Ambev [ABEV] Conference call transcript for 2022 q1
2022-05-06 00:23:05
Fiscal: 2022 q1
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Operator: 01:04 Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's First Quarter 2022 Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br, as well as through the webcast link of this call. 01:38 We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. 02:04 Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and then information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. 02:33 Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the percentage changes that we will be discussing during today's call are both organic and normalized in nature; and unless otherwise stated, percentage changes refer to comparison with first quarter 2022 results. 03:07 Normalized figures refers to performance measures before exceptional items which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profits, EPS, EBIT and EBITDA on a fully reported basis in the earnings release. 03:32 Now, I will turn the conference over to Mr. Jean Jereissati, CEO for Ambev. Mr. Jereissati, you may begin your conference.
Jean Jereissati: 03:46 Good morning, good afternoon, everyone. Thank you for joining our earnings call for the first quarter of 2022. Three weeks ago, during our Investors Day. we focused on how our culture, our strategy and our business model has evolved? How we embraced technology in benefit of our customers and consumers? Why we see several opportunities to create value going forward in our overall company's transformation? Today, I will of course, focus more on our Q1 results. But as I do this, I will also highlight how many of the things we showcased during the Investors Day are already positively impacting our short-term performance. 04:39 Let's talk about the quarter. During our full year 2021 call, I explained why I believe we were starting 2022 better position, while acknowledging, we expected a tough start to the year. Q1 2021 had a very strong performance with volumes up 12%, net revenue up 28%, and EBITDA up 24%, record growth rates for the first quarter of the year. And this year, we were off to a slow start because we had a one-off January, a very tough month in many markets, given the Omicron rise. However, I was happy to see that the team managed to deliver a better overall performance than we expected, particularly in Brazil and LAS. 05:38 For instance, Brazil volumes bounced back in February and were very strong in March, which drove consolidated volume growth of 5.5% in the quarter. Brazil, net revenue per hectoliter grew not only year-over-year, but sequentially versus Q4 ‘21 both in beer and in NAB. In beer, volumes grew 2.1% despite the tough January. Thanks to premium portfolio growing high-teens in core portfolio growing mid-single digits. According to our estimates, we once again gained market share versus last year. Our three main core brands Brahma, Antarctica and Skol were ranked in the top of the 10 most valuable brands in Brazil among 478 brands in 36 different categories according to BrandZ. 06:46 In the core plus segment, Spaten remains expanding its distribution and volume for outlet in Brahma Duplo Malte launched new returnable and one-way presentations, which we will address more consumption occasions. NAB volume grew 16.9% driving market share gains, according to our estimates. The premium brands volume grew above the rest of the portfolio, led mainly by energy drinks H2O Pepsi and Gatorade. 07:24 In LAS, volumes grew 2.9% despite a strong comparable in Argentina and the volume impact in Bolivia due to another COVID-19 wave in January. In Chile, we gained market share according to our estimates and expanded distribution despite lapping the start of the partnership with Coke bottlers. Our core plus and above portfolio continued to grow in Chile, as well in Paraguay and Bolivia. Of course, not ever seeing worked. 08:02 In CAC volumes declined 4.7% due to supply constraints in the Dominican Republic, our largest market in the region. We expect supply constraints to ease going forward, however, above the core portfolio continued to gain weight in our volumes, thanks to brands such as Corona and Modelo. In Canada, volumes declined 8.4%, mainly driven by the worst industry of the last 30 years in January, which then recovered in February and March sequentially, coupled with tough comps from Q1 ‘21. Despite weak volume performance, we just maybe having gained market share in beer and our net revenue per hectoliter grew 4% due to consistent implementation of revenue management initiatives. 09:01 So let's go deep and what’s behind this performance. Let's talk about our five pillars of our, how to win frame? The first pillar, brands for each and everyone. In Brazil, focus brands Brahma, Beck’s and Budweiser added over 500,000 fans versus same period of last year according to our estimates and in LAS, number of fans increased by 300,000. After reaching a better balanced price relativity between one-way and RGBs our bet price strategy. Our returnable packaging grew double-digits in Brazil, mainly in the 600 ml presentations in Premium and the 300 ml presentations in core portfolios. 09:56 Second pillar, thirst to lead the future. Our innovations continue to over index market share according to our estimates reaching 17.6% of Brazil’s Beer net revenue, thanks to the continued success of Brahma Duplo Malte, Spaten and Stella Gluten Free. Innovations also reached over 70% of loss (ph) net revenue. We launched new can sizes and secondary packaging to serve more occasions in the off-trade channel two brands such as Budweiser, Brahma Duplo Malte and . 