Ambev S.A. Q3 FY2021 Earnings Call

Good morning and thank you for waiting. We would like to welcome everyone to Ambev's Third Quarter 2021 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. We would like to inform you that this event is being recorded. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of 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'll be discussing during today's call are both organic and normalized in nature; and unless otherwise stated, percentage changes refer to comparatives with third quarter 2021 results. Normalized figures refer 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 disclosed the consolidated profits, EPS, EBIT and EBITDA on a fully reported basis in the earnings release. Now I will turn the conference over to Mr. Jean Jereissati, CEO for Ambev. Mr. Jereissati, you may begin your conference.

Hello, everyone. Thanks for joining our third quarter earnings call. This is our last call of the year, so I would like to do things a little bit differently today. I will cover the highlights of the quarter in a moment, but I would like to begin talking about people. I have been very vocal about how Ambev is on a transformation journey. Transforming a company like ours, it's hard. It takes time. It's painful. There is a lot of skepticism and setbacks. In many respects, we are learning as we go, but we are doing this together as a team. A couple of weeks ago, something happened that personally meant a lot to me. Ambev was recognized by Great Place to Work as the fifth best large company in Brazil to work for. Just to give you an idea of how transformational this is: In 2020, we ranked 27. A lot of great people built this company, and we are a company of owners. Our people have been and will always be the heart and the soul of Ambev, so I'm very proud to see that my team has been humble enough to face the brutal facts of the last few years and learned from our mistakes; has shown enormous resilience in the face of COVID; made bold bets and delivered results consistently as we recover from the pandemic and, at the same time, has helped society; has stayed committed to building a better, more collaborative, diverse, innovative, and more sustainable company for the long term; and is happier and more engaged along the way. And this is true not only in Brazil but also across the other markets where we operate, so a big thank you to everyone that has been making this transformation happen on a daily basis. The third quarter was another step on this transformation journey, and frankly, it was another solid step in the right direction. I ended the last call saying that our top line momentum would be put to the test in the second semester. And in Q3, we delivered 20% net revenue growth, with volumes up nearly 8% year-over-year. Nine of our ten markets delivered volume growth versus last year, and eight of them grew volumes ahead of 2019. As a result, we delivered 180 million hectoliters on a rolling 12-month basis, 8 million hectoliters above our peak back in 2015. In this quarter, we delivered another solid net revenue per hectoliter performance, which grew 12% versus Q3 2020. Comparing with 2019, net revenue was up 43% on a consolidated level in the quarter, and year-to-date up 31% versus 2019. If we break down this performance by region: Our international operations generally continued to bounce back nicely. In CAC, volumes grew nearly 9% year-over-year and are just slightly below 2019 levels. As mobility restrictions continue to ease, thanks to vaccination, our volumes continue to recover, led by the Dominican Republic and Panama, with the core plus and high-end portfolios continuing to gain weight in our mix. In LAS, volumes grew double digits versus 2020 and 2019. Argentina, Chile and Paraguay drove this growth, also thanks to our core plus and high-end portfolios. Bolivia posted strong recovery from 2020 but remains below 2019 levels, and there we still have a lot of work to do. Canada, however, had a tougher quarter in terms of top line. Although it's still above pre-pandemic levels, net revenue in the quarter declined roughly 2.5% versus Q3 2020, with volumes down almost 7%, while net revenue per hectoliter grew 4.5%. The industry was still impacted by mobility restrictions; and we faced some supply chain disruptions, mostly in Quebec. Turning to Brazil, starting with NAB. Net revenue increased 22% in the quarter versus 2020 and nearly 26% against 2019. Volumes