AB InBev

Welcome to Anheuser-Busch InBev's full year and fourth quarter 2023 earnings conference call and webcast. Hosting the call today from AB InBev are Mr. Michelle Dukaris, 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 are 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, See risk factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 17th of March, 2023. 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 Dukaris. Sir, you may begin.

Thank you, Jessie. And welcome, everyone. to our full year 2023 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our full year and fourth quarter operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our operating performance. Our global momentum continued in 2023. Revenue reached approximately 59.4 billion US dollars, an all-time high for our company. Although our full growth potential was constrained by the performance of our US business, our revenue grew by 7.8%. Net revenue per hectolitre increased by 9.9% as a result of pricing actions ongoing premiumization, and other revenue management initiatives. Total volumes declined by 1.7%, as growth in Middle Americas, Africa, and Asia-Pacific was primarily offset by performance in the U.S. and a soft industry in Europe. EBITDA increased by 7%, in line with our medium-term growth ambition and 2023 outlook. reaching nearly 20 billion U.S. dollars. Underlying EPS was $3.05, a two cents per share increase versus last year. As a result of our strong cash flow generation, we reached a net debt to EBITDA ratio of 3.38 times. Following our deleveraging progress, we have additional flexibility in our capital allocation choices. the Board has proposed a full-year dividend of 82 euro cents per share, a 9% increase versus 2022. In addition, we have now completed almost 90% of our US$1 billion share-by-back program. In the fourth quarter, we delivered top-line growth of 6.2%, with our net revenue per hectolitre increasing by 9.3%. Total volume declined by 2.6%, and EBITDA increased by 6.2%. We delivered broad-based growth this year with both top and bottom line increases in four of our five operating regions, and with net revenue growth in more than 85% of our markets. Our scale and diverse footprint, with leading positions in the largest profit and growth pools, has us well-placed to deliver superior long-term value creation. Now, I'll take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America. In the U.S., the beer industry remained resilient. with volumes improving sequentially throughout the year and with beer gaining share of total alcohol by value in the off-premise. Our revenues declined by 9.5% this year, with STW volumes down by 12.7%, primarily due to the volume decline of Bud Light. Our market share continued to improve gradually from May through the most recent weeks in February. In 2023, our market share was 38.3%. 2023 was a challenging year for our business in the US. I would like to take a moment to reflect on how we adapted, the choices we made, and how we are taking the learnings and moving forward. Our teams showed remarkable resilience and agility. And I'm proud of the many actions we took to support our people, our wholesaler partners, and our brands. We stepped it up to support our frontline employees and provided financial assistance to our wholesaler partners. We increased the media investment behind our brands. We expanded our long-standing partnership with Folds of Honor. including bringing the NFL and Bud Light together to also support first responders. We continue to invest in our mega brands and mega platforms such as sports and music that all consumers love, including the NFL, NBA, Lollapalooza, as well as new investments with the VMAs, UFC, Copa America, and Team USA for the Olympic and Paralympic Games. We continue to support the communities in which we operate. We purchase annually more than $700 million in quality ingredients from U.S. farmers. We produced, packaged, and delivered clean drinking water when disasters struck. More than 93 million cans to date. We create jobs. Together with our wholesaler partners, we employ 65,000 hardworking people across the U.S. 99% of what we sell in the U.S., we make in the U.S. And we built on our more than $1 billion total investment in responsible drinking programs in partnership with our wholesalers. And we do this because that's who we are. As we move forward, we continue to focus on what we do best, brewing great beer for everyone, actively engaging with our consumers, supporting our partners, and impacting the communities we serve. Now, moving to our largest region, Middle America. In Mexico, we delivered high single-digit top and bottom line growth. with margin expansion. Our above-court portfolio continued to outperform, led by the strong performance of Modelo Especial. In Colombia, our business delivered record high volumes with double-digit top line and high single-digit bottom line growth. Driven by the consistent execution of our strategy, the beer category continues to grow, gaining 70 basis points share of total alcohol this year. Our core portfolio led our performance, with a particularly strong performance from poker, which grew volumes by high single digits. In South America, our business in Brazil delivered high single digit top line and double