10:41 Third pillar, a toast to our customers success. The digitalization of our customers continue to prove successful and supported our NAB business to achieve a higher penetration per outlet increase its number of customers. And we continued the successful expansion of BEES in Paraguay and Argentina. These market place in Brazil grew GMV almost 10 times versus the first quarter of last year. In the last six months, served more than 500,000 customers offering 400 SKUs, which include partners such as Bermo and Bacardi. 11:30 BEES Bank continued its rollout in our operations reaching more than 270,000 accounts in more than 1.4 billion TPV in the month of March. In in April, we announced the deal between us and which is a relevant player in the logistic industries in Brazil, Together, we will further advance on the Urban distributions centers develop. 720,000 monthly active users. 12:29 Fifth pillar, together for a better world. We launched a collective effort to tackle Scope 3 emissions with more than 165 suppliers that represents over 65% of our total scope 3 emissions. And for the first time, more than 50% of our newly hired employees in the quarter were women. All in all, I come out of Q1 encouraged and we will remain focused on seizing the moment for the main consumption occasions to come during the reminder of the year. We continue to expect volatility in some of our markets in cost pressures coming from commodities for the reminder of the year, but we are not making any changes to our outlook for the year. Therefore, the full year guidance relating to Brazil beer cash cost per hectoliter growth between 16% and 19%, excluding the sale non-Ambev products on the marketplace remains unchanged. And despite the challenges ahead, we are on track in terms of our main ambitions for the year, get Brazil back to bottom line growth, to have consolidated organic EBITDA growth ahead of 10.9% organic growth that we had in 2021, and improve our ROIC. 14:18 To close, I would like to once again thank all our people that manage to deliver this quarter's performance. And I would like to thank you for your attention and handle this over to you, Lucas.
Lucas Lira: 14:34 Thanks, John. Good morning, good afternoon, and good evening. During our full year 2021 call, I laid out our approach towards 2022, and I mentioned what should be the same and what should change during the year as compared to 2021. So let me walk you through how Q1 performance stacked up using this exact same logic. 14:57 Starting with, what wouldn't change? First, topline growth would remain a priority, and the key performance driver, the results 18.5% net revenue growth overall with Brazil being the main highlight. Second, input cost pressure would remain a headwind. The result cash COGS per hectoliter grew nearly 20% of the consolidated level and for Brazil Beer, it grew a little over 15% excluding non-Ambev marketplace products. And third, we will continue to focus on value creation drivers. 15:32 Here, during our recent Investor Days, we shared the financial logic behind our strategy and why we believe there is a path to sustainable long-term value creation for Ambev. Starting with the focus on improving our return on invested capital, building on our progress in 2021. And as Jean pointed out, there are some good examples already of how our bets are translating into improvements in the short-term performance. 15:59 Now in terms of what should be different in 2022. First, net revenue performance should be more driven by net revenue per hectoliter than volumes, as we adapt to a higher inflationary environment. The result, net revenue per hectoliter grew around 14% and volumes grew nearly 4%. Second, cost headwinds would come mostly from commodity inflation rather than FX. The result, commodity inflation represented over two-thirds of the increase in Brazil Beer cash COGS per hectoliter driven mostly by aluminum and barley. 16:37 Third, SG&A growth should improve. The result, cash SG&A grew almost 16% with sales and marketing growing a little over 12%, distribution growing 24% mainly due to rising diesel prices, and administrative expenses growing just about 3%, given lower variable compensation accrual. And fourth, over the last two years, we had significant tax credit one-offs in Brazil that positively impacted our EBITDA, financial results and effective tax rate. This was not a major factor in Q1, but will be a factor in Q2, given how much this tax credit one-offs positively impacted the second quarter of 2021. 17:20 What this all means to us, is that these results are a clear indication that we are on track to deliver a better EBITDA organic growth in 2022, then the 10.9% organic growth that we delivered in 202. 17:37 I would now like to cover two more topics. First, our financial performance below EBITDA and cash flow, and then ESG. Cash flow from operating activities totaled about BRL520 million in the quarter, which represents a decline of about 82%. Q1 2021 cash flow from operating activities had grown about 84% and this quarter, there were two main factors that adversely impacted our operational cash generation. First, payment of variable compensation in March and second, higher CapEx payments to start the year given the calendarization of our 2021 CapEx commitments. 