were up nearly 10% compared to Q3 2020 and almost 15% versus 2019. This performance was mainly driven by Gatorade, H2OH! and Guaraná Antarctica, all of which grew above 2019. And last but not least, Brazil Beer top line grew 16% in the quarter versus 2020 and 51% versus 2019. Our step change in volumes continued in the quarter with 7.5% growth versus 2020 and almost 35% growth versus 2019, outperforming the industry and gaining market share. This is a result of a commercial strategy that has consistently continued to work despite COVID, macro headwinds, and competition. It is not just one thing that's working. It's a combination of a healthier portfolio, with stronger legacy brands plus a strong innovation pipeline which once again represented over 20% of our net revenues. In addition, we increased the number of fans of our brands by 3 million people since 2019. Second, a better service level, reaching 53% Net Promoter Score in the quarter; third, our technology big bets, which have continued to structurally improve how we connect with consumers and solve our customers' pain points. For instance, BEES is now used by 85% of our active customers in Brazil, currently offering over 350 products from 40 third parties of different industries. In addition to that, it was announced that BRF products will be made available through BEES, which is consistent with our desire to offer better service and solutions to our customers. And finally, great execution of our pack and channel strategy, with the 300 ml returnable glass bottles leading the way as the on-premise continues to reopen. All in all, year-to-date top line is up 28%, with volumes growing 12% and net revenue per hectoliter increasing 14% versus 2020. When comparing with 2019, we are up 31% in top line, 11% in volumes and 17% in net revenue per hectoliter. During our last three calls, I took the opportunity to focus on how each of our technological platforms in Brazil are enabling our transformation as a company: Zé Delivery in Q4 of last year; BEES in Q1 2021; and Donus, our fintech, last quarter. Today, I would like to spend some time on what I like to call the logistics revolution that is underway to allow these platforms to fulfill their potential. As Ambev transforms itself into a platform with inspiring brands that connects people and the ecosystem, creating shared value, a best-in-class logistics operation is a must. In the 1990s, we created our second-tier logistics operations, betting big on direct distribution, with currently more than 100 distribution centers spread across Brazil and making 80,000 deliveries per day. In the last two years, we have started to set up a third-tier logistics operation. Approximately $100 million have been invested to date on several footprint and technology-related initiatives to better prepare us for these new operating models. For instance, in terms of creating a delivery footprint designed for growth, we are investing behind small urban distribution centers near high-density regions, making our delivery capabilities more flexible and agile. These urban distribution centers operate only with small models like bikes, lightweight motorcycles, and small vans, which are faster and cheaper for small drop-size orders. The idea is to provide a better service level for small box using the right model with more efficient occupancy rates and lower carbon emissions, leaving bigger deliveries for bigger trucks. The UDCs integrate B2B, DTC, and the marketplace platforms. We currently have five UDCs in operations, three of them in São Paulo. We will end the year with 14, and we are just starting. To wrap things up, some quick words regarding our journey, the remainder of the year, and 2022. 2020 was a very tough year, but we stood our ground. 2021 has also been challenging, but we have continued to improve our performance in a consistent way, led by our V-shaped top line recovery, so I'm looking forward to what 2022 will bring with its risks and opportunities. Lucas will go into more detail, but although Q4 will be another tough comp, we will continue to work to bring our nominal consolidated normalized EBITDA for the full year back to 2019 levels. And based on our year-to-date performance, we believe there is room for improving this number, close a better 2021 and be better positioned for the next year. With that said, let me hand it over to Lucas, who will cover our financial performance. Thank you, everybody.

