Ambev S.A. Q3 FY2024 Earnings Call

Good morning, good afternoon and thank you for waiting. We would like to welcome everyone to Ambev's 2024 Third Quarter Results Conference Call. Today with us, we have Mr. Jean Jereissati, Ambev's CEO; Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website ri.ambev.com.br as well as through the webcast link of this call. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the Company's presentation. After Ambev's remarks are completed, there will be a Q&A section when we kindly ask that each participating sell-side analyst asks only one question. 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 will be discussed during today's call are both organic and normalized in nature and unless otherwise stated, percentage changes refer to comparisons with 2023 third quarter 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 discloses the consolidated profit, EPS, operating profit and EBITDA on a fully reported basis in the earnings release. Now, I'll turn the conference over to Mr. Jean Jereissati. Mr. Jereissati, you may begin your conference.

Hello everyone. Thank you for joining our Q3 earnings call. I would like to start by putting this quarter's performance into perspective. First of all, we delivered another solid quarter of growth and profitability against our toughest comp of the year. Just as a reminder, Q3 2023 was our strongest quarter last year where EBITDA grew over 30% ex-Argentina and EBITDA margin expanded 630 basis points ex-Argentina. Normalized profit grew around 25% and cash flow from operating activities increased nearly 30%. Second, we built this quarter on our performance during the first half of the year with Brazil and CAC delivering once again, LAS and Canada improving sequentially and cash flow generation continuing to improve despite the well-known tax headwinds in Brazil. As a result, this quarter brought us one step closer towards delivering another year of consistent top-line growth with record volumes in Brazil, consistent EBITDA growth, gross and EBITDA margins expansion and solid cash flow generation. So, let's dive into our operational performance starting with what remained a reality. Resilient consolidated top-line performance in the mid-single digits, gross profit growth in the high-single digits, and EBITDA growth with gross and EBITDA margin expansion, continued investments behind our brands across our main markets. If we break down volume performance in LAS, despite some sequential improvement, we continue to see a tough consumption environment in Argentina as volumes declined in the mid-teens on the back of the easiest comp of last year. In this scenario, we are better prepared for the future with estimated market share gains and improved brand health indicators in the country. Ex-Argentina volumes increased by mid-single digits led by Bolivia and Chile performances. Canada volumes sequentially improved with our premium back to growth. Premium and core plus brands grew by low-single digits. Our market share remained stable in the country according to our estimates and our brand health improved versus last year with a highlight to Corona that has the highest brand health in the market and is growing. In CAC, the continued strength of our business in the Dominican Republic delivered mid-single digit volumes growth led by Corona and Presidente which presented a strong brand health performance. However, in Panama, the industry contraction was primarily driven by the recent tax increases amid a tougher macro scenario which weighed on our volumes. And in Guatemala, a temporary logistics shipment phasing faced by our local distributor impacted our quarterly performance. In Brazil, NAB continued with a great commercial performance reaching all-time high volumes for our Q3 led by our Health and Wellness portfolio with Guarana Zero up high 50s and Pepsi Black and Gatorade up low 20s. Volume of no-sugar grew low 20s with a highlight to our energy and hydration brands presenting solid performances as well. In beer, based on our estimates, the industry in July and August grew low-single digits below production data reported. This quarter, we reached our all-time high rolling 12 months' volumes. Our brand strategy continued to work with premium, super-premium and core plus brands growing ahead of total volumes and our brands improving brand health indicators. Our premium brands grew above 20% led by Corona, Spaten and Original, all of which rose volumes over 25%. The core plus brands grew in the low-teens, led by Budweiser that increased volumes by nearly 50%. And although Brahma and Antarctica each grew high-single digits, our core brands declined by low-single digits. Our pricing strategy remains nimble and we took pricing starting in September, which was earlier than last year. In addition, one very important point to make regarding Brazil Beer is that we ended this quarter better prepared for the summer season and here's why. Last quarter, I spoke about our four focus brands, Brahma, Budweiser, Spaten and Corona and I'm glad to see that the investments behind these brands are starting to pay off and they have momentum. Each of such focus brands reached all-time high rolling 12 months' volumes with Bud, Spaten and Corona reaching record brand health indicators in the quarter. Combined, these brands grew almost 10% in the quarter. Also, our inventory levels are much healthier this year than they were at the same time last year, giving better production in the quarter. On top of that, we have been sustaining all-time high service levels to our customers. And before I hand this over to Lucas, as you know this is also my last earnings call as Ambev's CEO and as I transition to a new challenge, I would like to share some reflections over the last five years. Ambev was built on great people, strong culture, big dreams and amazing brands and I'm proud of how our talented team has evolved over the past few years. We are now better prepared to listen to our ecosystem, to innovate and to drive continued transformation throughout the company through technology. We are making better decisions. The team embraced change, dreamt big and created incredible initiatives from producing hand sanitizers in our breweries during the pandemic to creating some of the largest innovations in the Company's history. We have accomplished so much, too many achievements to list here, but each one reminds us of how our business can drive positive impact across our ecosystem while strengthening our performance. Over the past five years, we have attracted around 4 million new fans, thanks to the amazing work our team has done with our brands. As you can see, we are winning in the premium and super premium segments and we are leading in the core and core plus segments. I am also proud of our results on innovation across our entire portfolio. We made a significant push into beyond beer and into balanced lifestyle brands, where we were pioneers here launching gluten-free brands and low-calorie beers and also leading the zero alcohol category. Another significant evolution was in technology. We leveraged tech to enhance our capabilities and we built a platform. With this, we digitized our route to market increasing the number of PoCs served to over 1 million while improving service levels. We also used all these assets that we have to build a marketplace that offers a broader assortment of products for our customers. And on the consumer front, Ze Delivery is a reality, is a loved digital brand which is now available and relevant in more than 700 cities across Brazil. On our journey to create a future with more cheers, we embraced sustainability in our operations adding 15 carbon-neutral plants to our footprint as part of our decarbonization plan. And we have reduced water usage per liter of beverage produced by over 7%. And through all these changes, we have created substantial value. Over the past five years, we generated BRL68 billion in free cash flow, we expanded ROIC and achieved positive EVA every year. As a result, we have returned over BRL43 billion to shareholders since 2020. And yesterday, our Board approved a BRL2 billion share buyback program, demonstrating our disciplined approach to capital allocation and our belief that all these evolutions made our business better. I am proud to say that we accomplished a parallel and remarkable transformation as an FMCG company. The combination of a stronger portfolio, BEES and Ze Delivery driven by our talented team, put us in a solid position to tackle a much bigger addressable market in the future. We have built a stronger business with the stamina to go the distance. So, thank you very much. And now, I will hand it over to Lucas.