18:21 Normalized profit however grew nearly 29% in the quarter given EBITDA growth, a lower net finance expense versus Q1 2021 of about BRL600 million and the lower effective tax rate. As I mentioned, we face a very tough comp in Q2, given the tax credit one-offs that totaled about BRL1.6 billion of which approximately BRL1.2 billion impacted our EBITDA and almost BRL400 million impacted our net finance results last year. 18:54 Turning to sustainability. Recently, we had some very important milestones. I would like to highlight three related to our focus on environmental sustainability. First, we announced two more carbon-neutral breweries in Brazil, Agudos brewery, in the state of Sao Paulo, and Cachoeiras de Macacu brewery, in the state of Rio de Janeiro. Together they represent an emission reduction of over 14,000 tons of greenhouse gases per year. And we intend to deliver another seven carbon-neutral operations by year-end. 19:30 Second, Guarana Antarctica is now packaged in bottles that are made with 100% recycled PET. This was a groundbreaking initiative that our team embraced and managed to deliver a great outcome. We are very proud of Guarana Antarctica’s heritage in Brazil, what it represents to Brazilian consumers and its leadership in the circular packaging again. 19:51 Third, another unprecedented initiative, but regarding scope 3 emissions. As part of our ambition to reach net zero in the value chain by 2040. We engaged over 165 suppliers that represent over 66% of our total scope 3 emissions covering not only reporting but also concrete actions to decarbonize. And lastly, our 2021 ESG report is out and can be found on our Investor Relations website. We plan to host another EFG day in the second half of the year, so we can cover in greater detail our ambition, our progress and learning so far, and what's to come. 20:32 That's it, folks. Better start to the year than we expected, which is encouraging. Challenges and volatility remain a reality. So our goal remains high and we have more work to do. Let's move to Q&A.
Operator: 20:51 Ladies and gentlemen, we will now begin the Q&A session. The first question comes from Mrs. Isabella Simonato with Bank of America.
Isabella Simonato: 21:22 Good morning, everyone. Good morning, Jean, Lucas. Thank you for the call and the question. I would like to go to, to ask about Beer Brazil. You mentioned that the penetration of RGB right has been improving. Can you extrapolate how much is the, the recovery of the on-trade itself and how much is the strategy of the repositioning of the RGB that you mentioned in the Investor Day, right with more adequate prices? And what we can expect from that going forward, if you are already in the optimized mix of RGBs or there is more to come? That would be my first question. 22:07 And the second question for you on the consumption environment, right. I think you are not exclusive of your the general real weak and that we saw improvements across different sectors in February and March, but can you give us a sense how you guys seeing in the beginning of Q2 in terms of consumption environment and eventually mix performance, how are you feeling overall -- the overall market now in Q2? Thank you.
Jean Jereissati: 22:38 Hi, Isabella. Thank you very much for the questions. So, I would -- first one Beer Brazil on-trade recovery right in RGB. What I can mention it is that we still don't see in Q1 the full recovery of the social out of home occasion, as we compare to the pre-pandemic level in terms of mix, okay. So we are still seeing mid-single digits down in terms of mix. And, but it's really accelerating. So we saw that this is -- this trend, this recovery was happening quarter-after-quarter than we had sequential improvements in Q1 compared with Q4 of last year, but we are quite not there yet, but more in, okay. So still opportunity on that front. But happy to see sequentially moving. So this is the first question. 23:50 The second one, as I mentioned in the last call the previous call, the big question of this year really would be about the volumes, right. So I think the other things we're well set. So we had a good starting point in terms of market share. The price sequentially looks solid and the COGS, it is really something that we confirm the guidance. So the question, it was really about the volumes. We were going through a very tough January due to Omicron at that point, at that moment. And we had the questions about disposable we become income and inflation impact in the industry, but we knew that this year, we would have to have Carnivals, a lot of occasions related with beer, World Cup in the some so the big questions was really about the volumes. 24:50 And then, we figure out during the quarter that January looked like really a one-off because of Omicron and then February got better, March it was a very strong month and we have momentum. We have seen this continuing.
Isabella Simonato: 25:06 That's clear, Jean. Thank you very much.
Operator: 25:16 The next question comes from Mr. Thiago Duarte with Banco BTG Pactual.
Thiago Duarte: 25:26 Hello. Good afternoon, everybody. Thanks for the opportunity. Two questions on my side. The first one, first of all, I appreciate very much the breakdown you're giving in terms of the non-Ambev marketplace sales and the impact on the results. I mean, this is very helpful. And particularly on that, I was looking for some more color. When we think of the revenue per hectoliter performance in the Brazil Beer division. Can you break down to any extent how packaging and brand mix impacted the year-over-year performance, or even the sequential performance. I mean Jean just discussed, how the RGB is gaining traction there, but not there yet fully. So can you talk a little bit how again packaging and brand mix impacted the revenue per hectoliter? That would be great. 26:23 And the second question is regarding the performance of the core plus segment, right? It's clear from the statements that premium did really well, core was once again resilient, but there is a sense that core plus lost a little bit of ground. So just wanted to see and hear your thoughts on how about -- how that specific segment performed during the quarter? Thank you.