Thanks, Jean. Good morning and good afternoon, everyone. I would also like to start by talking about transformation, so I will kick off with climate action, where we also took a transformational step in the right direction during the third quarter. Q3 was marked by the announcement of our first carbon-neutral brewery and malt plants in Brazil. Our Ponta Grossa Brewery in the state of Paraná and our malt plant in Passo Fundo in the state of Rio Grande do Sul delivered 90% reduction of CO2 emissions versus 2017 and had the remaining 10% emissions neutralized via carbon credits. This process began in 2012 when we built these plants designed to be low-carbon operations, and we're proud to see it come to life. To get here, we focused on four things: heat produced on-site from biomass boilers; green energy produced on-site from biogas of the effluent treatment system; energy consumption efficiency leading to more than 15% total purchased energy reduction; and 100% electricity purchased from renewable resources, in this case hydro. As next steps, we will implement electrical forklifts, starting in Q4 2021; and build on-site solar farms, starting next year. And these investments make total financial sense as well. Our decisions to move towards carbon neutrality have not only led to efficiency savings in terms of energy consumption but also allowed us to secure renewable energy sources at more attractive rates than before. Also, this milestone is not an isolated event. We're developing a roadmap to have 100% of our production facilities become at least carbon neutral in the future, which we expect to be able to share in the coming months. Turning to our financial performance in the quarter. Overall, we saw a similar dynamic to the first half: EBITDA growth driven by top line recovery, partially offset by cost and expense headwinds. The difference this time is that, in Q3, we faced much tougher top line comps than during the first half of the year, but the team's disciplined execution came through once again. In the quarter, net revenue grew nearly 21% organically, lapping 15% organic growth in Q3 2020. EBITDA grew approximately 9% organically against 1.4% organic growth in Q3 2020. Normalized profit grew about 50%, following 2.2% growth in Q3 2020, while operational cash flow declined almost 10%, lapping 99% growth in Q3 2020. Versus Q3 2019, net revenue grew 43%. EBITDA was up almost 16% in organic terms, while normalized profit increased 54% and operational cash flow improved 80%. Margin pressure, unfortunately, remains a reality, with gross margin contracting to 50% and EBITDA margin contracting to slightly below 30% in the quarter. However, we did see sequential EBITDA margin improvement versus Q2 2021, which stood at 26% at the consolidated level if you disregard the one-off tax credits in Brazil. We still have a long way to go, but we see this as a relevant improvement nonetheless. Now let me go through the main cost and expense drivers. COGS per hectoliter increased 18.5% on a consolidated basis in the quarter. We once again saw adverse FX and commodity costs as the main factors, particularly in Brazil, while better mix offset higher unhedged commodity costs. Brazil Beer cash COGS per hectoliter in Q3 totaled almost 16%, which should be the lowest growth for the year. FX and commodity pressures should still be an issue in Q4, but we continue to expect Brazil Beer cash COGS per hectoliter to grow in the low 20s for the full year. As for cash SG&A, year-over-year growth totaled 23.6% on a consolidated basis. Sales and marketing and distribution expenses grew mid-teens, below net revenue growth. The main drivers here were the same ones from Q2, albeit at lower levels of growth year-over-year. Administrative expenses were nearly 81% higher year-over-year, which was primarily a result of provisions for variable comp since our performance for the year was once again better than expected. Should our performance remain on track during Q4, variable comp accruals should continue to impact our year-over-year performance. In addition, it's worth sharing that, when we break down our administrative expenses excluding variable comp accruals in regions like Brazil, for instance, what we saw in the quarter, and this is also true since 2019, is that overhead packages are growing below inflation, with the exception of two packages: first, our investments behind B2B, D2C and fintech platforms; and second, technology spend to enable our transformation. Despite the near-term impact, we have no doubt whatsoever that these investments make sense given our overall strategy. We've managed to find nonworking dollar savings in other lines to fund this transformation to a great extent. And as these platforms scale up and we find smart ways to leverage Ambev's scale and reach, we do see opportunity for more attractive returns in the future. Looking ahead, given year-to-date performance and should the recovery continue in the final months of the year, we feel more confident in our ability to deliver on our two main ambitions for 2021 despite a tough comp in Q4: first, a healthy balance between improved volume and improved net revenue per hectoliter growth as part of our top line-led recovery across markets. Year-to-date volumes are up 12.3% and net revenue per hectoliter is growing 14.1%. And second, normalized consolidated EBITDA performance for the full year above 2019 levels in nominal terms, which we increasingly see as feasible. Year-to-date normalized consolidated EBITDA stands at approximately BRL 16 billion, which is 4.5% above 2019 in nominal terms, excluding the one-off tax credits in Brazil. Finally, some quick comments on our financial priorities of protecting liquidity and improving our return on invested capital. Liquidity remains solid given strong cash generation despite the several headwinds we've faced since last year, but the environment does remain uncertain and volatile, so we continue to believe a prudent approach remains warranted. Our use-of-cash priorities also remain unchanged, to reinvest for growth organically and nonorganically and return excess cash to shareholders over time. In terms of improving return on invested capital, the name of the game continues to be operating efficiency coupled with better resource allocation across the company. Given the evolution of our business such as our bets behind B2B, D2C, and fintech platforms, we believe that, when thinking about profitability, we need to look beyond margin ratios and also focus on return ratios. We will always focus on improving the drivers of margin ratios for each of our segments and ventures, but given their different financial profiles, we've been focusing more and more on return ratios to manage our business. 2020 was tough in terms of profitability in both dimensions, but the good news is that 2021 has the potential to deliver better returns than 2020, which is important progress despite sustained margin pressure. Our journey of continuous and consistent improvement is well underway since 2020, step by step. This goes way beyond quarterly performance, and we will stay the course towards creating value over the long term. Thank you, and we can now go to Q&A.