digit bottom line growth, with margin expansion of 462 basis points. Our performance this year was led by our premium and super premium brands, which delivered volume growth in the mid-20s and gained its share of premium segments. Now, let's talk about EMEA. In Europe, we grew top-line by high single digits and bottom-line by low single digits. Our portfolio continues to premiumize with our premium and super premium brands, delivering high single-digit revenue growth, led by Corona, Lash, and Stella Artois. In South Africa, we delivered record high volumes with double-digit top line and high single-digit bottom line growth. Our portfolio continued to gain share of both beer and total alcohol, led by our global brands, which grew volumes by more than 30%. And finally, APAC. In China, our business delivered double digit top and bottom line growth, with margin expansion of 125 basis points. Our premium and super premium brands continued to outperform, growing revenue by double digits and driving overall market share gains. Now let's move on to our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. The beer category is big, profitable, and growing. In 2023, according to our monitor, the beer and beyond beer category continue to gain share of total alcohol by volume globally, gaining 260 base points over the last five years. And looking ahead, beer is projected to continue this trend led by the strong performance of our global mega brands our revenues continue to grow this year reaching a new all-time high for a company of 59.4 billion dollars we continue to invest in our category expansion levers and mega brands building meaningful connections with our consumers In 2023, we invested $7.2 billion in sales and marketing and have averaged more than $7 billion over the last five years. These consistent investments, combined with increased effectiveness and creativity, is driving the brand power of our portfolio. Our total volumes remained resilient, delivering near all-time highs. and with our revenue management choices driving continued strong net revenue per hectolitre growth. Through the consistent execution of our replicable growth drivers and our five category expansion levers, we are leading and growing the category by offering superior core propositions, developing new consumption occasions, and expanding our premium and beyond beer portfolio. Our global brands continue to scale and are driving premiumization across our markets. In 2023, the combined revenues of Corona, Budweiser, Stella Artois, and Michelob Ultra grew by 18.2% outside of the brand's home markets. Scalable innovation continues to support category expansion across each of the five levers. contributing approximately $6 billion in net revenue in 2023. From expanding our non-alcohol beer portfolio to innovating with pure and double malt offerings, to growing our Beyond Beer portfolio by scaling Brutal Fruit and Flying Fish across Africa, innovation is a key focus of leading and growing the category. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach, capturing approximately US$40 billion in gross merchandising value this year, a 27% increase year over year, and reaching 3.7 million monthly active users. Customer satisfaction continued to improve with our weighted average net promoter score improving to plus 60, up 10 points since last year. In 15 of 26 markets where Biz is live, our customers are also able to purchase third-party products through Biz Marketplace. Customer adoption is increasing, and today, 67% of Biz customers are also Biz Marketplace buyers. In 2023, Biz Marketplace generated approximately 1.5 billion US dollars in GMV. Now let's talk about how we are strengthening our direct relationship with our consumers. Our D2C mega brands, Z Delivery, TADA, and Perfect Draft are now available in 21 markets, generating approximately 69 million orders and over $550 million in revenue this year. We are developing deep consumer insights in new consumption occasions, such as Corona sunset hours, Brahma soccer Wednesdays, and increasing in-home consumption of returnable glass bottle packs, by expanding availability and simplifying logistics. 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, optimize resource allocation, robust risk management, and efficient capital structure. First, let me share how we have progressed on our 2025 sustainability goals. All data points are with reference to our 2017 baseline. In climate action, we reduced scopes one and two absolute emissions by 44%. In water stewardship, we improved our water efficiency by 18%. In smart agriculture, we are working with nearly 24,000 farmers in our direct sourcing programs through research, technology, and hands-on support to help upskill, connect, and financially empower them. And we made progress in our circular packaging goal with 77.5% of our products now in packaging that is returnable or made from majority recycled content. In recognition of our leadership in corporate transparency and performance on climate change and water security, we were awarded a AA score by CDP. As we continue to optimize our business, investing in organic growth is our number one priority, and we have no shortage of investment opportunities. In addition to investing $7.2 billion in sales and marketing, we invested $4.5 billion in net capex in our facilities and capabilities. Over the last five years, we have invested almost $59 billion to execute our strategy and drive organic growth. While input costs remain elevated, our everyday financial discipline and revenue management choices enabled us to manage margin pressure this year. Although our margins are still below 2019 levels, the decline has been driven by unprecedented commodity and transactional effects headwinds, and it is not structural. These headwinds impacted different regions at different times, and middle America and South America are already good examples of EBITDA margin improvement in 2023. Our fundamental strengths, disciplined pricing, continued premiumization, and efficient operating model create an opportunity for margin expansion over time. In 2023, we continue to deliver strong free cash flow, generating approximately $8.8 billion a $300 million increase from 2022. 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. The excess cash generated by our business is then dynamically allocated across the leveraging, selective M&A, and return of capital to shareholders. As you can see on the next slide, two times net debt to EBITDA remains the point at which you maximize value, though approximately 90% of the benefits from the leveraging can be captured as we approach three times. In 2023, gross debt reduced to $78.1 billion, resulting in further progress on our deleveraging, with our net debt to EBITDA ratio reaching 3.38 times. Our debt maturity profile remains well distributed, with approximately $2.5 billion in bond maturity in 2024 and no relevant medium-term refinancing needs. We have $6.5 billion worth of bonds maturing through 2026. Our bond portfolio has an average pre-tax coupon of around 4% and a weighted average maturity of 14 years. In addition, our debt portfolio does not have any financial covenants and it is comprised of a variety of currencies diversifying our FX risk. 98% of our bonds have a fixed rate. insulated from interest rate volatility and inflation. We will continue to dynamically balance our capital allocation priorities to maximize value creation. In 2023, we invested $11.6 billion in sales and marketing and CapEx to execute our strategy and drive organic growth. We will purchase $3 billion of bonds and reached a net leverage of 3.38 times. With all the leverage in progress, we have additional flexibility in our capital allocation choices. The board has proposed a dividend of 82 euro cents per share, a 9% increase versus 2022. And we have now completed almost 90% of our $1 billion share-by-back program. And now, let me take you through the drivers of our underlying EPS this year. We delivered EPS of $3.05 per share, a $0.02 per share increase versus last year. Nominal EBITDA growth accounted for a $0.05 per share increase. We continue to optimize our business, reducing net interest and income tax expenses, which mostly offset headwinds in other line items. As we look ahead to 2024, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. Given a continued hyperinflationary environment in Argentina, for 2024, we are amending the definition of organic growth to cap the price growth in Argentina to a maximum of 2% per month. As we continue to invest to execute our strategy and optimize resource allocation, we expect net capex to be between $4 and $4.5 billion in 2024. And we expect our normalized effective tax rate to be between 27% and 29%. 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. Before opening for Q&A, I would like to take a moment to recap on 2023 and look ahead at the exciting opportunities that our brands have to activate the category in 2024. While our full growth potential was constrained this year, we continue to make progress in executing across each of our three strategic pillars. We invested behind our five category expansion levers, and the beer and beyond beer category continue to gain share of total alcohol globally. Driven by the strength of our mega brands, we delivered all-time high revenue with growth in approximately 85% of our markets. We progressed our digital transformation, generating approximately 40 billion US dollars of GMV through BIS, with 67% of BIS customers now also BIS marketplace buyers. EBITDA grew by 7%, in line with our medium-term growth ambition and outlook for 2023. We delivered continued strong free cash flow generation of US$8.8 billion. We progressed on our deleveraging path and have increased flexibility in our capital location choices. As we look ahead to 2024, we are uniquely positioned to activate the category. The combination of our mega brands with the key global platforms that consumers love and that bring people together is a powerful opportunity to lead and grow the category. From the NBA to Copa America, to the Olympics, NFL, the UFC, and the VMAs, we will be focused on doing what we do best. Our brands will show up in a big way, connecting with consumers and bringing to life our purpose of creating a future with more cheers. We remain focused on the opportunities ahead of us. The beer category is large and growing, and our unique global leadership advantage, implementation of our replicable growth toolkits, and our superior profitability position as well to generate value for our stakeholders.