Good day, everyone. Our financial performance in the quarter was all about continuous growth and continuous improvement in terms of profitability. EBITDA grew 8.5%, 8.7% ex-Argentina. Gross margin expanded 180 basis points organically 220 basis points ex-Argentina. EBITDA margin expanded 110 basis points organically, a 130 basis points ex-Argentina and even though normalized profit declined around 11%, cash flow from operating activities grew a little over 2%, totaling about BRL8.1 billion. What's more, year-to-date cash flow generation was pretty much in line with last year's despite having invested BRL1.7 billion in connection with a Dominican Republic put option back in January. Additionally, we benefited from exchange rate fluctuations on cash held in our international operations. So, let me cover our beyond-EBITDA performance, starting with net finance results. Net finance results improved roughly a BRL150 million versus 2023 with the same drivers as the first half of the year. First, lower losses on derivative instruments given lower carry costs to implement our hedging strategy for FX in Brazil. Second, lower fair value adjustments of payables pursuant to IFRS 13 and CPC 46. And third, our hedging decisions and lower USD exposure in Argentina, albeit to a lesser extent than in H1, which should continue to be the case in Q4. Moving to income taxes. Tax headwinds in Brazil once again impacted our net profit performance in the quarter. Our income tax expense totaled around BRL1.1 billion in Q3, which was equivalent to a consolidated effective tax rate of almost 24%. The two main drivers were consistent with H1. First, higher EBT which grew from BRL4 billion to nearly BRL4.7 billion. And second, less deductibility related to state VAT government grants and IOC. Regarding state VAT government grants, one important update. In August and October, we obtained injunctions with respect to certain of our subsidiaries, which should help partially offset the adverse impact going forward. Let me now provide a brief update in terms of litigation and the tax reform on consumption. Regarding litigation, since our Q2 call as per Note 14 to our financial statements, favorable administrative court decisions totaling about BRL2 billion became final in Q3 and we also obtained favorable administrative court decisions totaling about BRL2 billion that are not yet final and may be subject to appeal by tax authorities. And with respect to the tax reform on consumption in Brazil, we continue to expect the Senate to vote on the matter before year-end. We will keep everyone posted as the legislative process progresses. Turning to cash flow, we're off to a good start to the second half of the year. Cash flow from operating activities totaled nearly BRL8.1 billion, almost BRL200 million above last year with higher EBITDA, better working capital performance in Brazil and net interest more-than-offsetting higher cash taxes. Cash flow used in investing activities totaled approximately negative BRL1.1 billion with year-over-year performance mostly impacted by lower CapEx. And finally, cash flow from financing activities totaled about negative BRL1.1 billion, an improvement of BRL300 million versus Q3 2023 driven mostly by lower net finance costs. Looking ahead, Q4 is critical in terms of cash generation given the seasonality of our business. And we also face a tough comp because in Q4 2023, our cash generation benefited from one-off payables in Canada in connection with the 100-year agreement for the long-term licensing of Corona in the country as disclosed in Note 1 of our 2023 full-year financial statements. So, we still have work to do on the cash flow front. Having said that, given the strong cash generation year-to-date and the completion of the share buyback program announced earlier this year, the Board has approved the launch of a new share buyback program totaling BRL2 billion with the primary purpose of cancellation of shares as a means to begin returning excess cash to shareholders this year. Any shares that are not canceled may be held in treasury, transferred and/or cover any share delivery requirements contemplated in our share-based compensation plans. One final remark before handing it back to the operator. I would like to thank and congratulate our finance, shared services, and legal teams for receiving for the second year in a row the 2023 Transparency Award by ANEFAC regarding the integrity and quality of our financial statements. Well done team. Thank you and time for Q&A.