There has been significant background noise lately due to unprecedented changes in the competitive dynamics in Brazil, especially regarding categories. Your main competitor seems to be moving away from many of their core value brands and is completely restructuring their portfolio. Can you discuss what is happening in the Brazilian beer market regarding pricing structures and what opportunities you see? You are introducing Spaten as a core plus offering, but how does such a dramatic shift in the competition affect the market, especially with a major player stepping back from the economy or value beer segment?

Thank you for your question, Robert. The Brazilian market has always been competitive and will remain so for some time. However, I previously mentioned that I anticipated a shift in the competitive landscape favoring us. Since my arrival, we have been diligently working on our strategy, analyzing consumer trends and the competitive environment. We are very pleased with our progress, as evidenced by the volume numbers this quarter. Our growth isn't solely driven by competition; we are expanding our consumer base and increasing transactions with our brands, which is very encouraging. Innovation now accounts for over 20% of our net revenue, indicating we are selecting the right products for the right markets. One example is Brahma Duplo Malte, which has emerged as a leader in the underdeveloped core plus segment in Brazil, showing significant potential. We have consistently grown new brands this year, with our high-end products experiencing growth in the 20% range. More consumers are choosing our brands as their favorites, and we have gained 3 million more consumers since 2019. The advancements in technology and the accessibility provided by BEES and Zé Delivery have enhanced our consumer engagement and customer service. All the volume growth in the industry has come from our brands. While our competitors seem to be facing challenges and producing at levels below 2019, we remain ahead. Although I'm unsure about the factors affecting their sales, we are successfully attracting consumers, who seem to favor our brand. We will closely monitor our competitors. Regardless of the competitive dynamics, we view this as a significant opportunity and are thrilled about our strong connection with consumers and our record-high customer relationship metrics, evidenced by our Net Promoter Score, which reflects our ability to drive industry expansion.

Jean, Lucas, congrats on the results. I have two questions on Brazil Beer. First, is about loading. I would like to understand better if, after announcing the second price increase in mid-September, you saw any signs of mismatch between sell-in and sell-out late in the quarter that could have given an extra boost to the Q3 volume performance. That would be my first question. And secondly, it's about packaging supply. We have seen constraints for both glass bottles and aluminum cans globally. Ahead of the fourth quarter, which is a seasonal peaking period for the industry, I would like to see if you are seeing any signs of constraints in the packaging industry in Brazil or if it could become a risk going forward.

Thank you for the question, Marcella. We presented the graphic showcasing the rolling 12-month performance of our volumes in Brazil and Ambev because it effectively accounts for any inventory level variations over the year. I'm very optimistic about the Q3 volumes, as they reflect an improvement in our net revenue per hectoliter. When comparing Q3 to Q2, we made significant efforts to maintain this amidst the rapidly rising inflation scenario in Brazil. We announced a price increase in October. I feel that the sell-in and sell-out levels are well aligned with market inventories, and we have managed this consistently because we anticipate the arrival of summer. Regarding your second question about supply constraints: the supply chain has continued to face pressure since the pandemic. We have successfully managed can supplies and have seen more normalized availability there. However, glass supply remains under more strain. We had hoped for some normalization in glass supplies by 2022, but the disruptions we’re experiencing are much less severe than those in 2020.

And then just to add there, Jean. This is Lucas, Marcella. I think, when it comes to glass bottles, one thing to keep in mind is that we have vertical bottle production capacity in countries like Brazil. So that also gives us a very reliable source of supply for bottles and more flexibility to adapt to pressure in the supply chain overall, in addition to our long-term relationships with suppliers.

