within the US. Our focus remains on driving sustainable long-term growth. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach, capturing 32 billion US dollars in Gen Z this year. a 60% increase year-over-year, reaching 3.1 million monthly active users. Since this began its rollout in 2019, our initial focus markets have strengthened customer engagement with the weighted average net promoter score improving to positive 56 as of year-end 2022. In 15 of the 20 markets where this is live, our customers are also able to purchase third-party products through BizMarketplace. Customer adoption is increasing, with 56% of Biz customers now also BizMarketplace buyers. In 2022, BizMarketplace generated approximately $850 million in revenue. As an example of how Biz is improving our business and enabling us to be a better partner to our customers, let's take a look at one of our countries, Brazil. Bees is enabling us to be closer to our customers and solve their most pressing pain points. Since the rollout of bees in 2019, we have expanded our customer base in Brazil by over 250,000 bucks. increased the total number of annual delivers by 3 million delivers and broadened the availability of our portfolio. And most importantly, our relationship with our customers has improved significantly, with NPS score increasing by 24 points. Digital transformation is a key pillar of our strategy and has enabled our accelerated growth in Brazil. Since 2019, the beer category has gained a share of total alcohol, with beer market share expanded, and our beer volume grew by 17%. One key learning from this is, when our customers grow, we grow. Now let's talk about how we are strengthening our relationship with our consumers. Our digital B2C products, Z Delivery, Tadá, and Perfect Rust, are now available in 17 markets and generated over 460 million US dollars in revenue and 59 million orders this year. That is 69 million opportunities to better understand our consumers and their consumption occasions. The Street4World Cup offered an exciting opportunity for our digital D2C platform. as we launched the biggest digital campaign in our history. Our D2C activation yielded impressive results, increasing daily average orders during FIFA World Cup and attracting nearly half a million new consumers to our platforms. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando, over to you. Thank you, Michel. Good morning. Good afternoon, everyone. We aim to maximize value by focusing on three areas. One, optimized resource allocation. Two, robust risk management. And three, efficient capital structure. With respect to capital allocation, we are focused on maximizing long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth to support our strategy to lead and grow the category and digitize and monetize our ecosystem. The excess cash generated by our business is then dynamically allocated to our other three capital allocation priorities. The leveraging, selective M&A, and return of capital to shareholders. Investing the organic growth of our business is our number one priority, and we have no shortage of investment opportunities. In addition to sales and marketing, which, as Michel mentioned earlier, has averaged around $7 billion per year since 2019, we also continue to invest in our facilities and capabilities, allocating $4.8 billion in net capex in 2022. Over 50% of our CapEx spend is to support capacity expansions, new capabilities, digital transformation, and other growth initiatives. In 2022, we invested a combined 11.7 billion US dollars in sales and marketing and net CapEx. And since 2019, we have invested over 45 billion US dollars to full growth. As you can see on slide 33, two times net debt to EBITDA remains the point at which we maximize value, though approximately 90% of the benefits from the leveraging can be captured as we approach three times net debt to EBITDA. This year, we continue to deliver a strong free cash flow. generating approximately US$8.5 billion. Gross debt reduced by US$8.9 billion to reach US$79.9 billion. As a result, we have made significant progress on our deleveraging journey with our net debt to EBITDA ratio reaching 3.51 times. Our debt maturity profile remains well distributed with no bond maturity in 2023 and no relevant medium-term refinancing needs. If you look at our debt maturity profile, we have 3 billion US dollars worth of bonds maturing through 2025 and more than sufficient liquidity today to redeem all of these bonds. Our bond portfolio has an average pre-tax coupon of around 4% and a weighted average maturity profile of approximately 15 years. Moreover, our debt portfolio does not have any financial covenants and it is comprised of a variety of currencies diversifying our effects risk. 95% of our bonds have a fixed rate insulated from interest rate volatility and inflation. And now, let me take you through the drivers of our underlying EPS this year. In 2022, we grew underlying EPS by 5.2% versus last year, delivering US$3.02 per share. This increase was primarily driven by nominal EBITDA growth which accounted for a $0.29 per share increase. We continue to optimize our business, reducing net interest and income taxes expenses, mostly offsetting headwinds in other line items. To simplify our disclosure, as from January 1st, 2023, market-to-market on derivatives related to the hedging of our share-based payment programs will be reported in the non-underlying net finance line.