With that, I'll hand it back to Jeff 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. Our first question is coming from Mitch Collette with Deutsche Bank. Please proceed with your question.

Hi, Michelle. Hi, Fernando, Sean. I've got one question and one follow-up, please. You've maintained your organic EBITDA growth guidance 4% to 8%, but because you're stripping out Argentina, that implies a 200 to 300 basis point increase to the growth rate for the rest of the group. Can you give some color on what's driving that increased confidence both in the near term and the medium term. And then my unrelated follow-up is, can you give some color on why you expect CapEx to be lower in fiscal 24 than it was in both 23 and 22? And is that level broadly sustainable long-term? How should we think about the split between production, logistics, commercial, and other CapEx going forward?

Hi, Mitch.

Fernando here. So let me start answering, and then I'll ask Michel to give you some call. So once we think about the outlook, it's always, on a high level, it's good to bring some context to it. So in our CMD, we provide the middle-term ground outlook the moment that we are evolving our strategy and transitioning from inorganic to organic growth. And with this transition, we would be required to invest to lead and grow the beer category, invest to advance our digital transformation, and all of that while dynamically locating resources to grow and optimize our business while we're still the leveraging. So, with this dynamic operating environment and evolution of our strategy, we thought it would be important to provide clarity on our medium-term ambition while allow us the flexibility to invest to drive long-term value creation. With all this background, our 428 growth outlook for 2024, it is both consistent with our medium-term outlook and more ambitious, given that we are capping Argentinian growth. We aim to... continue to deliver these more ambitious 4% to 8%, but in an optimized way with $500 million, give or take less CapEx. That's the difference of the outlook from last year to this year. And this lower CapEx is the pillar three of our strategy in action when we look to optimize our business and sustain the same growth ratios, but in a more efficient way. I'm going to turn to Michel so he can give some color on why we think this is the appropriate outlook.

Thank you, Fernando, and thank you, Mitch. I think that Fernando gave you the answer on the key items on the outlook, but you had like two follow-ups. I think that one is the confidence and the other one, what's being optimized and how we are optimizing CapEx. I think that in terms of confidence, this comes from the execution of our strategy and the momentum that we've been seeing globally and is accelerating across many, many markets. As we described during the presentation, we grew revenues in 85% of our markets. We've been seeing this acceleration across the board. We had the chance to share with you many, many replicable toolkits when we were together in Mexico. And as we set the bar high with this Argentina cap, we want to continue to deliver on the outlook because that was a midterm outlook. Every year will be different. As a matter of fact, even within this year, we will see quarters that will be different because on the quarter one, we'll be still lapping a little bit of the US but light situation. And therefore, we should expect growth building up as we go from quarter one to quarter two to quarter three. So there will be progress there. And in terms of CAPEX, which is more on the expense and cost area, we've been also building very interesting replicable toolkits and global toolkits. So think, for example, the breweries that we build. And we build breweries across the globe. So we were able to do some work with our teams in the specification with the suppliers, and we've been able to grow our capacity at much lower cost now, given the standardization of the way that we are buying components, building the breweries, expanding the capacity in a modular way. Think, for example, about the benefits that we always talk about that with this, which is one platform, one product that we use globally. So every time that we do an update, let's say for Mexico, this gets rolled out now for all markets where we operate with this. And when you combine this standardization, one product with just one thing, for example, AI, we are able now to code and develop tools within this with efficiencies, for example, close to 20% in cost per hour coded because of the usage of AI. So a practical use of AI is enabling us to do more, which is what we need to do with our investments, but spending a lower CapEx cost. And I believe that it is sustainable. If you look at this CapEx, as a percentage of net revenue in the last three years. We've been improving the efficiency each and every year, not invest less, but doing more with our investments. Thank you for the question.

Thank you both. Thank you. Our next question is coming from Trevor Sterling with Bernstein. Please proceed with your question.

Hi, Michelle and Fernando. So my two questions, the first one, Michelle, the 4% to 8% guidance, what do you think are the key variables that will determine whether you end up at the high end or the low end of that guidance? And then a little bit more detail that in the quarter in the U.S., you had negative price mix. I presume that will continue into 1Q because of the continued weakness, the Bud Light weakness. Do you expect that that will start to improve as we go through the year in the U.S.? ?

Hi, Trevor. Fernando here. Let me take the first one. Of course, there are a lot of different puts and takes on the outlook. We are a global company. And one of the decisions that we made in the past, instead of giving specific items of the outlook, we give kind of the outcome, which is the four to eight to simplify the understanding. So I wouldn't go into the detail what it takes to be on the four to eight. I would just say that our outlook is four to eight.

Thanks, Fernando.

And, of course, there are some universal things there, right, Trevor, like the industry performance, the consumer sentiment. But I think that the fourth weight has all win, and we are always aiming to deliver the best results that we can. On the quarter for the U.S., I think that you remember, you all remember, that we have always this, two different dates in the US in which historically prices have been planned and executed. The most common one is during the quarter one. And during these higher inflation periods, sometimes there is an extra supplemental price that moves in October. In 2022, our price move was in October, which covered 2023. And now the idea was not to put a second price last year in October. So we are lapping the price increase of the year before. I think you notice, and we talked a little bit about that, there was a mismatch in terms of STRs, STCs, and STWs in the quarter four, and was better STCs followed by a little bit better than expected STRs, and the shipments lagged a little bit as we were both adjusting a little bit inventories, but also unable to follow the improvement on the STRs, especially in the second half of December. And prices this year start to move late last year, but really moving during the quarter one. So I think that the combination of STR, STW, the mix, that's still a little bit in disadvantage on the shipments. And the price that moved to the quarter one this year is why the prices were off in the quarter four last year. And we expect a much more normal price mix promotional activity for 2024 as we've been having over the years.