And we are leveraging our global footprint too on that.

Impressive numbers indeed. I had a couple of questions, one follow-up regarding competition. Regarding the main competitor, I believe my first question addressed that, but when we examine your figures alongside the industry data we track, your performance is notably superior. You are significantly outperforming smaller players as well. Could you provide insight on how you are faring in relation to them? Are there specific categories or regions where you believe you excel compared to your smaller competitors? For instance, we have observed varying performances across different regions in the Coke system, so I wonder if that plays a role. That's my first question.

Okay. Let me provide more detail. When analyzing our numbers, it's clear that we are capturing a significant amount of market share, much more than just a small increase, and this aligns with our strategy. The core plus segment, a decision we made two years ago, is truly yielding results. There has been a lot of innovation in this area. Brahma Duplo Malte and Spaten are performing exceptionally well. Our approach to assist the on-trade in adapting during the pandemic, along with our affordable 300 ml bottle takeaway initiatives, is also showing success. We’ve grown from 750,000 customers before the pandemic to 1 million in Q4. Our strategy is fundamentally sound and appears to be working. In contrast, our competitors are producing below their 2019 levels which seems not to be related to supply issues, as they have the capacity to sell. It's crucial that customers choose us. Our commercial strategy is successfully attracting more customers and engaging consumers. We’ve added 3 million new consumers, reflecting the effectiveness of our approach. Our recent investments in capacity over the past two years have positioned us well for this volume. I believe our competitors have struggled to capitalize on transactions and sales. Even the recent announcements about their increased capacities make me question whether they are genuinely enhancing their capabilities to boost market volume. This remains a significant concern for us. We are performing very well in the North, Northeast, Middle East, and Midwest, with strong growth across all areas. It's impressive how we are expanding in all segments. We are seeing growth in our core, an area that was previously a challenge for us. Our brands—Brahma, Skol, and Antarctica—are all increasing. We've successfully developed the core plus segment with Bohemia, Brahma Duplo Malte, and Spaten. Our high-end portfolio is also experiencing growth in the 20s year-to-date, indicating balanced expansion throughout segments and regions, demonstrating the effectiveness of our commercial strategy. Despite macroeconomic challenges and competition, I am very pleased with our commercial approach.

Super helpful, Jean. One final question, a very quick one on the revenue per hectoliter in Brazil Beer: When you're thinking about the fourth quarter, just wondering what your latest thoughts are because of the price increase. I don't know if there are any major mix of category or mix of channels that we should keep in mind when we're thinking about unit revenue. But even more interested in the price increases, how they've been accepted so far, so if you're able to share any color on how October is performing on that front, that would be helpful.

We don’t provide forecasts on revenue per hectoliter. However, what I can share is that the recovery in on-premise sales has been stronger than we anticipated. We have assisted bars in transforming into platforms for takeaways and deliveries, and Zé Delivery has been very helpful. Now we are witnessing a resurgence in social outings, with people enjoying gatherings and visiting bars again. This trend is picking up more quickly than we expected, which will be beneficial for us. We have tailored our offerings to capitalize on this, and for example, our RGB bottles and RGB mix are growing sequentially more than we anticipated. We expect that in 2022, their performance will surpass levels seen in 2019.

I have two questions. I will stick with the Brazil Beer discussion. The first one is a question on how should we think of Ambev's brands' fair market share in Brazil Beer right now, particularly in terms of the price point relative to the actual market share that you have achieved. It looks like you're capturing a lot of market share, as Jean said just now. Pricing is evolving, but it continues to lag overall beer inflation. Despite the premiumization of the mix and margins and not even relative to basis points. In nominal terms, margins are not much higher than they were several years ago. Jean, you mentioned in the opening remarks a healthier portfolio, better service level. You mentioned you're reaching 3 million more people, consumers, relative to 2019, so I wonder how that should translate into your discussion between your actual market share, your fair market share and the price point that you see for your most relevant brands today. If we look historically, this is a point in time where you guys would probably be capturing a lot more pricing power than we have seen, so far. That's the broad discussion I was looking to have. And the second question is on the industry. Even putting the market share discussion aside, ABI in their conference call mentioned gaining share of throat in many markets, including Brazil, but it is still striking to see how the aggregate beer industry volumes are growing in spite of the very tough comps from last year. Could you comment on how the category growth is sustainable, in your view, relative to other alcoholic beverages? And of course, in terms of per capita consumption relative to where we were before and into the future would be nice to hear as well.