As a result, we will continue disclosing normalized BPS as a separate metric.

As we continue to optimize our business and bring our dynamic capital allocation priorities to action, in 2022, we invested $11.7 billion in sales and marketing and net capex to drive organic growth. we reduced gross debt by 8.9 billion US dollars and reached a net leverage of 3.51 times. As a result of our continued momentum and consistent in the leverage in progress, the board has proposed an increase of the full year dividend by 50% versus 2021 to 75 euro cents per share. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel? Thanks, Fernando. Allow me to take a few minutes to recap my key takeaways from the year and how we are prepared to continue to meet the moment in 2023. We lead a big profitable and growing category. Beer is resilient and is gaining share of growth globally. We made significant progress in 2022, executing across each of our three strategic pillars. Driven by the increasing strength of our brand portfolio, we delivered all-time high volume and gained share across key markets. We made important strategic choices in revenue management, driving accelerated net revenue per capita growth of 11.2%, in the fourth quarter. We progressed our digital transformation with 63% of our revenues now digital. 56% of these customers are now also business marketplace buyers and our digital B2C products fulfilled more than 69 million orders. We delivered another year of strong free cash flow and underlying PS growth of 5.2%. As a result, the ABI Board has proposed a full-year dividend of 75 euro cents per share. Looking ahead to 2023, we are focused on the relentless execution of our strategy and driving the momentum of our business. We have an industry-leading portfolio of brands across all price points, an advantaged geographic and superior digital products that are bringing us closer than ever to our customers and consumers. We are well positioned to meet the moment in 2023 and to create a future for more tiers.

With that, I will hand it back to Jessie for the Q&A.

Thank you.

The floor is now open for questions. In the interest of time, we will limit participants to one question and one follow-up question. Again, if you have a question or comment, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We do ask that while you pose your question, you pick up your handset to provide optimal sound quality. Thank you. Our first question is coming from Simon Hales with Citi. Please proceed with your question.

Thank you. Hi, Michelle. Hi, Fernando. I suppose a couple. My first, Michelle, is really on Mexico. I wanted you to just talk a little bit more about what's been happening there. KBQ4 volumes were a little bit weaker than the market expected, maybe a little bit slower than we saw through the first nine months of your year but perhaps more importantly um could you talk about what you know what how you see that market developing as we head into 2023 and you get the full benefit of the oxo roll out into the north uh and perhaps associated with that what are you doing in those northern oxford stores to make sure you get your fair share of the consumer offtake um so my first one and then my follow-up would be just around the us market that Michelle pleaded referenced, you know, sort of volumes running down about 1% for the industry year to date. How are you thinking about the status of the U.S. consumer for 2023? How do you think about the full year beer market trends there? And what are you seeing in terms of elasticities on your brands?

Hey, Simon, good morning. I think I got all the questions here.