Brilliant. That's very helpful, Michel. And thank you, Fernando, as well.

Thank you, Trevor.

Thank you. Our next question is coming from the line of Olivier Nicolai with Goldman Sachs. Pleased to see with your question.

Hi. Good morning, Michelle, Fernanda, and Sean. Two questions, please. Going back to the guidance 4% to 8% organic EBITDA growth in 2024, what is your basic assumption for Bud Light share recovery? Obviously, Q1 is still going to face some tough comps, but would you also expect to keep the same level of share space with U.S. retailers by essentially being able to replace Bud Light with other of your beer brands or RTDs? And second question for Fernando, with regards to the free cash flow and the deleveraging, which was a bit less than some people anticipated. Networking capital was weaker partly due to the support that you gave to the U.S. beer wholesalers. Should we expect this to reverse in 2024? Is that a new base? And equally, should we assume a lower pace of share buyback for the rest of the year once you have completed your initial $1 billion share buyback program in March?

Thank you. Olivia, thanks for the question.

Michel here. I'll take the first one on the guidance. I think that Fernando always goes back to this point of the fourth weight that encompasses everything that we are doing globally. And we, throughout this whole situation, we have never given any forecast or guidance on the pace of Bud Light. I think that what we can talk about We can talk about what we are seeing and happening as we go week by week, month by month. And if you look at May last year versus February this year, we recovered basically 120 bps of the market share that we lost. And as discussed in the last call, we've been seeing this 10 to 20 bps recovery every three to four weeks. So I think that we are making progress. It's not at the fast pace that we were expecting or that we've been working for. But nevertheless, progress is in place. And when you think about the shelf spaces, we discussed this on the fall. There was very little adjustment in the fall, close to 5%, 10% of the retailers. And I gave a simple reference for everybody to understand the number. We had an adjustment of one shelf space. for average 20 that we have in these stores. When we see now the spring, there is a lot of activities on the spring today, more than 55% of the retailers already put the announcements in place, and the result is very similar, is 1.5 fronts to every 20 that we have in these stores. What we lost is on Bud Light, and we recovered across the portfolio with Michelob Ultra, Bush Light, Cutwater, Neutral, Kona, Stella, all gaining a share of shelf. And when we think, which I think is another very important point to share with you, this big calendar of activations for mega platforms that we have throughout the year, that goes from NBA, NFL, Olympics, Copa America, so very heavy investments. This also comes into consideration for planning and joint business plan with our retailers. So we expect to have a massive execution with extra displays and programming with the retailers that should more than compensate the 1.5 for every 20 front shelves that we are missing or losing during this adjustment now during spring. So plans are good. The team is focused on the execution. Our mega brands are very well positioned for the year because they have some of the most relevant mega platforms for interacting with consumers and activating the category together with our wholesalers and retailer partners. I will now hand over to Fernando to cover the second point.

Hi, Olivier. So on your question on core working capital, I think the We have some unique factors this year. We had the U.S. Since we have a negative working capital and we had the volume reduction has a negative impact on our core working capital, and that was further amplified by the wholesaler support, the extra days of credit. And, of course, this will phase out throughout the summer this year, so some of that should be reversed. Then we had also reduction in payables, which was driven by two things. We made an effort to optimize our service levels, and that led to reduced level of inventories. We also optimized the resource allocation that led to lower CAPEX. But most of the reduction for both the CAPEX and inventories was in the second half, and that led to a drop in payables. So the benefit in terms of cash flow, most of it will only be seen in 2024. So As you said, most of the things we should revert to 2024. On the leveraging piece, we had another year of consistent profitable growth and very strong free cash flow generation, so $8.8 billion of free cash flow. We continue to make progress on the leveraging, and our gross debt was reduced by $1.8 billion in And the net debt to EBITDA reached 3.38. There were some headwinds in the net debt to EBITDA ratio in 2023 compared to 2022. Even though we purchased $3 billion back of debt, there were some negative effects that offset some of that. That's why you only see $1.8 billion of debt. of net debt reduction, and this was due to strong euros. Sometimes it will go in our favor, sometimes it will go against us, but this is like 0.04, 0.05 times. We have the impact of the accounting treatment of Argentina. IFRS is very unique how the accounting should work. For example, U.S. GAAP is very different, but this accounting impact is another around 0.05 times. And, of course, we have this in 2023, the performance of the U.S. business also had some impact. But we continue to be confident on the progress. The business generates a large amount of cash, and we continue to deploy some of that to the leveraging and some of that to other capital allocation priorities, which leads to your follow-up question about buyback dividends. I think we will continue to explore different capital allocation priorities. This full year, we announced the dividend. So we announced a 9% increase on the dividend to 0.82 cents. And any other capital allocation, we will be discussing throughout the year. I feel that we have increased flexibility compared to years in the past. And we are going to decide whether we do share buybacks, dividends, or whatever other capital allocation priorities. throughout the year when the moment is appropriate.