Jean Jereissati: 26:49 Okay. Thank you, Duarte. So let's see if I can break it down, I'm not sure if I can break it completely down, but overall, brand mix was over indexing, right the net revenue per hectoliter. And in the pack mix wins, a little bit down as we mentioned in our Investors Day, that during this previous year, we were rebalancing our pack price strategy on ways in RGBs. So in the end, net-net, it was positive. We are somehow, we are confident on the net revenue per hectoliter. I think it's -- I think one way for you to look at it, it is that sequentially, it is going up comparing with Q4. And if you look at my previous year, the specific Q1 of the previous year was really something that, that it was a strong, but then moving forward so the mix effects diluted a little bit in the previous year. And we are confident that now it's really sequentially going up and very solid is a good level. When you look at the full year in the level where we are now, okay. So in terms of revenue per hectoliter. 28:20 Talking about brands, brands and packs, I think we are very pleased with the volumes right so with -- so if you look at our volumes and compare with the pre-pandemic levels with 2019. If you look at production numbers, we are 6% above -- 5% above 2019 and we are seeing overall competitors in a level there is much below that. And in the short term year-over-year, we are happy with the 2%. So the bright spots, it was really the high end, so that we grew high, high teens, right, so for me not to say, it's wrong, high-teens. So the mainstream was very solid to mid-single digit the combining brands. In the core plus, we put a basket there that’s Brahma Duplo Malte passing Bohemia. It's already represent more than 10% of our volumes, with the highlights for Brahma Duplo Malte and Spaten and Bohemia’s we took some discounts out regionally but so core plus, we feel that, that the strategy is right and represents more than 10% of our volumes so far. 29:58 One big thing too is that I mention is that in terms of strategy of portfolio and brands, the RGB basket it really with up double-digits and it's not there, okay. So it's -- as I mentioned to Isabella. So the mix of 600-ml is not still (ph) in the pre-pandemic level. But when we look at the full basket of RGB, they are really growing double-digits. They are more on the choice. Okay.
Thiago Duarte: 30:34 Thank you. That's helpful, Jean.
Operator: 30:39 The next question comes from Mr. Sergio Matsumoto with Citigroup.
Sergio Matsumoto: 30:50 Yes. Good morning. I wanted to ask people on a topic that came out in the Investor Day about those four brand, the three plus patent and kind of ask you about how do you balance between those priority brands versus the complementary brand. Do you see Spaten, Budweiser and brands like those through you, that are not as big as Brahma too, to kind of just as big over the medium to long term and perhaps overtake the size of Antarctica and Skol or how do you see this balance between this core -- this priority brands?
Jean Jereissati: 31:53 Okay. Thank you for the question. I think when we put our vision on innovation and white spaces to launch new brands and build the portfolio of the future. I think what was very clear for us, it was that, we have space in Brazil on the core plus segment that is highly developed across the board in China, in U.S., in high maturity markets in Canada, and UK. And somehow the -- so the space that would be created over there on the core plus should -- the potential should be something around 25% for the industry, right. So, somehow in the long term, I think premium at some point in time could be like 20%, core plus 25%. And then we have core and value, core in value little bit more than 34 in the rest of the value. So this opportunity that we are focusing on the core plus in the entry premiums. So they are, we are aiming on build something that we over index in market share in 25% of the market. And so far, our two bets are Brahma Duplo Malte and Spaten. So Spaten has to be sizable and it has to be a play that can together with Brahma Duplo Malte lead this segment, okay. And then you can do the math for that. We are very excited. It is just starting, but we are very excited about the performance about the feedback that we are having. So we believe that it really can be a sizable bed brands partly in the core plus. 34:01 Talking about the Premium segments. We are really -- speaks that Budweiser, it will benefit from the reopening overall something the World Cup that it was very depressed in the previous years and we believe that vaccine (ph) Corona they can play, really important role coming from abroad and building the super-premium the super-premium segment, okay. So I'm not quite sure if I really answer exactly, but this is a little bit division. I think the core plus can be 25, the premium can be 20%. We have a dream really to over index overall in this brands should get sizable to make this vision for us.