We have a little bit of background noise on our side. I will go through the the answers and then at the end I miss any point, please compliment it. But starting with Mexico, I think we had a great year in Mexico. Volumes, positive, share positive, top and bottom line, double digits. We talked a little bit about this bad weather in the quarter four in North America. And the reality is that this extended to Mexico as well. Even though we've been talking a little bit less about that, but it was extremely cold, including some of the Caribbean countries where we do have operations. We think that as we look at this year, things are more normal and we expect to see how the quarter one is going to be. And we'll talk more as we announce results for quarter one later. Also, we completed the last wave of our expansion. And we could not be more excited now with the opportunity to activate our brands across OXO, premiumize the portfolio, and get our share, fair share across the network. So I think that continues to be a great opportunity as Mexico is a relevant country, OXO expands, and we're going to be expanding our portfolio together with them. In the U.S., I think that we saw these, one off complicated quarter on quarter four. Many things there from phasing of price increase, the effect of the two price increases of the year in one quarter, and a really, really complicated weather at the back end of the quarter. As we are now with a couple of weeks under the belt into January and February, the public numbers that are there, IRI numbers, they point out for volumes, give or take 1% down, revenues close to 5% up. And you see this very consistently across each and every week. Of course, there is phasing of Super Bowl, which is an important part of the industry in the first quarter of the year, but working well so far. Consumer and demand resilience. We say that different than other categories, beer does not have penetration on private labels. So we don't see what other categories see in terms of trade down. What we see is consumers changing a little bit channels and changing a little bit package. So people buying more in larger formats, both in terms of the chains, supermarkets, and the packs, and people staying more at home. So penetration and consumption at home is being bigger, which in a way is very good for beer because beer has higher share of growth in home than out of home. And our brands continue to perform well. We see strength in Michael Boulter, strength in Bush Light. We see better performance so far in some of our core brands. And our Beyond Beer portfolio is performing very well.

Great. That's very clear. So thank you. Thank you.

Thank you. Our next question comes from Mitch Collette with Deutsche Bank.

Please proceed with your question.

Thanks. Hi, Michelle. Hi, Fernando. I'd like to ask a question on bees, please. I think you say in the release that 40% of your revenue in China is now via digital channels, or at least it was by December. And I think at the Q3 stage, that was 15%, so a pretty big uplift. You talked about China and the U.S. being part of the third wave for the bees rollout due to the wholesaler model there. So can you comment on the benefits of that digital rollout and what it brings to China and how we might think about that as it goes into other wholesaler-led markets?

Thank you. Hi, Mitch. Thank you for the question.

It's very interesting because I just came back from a trip in China. I was there in the region for one week. And one of the things that I spent time looking at and discussing with the team was beef. And you are right, like beef is the Chinese one of the markets where beef was being built for a different role to market. And because of the difference on the role to market is this third wave in which the acceleration is not the same as when we have direct distributions. I was super glad to see that the product is very good. It is scaling up very fast. Usage by the retailers is very, very good. They are very happy. The NPS is high. And one extra point coming from this in China is a little bit complicated to explain, but I'll try to put this in a simple way. In China, because of the three-tier system of China that can be a five-tier system, it's very complicated for CPGs to trace product and to have visibility throughout the road to market. Because we are integrating very well QR codes, the wholesalers, and these as a tool We are doing a lot of geolocation. We are getting an unbelievable array of visibility through the network. And we can really now get, even when we have more tiers in the road to market, the full visibility of the sales on a talk-by-talk basis. And, of course, by doing that, we are integrating revenue management, promotional activities, our wholesaler and logistics network. So I think that these will continue to scale very fast in China. Both wholesalers and retailers are very happy with the product and what we bring in terms of better data, quality data, and visibility. And I think that the effects in China will be pretty similar to other markets. We'll see acceleration in sales, better trade programs, better integration with our marketing campaigns, and more efficiency.

It's very effective. and helps us big time. It's very interesting. Thank you.

Thank you. Our next question comes from Brett Cooper with Consumer Edge.

Please proceed with your question.

Hi, good morning, good afternoon. I wanted to dig into your approach to managing the portfolio with respect to balancing the need to support core versus innovation, and more specifically innovations in more traditional beer like Brahma Duper Baltic. have been successful, which we can see in the innovation contribution, but expansion in Beyond Beer has proven, I think, a bit harder, with the company being at the strategy of innovating and extending for a period of time. I was hoping you could share learnings from your work over the last several years and maybe how you balance efforts and investments on the core versus innovation and if that process has changed at all.