Thank you very much for the detailed answer.

Thank you. Our next question is coming from Sarah Simon with Morgan Stanley. Please proceed with your question.

Yeah, hi. It's just a question about marketing spend. You obviously kind of changed the phasing of marketing spend last year and pulled it out of the sort of winter, more around the summer periods. Can you talk about how marketing is going to phase this year, given some of the big sports sponsorships and things that you're doing? Thanks.

Sorry, Michelle here.

I think that every year is slightly different, but for sure, if we look back to last year compared to the year before, there was a big shift due to FIFA, which moves usually during the summer, but that one was very special because it was more close to the end of the year, let's say winter for the northern hemisphere, was summer for the southern hemisphere. And I think that the key point here on sales and marketing for us is this unique opportunity that we have to activate with our mega brands, these mega platforms that bring people together. This outstanding opportunity to lead and grow the category. We have this year, fortunately, an incredible amount of activities throughout the year. Let's just talk about January and February. So we had Super Bowl, we had Carnival in Brazil, we had Chinese New Year, Lunar New Year in Asia, and we were very happy in activating all these opportunities. Now we face from quarter one to quarter two, and there is an expression already being used by lots of people with this summer of sports because we have Copa America in the US. That's very important for the whole North and South America. We have the Euros in Europe. Then we'll follow this with the big tennis islams in Europe, Wimbledon, and Roland Garros, that now is Stella Artois, is the official sponsor. And you wrap the summer with the Olympics, which is going to make this an incredible summer for beer. And then we march towards the end of the year, coming back again with an incredible season for the NFL, following what was this year. We have throughout the whole year the activation of UFC. So I think it's going to be very balanced. throughout the year, and we should not expect big differences as we saw in 2023 because FIFA was off-season and was there in 2022. So the impact of last year was more because of FIFA. This year we have an incredible amount of opportunities for activation.

Great. Thanks a lot.

Thank you.

Thank you. Our next question is coming from Rob Ottenstein with Evercore ISI. Please proceed with your question.

Great. Thank you. A couple of follow-ups, please. First, on the U.S., my understanding is that you put in about a 2% price increase right around the Super Bowl. I'd like to understand how that's being received so far. Any thoughts on that? And then further on the U.S., is there work that you're doing – on the supply chain, on general logistics to adjust for the changes that happened last year in terms of demand so that even if we don't get a significant improvement in Bud Light, that the EBITDA can be significantly better.

Thank you. Robert, thanks for the questions.

So as I said before, prices in the U.S. went back to this normal schedule, which is quarter one. And they vary state by state, brand by brand. So I won't give you any details here on what's happening. But so far, as I said, two windows, October, quarter one, March, February. Usually most of the movements over the years, They happen on this quarter one, and we are just moving and executing on our plans. In terms of supply chain and cost in the U.S., we've been saying that two-thirds are volume-related. One-third is choices we made that span across many different items. As Hernando said, support to our wholesalers, higher investments on our brands, and job security. Out of the two-thirds that's volume, as I said before, we claw back 120 bps of this share, and we continue to see this movement every three to four weeks between 0.10, 0.20 recovery, and we will continue to optimize as we always do our activities to extract the best possible productivity. So this is part of The company culture is part of who we are, being always with an eye on the market consumers and one in how we do better the activities that we have within our own walls. So we continue to work in everything that we can always to be more productive and to have better productivity.

Thank you. We'll move on to our next question, which is coming from the line of Chris Pitcher with Redburn Partners. Please proceed with your question.