Sergio Matsumoto: 34:59 Yeah. Understood. It does makes sense and it sounds like Spaten there is a lot of opportunity that you see are going forward and there is something that we should keep an eye on. Thanks very much.
Jean Jereissati: 35:19 Yeah. For sure.
Operator: 35:26 Your next question comes from Mr. Lucas Ferreira with Banco JPMorgan.
Lucas Ferreira: 35:33 Hi. Good afternoon, everybody. Thanks for the time. My first question is regarding the costs, the cost guidance that you have for the year. Specifically if the volumes come in stronger or performing well, put it this way, if you start seeing a bit more comfortable with the cost kind of coming more towards the low end of the range, provincially coming even below that, that range like it was the case in the first quarter adjusted for the marketplace. Is this something that we can say or not yet? 36:11 And the second question maybe to Lucas regarding the working capital specifically, this quarter, which was a bit heavier, put it this way, especially on the accounts payable line. So if there is anything particular about this quarter that you can highlight and how to think about that going forward? Thank you.
Jean Jereissati: 36:33 Okay. So I will get the first one and then and then Lucas get the second one. So I think -- so when we give this guidance in the previous quarter, it was in the date that the, the war started, right. So at some point in time we were a little bit anxious about it because we didn't know how everything would evolve with the war. But we were confident, so we did a lot of math to get to this range and we are very confident that, that we will be in that range. We are working very hard for that more, as I've seen in, it is hard to say it's too early to mention that we can go under, but we are very confident to say that we are going to be inside that range.
Lucas Lira: 37:31 Okay. Hi, Lucas. This is Lucas here. So on working capital, I think the two you're spot on, I think the big difference in the quarter is really, when it comes to payables and within payables, there were two main, main factors. Okay. Factor number one was the payment of the variable compensation, okay. In Q1, remember 2020 was a no bonus here, so 2021, there was no cash outlay for variable compensation, which was not the case in 2021, where there was a bonus paid out and it hit us in the first quarter of 2022, okay. So that was the first big impact that we saw in the payables line. 38:21 And second related to CapEx, as you may remember, we have payment terms that vary depending on the category of suppliers and many of our suppliers, particularly CapEx we have longer payment terms. And so depending on the calendarization of our CapEx spend, there are instances where we commit, we book the expense in one fiscal year but the actual payment, the cash outlay falls in the next -- in the next fiscal year. And so, what happened this quarter was exactly that. So there were CapEx commitments that were booked in Q3 and Q4 and the cash outlay is going to -- has fallen in Q1 of this year, okay. So those are the two main drivers of this variation on the payables line. 39:20 I think for the year, we continue to work very hard on improving working capital performance overall. So I would see Q1 performance, as these two factors and nothing more than that. And then we're continuing to work on it, okay.
Lucas Ferreira: 39:38 Excellent. Thank you very much.
Operator: 39:45 The next question comes from Mr. Gustavo Troyano with Itau BBA.
Gustavo Troyano: 39:52 Hi, Jean, Lucas. Hi, everyone. Thanks for taking my question. I was wondering if we could explore a little bit the EBITDA organic growth forecast for 2022 of the 11% that you have mentioned in the fourth quarter, especially trying to analyze how this first quarter compares with your initial expectations. So it would be really helpful to hear from you if this quarter came in line with our forecast, especially focusing on a business unit breakdown. So is there a business unit that has surprised you to the upside or to the downside and looking forward as we walk through the second quarter, do you believe this positive or negative highlights are on track to reach our original forecast. So, any color that you can give us on the size would be really helpful. Thank you.
Jean Jereissati: 40:39 So thank you for the question, Gustavo. So let me try to elaborate on this EBITDA ambition that we had. So, we mentioned that we should grow faster than in the consolidated level if Ambev then we grew last year, the number is 10.9. So we feel that somehow, what happened in the -- if you look at the growth on the previous year. It was really Brazil on the negative territory and international operations doing well. Somehow, we believe that our acceleration for the year, will be the continued performance off international operations and the rebound of Brazil. And net-net, when we look at this quarter, everything that I look on it makes me confident that we are in line to make this guidance. I think it was a place Canada and Dominica Republic, it was a place that they were a little bit off, but somehow we saw the other areas really compensating. So I really feel that this quarter confirms our journey to deliver the ambition of accelerating the EBITDA growth that we mentioned before. And the main changes really in Brazil Beer and not really bouncing back strongly.
Gustavo Troyano: 42:23 Welcome. Thank you.
Operator: 42:34 The next question comes from Mr. Robert Ottenstein with Evercore.