Thanks. Hey, thank you for the question.

I think that the first point is Really a matter of and instead of or. So I think that we need to be able to invest in the core and renovate, create excitement around our core brands. As you said, best class work being done in Brazil with Brahma Duplo Malt. If you think about Kaz in Korea, incredible results. Victoria and Modelo in Mexico doing extremely well. At the same time, because we know that we have penetration opportunities and we can gather more consumers and be present in more occasions, we need to continue to innovate in this beyond beauty space that offers us incredible opportunities for growth, especially with female consumers and sources a lot from liquor and from wine. One of the key learnings, I can talk about this for a long time, but I'll try to get to you the biggest learning that we had so far because of the time and the other questions that we'd like to talk about, is really that when we create new brands that are catered to this consumer and to the occasions that we want to gain share, They work better in the long term. They start slower than when you extend brands from our core brands, but they build a much more sustainable model. And the learns that we've been having on that, they go from brutal fruit in Africa, to beets in Brazil, to what we've been seeing with cut water in neutral in North America, from Canada and the US. Those brands, they are champions of the future that we are investing consistently to build. It's a very, very good way to expand the portfolio. It's aggressive because they go outside of our core and they interact with new consumers, but it's much more sustainable. And we've been doing things both ways. When we need to do something fast, using our core brands, extension lines, but we've been doing also creating new-to-the-world brands, and they are doing very well. And this is true in the physical world. I just gave you examples, Neutral, Brutal Fruit, and it's even more true in the digital space. For example, what we are doing in Stada now, in the direct-to-consumer ecosystem, is a multi-country, already-born global brand. We are in 11 countries, expanding very quickly, is a very powerful value proposition to consumers, a brand that is being built at fast, stellar pace, and we are very happy with both examples, physical but also digital products that we are creating.

Great, very helpful, thank you. Thank you.

Our next question is coming from the line of Trevor Sterling with Bernstein. Please proceed with your question.

Hello, Michelle and Fernando. Two questions on my side, please. The first one, Michelle, you highlighted that volumes are up almost 6% compared to 2019. I think by my calculations, revenues are up 24%, but margins have down, EBITDA margins down about 600 bits. How much of that do you think you can get back? I appreciate there have been input cost pressures, transactional effects, negative operating leverage from COVID, but how much is it realistic to get back and over what timeframe, especially since, I guess, implicitly, You expect more margin compression in 2024. And the second question, maybe one more for Fernando. The EPS is up 5%, the dividend is up 50%. Is that purely a function of where we are on the deleveraging curve?

Hey, Trevor. Good afternoon.

Let me take the first one here, and Fernando will take the second. We always talk about this, and I always start the conversation around margins with two. real statements. The first one is that we love our margins. We really like the fact that we have high margins because this brings us a lot of flexibility to invest as well as to navigate when situations are tougher. And the second one is that our margins, they exist for structural reasons. The power of brands that we have, premium brands, that they command higher margins the strength of positions that we have in key markets and the way that we operate our business in a very efficient way. And yes, I acknowledge what you said, the margins since 19. I think that we all saw a huge dislocation in terms of costs because of supply disruptions, because the way that things happen, but also because of inflation. That got worse. with the situation last year in Europe and commodities going even higher. And we've been balancing as much as we can our ability to price correctly and having the category penetration in the growth of the category being prioritized. I think that we talked about this before as we looked at 2023 with the visibility that we have today The cost escalation is big, but it is smaller than what we saw in 2022. And on a percentage basis, it's definitely smaller. And we continue to bring our prices up. So what we did in the quarter four was a very important ways of prices and revenue management that will yield for us good benefits this year. And I think that things will accommodate with time. I can't precisely tell you when and how much in a timeframe, but we are very focused and continue to drive the powerful brands, charge the premium price that they deserve, and be efficient in the way that we do in the company. So therefore, we expect our margins to come back. And hi, Trevor. On your second question on dividends, on EPS, on capital structure, I always like to take one step back and look at our business. We have a very good business that generates a large amount of cash flow in a very sustainable basis. So it's a very good business that consistently generates cash. Having said that, once we have the excess cash for the business, and just to quote a number, the free cash flow for 2022 was $8.5 billion, we need to decide what is the best way to allocate. And that's what we call dynamic allocating our capital. We know that the leveraging creates value. And we know that 90% of the value of the leveraging happens when you get towards three times. So while we were at a higher leverage, we focus most of the efforts towards the leveraging and very little towards other uses of capital. Now we are at three and a half. we continue to use most of our resources towards the leveraging. You see how much our gross debt was reduced in the year of 2022, but we are at a dynamic locating and increasing dividend. It's a sizable increase as a percentage. In absolute figures, we are still driving most of our resources towards the leveraging. And the idea is that going forward, At any given moment, we see what is the combination that maximizes value creation. That should be the main driver of our decision-making.