Okay, let me see if I can get this right, Duarte. So yes, we are with a market share gaining that is exceeding our expectations. This Q3, when we compare with our competitors, we're seeing significant market share gains based on our strategy. We have been building the high end and the core plus segment. If you remember, at the beginning of the year, we gave guidance for our VIC in Beer Brazil to grow in the low 20s. So we anticipated this. A big part of it was due to our hedging policies and the impact of the currencies that we had in the hedges this year. We have set our pricing strategy based on what consumers can pay to maintain our volumes health; and based on that, we worked on the mix of innovation and channels; and overdelivered based on that mix. We have kept our guidance in our VIC numbers. We're working on that, even with the changes on the commodity side, but we maintained our guidance. Consumer ability to pay has been impacted by rapid inflation in Brazil. This is a reference for our pricing decisions, ensuring that beer in the basket remains competitive for us to develop share of throat and continue to develop per capita. With the type of volumes we are having and inflation picking up, this equation will follow to ensure that our revenue per hectoliter is on target. We believe that, next year, this equation will be more favorable to us. We are tracking inflation closely with our rates, and on top of that, we have innovation and premiumization strategies. The drivers of revenue management are also evolving, and we believe these muscles are improving. We are very excited about learning from our revenue management side with our fintech and with BEES. We are beginning to pilot trade-offs of discounts and cashbacks, which is a whole new world of possibilities for us. This is something that I'm very excited about. This project will help us a lot in our revenue management in the future, okay? Noting our industry: We are excited about the way we have been developing beer in Brazil. All the industry expansion is really coming from our initiatives. When we look at Brazil on a granular basis, we have a lot of opportunities for per capita growth when we compare regions. São Paulo and the Midwest show a very different level of per capita consumption. Frequency peaked during the pandemic and looking at markets like the U.S. and others, we still have a lot of opportunity to improve frequency among consumers. We are optimistic about per capita consumption in the future and the industry expansion moving forward. Additionally, we have developed a business unit focused on beyond beer and future beverages, which is a huge opportunity for us here in Brazil to learn from experiences in Canada and the U.S. We are bringing new products like RTDs and wine in cans, which are providing a new avenue for growth and complementing our portfolio.

Jean, Lucas, I have two questions. First of all, thinking about 2022, I understand that you guys will release the guidance on costs in the beginning of the year, but if you could give us a color on where you're seeing cost pressures and especially your FX hedges given the recent depreciation of the BRL, that would be helpful to understand how to think about next year. And second of all, Lucas, you mentioned in the presentation about protecting liquidity and the balance sheet. At the same time, we have a potential tax reform in Brazil. How are you guys thinking about returning cash to shareholders, not only in terms of timing but if we could expect an increase in this year versus 2020?

Isabella, thank you for the question. Starting with 2022 cost outlook, I think the first important message here is that the scenario for input costs remains fairly volatile, as I'm sure you've all been following, particularly in Brazil and Argentina. And there's still some hedging to do before the end of the year. We continue to work under our hedging policy to give us the predictability going forward. This will give us time to prepare and adapt as needed from time to time, but what we can say at this point is that, although, in 2021, the main headwind was FX, followed by commodities; in 2022, what we're seeing as of today is that FX should be less of an issue because of the hedge and because of how the BRL evolved throughout the year as hedging was executed. So we see less pressure going into 2022 from FX and more pressure coming from commodities. And again, as I said, there's still some hedging to be done. One of the things that has helped us in 2021 and that we hope could also play a positive role in 2022 is the mix. One thing that contributed to our better-than-expected performance is that the mix has started to work in our favor. If the COGS impact of the mix continues to evolve positively, it should help us offset our unhedged commodity exposure, which picked up in Q2 and Q3. As you said, we hope to provide more visibility regarding expectations for 2022 at the end of February when we announce the full year results. As for your second question about returning excess cash to shareholders over time, this continues to be a year-end decision. We keep working under the same paradigm for capital allocation in the company, where priority #1 remains to reinvest in growth, both organically and nonorganically. So that hasn't changed, and we will continue to return excess cash to shareholders over time, but that's a year-end conversation that we will have with the Ambev Board.