Robert Ottenstein: 42:41 Great. Thank you very much. First, a more detailed question on the operating environment and then a bigger picture question. So can you talk and give us bit more detail in terms of what kind of pricing is going on in the Brazil Beer market today that you've done that the competition has done and maybe break it out a little bit more by tears from what we can tell, it seems much more geared to the high-end and an increase in gap between core, core plus and the high-end maybe we're wrong but that's kind of what our trade visit suggested. So that's the first topic on pricing. 43:26 And then the second topic, kind of just bigger picture some important management changes at the ABI level a growth officer Ricardo Tadeu, with a lot of businesses coming into him. Can you talk about how that impacts? How you run your business and if anything changes there and whether it's a beneficial. Thank you very much.
Jean Jereissati: 43:53 Okay. Thank you for the question, Robert. So Robert, our Q1 net revenue per hectoliter was 8.4% versus last year, excluding in beer just talking mainly in beer right, beer excluding the marketplace. It was driven mostly by the price increases carry over that we had during Q4 in revenue management initiatives. Our less price increase was in October ‘21. So, Q1 is really a tough comp that when we look at what happened in the previous year, but sequentially, we've seen Q1 going ahead of Q4 in solid, which puts us in a good position to the rest of the year. Sequentially, we improved with 0.7 compared with Q4 2021 and historically, the Q1 and Q2, they go because of seasonality and regions, it really usually goes down and we were able to put it up and we are seeing it solid moving forward. We're going to remain flexible watching inflation, inflation is not controlled in Brazil watching disposable income in elasticity demand among the factors to continue to be flexible and get all the opportunities that we need. 45:31 Talking about competition and segments. I think from our perspective, that the segment that really have a rate of price increase the most it was really the value segment, the value segment was the one that that increase the most price overall in the industry and what we saw in this Q1 too, it was the price to consumer relativity was open. We moved ahead competition took a little bit time to follow and follow more by the mid of the Q1. And so when you look at it this Q1 that we had, it was with our open relativity to competitors when we see these historical. So I think this is a little bit, what I can mention so we are fortunate that the things are solid and then we have, that we have moments. 46:42 Talking about Ricardo, those strategy, we had been working together for a while, there is a lot of collaboration with that. Ricardo worked with us many time, long time with we fast knows a lot our operations here in Brazil. We expect to continue the collaboration on B2B Bank (ph) and B2C that these are a big bet for us and I feel that this structure that ABI proposed with Ricardo, it's really something that that's the right thing to do and we will help us to think all this transformation like holistically as a platform not siloed and really, we will make all these things connect and deleverage. So I'm very excited about Ricardo’s structure.
Robert Ottenstein: 47:42 And just on the price increases value up the most yes, but that's not a segment that is very big for you. How would you compare the difference in your price increases between core, core plus and premium?
Jean Jereissati: 47:58 So I think in the end, Robert, this is a little bit of a sensitive information. We do not comment that much on that, but there is no big difference on that. It's a little bit aligned. What we are doing across the segments. It's pretty much, pretty much the same. Of course, we have different strategy on branding, as I mentioned in the call before we took some discounts off Bohemia for example that was a brand that it was a regional play in the core plus segment to really focused on Brahma Duplo Malte and Spaten. So inside there is some strategic brand wise but segment overall, they are pretty much going up almost the same rates.
Lucas Lira: 49:02 Yeah. Just to complement here Robert, Luca speaking. I think in 2020 and 2021, I think there was a more deliberate decision on our part to focus pricing more on one way packaging, right, as opposed to RGB, right as we kind of revisit of the entire price tree and also we didn't want to overburden the on-premise, which was suffering a lot during the COVID pandemic. So we felt that if we were to take pricing during that period of time where the consumption occasions out of home were depressed, right. We would be kind of over burdening and slowing down the recovery of the channel, but this was more a reality of 2020 and 2021, and so now I think it's more of a overall kind of pricing strategy obviously looking at segment by segment, brand by brand, region by region, channel by channel to see where there are fine-tuning needed, but, but I think this is where in the past.
Robert Ottenstein: 50:06 Got it. Thank you very much.
Lucas Lira: 50:09 Okay.
Operator: 50:11 Your next question comes from Mrs. Fernando with Credit Suisse.
Unidentified Participant: 50:20 Hi, Jean. Hi, Lucas. Frenando from Credit Suisse. Thank you for the opportunity to ask questions. I have two on my side. So first, I was wondering if you could comment on market share dynamics across markets, specifically across segments and brands. And then also if you could give us some more detail on what had been specifically in Canada and how you see the business going forward. Thank you.