Super. Thank you very much, Fernando and Michel. Thank you.

Thank you. Our next question comes from the line of Pinar Ergun with Morgan Stanley. Please proceed with your question.

Hi. Thanks for taking my question. The first one is on marketing. We're hearing from a range of consumer companies how They're looking to increase their marketing standard in 2023. How do you think about that? And then the second one is, when you look at 2023, which regions do you feel most bullish about in terms of volume development?

Thank you. Hi, Pinar. Thank you for the questions. Michel here.

On the first one, you know that we don't give guidance by line. We showed during the webcast here that we continue to invest close to $7 billion across all years since 2019. And there is a growth when you get 2019 to 2022 of roughly $400 million in organic terms. And our plans are to continue to invest behind this brand. They are a great brand. We achieved last year an all-time high power of our portfolio, the measurement that we have for favorite preference. Whatever different companies call, we call power. And those brands, they deserve good investments because they drive the growth that we want to have for the company today. And in this journey from inorganic to organic, growth will be achieved by the quality of this sustainable growth of our brands. But I think that more important than that is increasing investments with effectiveness. And our creative quality is as good as never been, recognized by Ken, recognized by F. We won't not only create this, but also effectiveness. And as we expand our digital products, both these and the D2C, we have this unique opportunity to combine data, to do all to all, to activate campaigns in large scale, as we did, for example, during FIFA World Cup, in a very effective way. So we are not only growing the amount of dollars that we are investing in the brands, but we are sweating these dollars much better than before with higher ROIs. And on the second question, I think that this is a are easy from our side to answer. I think that the market that we are more excited for the moment is China. And in a nutshell, China was incredibly disrupted last year by a series of lockdowns, open, close, and people really losing opportunities to be social and to use our products. And based on what I saw on the street last week in the market. I visited several places. I could see like restaurants with two hours waiting list on giving Thursday. I saw nightlife blocks full of people and consumption resuming very quickly. I think that the market that we are more excited for 2023 is getting China to its full potential and giving our premium presence, the relevance of our brands there, and how sizable China is, that can be a nice add-on to build on the momentum that we have across the globe.

Thank you so much.

Thank you.

Our next question is coming from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question.

Great. Thank you very much, and congratulations on the tremendous progress you're leveraging and the dividend increase. Going back to a prior question, can you give us maybe a little bit more granularity on the major price increases that you took in Q4 in the major markets? As much detail as possible would be great. And your sense of how well those are sticking, are competitors following? I mean, in most cases, you tend to lead. So that's an important dynamic.

And then I have a follow-up question for Fernando. Hey, Robert. Good morning. Thanks for the question.