Thank you. Good afternoon, Jean, Lucas, everyone. Congratulations to Jean on your work with Ambev, and best wishes in your new role. My question is about pricing in Brazil. From our observations, it seems there were some pricing weaknesses in September, with no clear price movement in October as we approach the summer season. Could you provide more insight on what we can expect regarding pricing in Q4? Additionally, the focus brands are performing well, and Antarctica is doing well when we consider the core. This makes us think that Skol has faced greater pressure, which negatively impacted overall beer volume performance. Could you also share more about the recent strategy for Skol and whether our understanding is correct that it is experiencing more competition in the economy segment? Thank you.

So thank you, Isabella. Thank you for the kind words and for the question. Let's talk a little bit about Brazil, then I'll jump into your two questions. So, Brazil Beer had a solid performance this quarter. It was a mid-single digit top-line growth with margin expansion and bottom-line growth. We've seen the industry structurally better in general. We have seen the industry growing and premiumizing. We are seeing it too that at the levels of today, our hedges protect us, but we are seeing aluminum and currencies going in different directions for the next year. So based on that, with the strength of our business, with the brands doing well, with the solid commercial execution, we decided to take prices earlier during September and this is behind us now. September, we suffered on volumes. We started the third quarter stronger. We knew it was a conscious decision for us to lead. Overall, our focus brands are doing very well, our innovation performing very well, core plus working, Antarctica and Brahma resilient. But when we took the relativity of the core brands, as you mentioned, Skol suffered more than we expected. We believe that to some extent, this is short term. The things will come back to normality in the future. October already has been a month that is coming to normality. So, I think I addressed a little bit of pricing and brands.