Congrats for the results. I'm trying to add up your revenue per hectoliter growth in Brazil in a bit more detail. You mentioned the positive impacts of the on-trade mix into your average prices. However, when I see net revenue per hectoliter in Brazil Beer, it is still up but sequentially decelerating. Can you please break this down in more detail to explain what were the drivers for this sequential deceleration? Additionally, in terms of overall trends, while we don't have guidance for the quarter, what should we expect for the fourth quarter, bearing in mind that cash COGS per hectoliter should sequentially accelerate?

Yes. At the beginning of the year, we indicated that our revenue management strategy would be flexible to capitalize on market opportunities and learn from different regions. To be honest, inflation increased rapidly, and we were trying to adapt as we went along. This was not something we had anticipated at the start of the year. In this context, it was a pleasant surprise to observe that our Q3 net revenue per hectoliter reached a peak, exceeding Q2 figures. When assessing whether this trend is accelerating, we must consider last year's figures for comparison. What I can tell you is that the elasticity we experienced in Q3, when compared to the first half and Q2, in terms of price adjustments with this volume, pleasantly surprised us. This indicates that our brands are performing well. The increased volumes contributed positively to the net revenue per hectoliter, and we are very pleased with this performance. Our actions aligned with our strategy, and we publicly announced the pricing move in October, which has been well-positioned in the market. This represents a significant development. Concerning delivery volumes, the Zé Delivery is on the right path. It's really, yes, something we're excited about. We temporarily halted city expansions for us to fully refine the strategy. We expanded into fewer cities than we anticipated. We did not see a significant change in our initiatives, but Zé Delivery is focusing on delivering a more omnichannel approach to our consumers, with three major changes: more omnichannel offerings, gradual city expansions, and improved last-mile efficiencies. This is vital for sustainable growth. One piece of information I'd like to share is that we saw Zé Delivery focus on in-home occasions with the same RGB mix as our company average. This occurred ahead of schedule. The reality is that 40% of Zé Delivery's mix already comes from returnable bottles because it optimizes the delivery process. This engine is working, so we are excited about that. BEES, too, is performing nicely, with 85% of our active buyers on the platform, achieving an annualized GMV of 1.1 billion in our marketplace. Mentioning products outside our portfolio, this is indeed performing well. Moreover, recently, we announced a partnership with BRF, a significant step as it’s the first contract providing Software as a Service. In practical terms, BRF's sales reps will now utilize BEES for order-taking, directly accessing a base of approximately 250,000 actual customers alongside our million-managed base. The third initiative is Donus, our fintech, which is experiencing rapid growth. We are currently reporting BRL 1 billion of total payment volume year-to-date, with BRL 650 million generated in the third quarter, representing a threefold increase quarter-over-quarter. We have 145,000 wallets downloaded by customers. We are optimizing our systems, reviewing our take rates, and effectively managing credits for our customers, all of which contribute to enhancing our revenue management capabilities and balancing discounts with cashbacks. Together, these three initiatives reflect my enthusiasm. They are becoming increasingly significant and delivering substantial value. I would like to once again express my gratitude to my team for this quarter. Further, I want to thank all the analysts and participants who joined this call, for your time and attention. To conclude, despite the anticipated tough comparisons in Q4, we'll maintain our commercial momentum, delivering robust top line recovery. Moreover, we will not lose sight of the long term while focusing on returns from our current investments. We will continue to invest in our portfolio and in the transformation through tech ventures that continue to grow and become more sizable. Cash generation remains solid even in a year marked by capital investments towards our ventures, capacity enhancements, and technology initiatives as part of our ongoing transformation journey. I'm incredibly enthusiastic about the relationships we're fostering with consumers, not just in Brazil but across all markets we operate in. Thank you very much. See you next year. Have a great day.

That does conclude Ambev's conference call for today. Thank you very much for your participation, and have a good day.