I think that you already know that we don't disclose much of this price by market and with details. But I think that... The best way to answer this question is thinking about our policy of moving prices with inflation. And inflation, as you know, was slightly different on a market-by-market, but growing everywhere. And we had beer, beer total, not only the eye, lagging behind inflation throughout most of the year, but catching up towards the end of the year. So I think that perhaps more interesting is to think about the positive carryover that this price will have for 2023, while 8%, give or take, during 2022 was above 11% in the quarter four. And we know that inflation is pointing down across most of the markets, but it's still on the high level. So I think that we have a very good carry over. We were able to move these prices globally according to our plan and reorganize the plans as inflation was above what was originally planned. We see majority of the markets holding well, and we know that beer is a resilient category, is not immune to inflation and everything that happens. but it's very resilient. I think that throughout the year, as you see salaries increasing and each and every country has a different agenda for that right from March, April, May in some of the Latin American countries to more middle of the year in North America and China, we will see them purchase power coming back. And I think that the balance of volume and price will be very positive. On a relativity basis, historically, we see that the relativity is holding, and in this very high inflation, high input costs, the relativity tends to be good across the markets. We monitor this, of course, because we have to balance the prices that we have, the penetration of our brands, and how the category is responding on the market to market. too early to call more details. I hope that my answer was helpful to you, and I'm sure that we'll be talking more about that as we go to quarter one to quarter two, and then with much more details and information in our hands.

Great. Thank you. And Fernando, I just want to push you a little bit on the capital allocation and this idea of the dynamic capital allocation. You know, As you get to three turns and head towards the long-term goal of two turns, it's striking to me that where the stock is valued today is on a multiple that is well below transactions that everybody has done in the beer industry for the slowest growing businesses. If you even put a a multiple on your consensus estimates for EBITDA for 24 at the lowest valued kind of international transactions, you get a stock price of $100 US or more. So it just seems remarkably cheap. I know you expect it to go higher as you deliver, but if this disconnect continues, how do you think about the possibility of buying back stock when you get to three turns or less? And that's something you haven't historically done, but it's a new world and love to get your thoughts on that.

Hi, Rob. Thanks. It's a good question. A long question, but a good question. I feel that we go back to the dynamic capital location and what is the main the main goal of dynamic capital allocation. The main goal is to create value. That's what we're aiming for at the end of the day. And in different moments of time, you are going to wait all the benefits of each one of the options. You mentioned buybacks. Of course, you have your model to see the value of ADI share. We have our own model. We are going to always see the intrinsic IRR versus the IRR of the leveraging versus the IRR of paying dividends, versus the IRR of any M&A projects. And we are going to look at every moment in time, which composition is the one that maximizes value for ABI. So I think I don't have much more to share because I cannot give any guidance, but you can be assured that in any given moment in time, we're going to be assessing all the different alternatives and see the ones that maximize value.

Thank you. Thank you.

Thank you.

The next question is coming from the line of Olivier Nicolai with Goldman Sachs. Please proceed with your question.

Hi. Good morning, Michelle, Fernando. Just two questions, please. First, if we go back to the U.S., ABI is losing share within beer, but beer as a category is actually losing share against spirits, and that's been the trend for some time. Now, what do you think the beer industry is missing when it comes to innovation or marketing or pricing relative to spirits to stop this trend. And second question, just on Fernando, you're giving guidance for the increase in accretion expense this year, but regarding your other financial reserves, they have increased by 50% to $1 billion. What should we expect for 2023 there? Thank you.

Hi, Olivier. Michel here.