Yes. And just if I may do a quick follow-up. When you say you anticipated right the price movement in September, this is pretty much across the portfolio? Or it's more on the core?

That was pretty much across the portfolio.

Thank you. Hello, Lucas. Hello, Jean. Jean, the same to you, it was an honor to interact with you all these years and good luck in the new role in the company. And now to the question, I also wanted to tap on the pricing or maybe even better, on the revenue per hectoliter discussion in Brazil Beer. I appreciate the breakdown that you guys provided in the presentation when looking on a year-over-year basis. And based on that, two little questions. One, how much would you say premiumization is pushing on the price mix part of the equation? That would be the first. And the second, if you could elaborate as best you can on how revenue per hectoliter evolved on a q-over-q basis? If we were to think of these three elements that you show in the chart there, price mix, ICMS taxes and others, that would be helpful to think on a sequential basis instead of looking on a year-over-year basis. Those would be my questions. Thank you.

Thank you, Duarte. So yes, so looking back at Q3 2024, beer net revenue per hectoliter grew 2.6%. Right? But the point is that we saw it too sequentially growing from Q2 to Q3. Right? And that was what I mentioned that in one month in September, we decided to move. The brand mix has been very positive. Okay? So, mix overall is positive with brand mix very positive. And we have this part of channels that we are making through a conscious decision on expanding our wholesaler's network participation in our business once we have BEES implemented that this brings a bit of the mix down. But in the end, this is a much lighter model that when we look, it impacts the distribution costs that are in a good momentum, in good shape and our CapEx investments because we do more of third part. So, looking at mix, pure brand mix is doing very well.

That's helpful. Thank you, Jean.

Thank you very much. I would like to know more about your strategy at the lower end of the market now that a new competitor has emerged. In the U.S., ABI has recently revitalized Busch Light, which previously received little focus on brand building at the lower end. This has positively contributed to overall growth. While I understand you don't have a brand like that and lack a large value brand, I'm curious if there are opportunities within your current portfolio or the local regional brands you developed a few years ago with local ingredients, to help mitigate some losses at the lower end of the market. Thank you.

Thank you for the question, Robert. So, let me give you a broader picture and then we jump into the opportunity that you mentioned. What is amazing about the market that we have here in Brazil is that it's really premiumizing and it is something that we see; when you look at consumers, a lot of interest in our portfolio, in the category, our category continues to be culturally relevant. We brought a lot of new propositions to the market that really opened the possibilities that our consumers have in terms of continuing or coming to the category. We brought, for example, the Stella Pure Gold, gluten-free that has attracted like 1 million consumers that they were out of the market before we launched it. We are with Near Beer, with Beyond Beer, really addressing the palates and the sweet seekers. The category is very relevant, growing and the biggest opportunity that we have, first of all is really win on this trade-up. I think this is something that we've been very consistent for a while now with the brands and really to get the segment right. And to win in high end and to build this core plus opportunity that we see in other markets that we don't have here. And then we made a conscious decision to maintain or to make core relevant more than to play in the value segment. So, that is a decision of our marketing understanding where it is going. Our plan is really to maintain the core relevant for the future. And the way we tackle this opportunity that you mentioned is through the pack price strategy where we give more options with great brands to consumers that somehow are short and don't have the money to have the right frequency on beer. And that's where we are working on for a while. We had Brahma growing high-single digits in this quarter. We had Antarctica growing high-single digits. We have this strategy of bigger cans and smaller RGB bottles. These two strategies are working on good brands. And that's how we believe a healthy business will be in the future. We have to keep the core relevant with the right affordability and moving forward. What happened in Q3, we believe that is specifically in Q3, the moment that we decided to be ahead, these things naturally happen. We don't think this is something that it will come back to some normality our volumes. And it's part of my strategy of the company to have the mainstream active flattish growing. Okay? So, this is how we want to tackle the opportunity of the Brazilian market. And then on top of that, there is a lot of growth on core plus, a lot of growth on premium, a lot of growth on Zeros, a lot of growth on Beyond Beer.