Jean Jereissati: 50:57 Okay. Thanks for the question Fernando. Talk about region first and then, we jump into segments. Overall, we are with a solid market share at Ambev, right. So if you look at, I'm really putting the rolling 12 volumes math that is really something that that we looking each with. We know that we are the leaders of the industry. So we have to think not just about gaining market share, but we really have to think about occasions and industry expansion and we are very excited about our volumes. When we were discussing, in the previous quarter, if we have cycled all the growth and then it would be the story of volume growing would be behind or if we want to continue to be able to grow volumes and then we delivered at Ambev levels that rolling 24, rolling 12 months again, that it was very strong to lead us to 182,000 hectoliter that some Ambev level. So this is the first thing. 52:16 So going and thinking just in terms of market share, the breakdown on the market share, on the regions. So it is solid. So we are gaining market share in Brazil. We are gaining market share in Chile. Canada, we gained the market share. We have a very solid position in terms of market share in Dominican Republic. Argentina somehow we are in line with the market share that we have -- that we always had over there. And so region wise, we are pretty much with a good performance of market share. And looking at segments in Brazil somehow, so let me just mention that we don't mention usually. And then NABs, we are selling a lot and gaining a lot of market share with this strategy that we had on the portfolio rebalance. We have the digital platforms really helping us to gain market share overall in NABS debt. We don't talk that much and it will be -- we really see as a more of growth moving forward, okay. 53:38 So talking about specifically about Brazil and the segments. So we are seeing, we were very excited about the high end performance that we have in Q1 that we had in Q1 in terms of volumes. It was a high-teens performance, the core plus it is solid with Brahma Duplo Malte and Spaten. Bokor is really outperforming the industry overall and we make some decisions on the value side, mainly in cans on the value to really put prices up. And then, so there is less volumes and less market share over there, but somehow market share fuels -- fuel solid, and we are focusing on a basket of brands that you mention in the Investors Day. We are focusing across the board on the core plus segment, so we have -- we launched two years ago Skol in Paraguay in the core plus segment we have our Andes Origen in Argentina in the core plus segment, so we across the board focusing a lot on the core plus segment. And somehow the focus brands that we mention to Brazil on the Investors Day that are the BEES the strategy that we have over there. 55:04 In Canada specifically, Canada was across the industry somehow the heat off Omicron and the tough comp that we had previous year, it was really something. The good part is that this quarter is not a big quarter in terms of seasonality for Canada and we are seeing industry recovering. And we are seeing that the market share that we are gaining market share in Canada. So somehow, it was pretty much a combination of a tough comp and the bedding industry that we have in Canada. But the business is solid, innovation is working, the brand is working out there. The beyond beer that we are launching, they are solid in Canada. So, somehow we are confident when we -- when it comes to market share in Canada.
Lucas Lira: 56:01 Yeah. Just to add here on Canada specifically, I think just to give you a little bit more detail around the market share performance. First, I think we saw good performance market share wise in premium. This was led by Stella and Corona, when you go to core plus Michelob ULTRA continue to also perform well. So these three brands have delivered for us over the last few quarters in Canada, and so it was great to see that despite a very negative industry particularly in January these brands continue to outperform the market and gain share, okay. 56:45 And then in addition to going beyond volume because net revenue per hectoliter was actually positive growing 4%. But on the cost side, the operation, obviously suffered from the commodity headwinds that have been impacting many, many markets right across the board. And in terms of SG&A, I think the main impact was on the distribution side, given rising freight costs and so that was also a factor in Q1. But again, going forward we have a plan in place to improve performance and -- but we have to deliver. So that's the challenge going forward.
Unidentified Participant: 57:31 Thank you and congrats on the results.
Lucas Lira: 57:38 Thank you.
Operator: 57:41 The next question comes from Mr. Thiago Bortoluci with Goldman Sachs.
Thiago Bortoluci: 57:47 Yes. Hi, Jean, Lucas. Good afternoon, everyone. I have two questions. The first one following up on the discussions on market share. Could you please elaborate a bit more in volumes growth in Argentina, please? This is the first one. And the second one, regarding the additional information you shared on BEES, especially the portfolio up from Ambev. We are seeing at this point cash gross margin close to mid-single digit, right? But I understand that part of this is basically because leveraging your existing footprint and existing capacity within the truck. So most of this should flow to EBITDA. And please correct me if I'm wrong on this, but going forward, as you scale up the platform, how should we think about margins for this business unit on an underlying basis, should we expect additional SG&A to come over the next quarters or should we take this current levels as an underlying base for margins going forward? Thanks.