The first question is a tough one to answer. I think that there is A lot happening there at the same time. If you look, I think that the best part of my answer is going to be if you look at the last few weeks and what's happening in the U.S. is beer responding much better. The biggest user is wine. Spirits continue to do well, but the majority of the growth is in ready-to-drinks. And in ready-to-drinks, actually, we are leading the pack, and we are much better positioned to grow the ready-to-drinks based on the footprint that we have, the network that we have. And this is part of our portfolio renovation. So that's why it's so important for us to get premium correct, to get Michelob Ultra to continue to expand, and having neutral cut water in the other ready-to-drinks propositions that we have to grow. I think that when you think about the main causes for SPIRITS to be performing well in the US has a lot to do with availability. So several propositions in states, things that increase the availability and for some people questioning how big this can be and all the availability that was created, if this is the correct thing. And the second point we see throughout the years more on the affordable, cheap side, when you compare spirits prices in the US versus any other market globally, which is something that is interesting, not to say anything different, it's quite affordable. But it's good to see that in the last two weeks, and when you look one, two, three years compounded, beer is performing better than was performing before. Year to date is gaining share of value. and gain share of growth. And I think that innovation, quality of the products and the right alignment with the consumer long-trend are the answer. Yet a lot of work to be done. And, Olivia, on your second question, on other financial results, you mentioned acquisition expenses. This is the one that is more predictable, so we can give the outlook and provide the range. On the rest of other financial results, the most relevant line is the carry cost of the hedges. And carry cost of the hedges are function of interest rate differential between different countries. And this one can float. That's why we don't provide too much of an outlook. But if you look at our major exposures, which we have available on our financial statements, and if you understand the carry cost differential, then you can make an educated guess, but acknowledging that interest rates may flow throughout the year and the number may be somewhat different.

I'll do my best. Thank you very much. Thank you.

Thank you. Our final question will come from the line of Lawrence Wyatt with Barclays. Please proceed with your question.

Hi, Michelle. Hi, Fernando. Thanks very much for the question. As well, please. Firstly, we saw a winter World Cup in much of the northern hemisphere, but of course it was the summer World Cup for much of the southern hemisphere. We didn't hear too much about any benefits from that over the last few months and in the last quarter. Are there any geographies that took a real benefit? Did you see anything in Brazil or South America or Africa from that World Cup benefit? And then secondly, we've seen a decline in number of your input costs. and I understand you hedge generally on a 12-month basis. If you were to look at the current spot rates for those input costs, would they be below the current hedge rate for your 2023 COGS, i.e., would you expect 2024 input costs to be below the current level of 2023 hedges?

Thank you very much. Hey, Laurence. Michel here.

I'll take the first one and leave the second to Fernando. I think that you are not hearing me talk too much about that because it's still depressing. Brazil lost. But all in all, FIFA was a great opportunity once again for us to activate our brands. And different geographies, they had different results. Of course, you can imagine that Argentina had an extended party that never ended, went through December and parts of January. And some other countries, they run short and the interest is likely smaller. But I think that the benefit was great for the brands. So Budweiser had a hell of a run and very strong results in brand equity across the globe with the campaigns that we run. The interest for the sport, all time high and huge excitement building up now for the next event that's going to be Canada. US and Mexico, we activated our brand, especially digitally. We gained 500 million consumers more. So that was an interesting way of seeing the power of integration of brand campaigns and our digital products. And we had a great volume with WorldWiser in quarter four. The exception was China once again, because of the lockdowns, very relevant Budweiser market for Budweiser. So we saw that the whole Budweiser was not good, but outside China, very positive, especially in the places where we heavily activated the campaign. And Lawrence, on your question on input costs, it's too early for us to start looking at this metric. we normally had 12 months out, so we are just starting to look at 2024. Probably more as the year goes by, we're going to have a more relevant information that is more useful for us to start thinking about.

So too soon to make any comment on that. Okay, then. Thank you very much.

Thank you.

This is the final question. If your question has not been answered, please feel free to contact the Investor Relations team. I will now turn the floor back over to Mr. Michel Dukaris for closing remarks.

Thank you, Jessie, and thank you, everyone, for participating, for the questions.

I hope you are all doing well, and I wish you a great 2023, and we will get back to talk to you as we close quarter one.

Thank you. Have a good one.

Thank you. This concludes today's earnings conference call and webcast.

Please disconnect your lines and have a wonderful day.