Can you provide some early insights into the key innovations planned for 2025? A bit more detail on that would be appreciated.

Yes, Robert. So, let me try to elaborate a little bit on the journey that we had here on innovation. You know that I'm betting a lot on innovation on the portfolio of the future. And if you look back, we had a moment that we decided to reenergize the core. So, we had like Brahma Duplo Malte helping the Brahma franchise. And then at some point in time, we brought the international premium with a bolder proposition that was Spaten that we brought up. We picked one brand in the whole world that we had that really could have this positioning, this liquid, this relationship with the Brazilian consumer that we're looking for something stronger. And then we went to a pack expansion on the high end. So, we look at that Corona and Original and they were two brands that were bigger than what they were selling. And then we gave more packs for Original and for Corona that are doing very well because of that. And then we went on this vision that now it was time to do functionality in beer. So somehow, we strengthened our zero-alcohol portfolio right now. So, we just launched Corona Zero Alcohol before the Olympics. We launched Budweiser Zero one year ago, and we launched gluten-free, low-calorie propositions that it was Stella Pure Gold and Michelob Ultra. So, I would say that in a framework that we treat innovation here, that we have to follow for three years, that's where we are. We are betting on functionality in beer. The Zeros have a lot of room. We lead this segment. The gluten-free and low-calorie, it's amazing the response that we are having in the market. Heavy users of beer are sticking with Michelob Ultra and Stella Pure Gold because of the additional benefits on calories on gluten-free. So, I would say that the functionality, the Zeros, the Stella Pure Gold, Michelob Ultra beyond beer that we have really betting on would be the area that we will continue to innovate.

Hi everyone. Thanks for your time. Jean, congratulations on the promotion. We'll miss you on these conference calls. My question is about the buyback, specifically for Lucas. In the context of our previous discussions regarding Ambev potentially adjusting its capital structure to optimize it, do you view this BRL2 billion buyback as perhaps an initial step towards leveraging up Ambev's balance sheet? Or is it simply a one-off event related to the free cash flow we've generated over the past year and the plan to return cash to shareholders? If this buyback is indeed a first step toward leveraging the balance sheet, why not consider a larger amount than BRL2 billion given the strong position of the company's balance sheet and the free cash flow generation? That's my question. Thank you.

Hi Lucas, thank you for your question. The decision to initiate the buyback program now is primarily based on the visibility we had at the end of September regarding the excess cash we were holding, rather than the long-term capital structure of the company. We've been discussing the capital structure with the Ambev Board throughout the year, and this will continue until the year's end. However, after analyzing the cash generated year-to-date and the excess cash available as of September 30, we determined there was sufficient residual cash to begin returning value to our shareholders this year. Considering the current stock price in relation to our intrinsic value assessment, we believe that investing BRL2 billion in our own shares represents an attractive investment opportunity with the potential for returns exceeding either our cost of capital or our return on invested capital. We continue to apply the same methodology for capital allocation decisions. The Board concluded it was the right time to start returning excess cash through a share buyback program. Regarding why we didn't opt for a larger buyback, it's important to note that Brazilian law imposes limits on the size of the shares we can repurchase. In our case, the legal limit is around BRL5.5 billion. After comparing this limit with the excess cash we had at the end of the quarter, we felt that BRL2 billion was consistent with our historical practices of returning excess cash to shareholders.

Super clear. Thank you.