Jean Jereissati: 58:51 I'll get the first one and then Lucas help me with the second one. So, somehow, let me talk first about LAS Argentina. We had a good performance in topline in LAS. So it was a 40%, 40% up. So we have to remember that we have the countries that we have here is Argentina, Chile, Bolivia and Paraguay and Uruguay. So it was a good performance is an area that it's relevant for our growth. Talking specifically about Argentina, our volumes in Argentina, they weren't negative on this quarter in Beer. So they were low-single digits negative cycling a strong Q1 that we have in the previous years with NAB's on the more positive territory over there, but with a market share that was pretty much in line with what we had in the previous year in Argentina, okay. 60:03 So talking about BEES and margins, I will hand over to Lukas.
Lucas Lira: 60:09 Sure. Thanks for the question, Thiago. I think overall, given that the platform is still an expansion mode again, we've come a long way in the last year, but there is still a lot of opportunity ahead. The honest answer is still, it's still too early to establish on a steady state type kind of margin level, okay for the marketplace business. But given how we are structured and how we're working right with BEES meaning leveraging our -- the capillarity right of our distribution network, our reach to clients. I think I mean conceptually it makes sense to think about gross margin flowing more right to EBITDA margin and less SG&A expense then you would see, if you looked at other kind of similar type operations, okay. Conceptually, that makes sense. That’s hard to give a more precise indication of how much of it flows through at this time, because we are still expanding.
Thiago Bortoluci: 61:28 And Lucas, if I may follow-up on this thing, further color, would you think it would make sense to comp this absolute level of margins with the cash and carry guys or wouldn't make sense?
Lucas Lira: 61:40 You guys are the experts here, right, you guys are the experts on one of the best comp, okay. We obviously right look at other market participants and -- but again, we're focused on, we're focused on the client and delivering the best possible service in the assortment to our clients. I'll leave it to you guys the experts on what are the best ones.
Thiago Bortoluci: 62:03 Thanks, Lucas. Thank you, Jean.
Lucas Lira: 62:06 Okay.
Operator: 62:08 The next question comes from Mr. Ricardo Alves with Morgan Stanley.
Ricardo Alves: 62:20 Hello, Jean, Lucas. Thanks a lot for the call. Most of my questions have been answered. Just some more specific ones. On administrative expenses in Brazil Beer, we did see the year-over-year decline as a percentage of sales. I think you're running at 8% or so, but still seems a little bit above historical, so did you guys expect this line to go lower from here? Did you expect to see a lower number already in the first quarter. Just for the sake of modeling the rest of the year in 2022. Any color here would be would be helpful, if there is anything within the admin line that surprised negatively in the first quarter and maybe that will change going forward?
Lucas Lira: 63:10 Yeah, I think the big -- Lucas here. Ricardo, thanks for the question. I think regarding Brazil Beer specifically, I think the main thing I would call out was that last year sales and marketing expense, right was actually down year-over-year, okay. And so in the sense, we actually had a tough comp on the sales and marketing portion, okay of Brazil Beer SG&A, okay, number one. On the distribution side, we continue right to face cost inflation, particularly from diesel, right. So we do operate a large direct distribution network. And so to the logistics operations tends to suffer right as diesel, fuel prices continue to increase. So I think looking ahead to your question right that should continue to pressure. And last but not least, I think the administrative cost side of things was a major factor in 2021, right, given the variable compensation accruals that were done quarter-after-quarter, and for this year, we're not seeing, we didn't see in Q1 and we don't expect to see going forward that type of growth on the variable comp accrual side, okay, just because of the dynamics between 2020 and 2021 and the level of performance that was ahead of our expectations in 2021. I hope this helps.
Ricardo Alves: 65:05 It does help. So thanks for the details, Lucas.
Lucas Lira: 65:11 Great.
Operator: 65:14 The Q&A session is over. I would like to turn the floor over to Mr. Jean Jereissati for his final remarks.
Jean Jereissati: 65:26 So thank you all, thank all analysts and everyone who joined the call for your time and attention. To wrap up, we had an encouraging quarter and we will remain focused on seizing the moment for the main consumption occasions during the reminder of the year. We still expect some volatility in cost pressures coming, mainly from commodities despite of the challenge. We remain on track in terms of our main ambitions for the year that I mentioned here to deliver consolidated organic EBITDA growth in 2022 ahead of our 10.9% organic growth that we had in 2021 on mainly because of Brazil back to growth. So thank you very much. See you in July and have a great day.
Operator: 66:17 This concludes Ambev’s conference call. Thank you for your participation and have a good day.