Thanks very much. A couple of questions, please. One's a follow-up on the US shipment movements. I'm just trying to understand where the fourth quarter leaves you in terms of stock in trade, particularly in the context of the discussions ongoing with the unions. I wonder if you can give us some idea of how much contingency stock is there. And then I was wondering if you could give us a bit more detail behind the tax guidance, given all the moving parts this year, just to understand that this is now the structural range for your tax and there isn't sort of one-offs that's helping keeping it low this year with it potentially going up next year.

Thanks. Hi, Chris. Michelle here.

thank you for the question. I'll take the first one and then leave Fernando to cover the second. I think that what I was describing on the quarter four in the US was a good acceleration on the STRs and sales to consumers in December, especially in the second half. And because of that, the shipments did not catch up with the STRs. And The simple consequence of that is wholesalers turn the year with a little bit less inventory than they would otherwise be if we were able to do shipments and STRs at the same pace. So there was no loading from December to January, quite the opposite. And I think that on the... Preparation, contingents, of course, our main objective was to reach an agreement with Teamsters. We do and we operate in many different countries. We have collaborating with unions and we are always thinking about what is the best to our employees. There were contingencies in place, but there is now also a tentative agreement. So the agreement is going to be for vote next week. And therefore, we don't expect any contingents to be activated in March. So it should be like normalized. In the long term, STRs and STWs will always converge.

And Chris, on your question on ETR, our outlook for 2024 is expect normalized ETR to be in the range of 27% to 29%. These include everything that we know today, including the impact of the recent legislation changes in Brazil. And going specifically on the IOC, it's good to provide some more context. The reduction of IOC deductibility does have an impact on the ATR of FEMBEV. However, when you go to the ABI level, the impact is partially mitigated. ABI, as any other shareholder of FEMBEV, needs to pay a 15% withholding tax on the IOC distribution. So the next impact on ABI-ETR is smaller than what you can see at Ambev. And if you go one line further, if you go all the way down to EPS, then the impact is further diluted given the minority interest component. So all in all, it is something that we can manage to deliver the 27 to 29 on our outlook. And when you go one line further on the EPS, it's even a smaller impact.

Thank you. And just to confirm, because tax is obviously a complex matter, 27 to 29 is a good medium-term range. There aren't, as I say, in the background, tax losses that will run out that help mitigate it. We can be confident 27 to 29.

I think this is our outlook for 2024. We are not giving any medium-term outlook. But before you know today, with the legislation that we have today, with our business today, this is our assessment for 2024.

Okay. Thank you very much.

Thank you. The next question is coming from the line of Sanjit Arlov with UBS. Please proceed with your question.

Hi, Michelle Fernando. Two from me as well, please. Firstly, Michelle, can you just talk a little bit about the health of Michelob Ultra in the U.S.? ? You know, clearly, you know, we were used to this brand gaining 60, 70 basis points of share per annum, growing volumes mid-high single digit. It's been caught up with the Bud Light issue as well. But is there anything underlying above and beyond that on Meekleb Ultra, please? A few words on that. And secondly, you know, can you just talk a little bit about the state of the consumer and the beer category in China? You know, clearly things have deteriorated there in the second half of the year. in 23. How are you thinking about the start to 24 and the outlet there, please?

Thank you. Hi, Sanjit.

Thanks for the question. So, Michelob Ultra first. This is a brand that has been growing over the years, very healthy, expanding, and as we shared in different occasions, the brand has a lot of headroom in the US, basically for two reasons. One, because it's perfectly aligned with the health and wellness trend. And two, because it has a lot of distribution opportunities and an asymmetric relevance in some states, but not in all states in the US. The brand has performed well and was performing very well throughout the year. Of course, this whole events from April to the end of the year caused trouble not only for Bud Light, but for Anheuser-Busch as a whole. But we see very health signs. The brand is already on the positive territory again, Michelob Ultra, gaining share of shelves, and we'll have unbelievable opportunities to activate throughout this year. Just think about the NBA now phasing to the Olympics and Copa America, so both properties allocated for Michelob Ultra through the year. And the plans and everything that we saw with wholesalers and retailers during Samcom, very strong, is the year 2024 where we've been seeing the highest investment behind Michelob Ultra for our wholesalers because they commit early on in the year and how much they believe on the plans and invest behind the brands. So, so far, everything moving as it should on Ultra. And Ultra continues to expand outside of the US. So Canada, Mexico, many other markets where the brand is also getting a lot of momentum because the trend is universal. So we see health and wellness across the globe. And Michelob Ultra has a simple proposition. that is scalable and is working across different geographies. Talking about China, I think that last year had a little bit of everything in China from the beginning to end the year. And if I would answer your question in a very simple way, we continue to see premiumization as a very strong trend. And our brands, both in premium and in super premium, they grew double digits, performed very well in China. And we see a little bit of this bifurcation when you take the core with a performance that was a little bit below what we were expecting, let's say, for the recovery of China. But combined, China had a very decent industry last year in revenue and good volumes, not great, but good volumes led by premium and super premiums. Thinking about this year, I was in China, I think last week, I spent a week in China, and what we saw was normal, let's say, Chinese New Year. There were a lot of puts and takes there in different categories, but basically, again, premium, super premium performance was very good. Our execution was very strong. I visited two different cities, and I saw a turnover good, good sales. And we saw again a little bit of constraining core value brands, while premium, super premium doing very well and performing well. This period of the year is important for premium, but it is small overall for the category. I would say that we'll need to see more of spring, maybe beginning of summer, to have a very clear indication on what's going to be the direction overall for the industry. But it's clear to this point, I would say that premium, super premium will continue to perform well. While core value, we need to keep an eye on and understand the overall sentiment for consumers and how this is going to come. And that was somehow a behavior that we saw across many categories. and different players.