Hello, Jean, Lucas. Thanks for taking my questions. And Jean, congratulations and I wish you the best of luck in your next challenge. My question is about the contribution margins that you are seeing in premium beer in Brazil. Now that you have many of the brands that the company invested in over the past few years are gaining, I think, more relevant scale, how do you see the profitability in the segment when compared to the mainstream or even to what it was in the past? And when it comes to the growth that you are seeing premium, how much has this been driving a change in the company's channel and packaging mix and how could these also be a driver of potentially better margins going forward, in part also driven, I think, on the RGB rollout for premium beers that I think had been in the strategy that you mentioned in the past. This is my question. Thank you.

Thank you, Henrique. Thank you for the question. So, as I mentioned, what is good about the Brazilian industry is that there is this premiumizing trend happening for a while. And all the decisions that we did of betting on the brands, on the premium brands, picking the premium brands, premium propositions, innovate, bringing new propositions, we have this creative mindset that we really check in general what we are launching, what is the role, how consumers will interact, but in the end, how this will be accretive to our business. And that's a mindset that is implemented. And when we come to the high end, yes, you saw, what you mentioned is true. We started most of these brands, the high-end brands with own way presentations. The Corona, we have like the long necks. And now the expansion, the journey of expansion of the premium brands that we have generally go in the direction of RGBs. And this is even better for us. I don't know if you saw, but we began to do the Corona Long Neck RGB through Ze Delivery, right? So it's really something that makes all sense for a brand like Corona that really embraces the world, how natural it should be the world and sustainability. We are moving to have, if consumers want a proposition of returnability of the Corona Long Neck in the market. So, we are talking about bringing, we launched for example Stella Pure Gold with a premium price compared with Stella. And now, we are moving these propositions to RGB bottles. So, what we see is that there is a lot of consumer connection to make and there is a lot of volume to bring as the packs expand.

Good afternoon, everyone. Thank you, Jean and Lucas, for taking the questions here. Jean, just wish you the best in your next position and wish you have a career with more cheers. My question goes to Lucas. Lucas, you mentioned a lot about the fact that the company had pretty strong cash generation. Right? And if you could go through a bit on the taxation, it seems that the company reduced a bit the tax recoveries this quarter. And if you could go through about the strategy of monetization of taxes going forward, that would be super helpful. Thank you.

Hi Guilherme, thank you. Thank you for the question. Lucas here. I think on the one hand, we're still being impacted by lower deductibility when it comes to government subventions given the tax changes at the end of last year. I think the glass-half-full side of the story here is that as I mentioned in my prepared remarks, in August, we obtained an injunction, and in October, we attained another injunction with respect to two of our subsidiaries. And so, going forward, we should continue to see a benefit to partially offset the impact that we've seen. And when it comes to the IOC deductibility, we do have much less deductibility compared to last year, but when you look at it from a cash flow perspective, we have, right, other means to offset this lower deductibility by using other tax credits that we have available. We have north of BRL11 billion of deferred tax assets, some of which are more readily available in the short term. Others are more of a medium to long-term horizon for utilization. Okay? So, that's why there is this difference between our effective tax rate which has been going up and our cash flow generation where EBITDA growth, lower net finance results, working capital, lower CapEx have been able to offset and even more than offset a higher cash tax bill in the quarter per se. So, looking long term, we still see and still like to remind folks that an increase in our effective tax rate will not necessarily reduce our ability, right, to generate cash flows and subsequently return these cash flows to shareholders over time.

Hi Jean. Hi Lucas. First of all, congratulations Jean. We will closely monitor your role in Middle Americas. I have a couple of follow-up points. The first concerns the competitive landscape. I appreciate the insights you shared about the win and pricing strategies. However, there's likely to be a significant difference looking ahead to 2025. This year, costs have been a tailwind, but next year, we expect costs to become a headwind, which I believe allows for more room to increase prices in the premium and core plus segments. I understand that working on packaging and aiming for volume growth in core plus is a solid and defensive strategy, especially against competitors focusing on mainstream products. Considering the anticipated cost increases for 2025, it would be reasonable to expect some recovery in your volumes, and I'd like to understand if this strategy will persist while factoring in the cost aspect. My second follow-up is regarding my earlier question about Argentina. Have you seen the bottom there? Volumes seem to continue to decline, and even if you outperform the industry, the market itself is shrinking. Do you anticipate it reaching the bottom this quarter or soon? I’d like to get a sense of whether the situation will stabilize or continue to affect results negatively. Thank you.

Okay, thank you, Leonardo. Talking about a little bit, I will focus on the price as you mentioned the costs going up and we talked about the competitive landscape for a while now. So, we remain nimble in our pricing strategy focused on finding the sustainable balance between the net revenue per hectoliter growth with our medium to long-term pricing strategy. We didn't change, we prioritize, we prefer price increases in line with inflation and then to have this favorable brand pack and channel mix. But we are looking at our costs and we are hedged. As you mentioned, this year has been a good year on the cost side and we know that aluminum and currencies impact will impact in the next year. We believe somehow that aluminum, we are the company less impacted by aluminum. So, somehow this is something that will hit overall the category and we have a commitment to continue to expand margins moving forward. So, I think this is the most I can say so we don't change our objective on pricing but we are committed to margin expansion moving forward.

I want to add a few comments regarding the cost outlook. As you know, our hedging strategy is still in play, and based on the end of the quarter, we are facing some challenges with the Brazilian real and aluminum. However, we are seeing positive trends with corn, sugar, and wheat acting as tailwinds. Overall, the net effect is still a headwind, but it is not as severe as the challenges we encountered from 2020 to 2022. Now, regarding the situation in Argentina, we are pleased with the progress in controlling inflation and reducing deficits, with signs of improvement such as slowing CPI and better conditions in the foreign exchange market. However, we have noticed a drop in consumer spending on fast-moving consumer goods. That said, we believe we hit the lowest point in April and May, and this quarter shows signs of gradual improvement, which we expect to continue. Looking ahead to Q4 2024, while Q3 2023 was our hardest comparison, we will begin to cycle through the lower performance we experienced last year in Argentina. As we move forward, we anticipate better sequential improvement, even though we are not back to where the industry was. Overall, we believe next year will be promising for Argentina.

Hi. Thank you for taking my question. Jean, congratulations on all your achievements and leadership at Ambev. I wish you success in your new role. My question is about two strategic areas. Firstly, regarding Ze Delivery, you mentioned some recent initiatives. Could you provide more details on what the company has accomplished this year and the opportunities available? Secondly, I would like to know about RGB, especially in Brazil and Argentina, where affordability is currently very important. Thank you.

Okay, thank you very much, Renata, for the words and for the question. So, yes, let's talk about Ze Delivery. I was happy that these days, there was an article in a newspaper that mentioned that millennials, right, that were born in between 1980 and 1995, they really put Ze Delivery as a top two retail brand in Brazil. And that's a great achievement for us. The brand is a loved brand. It is not just about the marketing of the brand. It's about really delivering the proposition of 30 minutes' cold beer, the right price to our consumers. This really is something that consumers really appreciate in the new generation. And this will just get better. Ze Delivery will just get better. We are super excited about it. So, Ze Delivery has on a yearly basis 25 million yearly active users. So, this is the number of consumers that go into Ze, buy something and survey a price and understand something. On a monthly basis recurrent, we have 4.9 million. That is 5% that really go there and buy something. So, the GMV is growing 14%. It is super important Ze Delivery for our mega brands strategy. Somehow, our brands are performing super well, Spaten, Corona in Ze Delivery. RGB continues to have a key role in Ze. So, bringing convenience for our consumers to keep their bottles at home that we pick, we deliver, and we collect. So, this brings something that's very unique for Ze Delivery and it represents, I don't know if you know this number, more than 45% of the Ze Delivery platform volumes, they are RGB. That's why we elected to start the Corona RGB project for the consumers that are more conscious about their impact on the world through Ze Delivery. So, we are really beginning on that front. And now, we are moving to expand assortment in Ze Delivery. So, the marketplace of other products that are not ours, that are really growing. They are growing at a 30% rate in GMV. And finally, now for a year, we are monetizing this piece of the equation. There is this marketplace that Ze Delivery is offering and so really excited about Ze Delivery in connected with your second question as an important play on the RGB in home play that we are doing with RGB. RGB is doing well and we are bringing more and more premium propositions for the RGB. So, I think I went over the two questions. Right?