Thank you for the call.

Thank you.

Thank you. Our final question will come from the line of Brett Cooper with Consumer Edge. Please proceed with your question.

Thank you. A question and a follow-up on premiumization. In appreciating that may be difficult to generalize across markets, but can you speak to where you're sourcing consumers or occasions for the premium to your portfolio? Is it beer drinkers that you're keeping in a category, increasing relevance for new occasions, keeping them in where they may have gone outside? And then the follow-up on a similar topic is, can you talk about the loyalty you're seeing as you bring consumers in? I would assume it's coming through a particular occasion. And then are you growing that in new occasions in repertoires of those drinkers?

Thanks. Hey, thank you for the question.

And I find this a very interesting topic for us to talk about. And I'll try to take this high level because, as you said, every market is slightly different, right? But the way that we approach this is participation, occasions, and servings. And very interesting, premium has the potential and has been working for us, as Beyond Beer does as well, across all three levers. So we've been seeing higher participation in new consumers getting into the category through premium. And very interesting, we shared today this data on the overall share of throat, right? And this is overall. But when you look about premium brands versus premium presentations on the other categories, premium beer is also growing faster than the premium offers in hard liquor and wine. And premium, as you penetrate new consumers or the current consumers, you see some overlap of occasions, but you also see some very unique occasions for premium beers. I think that one great example that we have is France, where less created a total different occasion for beer, the aperitif occasion, And today is a massive brand, very focused on one occasion. And as this occasion developed and the brand grew, the brand now is penetrating even more occasions, such as meals and simple meals in France. So premium attracts more consumers. Interesting enough, attracts more women and more young consumers. So that's why the role of our global brands is very important, from Corona to Budweiser, with the position that we have, and each brand's position in a different state. Occasions are more spread throughout the week, which is very interesting as well. So you have more at-home occasions with premium. And when you think, for example, the role that Corona Cero or Stella Cero are playing now, they are expanding beer to even more occasions. So we've seen many places now Corona Acero being consumed during the day, lunchtime, during the weekend after sports, and more consumers, more occasions. In some very specific markets, then you also tap into servings because you can go for mood packs and convenience packs in different markets. that also help us to tap into larger occasions. I think Brazil is a great example of that. China is a great example of that. So I think that is across all three levers, bringing more consumers, retaining more consumers in more occasions, and also improving how many times people get in touch with our products. In terms of loyalty, this is also an interesting question because Consumers always have like a repertoire of brands and that's again why we have four global brands to tap into this premiumization trend. Each of these brands appeals for a different need state, meaning different occasions when people go for energy or for relaxation or to just enjoy a meal with friends. And once They connect well with one of these brands for one of these different need states. The loyalty is high, even though consumers, they consume across different occasions and they have different need states. That's why our portfolio is a big advantage, one of the global advantages that we have to play this game. And that's why we continue to invest behind our mega brands. And they grew 22%. last year, which was a very strong driver of our overall growth.

Thank you.

Thank you. This was 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 Michelle Dukaris for closing remarks.

Thank you, Jessie. And thank you, everyone, for the time today. the ongoing partnership and support for our business. Stay safe and well, and I hope I'm going to see you soon. Bye-bye.

Thank you. This concludes today's earnings conference call and webcast. Please disconnect your lines and have a wonderful day.