Hi everyone. Jean, it's been a pleasure. Thank you so much for the call and for your energy on the call. I really appreciate it. I have two follow-ups as most of my questions have been answered. First of all on Skol, beyond the implied contraction of the brand, I'm curious going forward, Jean, what is the strategy for the brand? You know, we all know that it's not been a focus brand. We've discussed the brand in many different ways in the past. But given the size, you know, to your portfolio, it still should have a role. I'm curious about, you know, any updates on the role that Skol is going to have, maybe protecting the lower end of the core. You mentioned a couple of times keeping your core relevant. How is Skol playing that role for you going forward on your core brands? That's the first follow-up. The second follow-up on revenue per hectoliter would be in spite of the, you know, the mix evolution of your brands in the quarter, the price movement that you mentioned in September, we still noticed the discount as a percentage of gross revenues increasing in the third quarter. So, I just wonder if you could elaborate on that, specifically, you know, or if there's something more significant that would have explained more discount or promotion activity, maybe a specific segment or channel that could explain that. That would be helpful as well on the discounts. Thank you so much.

Thank you, Ricardo, for the question about Skol. I want to emphasize that my focus is on stabilizing and growing my core segment. When comparing my core brands to 2019, I’ve seen a growth of 12%, which translates to a compound annual growth rate of around 2% for these brands. Brahma is leading the way as our chosen brand for this journey and it is growing even faster. This highlights that Brahma is our priority. To ensure the core continues to grow healthily, we need to retain the consumers who love Skol. Our strategy is to focus on keeping our current Skol consumers, even as they explore more products and try new offerings. Regarding the question about discounts, there has not been any shift in our pricing strategy. Our discount levels have not been significantly high; we have actually decreased them over time. In the third quarter, we achieved a growth of 2.9% compared to last year, mainly driven by revenue management strategies that aligned prices with inflation. Additionally, a favorable brand mix contributed positively, although this was somewhat countered by higher VAT tax impacts and channel mix. Overall, there haven’t been major changes; we’ve simply made decisions based on opportunities as they arise. Thank you.

This concludes the Q&A session. I would like to invite Mr. Jean Jereissati to proceed with his closing remarks. Please go ahead, sir.

Thank you very much. As we conclude this call, I want to express my gratitude to everyone within our ecosystem. First, I want to acknowledge my colleagues. The Ambev team is a remarkable group of talented individuals dedicated to meeting consumer needs and supporting our ecosystem's growth. It has been a true pleasure working with all of you. I also want to thank our clients for their belief in our products and for aiding in delivering them to the consumers who choose us, along with our suppliers and partners. Thank you for your support and for believing in our transformation towards a brighter future. Lastly, I want to thank each of you Analysts and Investors for the time we've shared. Your trust, candid feedback, and partnership have been invaluable during this shared journey, and it has been an honor. We are more than ready for what lies ahead. The exciting news is that our progress will not end here. Carlos Lisboa is joining us, an old friend whom I have known for over 20 years. With his extensive experience, business acumen, and passion for the brands, I am confident he is the right person to lead our company onwards. So please welcome Lisboa with the same warmth you have shown me. Thank you very much, and I look forward to seeing you soon.

Thank you. This does conclude today's presentation.